Case Study of Unitisation and Joint Development of Straddle Fields in Nigeria

Abstract

Abstract Hydrocarbon accumulations more often than not straddle two or more license areas or concessions and sometimes, international boundaries. Unitisation is a process whereby petroleum reservoirs (fields) straddling concession boundaries are developed and exploited as a unit using a single operator (the Unit Operator) and common production facilities under a signed agreement (Unitisation Agreement), by the holders of the respective concessions. The objective is to maximise economic recovery of producible hydrocarbon. In Nigeria, the enabling law that gives legal backing for unitisation is the Petroleum (Drilling & Production) Regulation 1969, Section 47, as amended and the 2008 Unitization Guidelines by the Department of Petroleum Resources (DPR). These laws are made pursuant to the powers conferred on the Minister of Petroleum Resources under Section 9 of the Petroleum Act (CAP 350) laws of the Federation of Nigeria 1990. One of the major milestones in the unitization process is the signing of the unitization and unit operating agreement (UUOA). The UUOA specifies how the straddle field is to be operated and defines tract participation (the equity interest, assigned to each Concession in the Unit). As at today, over seventy (70) straddle fields have been identified in Nigeria but not up to five (5) UUOA agreements have been executed. Issues ranging from correct interpretation of Regulation 47,recognizing unitization of straddling and non-straddling reservoirs, to single and combined provisional tract participation (PTP) for oil and gas, economic consideration & contractual disputes, fiscal terms, Redetermination, Reference dates, appointment of unit operator, funding, divestment, political and personal interest etcetera, have made unitization of straddle fields elusive for many years thereby locking down billions of barrels of reserves. This undoubtedly, is not in the national Interest, especially when the Country is striving to increase the Nation's reserves base from the current 36.24 barrels of oil to about 40 billion barrels and the daily production output of 2.5 million bopd to 4.0 Million bopd by year 2020. This paper therefore examines the synopsis of unitisation and joint development of straddle fields in Nigeria, the concerns and pitfalls arising thereof. The evaluation of some selected cases is also made to ascertain the effect of delay from Government objectives of reserves addition and production along with suggestions for future policy formulations.