In this paper, a new contractual agreement is proposed for the development of marginal oil fields in the Nigerian prolific hydrocarbon sedimentary basins. The proposed agreement is a modification of the existing agreements taking into consideration the special nature of marginal oil fields. Detailed economic analyses were carried out to assess the feasibility of the agreement. The economic analyses involved cash flow modeling, project profitability analysis, project sensitivity analysis and risk modeling using available and generally accepted economic, financial and technical data about the Nigeria operating environment. The final results from this study show that investing in the development of Nigerian marginal oil fields is a worthwhile option. The results show that the proposed agreement leads to favorable return on investment for all the parties involved. Project sensitivity analysis shows that if the combined cost of seismic survey and signature bonus is increased by more than 10%, the project becomes uneconomic. Also, if the price of oil falls below US$18.07, the project would have to be re-evaluated because the discounted pay back period (DPBP) would exceed the expected project life. Furthermore, risk analysis shows that as the NPV (net present value) increases, the risk level associated with such NPV also increases. Options available for financing marginal oil fields development are also presented.

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