The Nigerian National Petroleum Corporation (NNPC) and its production sharing contract (PSC) partners on Tuesday sealed a deal that would help boost the country’s oil output with the production from the deep offshore water oil concession, Bonga.
Bonga Field operated by Shell Nigeria Explorarion and Production Company(SNEPCO), the deep offshore affiliate of Shell Petroleum Development Company of Nigeria, is reputed to be one of the largest deep offshore oil fields in Nigeria’s oil basket.
Previously located in oil production license (OPL) 212, the oil field was located about 75 kilometres off Niger Delta coastal wayers and sits on an average water depth of 1,000 metres (3,300 ft).
Discovered by Shell in 1996, the field covers an approximate expanse of 60 kilometers square meters.
It was renamed OML 118 in February 2000, with first oil production achieved in November 2005.
Partners in the development of OML 118 under a PSC arrangement include NNPC, SNEPCo, Total Exploration and Production Nigeria Limited (TEPNG), Esso Exploration and Production Nigeria Limited (EEPNL) and Nigerian Agip Exploration (NAE).
At the agreement signing ceremony to signal the renewal of the operating rights to OML 118 for another 20 years, the Group Managing Director of the NNPC, Mele Kyari, said the deal was an indication of “a renewed confidence between NNPC and her partners as well as between the government and the investing communities, including NNPC.
Under the terms of the five agreements executed beween the NNPC and its partners led by Shell,
all parties agreed on a Dispute Settlement Agreement, Settlement Agreement, Historical Gas Agreement, Escrow Agreement and Renewed PSC Agreement.
They also resolved to cooperate to deliver to Nigeria immediate benefits in terms of oil and gas production valued at about $780million.
The operation of the oil field based on the latest agreement would save Nigeria about $6billion in arbitral liabilities, while paving way for the creation of about 10,000 direct and indirect job opportunities for Nigerians.
Kyari said over $10billion of investment would be unlocked as a result of the agreements signaling the end of the long-standing disputes over the interpretation of the fiscal terms of the PSC.
The agreement also put in place a clear and fair framework for the development of the huge deep-water assets in Nigeria.
“Bonga Field produces value for all of us by providing a clear line of sight for investment at around $10billion,” Kyari said.
Ths NNPC GMD said apart immediate revenues to the Federal Government while it would also free the parties from over $9billion in contingent liabilities.
“Ultimately, these agreements will engender growth in our country where investment will come in for other assets, not just in the deep-water, but even for new investors.
“It is an opportunity for them to see that this country is ready for business,” the NNPC GMD said.
He thanked President Muhammadu Buhari, the Minister of State for Petroleum Resources, Timpre Sylva, and the NNPC Board of Directors for enabling the Corporation to achieve this laudable landmark.
The Country Chair of Shell Companies in Nigeria, Osagie Osunbor, said the OML 118 renewal agreement would remain a watershed in the history of deep-water investments in Nigeria.
He assured that the giant stride would further bolster investor confidence in the country.
The Managing Director of SNEPCo, Bayo Ojulari, said the agreements marked the end of a 12-year dispute that had marred business relationships and affected trust and investment plans.
“Today, we have signed agreements that define the future of deep-water for Nigeria. This is the first deep-water block that was developed in Nigeria and it is also the first major one that we are resolving all the disputes that will lay the foundation for the resolution of other PSCs,” the SNEPCo helmsman stated.
On their parts, the Managing Directors of Total, Mike Sangster, Exxonmobil, Richard Laing and NAOC, Roberto Danielle, all applauded the GMD NNPC for providing leadership which engendered the resolution of the disputes.
They assured that the agreements would attract more investments into the Nigerian Oil and Gas Industry.
The Bonga Field is reputed to be endowed with about two billion barrels of crude oil reserves and about one trillion cubic feet of gas.
All parties agreed the agreement would pave the way for oil production from the offshore concession to help Nigeria earn more revenue to re-balance its budget and fiscal challenges, through increased oil production and exports, while addressing the global competition, in terms of prioritization of investments by key players.
In February 2019, the NNPC signed Heads of Terms (HoT) agreement with Shell and other PSC contractors in OML 118.
The terms of the agreement formed the commercial framework for parties to settle their differences, create pathway for a sustainable brighter future and a reference point for resolving the industry-wide PSC disputes.
The key feature of the terms of settlement include clear terms on the oil block ring-fencing, gas commercialization terms, replacement of disputed tax credits for clearer investment allowances, trade-offs on in-block consolidation and cost limits, early lease renewals, assurance of fiscal stability for investors, protection of profit sharing schemes and settlement of disputed past, among others.
The HoT would translate to fully termed agreements, including the Dispute Resolution Agreement and a new PSC Agreement for the OML 118 Contract Area.
After two years, the parties to the agreement on Tuesday resolved to confirm the anticipated full terms agreement, including the new PSC and the Dispute Settlement agreement reflecting the major agreed terms of the HoT, which finally creates a certainty for the desired brighter future.