Nigeria Offers 31 Smaller Oilfields to Expand Investor Pool

Nigeria will offer domestic operators 31 exploration licenses for oilfields next month with volumes too low for bigger overseas companies, broadening the range of investors in the industry.

Sixteen onshore and 15 shallow-water leases of so-called marginal fields will be auctioned, Petroleum Minister Diezani Alison-Madueke said today.

“Government encourages companies where possible to bid in consortia to enable the parties to leverage upon each other’s strengths,” Alison-Madueke told reporters in the capital of Abuja. There will be 3-1/2 months of bidding, she said.

Output from the fields is too little to be profitable for international companies such as Royal Dutch Shell Plc and Exxon Mobil Corp., which run ventures with state-owned Nigerian National Petroleum Corp. Such enterprises, also with Chevron Corp., Total SA and Eni SpA, pump more than 90 percent of the biggest African producer’s oil. The plans come a decade after a set of 24 marginal sites were awarded to 31 local producers.

Supply from eight of those now make up 1 percent of the country’s total, adding 100 million barrels of crude to the nation’s reserves, according to the minister. Nigeria, OPEC’s seventh-largest producer, pumped 1.99 million barrels a day in October, according to data compiled by Bloomberg.

Heightened Appetite

Increased output by local companies from oil leases bought from international producers have “heightened the appetite for oil blocks,” Dolapo Oni, a Lagos-based energy analyst at Ecobank Research, said in an e-mailed response to questions.

“A licensing round would be the ideal solution to the level of demand for oil blocks at the moment,” he said. “More importantly, the local banks are better informed about the oil and gas industry and can back the acquisition and development of these fields.”

Nigerian companies “continued to demonstrate remarkable technical ability in operating significantly larger assets” by buying fields from international producers, Alison-Madueke said.

Local producers including Seplat Petroleum Development Co. and Oando Plc are raising their share of the country’s output by agreeing to take fields in restive areas previously operated by global producers such as Shell and Chevron as they retreat.

Shell and Chevron are selling assets that can produce a total of 300,000 barrels a day from nine leases. Stakes in 13 fields were sold by Shell, Total and Eni from 2010, mostly to domestic companies.

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