Quantification of Uncertainty and Risks for Developing Marginal Fields in the Niger Delta

Abstract

The Niger Delta is Nigeria’s and Africa’s most prolific producing basin and has some untapped oil resources because of their marginality. The development of marginal oil field in Nigeria has now become an important strategic issue. This is due to the vast availability of these fields scattered all over the Niger Delta. The Federal Government of Nigeria in a bid to kick-off indigenous participation in the upstream sector of the petroleum industry initiated the marginal field program. This was also to increase Nigeria’s crude oil production. Years after awards of marginal fields, only a few of the awardees have been able to see first oil production. This is due to various challenges that marginal field investors have faced over the years and these challenges were not properly planned for. An important aspect of any field development planning exercise is inherent in adequately quantifying risks and uncertainty, particularly when information availability is limited. In this work, a risk management process was employed to quantify risk and uncertainty in developing marginal fields. This involved planning, identification, analysing, assessing, treating and monitoring these risks. A total of 15 risk factors were identified and these risks were screened to high loss risks in terms of NPV. These risks were lumped up to seven variables which were used as independent variables for Monte Carlo simulation used to carry out sensitivities on the investor’s NPV. Petroleum Profit Tax, Reserves, Oil Prices and rate of decline were identified as top risk factors on investor’s NPV. Fiscal terms, reserves, oil price, well production performance, reservoir performance and well integrity risk factors were discovered as the highest ranked risks in developing marginal oil fields. A set of guidelines was the formulated to support decision makers and improve the probability of success in developing marginal fields in the Niger Delta.