Marginal Field Operations in Nigeria and the Challenge of Uncertain Tax Regime: What Are the Available Options?
Published 27 February 2014
Introduction
The trigger for this paper is the recent announcement by the Minister of Petroleum Resources (MPR) in Nigeria of a fresh Licensing Round for Marginal Fields. In this round, 31 fields comprising a total 16 in onshore areas and the balance of 15 in the continental shelf would be on offer. The Federal Government of Nigeria (FGN) has been encouraged to initiate this fresh round given that holders of concessions from the previous round have recorded huge discoveries in excess of 100 million barrels to the nation's reserve base and "of the eight assets that had so far been divested by the international oil companies, at least four were held by active marginal field operators, who had continued to demonstrate a remarkable technical ability in operating significantly larger assets".
The objectives of the licensing round remain to grow oil reserves and increase production capacity; promote indigenous participation in the upstream sector of the petroleum industry; and enhance indigenous skills and capacity development in the upstream sector of the oil and gas industry. Obviously, the announcement by the MPR of the 2013 Marginal Field Licensing Round, 10 years after the first round, represents an opportunity to acquire a marginal field as well as the sobriquet of an "oil and gas player" for many Nigerians. The concern of many would hardly be about the unsettled and uncertain applicable tax framework for marginal fields operations (MFO).
Footnotes omitted from this introduction.