After a prolonged dispute that hobbled oil production at Oil Mining Leases (OMLs) 123, 124, 126 and 137, operated by Addax Petroleum Nigeria Limited, the company has reached a close-out and signing ceremony of an asset transfer, settlement and exit agreement with the Nigerian National Petroleum Company Limited (NNPC).
A statement from the national oil firm stated that the dispute has now been amicably resolved to pave way for the much-needed investment and growth on the oil blocks.
“Today, a new page was turned in the history books of the Nigerian oil and gas industry.
“The protracted dispute on OMLs 123/124, 126/137, operated by Addax Petroleum Nigeria Limited, has finally been laid to rest, paving the path for much-needed investment and growth on the oil blocks,” the statement noted.
The Production Sharing Contract (PSC) for the blocks was initially signed in 1973 between the NNPC and Ashland but was terminated after 25 years. Subsequently, the NNPC signed another PSC with Addax in 1998 on the blocks which were operated through Addax Petroleum for another 24 years.
However, the Addax PSCs were associated with significant intricacies and complexities and attendant disputes, the statement added.
The disputes associated with the Addax assets, the statement noted, were deeply sown to the extent that they threatened the cordial diplomatic relations between the Federal Republic of Nigeria and the People’s Republic of China.
“Consequently, the assets have suffered a significant lack of investment as multiple historical litigations have hindered the attainment of the desired objectives of value creation to the PSC parties, government, and other stakeholders.
“In 2021, issues around the revocation of the licences were reconsidered and the upstream industry regulator, the NUPRC, advised that the asset be returned to the Concessionaires, NNPC Limited, to ensure clean and amicable exit for Addax,” it stated.
It added that on January 25, 2022, the NNPC Limited commenced formal engagements with Addax and the Nigerian Upstream Petroleum Company (NUPRC), followed by series of meetings to ensure a swift closeout of the exit discussions and formalities.
This, it stated, culminated in the preparation and signing of a Transfer, Settlement and Exit Agreement (TSEA) by both parties.
According to the NNPC, the agreement received the support of the presidency, Office of the Attorney General of the Federation, NUPRC, Federal Inland Revenue Service (FIRS), the Economic and Financial Crimes Commission (EFCC), and the Federal Competition and Consumer Protection Commission (FCCPC).
Eventually, it noted that this led to a clean and amicable exit for Addax, by resolving the PSC contractual issues in a ‘robust, organised, and tactful manner.’
“This is an occasion where all stakeholders and government agencies have shown camaraderie to achieve a common objective,” it explained.
Looking into the future, the NNPC Limited pointed out that it has assembled a transition management team to oversee oil production and develop the gas potential of the acreages.
It disclosed that in his address at the close-out and signing ceremony, the NNPC Group Executive Officer, Mallam Mele Kyari, charged the transition management team to hit the ground running towards restoration and fulfilment of the promise of the assets.
“Readjustment is expected to be swift and efficient, and there will be no excuses for production losses/deferment as NNPC Limited has proven that it is ready to provide all the necessary support required,” it stressed.
Due to multiplicity of challenges witnessed by the assets over the years, most especially in recent past, it explained that the facilities are currently producing an average of 6,000 barrels per day.
However, it noted that with good asset management in place, a production increase of circa 10,000 bpd was expected before the end of the year, and total production was expected to be doubled in 2023.
“This is another laudable achievement by NNPC Ltd that is set to deliver additional value to the nation through increased oil production and gas monetisation from the resource-rich acreages,” it explained.
The drama trailing the Addax assets had begun last year, when the NNPC wrote President Muhammadu Buhari to reverse the then Department of Petroleum Resources (DPR) revocation of the OMLs and reject a reallocation to another company.
The NNPC in a letter to the president on April 20, had argued that the revocation of the oilfields would have implications for the Nigerian economy and the diplomatic relationship between Nigeria and China. Addax is owned by Sinopec, a state-owned Chinese firm.
Three days after the letter was sent, the president overruled the revocation by the DPR, and cancelled the reallocation of OMLs 123, 124, 126, and 137 to Kaztec Engineering Limited/Salvic Petroleum Consortium, a firm DPR picked as a replacement.
The defunct DPR cited Addax’s inability to comply with agreed targets. A panel set up by the Ministry of Petroleum to review the case concluded that Addax had caused the country significant losses in revenue and jobs.
The committee led by a former senator, Magnus Abe, had said $1 billion had been invested in the contract but Addax Petroleum called it off over an issue that was unrelated to the project. The action put over 3000 Nigerians out of work, the committee said.
But the presidency thereafter restored the leases on OMLs 123, 124, 126 and 137 to the NNPC which is in production sharing contract with Addax Petroleum.
The NNPC warned the president that the revocation, if unresolved, will create an unprecedented level of contingent liability of well over $1 billion for NNPC as the party in contract with Addax and reputational damage to the country with possible dire unintended diplomatic consequences. The case eventually went to court, but has now been resolved out-of-court.
SOURCE: THISDAY
