Economics Analysis on the Development of Nigerian Offshore Marginal Fields Using Probabilistic Approach

Adamu, M. A., Ajienka, J. A., Ikiensikimama, S. S.

Abstract


Marginal Field Development in the prolific Niger Delta environment is of strategic importance to the Federal Government of Nigeria’s drive towards aggressive Reserve and Production Capacity enhancement. The objective of this study is to provide a perspective on portfolio diversification, investment and resource development on offshore marginal field in Nigeria. The economic analysis was carried out deterministically using economic indices like Net Present Value, Internal Rate of Return, Present Value Rate and others. Probabilistic model was also incorporated to assess the impact of the uncertainties in the input parameters using Monte Carlo simulation through the use of Crystal ball software. The key uncertainties were represented and their respective impacts on economic viability defined. The deterministic model results obtained from the studies were very impressive with Net Present Value of $526,749,924.84 at a discount value of 15% and Internal Rate of Return at 60%. Probabilistically, certainty of having a positive net present value (NPV) and good internal rate of return (IRR) values far above the hurdle rate for investment in Nigeria was obtained. The sensitivity analysis outlined oil price and tax rate as key sensitive parameters in maximizing profit. These clearly showed that the development of offshore marginal fields in Niger Delta of Nigeria is economically viable.
Key words: Offshore marginal field; Probabilistic approach; Sensitivity analysis; Economic yardstick

Keywords


Offshore marginal field; Probabilistic approach; Sensitivity analysis; Economic yardstick

Full Text:

PDF

References


[1] Akinpelu, L.O., & Omole, O.A. (2009). Economics of Nigerian Marginal Oil Fields Identifying High Impact Variables. SPE International Technical Conference and Exhibition, Abuja, Nigeria, 3-5, August.

[2] Dixon, M. (2001). Nigeria Indigenous Licensing Rounds Begin (pp. 22). Houston: Hart’s E & P.

[3] Kue, Y. N., & Orodu, D. O. (2006). Economics of Innovative Approaches to Marginal Field Development. SPE paper 106001 Presented at the 30th Annual SPE International Technical Conference and Exhibition, Abuja, Nigeria.

[4] Ayodele, O. R., Frimpong, S. (2003). Economics of Nigeria Marginal Oil Fields. SPE Paper 81998 Presented at the SPE Hydrocarbon Economics & Evaluation Symposium, 5th - 8th of April, Dallas, Texas.

[5] Bergeson, A. (2003). Improve Economic Viability of Marginal Oilfields Using Innovative Technology and Best Field Practices. Third International Oil and Gas Summit, 12-14, November, NICON Hilton, Abuja.

[6] Grandi, M., Calderoni, A., Schenato, A., & Cicognani, C. (1996). Marginal Field Development Using an Innovative Drilling Rig. SPE/IADC Drilling Conference, 28 February-2 March 1995, Amsterdam, Netherlands.

[7] Thomas, P. A., & Hough, C. (1992). The TPG5000: A Way to Cut Down the Costs on Marginal Fields Development. European Petroleum Conference, 16-18, November, Cannes, France.

[8] Chuck, S. (2000). Offshore Operating Costs for Marginal Fields. Nigeria Annual Technical Conference and Exhibition, 7-9 August, Abuja, Nigeria.

[9] Aret, A. G. (2001). Marginal Field Developments. SPE Nigeria Council Sponsored Workshop NICON Hilton Hotel, Abuja, Nigeria, 16 March.

[10] Helge, H. H. (1993). EOR, IOR, Ouu, Atioraie and All That ….; A Pragmatic Approach. Seventh European Symposium on Oil Recovery, October 27-29.

[11] Ikoku C. U. (1984). Economic Analysis and Investment Decisions. USA: John Wiley & Sons Inc.

[12] Mian M. A. (2002). Project Economics and Decision Analysis, Vol. 2: Probabilistic Models. Oklahoma, USA: PennWell Corporation Tulsa.

[13] Mamora D. D. (2005). Fundamentals of Oil and Gas Economic Evaluations and Risk Management. Texas, USA: Texas A&M University College Station.

[14] World Bank (2004). Taxation and State Participation in Nigeria’s Oil and Gas. Retried October 2008 from www.esmap.org/filez/pubs/05704Nigeria. Taxation McPherson.pdf

[15] Charnes, J. M. (2007). Financial Modeling with Crystal Ball and Excel. New Jersey, USA: John Wiley & Sons, Inc.

[16] Oras, I. (2005). Uncertainty Analysis in Economic Evaluation. Amsterdam, Netherlands: Free University, Faculty of Science.

[17] Gray, W. M., Chiappe, A., & Koosh, V. H. (2007). A Probabilistic Approach to Shale Gas Economics. Texas, USA: SPE Hydrocarbon Economics and Evaluation Symposium.

[18] Adenikinju, A., & Oderinde, L. O. (2009). Economics of Offshore Oil Investment Projects and Production Sharing Contracts: A Meta Modelling Analysis. Nigeria: University of Ibadan.




DOI: http://dx.doi.org/10.3968/j.aped.1925543820130601.1598

Refbacks

  • There are currently no refbacks.


Copyright (c)



Share us to:   

Reminder

  • How to do online submission to another Journal?
  • If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:

1. Register yourself in Journal B as an Author

  • Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.

2. Submission

  • Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.

We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:
caooc@hotmail.com; aped@cscanada.net; aped@cscanada.org

 Articles published in Advances in Petroleum Exploration and Development are licensed under Creative Commons Attribution 4.0 (CC-BY). 

ADVANCES IN PETROLEUM EXPLORATION AND DEVELOPMENT Editorial Office

Address:1055 Rue Lucien-L'Allier, Unit #772, Montreal, QC H3G 3C4, Canada.

Telephone: 1-514-558 6138
Website: Http://www.cscanada.net
Http://www.cscanada.org
E-mail:office@cscanada.net;  office@cscanada.org

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures