OML 130: The Truce to Unlock $510m Gas Revenue
If there is anything the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari will be remembered for, it is his knack for resolving long-standing disputes and responding proactively to emerging global trends in the oil and gas sector.
First, it was his intervention that led to the reopening of the Oil Mining Lease (OML) 25 flow station after two years of inactivity as a result of squabbles between the host community/Belema Oil and Shell Petroleum Development Company (SPDC) in Rivers State. The closure robbed Nigeria 35,000 barrels of crude oil per day.
For those who have coursed through the upstream and downstream sectors of the industry, disputes and hostilities are common sight. In fact, it will be interesting for posterity to capture Kyari as a man who stoops to conquer, because when warring parties refuse to back down, he steps in with the perfect prescription for tranquility, for no personal benefit of his.
Those with private sector orientation know that Kyari’s target-driven style is uncommon in public service; as it is bogged down by incredible bureaucracy. But Kyari, a seasoned technocrat with vast knowledge of the petroleum industry appreciates the importance of industrial harmony and he has placed a premium on it. So, he has obviously designed strategic ways of getting results, amid lean resources, without veering off the due process path. He insists that disputes are dangerous blights that must not be allowed to suffocate the sector and by extension the Nigerian economy.
So, it was a most soothing development when the media was recently awash with the news of the amicable resolution of yet another perennial dispute - Oil Mining Lease (OML) 130.
This particular deal comes with phenomenal fortune. It seeks to rev up crude oil production to 3million barrels per day and unlock gas revenues to the tune of about $225 million in the short term and $510 million in the long run for the country. If this is not a remarkable achievement, one wonders what is.
The magic wand was the accord the NNPC reached with its partners, China National Offshore Oil Company (CNOOC) and South Atlantic Petroleum (SAPETROL), to settle all outstanding issues surrounding the development of Oil Mining Lease, (OML) 130.
For emphasis sake, OML130 block, a deepwater project, is comprised of prolific bloc’s four oil fields: Akpo, Egina, Egina South and Preowei. Production from the Egina Field block discovered in 2003 is and the second development in production after the Akpo field, located 150 km off the coast of Nigeria in approximately 1,600m of water started in January 2019 and consisted of a Floating Production Storage and Offloading (FPSO) unit and a Subsea Production System.
CNOOC International has a 45 per cent working interest in the OML130 block, and its partners Total Upstream Nigeria Limited, who is the operator of the block holds a 24 per cent working interest, Prime Oil and Gas (16 per cent working interest) and South Atlantic Petroleum Limited (15 per cent working interest). At the recent signing of Head of Terms (HoT) agreement with the partners Kyari, said the deal was part of the Corporation’s Production Sharing Contracts (PSC) Dispute Resolution and Renewal Strategy of 2017 aimed at securing out of court settlement of all disputes around the 1993 PSC and agreeing on terms for their renewal.
Kyari’s words were properly captured by the Corporation’s Group General Manager, Group Public Affairs Division, Dr. Kennie
Obateru. He explained that the dispute arose from recognition of certain cost and discordant interpretation of the fiscal terms of the PSC by NNPC and the Contractor parties. With the resolution and signing of the Head of Terms (HoT) document which sets out the terms agreed in principle between parties in the course of negotiations, apart from unlocking over $225 million of gas revenues, it will also enable settlement of renewal fees and create an environment conducive to further development of OML 130 with associated benefits to the Federation.
The NNPC boss clearly explained that this effort is replicated with every other partner in the PSC dispute. As a man who believes in equity and justice, he assured the NNPC partners that the HoT will clearly enable them to proceed and have a full settlement to the benefit of all stakeholders.
He commended CNOOC and SAPETROL for their understanding, while expressing delight that the HoT will facilitate the conclusion of all renewal issues. For a fact, such an effort does not go without appreciation. So, the Managing Director of CNOOC, Mr. Xie Vincent Wensheng, said the agreement has opened a new chapter in his company’s relationship with NNPC, stressing that it has provided a win-win situation for all parties.
On his part, Managing Director of SAPETROL, Mr. Toyin Adenuga, said the resolution of the dispute was a very important step towards further development of OML 130 and other new fields as the terms are now clearly spelt out. The execution of the HoT signals the resolution of a tax dispute that arose from the $2.3bn acquisition of a 45% stake in OML 130 by CNNOC from SAPETRO in 2006.
The OML 130 consists of the Akpo and Egina Fields which have been producing since 2009 and 2018 respectively. It is operated by Total Upstream Nigeria Ltd which holds 24% stake, while Petrobras Oil and Gas BV and SAPETRO hold 16% and 15% stakes respectively.
A cursory assessment of the Kyari’s transformational strides in the past 13 months has reflected remarkable innovations and the attendant positive developments, especially when understood against the backdrop of the pervasive effects of the economic sluggishness caused by the COVID-19 pandemic. Again, the efforts of Kyari to take the NNPC to the next level can be gleaned by his interventions in a broad spectrum like technology deployment, dispute resolution, transparency and diversification.