June 21, 2024

NNPC Ltd, PSC contractors resolve dispute over deepwater mining leases, renegotiate 4 subcontract agreements

After almost 30 years of protracted dispute over five oil mining leases (OMLs), including OMLs 125, 128, 130, 132, 133, and 138, the Nigerian National Petroleum Company Limited (NNPC Ltd) and its Joint Venture(JV) partners have come to fresh understanding leading to 4 layers of interconnected agreements, covering ‘ Production Sharing Contracts’ (PSCs), ‘Dispute Settlement Agreements’ (DSAs), ‘Settlement Repayment Agreements (SRAs), and Escrow Account Agreements’

This was the highlight of the signing ceremony of the renegotiated subcontracts between NNPCL and its partners in Abuja during the weekend.

EnergyDay gathered that the renewed subcontract agreement is expected to unlock more than 10 billion barrels of crude oil and generate an estimated revenue of over $500 billion for the government and all the JV partners.

It was, however, gathered that with the resolution of all pending issues, the country is expected to attract foreign direct investment (FDI)of around $30 billion and put an end to a contingency liability of about $9 billion.

The JV partners are Total Energy, Chevron, Shell Nigeria Exploration and Production Company (SNEPCO), Esso Exploration and Production Nigeria Limited, China’s Sinopec, Equinor, Sapetro, Exxon Mobil, and others.

Mala Mele Kyari, Group CEO, NNPC Ltd, said the renegotiation of the assets were in line with the provisions of the section 311 of the PIA with other improvements to the PSCs aimed at driving performance in the PSC operations.

Speaking further, Kyari said the negotiations were completed within the  timeframe specified by the PIA for all re-negotiated PSCs, stressing that the meaning of this is that there is now a great deal of clarity between NNPC Ltd and its partners in the deepwater space.

NNPCL said, “This provision paved the way for the resolution of lingering disputes which created investment uncertainty and stifled new investment in the nation’s deep offshore assets.

“To achieve this, NNPC Ltd leveraged the near-end term of the PSCs and the parties’ interest to renew the PSCs as a negotiated currency in bringing the contractors to work towards trading the past for the future.

“These renewed PSCs would provide several benefits such as improved long-term relationships with contractors, elimination of contractual ambiguities, especially in relation to gas terms, and enable early contract renewal amongst others.

Mr. Osagie Okunbor, Country Cahir, Shell Companies in Nigeria, described the execution of OML 133 OSC contract as significant progress towards harnessing the deep water resources of Nigeria.

Mr. Richard Laing, Chairman/Managing Director of ExxonMobil Companies noted that the renewal of the Usan and Erha leases validates his company’s commitment to maintaining a significant deepwater presence in Nigeria, through  Esso  Exploration and Production Nigeria(Deepwater)Limited.

The Execute Director and General Counsel, ExxonMobil Nigeria, Adesua Dozie, speaking on the PSCs agreement said, ExxonMobil Nigeria has used to development,  to renew its OMLs 133 (Erha) and 138 (Usan) deep-water leases for a further 20-year period.

Adesua described the renewed agreements as a fantastic and exciting deal, after many years of dispute, adding that it would bring additional investments and spur economic growth.

She expressed satisfaction over the implementation of PIA 2021 which recognised the potential and future for the deep water businesses in Nigeria.

“As for my company, what this means is significant deep water presence for our company in Nigeria for the next 20 years,” she said.

ExxonMobil further disclosed that the renewals validate ExxonMobil Nigeria’s earlier commitment to maintaining a significant deep-water presence in Nigeria, via Esso Exploration and Production Nigeria (Deepwater) Limited (EEPNL).

Mr. Rick Kennedy, Chairman/Managing Director of Chevron Nigeria Ltd, said Chevron  is proud of its strong partnership with Nigeria and its partners and remains also committed to support the country to develop its energy resources safely and reliably.

Mr. Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), said that the goal of the agreements was to ensure the NNPCL competes favourably with the best-run oil firms worldwide.

He said, “Nigeria looks up to the NNPCL to lead in turning our weaknesses into strengths and we are very confident that as a regulator, the NNPCL is fully prepared to lead operators.

“With the reports that we see happening with the new NNPC, in no time, it will have a presence expanding its portfolios like Petrobas and Aramco,” he noted.

Mr Farouk Ahmed,Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on his part noted that NNPCL needs to devote more attention to the exploration of Nigeria’s gas resources.
EnergyDay gathered that the recent renegotiation of the PSC and the leases, except OML 130, will run for another 20 years under pre-PIA laws, while OML 130 is to be renewed under the PIA terms.

it was further revealed that the PIA in section 311(2) stipulates that a new PSC agreement under new Heads of Terms will be signed between NNPC Ltd as a concessionaire and her contractor parties within one year of signing the PIA into law, giving a deadline of 15th August 2022.