24-year Oil Production Deal Between NNPC, Addax Officially Ends

24-year Oil Production Deal Between NNPC, Addax Officially Ends

Thursday, February 2, 2023 10:44 am

NNPC Limited and Addax finally end their relationship. Kyari, right,and Addax boss

* Antan Takes Over Four Assets

*Jajere leads new transition team

The 24-year Production Sharing Contract (PSC) with Addax Petroleum Development (Nigeria) Limited was announced by the Nigerian National Petroleum Company Limited (NNPC) yesterday. That marked the exit of the Sinopec of China’s subsidiary.

That was contained in a statement signed on behalf of the national oil company by its Chief Corporate Communications Officer, Garbadeen Muhammad. He wrote that that the amicable settlement was reached after both parties fulfilled closing obligations.

The official end to the business relationship came three months after the execution of the Addax Transfer, Settlement, and Exit Agreement (TSEA) for the PSC Oil blocks, OMLs 123/124 & 126/137, with the assets now transferred to the concessionaire, NNPC.

“Consequently, NNPC has taken necessary steps to take over the assets and oversee a clean, amicable, and speedy exit for Addax Petroleum Ltd., operate the asset on interim basis as a first step and subsequently appoint a competent replacement PSC contractor while NNPC Limited continues to remain the concessionaire of the assets in line with extant laws and regulations,” the oil firm stated.

The PSC for the oil blocks was, according to a Thisday report, initially signed in 1973 between the NNPC and Ashland, but was terminated after 25 years. Subsequently, the NNPC signed another PSC with Addax in 1998 on the blocks which were operated through Addax Petroleum for over two decades.

However, the Addax PSCs were associated with significant intricacies and complexities and attendant disputes, even threatening the diplomatic relations between Nigeria and China at a point.

Multiple litigations then ensued, hindering the attainment of the desired objectives of value creation to the PSC parties, government, and other stakeholders.

Recently the NNPC explained that the facilities were producing an average of 6,000 barrels per day due to the challenges, despite the huge potential, stressing that a production increase of circa 10,000 bpd was expected before the end of 2022, and total production was expected to be doubled in 2023.

The drama trailing the Addax assets became pronounced in 2021 when the NNPC wrote President Muhammadu Buhari to reverse the then Department of Petroleum Resources’ (DPR) revocation of the OMLs and reject a reallocation to another company.

The NNPC in a letter to the president on April 20 of that year, had argued that the revocation of the oilfields would have implications for the Nigerian economy and the diplomatic relationship between Nigeria and China.

Three days after the letter was sent, the president overruled the revocation by the DPR, and cancelled the reallocation of the OMLs to Kaztec Engineering Limited/Salvic Petroleum Consortium, a firm DPR picked as a replacement. The defunct DPR had cited Addax’s inability to comply with agreed targets.

A panel set up by the Ministry of Petroleum to review the case, led by a former senator, Magnus Abe, had said $1 billion had been invested in the contract but Addax Petroleum called it off over an issue that was unrelated. The action, he said, put over 3000 Nigerians out of work.

On yesterday’s closeout of negotiations, the NNPC stated that formalities had been concluded in collaboration with the Office of the Attorney General of the Federation, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Federal Inland Revenue Service (FIRS), the Economic and Financial Crimes Commission (EFCC), and the Federal Competition and Consumer Protection Commission (FCCPC).

It noted that they have agreed on the clean and amicable exit for Addax by resolving all the PSC contractual issues, including litigations that culminated in the execution of a TSEA on November 1, 2022.

“With the fulfilment of the closing obligations by the parties and effective January 31, 2023, Addax transfers the operatorship of OMLs 123/124 and 126/137 to Antan Producing Limited on interim basis through the transition period pending the emplacement of a substantive replacement PSC in compliance with the directive of Mr. President,” it stated.

Meanwhile, the NNPC has announced the appointment of the transition team led by Mr Sagiru Jajere, as the Managing Director of Antan Producing Limited. Jajere was, before his appointment, the Head of PSC Investment Management at the NNPC Upstream Investment Management Services (NUIMS).

The national oil firm added that Jajere would be supported by a team of highly competent personnel with in-depth knowledge of the peculiarities of the Addax assets. In the meantime, it was learnt that Antan Producing Limited is a fully owned subsidiary of the NNPC.

“As the Addax assets return to NNPC Limited, it is expected that the much-needed investments will be deployed to the assets while prudently conducting petroleum activities and creating value for the PSC, government, and other stakeholders,” the NNPC said.

Jajere, the team lead, is from Potiskum and started his early education at Damboa Primary School, and from there he proceeded to Government Science Secondary School, in the state.

He attended the University of Maiduguri, Borno State, where he got his BSc in Civil Engineering and carried out his National Youth Service Corps (NYSC) in Osun State.

He had worked briefly with the Federal Ministry of Works and Housing, Lagos, moved to National Engineering and Technical Company Limited, NETCO a subsidiary of the NNPC and later proceeded to the corporate headquarters to support the local content drive of the firm.
Following the signing into law, the Nigerian Content Act in 2010, he was selected to form the implementation committee that produced the implementation document for the NCDMB and was eventually seconded as one of the pioneer staff that set up the Board.

In 2020 Jajere was transferred to National Investment Management Service, NAPIMS (Now NUIMS) to head the PSC as General Manager.

Join The Conversation

What do you think?

This site uses Akismet to reduce spam. Learn how your comment data is processed.