UPDATED: Diplomatic Conflict Between Nigeria, China Averted As NNPC Seals Assets Transfer Agreement With Addax

… Agreement To Unlock 10,000 Barrels Per Day Oil Production

The Nigerian National Petroleum Company Ltd on Tuesday signed an Asset Transfer Agreement with Addax Petroleum Company, effectively bringing an end to the commercial disputes on the company’s assets.

The NNPC Board Chairman, Mrs Margary Okadigbo, the Group Chief Executive Officer, Mallam Mele Kyari attended the agreement signing virtually while the Executive Vice President, Upstream, NNPC Limited Mr. Adokiye Tombomieye; the Chief Upstream Investment Officer of the NNPC Upstream Investment Management Services, Mr Bala Wunti; the Chief Finance Officer of NNPC, Umar Ajiya; the Executive Commissioner, Development and Production, Nigerian Upstream Petroleum Regulatory Commission, Dr Habib Nuhu; and the Managing Director, Addax Petroleum, Mr Yonghong Chen attended the event physically.

The NNPC Ltd Chief Finance Officer, signed the agreement on behalf of the NNPC, while the Addax MD signed for his company.

With the signing of the agreement, a major diplomatic, governmental, and legal conflict has been amicably resolved.

Also, with the agreement, 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.

The exit agreement is expected to boost both commercial and diplomatic relations for Nigeria and China.

The Production Sharing Contract (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 24yrs.

The Addax PSCs were associated with significant intricacies and complexities and attendant disputes.

The disputes associated with these Addax were deeply sown to the extent that they threatened the cordial diplomatic relations between the Federal Republic of Nigeria and the People’s Republic of China.

Consequently, the assets have suffered a 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.

In 2021, issues around the revocation of the licences were reconsidered and the upstream industry regulator (NUPRC) advised that the asset be returned to the Concessionaires (NNPC Limited) to ensure clean and amicable exit for Addax.

On 25th January 2022, NNPC Limited commenced formal engagements with Addax and NUPRC, followed by series of meetings to ensure a swift closeout of the exit discussions and formalities.

This culminated to the preparation and signing of a Transfer, Settlement and Exit Agreement.

The Agreement received the support of the Presidency, Office of the Attorney General of the Federation, NUPRC, FIRS, EFCC, and the FCCPC, which led to a clean and amicable exit for Addax, by resolving the PSC
contractual issues in a robust, organized, and tactful manner.

This is an occasion where all stakeholders and Government agencies have shown camaraderie to achieve a common objective.

THE WHISTLER had reported that the revocation action, if it was left to stand would have resulted in several legal implications to the NNPC and the Federal Government.

Speaking during the agreement signing in Abuja on Tuesday, Kyari said the deal would boost the production of crude oil production from the assets for the benefit of Nigeria.

Kyari said the NNPC Ltd has assembled a Transition Management Team to manage oil production and develop the gas potentials of the acreages.

In his address at the close-out and signing ceremony, the NNPC GCEO charged the Transition Management Team to hit the ground running towards restoration and fulfilment of the promise of the Assets.

He added that readjustment is expected to be swift and efficient, and there will be no excuses for production losses/deferment as NNPC Ltd has proven that it is ready to provide all the necessary support required.

Due to multiplicity of challenges witnessed by the Assets over the years, most especially in recent past, they(combined) are currently producing an average of 6,000 BOPD.

But with good asset management in place, he said production increase of 10,000 BOPD is expected before the end of the year, and total production is expected to be doubled in 2023.

He described the pact as another laudable achievement by NNPC Ltd that is set to deliver additional value to the nation through increased oil production and gas monetization from the resource-rich acreages.

Kyari said, “We have worked with all our regulatory agencies, the FIRS, the FCCPC, NUPRC and all other agencies of government to arrive at what we have today.

“We believe that we have delivered on the mandate given to us by government to take over this asset and as expected. There have been ongoing engagements with the FIRS and this is in line with the approvals that we have.

“From today, we expect the asset to take off immediately and we will restore production, ensure all governance requirement and as we proceed and also maintain the confidence of workers in this company in line with the commitment that we have, there will be no disruptions in the operations of this company.

“Lastly, I know that the team in NNPC and Addax have done a great work to arrive at what we have today. Today, we see the exit of our partners and we hope they stay with us in Nigeria because Nigeria is a good place to invest.”

In his remarks, Ajiya said that with the signing of the agreement, NNPC has kept it’s words as a reliable company.

He said, “All due process has been followed leading to the drafting and the issuance of this final version of the Addax settlement transfer and exit agreement.

“All required approvals including NNPC’s Board of Directors approval have been obtained and all necessary approval from the regulator the NUPRC, FCCPC, as well as the Office of the Attorney-General has been secured.

“And therefore, the only issue at the moment that has not been disclosed is the reconciliation with the Federal Inland Revenue Service and which is also ongoing and we assure our brothers in Addax that this process will come to a close a quickly as possible.”

By engaging the industry regulations, the FCCPC, the FIRS, and the Office of the Attorney-General of the Federation, he said NNPC has shown that the transaction has been implemented in good faith.

“The same good fate is also expected on all parties in delivering on their closing obligations.

“The expectation from the transition management team is to hit the ground running, there will be no excuses for production losses at the NNPC Ltd,” he added.

Also, in his speech at the event, Wunti said this is the first time in the history of hydrocarbon exploitation journey that a PSC asset is being reverted back to the concessionaire from the contractor.

He said, “With the exit upon signing, We are going into a physical transition in which the asset operatorship will be transferred to us in a very prudent manner.

“We already agreed on transition framework. That transition framework will begin immediately.

“We believe immediately we sign this in another two weeks, we should be able to bring back and immediately restore about 10,000 barrels and that will be a stage that will set more incremental production. This wouldn’t have been possible without this signing.”