An Investment Matrix Model for Marginal Field Operators in Nigeria

Abstract

Abstract In a bid to promote the participation of indigenous oil and gas companies in the upstream sector, the Nigerian government introduced the marginal field program which is aimed at encouraging local participation in the industry and to increase Nigeria's oil production. The development of these fields has been quite challenging as petroleum projects require huge funds that are associated with a series of risks and uncertainties which a combination of experience, knowledge and careful evaluations may not be able to overcome. Economic analysis is an integral part of every field development as it is the pivot on which several other decisions revolve. It helps to reduce the challenges by carrying out economic evaluations to find out the best petroleum investment opportunities in terms of cost, revenue and risk mitigation. With the uncertainties in the oil and gas industry and in light of the current decline in the world oil price which has been having a negative impact on the Nigerian economy owing to the fact that 85% of Nigeria's revenue is gotten from the sale of crude oil, this study seeks to develop an investment matrix model for marginal fields in Nigeria. It recognizes the current drop in world oil price, analyzes its effects on marginal fields and proffers solutions on how marginal fields can stay afloat even with the current drop in oil price. Forecasts are carried out in case of a future drop in oil price and the results are incorporated into a deterministic model with the economic yardsticks as guiding factors in order to make the best economic decisions.