Nnpc targets 650,000 barrels for midyear income from OML 83/85

Olubunmi Martins

The Nigerian National Petroleum Company Limited has disclosed that it will earn a cumulative volume of 650,000 barrels of oil in June from OML 83/85.

In a document signed by the company’s Chief Financial Officer, Nasir Usman, it said that a total sum of USD 82 million will accrue to the corporation from the proceeds of oil production and the sale of 650,000 barrels of oil by the month of June 2022.

OML 83/85 are twin assets located in the swampy offshore region of the country’s Niger Delta region; the assets are operated by First E & P under a joint venture arrangement with the state oil corporation following the divestment of interests to First E & P by Chevron Nigeria.

The Anyala and Madu fields, believed to have reserve estimates of 193MMbbl and 0.637Tcf, are both tucked safely 50 km offshore in Bayelsa State. The two fields are 23 km apart from each other, but they both share connecting facilities for joint production, including an FPSO.

Crude production from the two assets is differentiated as CJ Blend and is generally designated for the export market.

The NNPC, in its disclosure, clarified that its USD 82 million in earnings from the assets represent the corporation’s 60% equity interest, while the balance of 40% is held and controlled by First E & P.

OML 83/85 assets came into prominence and gained a head start when it secured funding support of USD724m from Schlumberger as its technical partner in 2017, although first oil production didn’t occur until October 2020. The field development is split into two phases with a combined investment of $1.08bn, with gas asset development falling into phase two of the work program.

NNPC, in its official disclosure, did not confirm the current status of indebtedness to Schlumberger, but EnergyDay checks reveal that initial crude oil exports took place in January of 2021. Further checks also revealed that the two assets produce about 40,000 barrels of oil daily. There are instances, though, according to official documents made available to EnergyDay, which showed a drop in daily production to 34,000 bpd.

The NNPC is presently undergoing transition and will formally launch on July 18 as a commercial company limited by shares. Although there is no clarity yet on its recapitalization plans to fund joint venture obligations, it is not unlikely that the company will seek funding from the equity market through the sale of some of its assets.

Mele Kyari, Managing Director of the NNPC, disclosed such a possibility while reacting to the company’s future outlook. He said, “Shareholders can decide, as the law provides, that over time, they can reduce the shareholding into some private shareholding. That means it can be floated subsequently as a company that is quoted on the stock exchange. The intention at the very onset was not to go to that step, but there is a provision in the law that allows us ultimately to sell shares of this company ‘

The new Petroleum Industry Act, signed into law on August 16 by President Muhammadu Buhari, stipulates that the NNPC should convert into a limited liability company not later than six months from the enactment of the law, and it was registered under the new name as NNPC Limited, with an initial capital of N200bn.

In effect, the new company will cease to receive subsidy support from taxpayers and will also be required to be profit-driven as a commercial enterprise.

NNPC’s side of obligation in its joint venture arrangement with First E & P on OML 83/85 is funded largely through easier access to the federation account in circumstances that are often faulted.

“For third parties with existing contracts and joint operating agreements with the NNPC, Section 54 of the PIA provides essentially that all assets and liabilities of the NNPC will be transferred to NNPC Ltd within 18 months of the PIA coming into effect,” Mele Kyari said, clarifying concerns about assets held in common with partners. Subsection¬†2 of the Act states that any assets, interests, or liabilities not transferred shall remain those of the NNPC until extinguished or transferred to the government.

What this means in effect is that under the transition, existing contracts and joint operating agreements with NNPC will be evaluated and transferred in line with agreed principles to ensure business continuity.

In terms of ensuring business continuity, the NNPC recently negotiated and obtained a USD5bn facility from the African Exim Bank to shore up its capacity for future project engagements. but it remains to be seen how the company will fare in the days ahead.