QUANTIFICATION OF UNCERTAINTY AND RISKS FOR DEVELOPING MARGINAL FIELDS

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QUANTIFICATION OF UNCERTAINTY AND RISKS FOR DEVELOPING MARGINAL FIELDS

 

ABSTRACT

The Niger Delta is Nigeria’s and Africa’s most prol ific 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.

 

CHAPTER ONE

1.0 INTRODUCTION

1.1 PROBLEM DESCRIPTION

The Niger Delta is situated in the Gulf of Guinea and has prograded south westward from Eocene to the present forming various depobelts. It is Africa’s largest and most prolific oil producing basin and also one of the world’s largest delta systems of tertiary age and covers an area of about 75,000 km2. Several discovered marginal fields exist in the onshore delta area which provides attractive opportunity for development due to presence of multi stacked good quality reservoirs associated with growth fault related structures (Sahu et al, 2011). The development of marginal oil fields has become an important strategic issue in Nigeria. This is because government and indigenous investors both believe that, acquisition of fields which remained undeveloped or abandoned for a period of 10 years from major oil companies by government and re-allocation to intending investors would go a long way in improving the country’s proven and recoverable reserves. Marginal field operators have then been given fields to develop but majority of the marginal operators are facing challenges in developing such fields

 

 

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QUANTIFICATION OF UNCERTAINTY AND RISKS FOR DEVELOPING MARGINAL FIELDS

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