Developing thin oil rim reservoirs in Nigeria: A review of investment decisions, local content, and economic development

Abstract

This study assesses the economics of developing thin oil rim reservoirs located in Nigeria. Due to their unique structure, thin oil rims present production challenges and are economically marginal. As such, this study analyzes how decisions regarding the development of thin oil rim reservoirs are interrelated to returns to operators; job creation and skill development; energy security; and overall economic development of Nigeria. Despite being the largest contributor to Nigeria’s export earnings and a substantial source of government revenues, less consideration is given to the economics aspects than to the technical aspects. This paper
reviews relevant literature pertaining to both technical and economic issues related to thin oil rims. Based on our analysis, we conclude that the value of an oil rim depends on three factors: The order and timing of decision-making regarding the asset; The operating company's ability to effectively manage/operate the asset; and the regulatory/fiscal/market environment within
which the asset operates. Of particular importance is ensuring access to a gas market. All prior studies examined primarily limited themselves to analyzing reservoir performance and relied on simulated results using synthetic models. While prior studies identified plausible relationships between reservoir performance, energy security, job creation/skill development and economic growth; however, previous studies failed to adequately test those relationships. Our study found that major limitation to employment is due skill & local contractors. It provided conceptual framework linking operator decisions to commercial viability and national development outcomes. Identified six propositions that require further empirical testing and provides recommendations for operators, regulators/policymakers and researchers.