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Nigeria eyes $500b revenue as IOCs, NNPC seal new contract

By Kingsley Jeremiah, Abuja
13 August 2022   |   4:10 am
There are indications that Nigeria may unlock about 10 billion barrels of crude oil, revenue of $5 billion and immediate Final Investment Decisions (FIDs) in key oil and gas projects worth $4 billion following renegotiation and new agreements in the 1993 Production Sharing Contract (PSC).

Europe, America On Watch List Over Oil Theft
There are indications that Nigeria may unlock about 10 billion barrels of crude oil, revenue of $5 billion and immediate Final Investment Decisions (FIDs) in key oil and gas projects worth $4 billion following renegotiation and new agreements in the 1993 Production Sharing Contract (PSC).

Coming on the backdrop of the Petroleum Industry Act (PIA), a number of International Oil Companies (PIA) and the Nigerian National Petroleum Company Limited (NNPC) signed agreements ranging from the PSC, Escrow Agreements, Dispute Settlement Agreements, Settlement Agreements as well as Repayment Agreements on some Oil Mining Licences (OMLs), which included OMLs 128,130,132,133 and 138.

The development would, according to the stakeholders, see FIDs on Bonga projects and Agbami projects leading to $4 billion as well as 170,000 barrels of crude oil per day and 560 MSFD of gas.

Other projects, expected in 2023 and 2024, are major Greenfield project on BSWA, OWOWO, PREOWEI, BOAI and others.

The PIA had given NNPC the legal backing to renegotiate all existing PSCs in compliance with the provisions of the new Act within a one-year period.

Recall that Section 311 sub-section 2 of the PIA stipulates that new PSC agreements under new Heads of Terms would be signed between NNPC Ltd as Concessionaire and her Contractor Parties within one year of signing the PIA into law, giving a deadline of August 15, 2022.

With the development, the IOCs and the state oil firm would put behind lingering legal disputes, which had created investment uncertainty and stifled new investments in the nation’s deep offshore assets.

This is coming as the Group Chief Executive Officer of NNPC, Mele Kyari, yesterday, disclosed that the country would not allow the activities of oil thieves and vandals to sink the nation’s economy, adding that the country would now track crude oil of Nigerian origin across the world, especially in refineries in Europe, America and other countries.

Kyari stated that while disputes and disagreements were inevitable, there wouldn’t be investment in the sector without clarity, stressing that the move to renegotiate the PSC remained a step in the right direction.

“That is why we have had misunderstandings since 2007, which has been a major issue to all of us leading to arbitration and all forms of litigations. These damage relationships and affect investment,” he said.

The new move, according to him, would result in the closure of the disputes in an amicable manner so that the partners would stop all litigations and move forward.

Kyari added: “The real impact of this is that we will have much better, much clearer relationship with our partners. We’ll have clear agreements for new production sharing contracts that must have recognised all the issues that we have with the 1993 PSCs.

“Our country kept its promise, and I understand very clearly that it would not have been possible except you had some courage of leadership, and all of us must give this credit to President Muhammadu Buhari, who agreed that we must resolve this most amicably, in a manner that benefits the country, but also in a way investors recover their cost and make the competitive benefits that they must have from their investments.

“In the end, the PIA recognises all those terms. The fiscal terms are re-engineered to make sure that these terms are met and also allowed us by law to close our disputes amicably so that we stop all litigations; so that some terms and conditions will enable us to move forward with our relationship and that is why we are here today.”

Assuring investors that the Federal Government was not helpless in dealing with crude oil theft, Kyari said a new control system has been developed to monitor all oil sites in the country as well as an online real time incident report platform.

He also disclosed that Nigeria’s crude would now carry special identity numbers, a development that would enable the country to take serious actions against countries condoling oil thieves, who are refining Nigerian crude without the identification number.

The Group General Manager of the National Petroleum Investment Management Services, Bala Wunti said the new deal has the potential to develop and monetise over 10 billion barrels of crude oil and potential revenue in excess $500billion to stakeholders and attainment of energy security for the country.

According to him, over the last two decades, the PSCs have cumulatively accounted for about 40 per cent of Nigeria’s oil production.

“However, the implementation of the PSCs in Nigeria was characterised by disputes over the years between the Contractors/Operators and the Concessionaire (NNPC).  The disputes stifled investment in major Brownfield and Greenfield Deepwater projects.

“The execution of the revised PSCs today will deepen investment and development of Nigeria’s rich petroleum resources and ensure that the trifold mandate of the NNPC Ltd to ensure security of energy supply, sustainability of energy supply and accessibility is achieved.

“In anticipation of this history signing of the PSC, NAPIMS had been actively working in collaboration with PSC Contractors to emplace essential Final Investment Decision parameters for major Deepwater projects including Chevron operated AGBAMI Gas Projects, OWOWO and BOSI development by ExxonMobil, SNEPCO’s BONGA North and BONGA Southwest Aparo, BOLIA-CHOTA, the PREOWEI Project being operated by TotalEnergies,” Wunti added.

Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, who was also at the event, noted that the effort was a milestone in the implementation of the PIA.

“I have just two messages. The first is that the nation looks up to the NNPC. The NNPC should lead in turning our weaknesses into strengths and we are very confident that as a regulator, the NNPC is fully prepared to lead operators; and the second is the fact that with the reports that we see happening with the new NNPC, that in no times, NNPC will have presence expanding its portfolios like Petrobas and Aramco,” he noted.

The Chief Executive of the Nigerian Downstream and Midstream Petroleum Regulatory Authority Farouk Ahmed, said:
“Another area that I want to emphasize, as you are here and planning for future investments, please focus on gas assets. Lets focus on gas assets so that we can develop that midstream sector of oil and gas industry.”