The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NURPC), Mr. Gbenga Komolafe yesterday confirmed that the Nigerian National Petroleum Company Limited (NNPC) has retrieved the Oil Mining Licences (OMLs) 123, 124, 126 and 137, that previously was held under a Joint Venture (JV) agreement between the national oil company and Addax Petroleum, a Chinese company.
The regulator accused the oil company of failing to meet the terms of the agreement, prompting it to halt the process.
In a brief update on the matter, Komolafe confirmed that Addax Petroleum was unable to meet its obligations in line with the guidelines governing the agreement.
Komolafe said by operations of the law, the award had lapsed and it had automatically reverted to the NNPC which operates Nigeria’s stakes in such petroleum contract sharing.
The NURPC’s chief executive explained that the awardees was not able to meet its obligations in line with the provisions of the contract, noting that the breach meant the annulment of the process.
“The status of the Addax Petroleum award is that right now the awardees have not been able to meet their obligations in line with the provisions of the award.
“And by the operations of the law, the award stand elapsed and it’s automatically reversed to the NNPC, that is the status as for now,” he explained.
With the decision, the next step for the NNPC is to look for new partners who would exploit the oilfields in a fresh production sharing arrangement.
Since March, 2021, controversies have been trailing the award and revocation of the licences, since they were first carried out by the defunct Department of Petroleum Resources (DPR).
At the time, the industry regulator had explained that the licences were revoked due to the non-development of the assets by the oil firm, leading to the company’s inability to comply with the work programme targets.
The then Director of the regulatory agency, Sarki Auwalu, giving further insight into why the licences were cancelled, had said it was discovered that over 50 per cent of the assets then remained underdeveloped.
According to him, the situation was resulting in loss of the badly-needed revenue to the federal government.
“The first reason for a revocation is when you discover that the asset is not being developed according to the business guidelines because it is economic sabotage,” he had stated.
The regulatory agency which has now metamorphosed into the NURPC then awarded the OMLs to Kaztec Engineering Limited/Salvic Petroleum Consortium.
But President Muhammadu Buhari overruled the ministry of petroleum and the DPR, thereafter ordering the restoration of the leases to Addax Petroleum, which was in production sharing contract with the NNPC.
The decision to return the assets to the Chinese firm, according to a statement signed by the Senior Special Assistant on Media and Publicity, Garba Shehu then, was in line with the administration’s commitment to the rule of law, fairness and enabling a stable business climate for investment.
While directing the DPR to retract the letter of revocation of the leases, the president had also asked the NNPC to utilise contractual provisions to resolve issues in line with the extant provisions of the Production Sharing Contract (PSC) arrangement between the corporation and Addax
The decision by Buhari was based on the strength of a letter written to him by the NNPC on April 20, 2021, arguing that the revocation of the oilfields would have implications on the Nigerian economy and the diplomatic relationship between Nigeria and China.
The NNPC had warned the president that the revocation, if unresolved, would create an unprecedented level of contingent liability of well over $1 billion for NNPC as the party in contract with Addax as well as reputational damage to the country.
The NNPC had then written: “Addax has not been investing in capital projects, development drilling, and exploration activities due to dispute on applicable fiscal terms on its blocks.”
The corporation had reminded the president that China was providing financing for key infrastructural projects like the railways projects and the Abuja-Kaduna-Kano Gas Pipeline Projects, amongst others, and warned that the revocation action could also threaten the realisation of these critical projects.