*As New Partners Set to Pay $340m
By Teddy Nwanunobi
Just one week after President Muhammadu Buhari overruled the Department of Petroleum Resources (DPR), and restored four drilling permits that were initially revoked from China’s Addax Petroleum Exploration Limited, the Kaztec Engineering Limited and Salvic Petroleum Resources consortium has moved in to take over the oil mining leases (OMLs) 123, 124, 126 and 137.
It would be recalled that the Director of DPR, Engr. Sarki Auwalu, had, on Wednesday, April 21, inaugurated a team of experts to evaluate the revoked assets of Addax, in preparation for formal handover to the new operators, Kaztech/Slavic consortium.
But 24 hours later (Friday, April 23), Buhari ordered the restoration of the leases on the OMLs to the Nigeria National Petroleum Corporation (NNPC).
Valuechain reports that the NNPC is in a production sharing contract (PSC) with Addax.
According to a statement issued by the Senior Special Assistant to the President on Media & Publicity, Garba Shehu, in Abuja, on Buhari’s order, the DPR was to retract the letter of revocation of the leases.
Buhari also directed the “NNPC to utilise contractual provisions to resolve issues in line with the extant provisions of the Production Sharing Contract arrangement between NNPC and Addax”.
But one week after Buhari’s order to the DPR, the consortium has promised to offer Nigeria better value in terms of increased revenue, local content boost, and more employment opportunities as they take over the operationship of the OMLs which were previously operated by Addax.
As part of its assignment, the new consortium is required to, among other things, operate the OMLs under a production sharing contract, (PSC), with the NNPC; and pay a good and valuable consideration (GVC) of $340 million at the commencement of the PSC.
The new partners also disclosed that they have commenced engagement with Addax to ensure a smooth and amicable transition of operations at the assets.
The Kaztec/Salvic consortium stated that the DPR deserved to be commended for doing due diligence, and following relevant laws in making them the choice operators of the assets – picking the consortium as the new operators of the assets.
“The consortium intends to maximise the potential of the assets to ensure that the government and people of Nigeria reap their full benefits against the backdrop of the ongoing Energy Transition,” the new operating partners, who emphasised on raising community development services, said in a statement.
The consortium stated that the choice of the consortium was in accordance with the Nigerian Oil and Gas Industry Content Development (NOGICD) Act 2010.
It noted that DPR proactively took concrete steps to boost the revenue accruing to the government from these underperforming assets.
Kaztec, one of the leading indigenous EPIC-M companies, with vast experience in offshore and onshore petroleum exploration and production, had collaborated with the previous operator on the assets for many years.
“The choice of consortium is also in accordance with the Nigerian Oil and Gas Industry Content Development (Local Content) Act, which was enacted in 2010 to promote the indigenous operation of Nigeria’s oil and gas assets. Under the Act, seasoned Nigerian independent operators like Kaztec and Salvic are to be given first consideration in the award of oil blocks and oil field licenses,” the statement stated.
It noted that the DPR also directed that Addax and the new consortium engaged in an amicable resolution of all issues, including a commercial settlement, if needed.
As part of its assignment, the new consortium is required to, among other things, operate the OMLs under a PSC with NNPC; and pay a Good and Valuable Consideration (GVC) of $340 million at the commencement of the PSC.
The Kaztec/Salvic consortium is expected to commence development of the large gas resources on the assets within 24 months – both for the domestic market and for export, in line with the government’s aspirations for the gas industry.
The government equally charged the new partners to ramp up investment in the OMLs so that production revenue, royalties and taxes to the government will exponentially increase, in addition to the upfront payment of GVC.
Addax had increased production from the four OMLs to about 130,000 barrels per day (bpd) from 1998 to 2009 and in 2009, Sinopec (a Chinese state-owned company) purchased Addax and obtained the rights to these assets.
It disclosed that no payments were made to the federal government during the purchase by either party or that in recent years, there had been no new investments in the assets, leading production to decline to 25,000 bpd by 2021.
Valuechain reports that the four OMLs were revoked in March by the DPR due to the non-development of the assets by Addax.