China’s Sinopec- Addax ‘completely’ transfers four oil blocks to NNPCL, as Nigeria sets to increase crude oil production by 100,000bpd

Oredola Adeola

Sinopec Group, a Chinese state-owned company, owner of Addax Petroleum Development (Nigeria) Ltd has completely handed its Oil Mining Leases (OML) 123,124,126 and 137 over to the Nigerian National Petroleum Company Ltd(NNPCL) through a Transfer, Settlement, and Exit Agreement (TSEA).

Umar Ajiya, NNPCL’s Chief Finance Officer(CFO) signed the agreement on behalf of the national oil company, while Yonghong Chen Managing Director for Addax, , signed on behalf of Sinopec’s Addax, on Tuesday in Abuja.

The event was virtually witnessed by Mele Kyari, Group Chief Executive Officer, NNPCL, who joined the meeting from Abu Dhabi, United Arab Emirates (UAE).

The NNPC GCEO in his remark during the agreement signing ceremony, revealed that the deal would boost the production of crude oil from the assets.

Bala Wunti, Group General Manager, National Petroleum Investment Management Services (NAPIMS) said “with this agreement, Addax has ceased to be the PSC contractor of the asset.”

The NAPIMS GGM did not provide further details on the deal, but commended NNPC Ltd. Addax Petroleum, NUPRC, Federal Competition and Consumer Protection Commission (FCCPC), Abubakar Malami Attorney General of the Federation and Minister of Justice ,and Federal Inland Revenue Service (FIRS) for their contributions in bringing the deal to a close.

EnergyDay gathered that the Production Sharing Contract(PSC) for the four oil wells was initially signed in 1973 between NNPC and Ashland Nigeria Exploration Unlimited, emerging as the first PSC to be penned by the national oil company in Nigeria. The deal was terminated after 25 years.

The assets were later acquired by Addax in 1998, with the signing of Production Sharing Contracts (PSCs) with NNPC. The company had since then commenced operations on the assets until when it was revoked.

Sinopec Group, Hong Kong-listed China Petroleum & Chemical Corp in 2009 paid US$7.24 billion (N1.06 trillion) to acquire Addax Petroleum.

EnergyDay gathered that the four OMLs were in April 2021 revoked by now defunct Department of Petroleum Resources (DPR) from Addax Petroleum Exploration Nigeria Limited to a new operator – Kaztech/Slavic Consortium, for failure to develop the assets sufficiently, but the decision was overturned by President Muhammadu Buhari three weeks later.

Engr. Gbenga Komolafe Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, had in January, 2022, also reaffirmed the revocation of the assets from Addax Petroleum. He had then claimed that the company was unable to meet its obligation in line with guidelines governing the process.

Komolafe claimed that the average reserve profile of the assets showed that oil reserves have remained essentially flat, alleging then that Addax never made to grow the reserves, adding that crude oil in all three producing assets had been declining over the years due to inadequate investment by the company.

On the contrary, Addax disclosed that three of the leases have producing fields.

Meanwhile, NNPCL had since January commenced formal engagements with Addax and NUPRC. The national oil company’s intervention culminated in the preparation and signing of the new Transfer, Settlement and Exit Agreement.

EnergyDay’s check shows that Addax increased the assets’ average production from 8,800 b/d in 1998 to an average of 80,000 b/d during the first half of 2006.

The Addax that was then the largest independent oil producer in Nigeria claimed that the average daily oil production on the four assets later increased to 140,000 bbl/d in 2011.

The Chinese company revealed that its Year-to-date average daily oil production as of Q3 2012 was 167,000 barrels (26,600 m3) per day (this figure does not take the Talisman-Sinopec Energy UK nor the OML 138 production figures into account).

Addax Petroleum had then aimed to achieve an average daily production of 500,000 barrels (79,000 m3) of oil on the assets by 2015.

The assets have witnessed significant production decline since 2009 after SINOPEC acquired Addax share of the PSC, due to poor investment decisions that made production levels to fall to about 20,000bpb.