Chinese oil giant, Addax Petroleum Development Nigeria has exited it’s Nigeria operations with the completion of the transfer of Oil Mining Lease (OML) 123, 124, 126 and 137 to the Nigerian National Petroleum Company (NNPC) Limited.
Addax Production Sharing Contracts (PSCs ) were associated with significant intricacies, complexities and attendant disputes.
The deep-seated disputes threatened the cordial diplomatic relations between Nigeria and China.
Consequently, the assets have suffered 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.
The PSC for the blocks was initially signed in 1973 between NNPC and Ashland and terminated after 25 years. Subsequently, NNPC signed another PSC with Addax in 1998 on the blocks and operated through Addax Petroleum for another 24 years.
In 2021, issues around the revocation of the licences were reconsidered and the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) advised that the assets be returned to the concessionaires (NNPC Limited) to ensure clean and amicable exit by Addax.
A statement by NNPC said both parties had signed a memorandum of understanding (MoU) on the transfer, settlement and exit agreement (TSEA).
In his remarks at the close-out and signing ceremony, the NNPC GCEO, Mele Kyari, charged the Transition Management Team to hit the ground running towards restoration and fulfilment of the promise of the Assets. He promised that re-adjustment will be swift and efficient, in order to extract optimum value from the assets and to deliver maximum value to shareholders.
Umar Ajiya, NNPC’s Chief Finance officer (CFO) and Yonghong Chen, Addax’s managing director, signed the agreement for both companies
With the agreement, NNPC said, Addax has ceased to be the production sharing contract (PSC) contractor for the four OMLs.
It said 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 statement reads.
“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.”
“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.”
NNPC further disclosed that on January 25, 2022, it commenced formal engagements with Addax and the Nigerian Upstream Petroleum Company (NUPRC), followed by a series of meetings to ensure a swift closeout of the exit discussions and formalities.
Kyari, in a virtual address, said the deal would boost the production of crude oil from the assets for the benefit of Nigeria.
Kyari was quoted as saying the NNPC has assembled a transition management team to manage oil production and develop the gas potentials of the acreages.
He charged the team to work towards restoration of the assets’ potentials.
The NNPC leader said readjustment is expected to be swift and efficient, adding that there will be no excuses for production losses/deferment as it has proven that it is ready to provide all the necessary support required.
Kyari said with good asset management in place, a production increase of 10,000 barrels of oil per day (bpd) — from 6,000 bpd — is expected before the end of the year, and total production is expected to be doubled in 2023.
He described the deal as another laudable achievement by the national oil company that is set to deliver additional value to the country through increased oil production and gas monetisation from the resource-rich acreages.
In April 2021, the defunct department of petroleum resources (DPR) revoked the four Addax licenses over poor development of the assets but three weeks later, President Muhammadu Buhari restored the licenses.