The revised Production Sharing Contracts (PSCs) in the Nigerian oil and gas industry will deepen investments, grow deepwater oil production to 10billion barrels and generate over $500billion revenue
, the Nigerian National Petroleum Company (NNPC) Limited said.
The Group General Manager, National Petroleum Investments Management Services (NAPIMS), Bala Wunti, who disclosed this at the signing of the revised PCs in Abuja on Friday,
The ceremony also featured the signing of Dispute Settlement agreements as well as Escrow/Settlement agreements with joint venture partners, signifying the end to the lingering disputes over contract terms since 2007.
The five oil mining licenses (OMLs) whose agreements were signed with NNPC on Friday included OMLs 128 operated by Chevron Nigeria Limited; OML130 operated by South Atlantic Petroleum Company (SAPETRO); OML 132 operated by Texaco Nigeria Outershelf Nigeria Limited; OML133 operated by Shell Nigeria Exploration &Producrion Company (SNEPCO) and OML138 operated by Esso E&P on behalf of ExxonMobil,
The Agbami-Ekoli Oil Field, one of Nigeria’a largest deepwater projects,is located in OML 128, while Apo/Egina deepwater oil field is located in OML 130.
Similarly, the Bonga South West Aparo is located in OML 132, while Erha Deepwater oil field development is located in OML 133.
Although the PSC arrangement was introduced In Nigeria in 1993 to address the peculiar funding challenges faced by the joint venture operators, disputes between contractors/operators and their partner concessionaire (NNPC) characterized its implementation,
resulting investments in major brown and greenfield deepwater projects being stifled.
However, following series of negotiations with the various PSC partners, Wunti said the NNPC reached new terms, which resulted in the drafting of dispute settlement agreements signed on Friday on the five OMLs.
The execution of the revised PSCs, which has a lifespan of 20 years each, he said, would deepen investment and development of the country’s deepwater petroleum resources, while helping realise NNPC Limited’s triple mandate of ensuring energy supply security, sustainability, and accessibility.
He said the new PSC’s would encourage NAPIMS to collaborate with PSC Contractors to put in place the essential final investment decision parameters for major deepwater projects in the country, including Agbami Gas Projects operated by Chevron; Owowo and Bosi development by ExxonMobil; Bonga North and Bonga Southeest Aparo, Bolia-Chota by SNEPCO, and Preowei Project by TotalEnergies.
Already, he said NAPIMS was determined to realize the 2022 target set for FID for the Bonga New oil projects, Bonga North project and Agbami gas projects.
These brownfield projects when operarional, he said, would attract FDIs of about $4billion and additional volume of 170,000 barrels per day of oil and 560 million standard feet per day of gas, while FID on the greenfield projects on Bonga, Bolia and others are targeted at between 2023 and 2024.
“Pending the resolution of all disputes in our PSCs, Nigeria has a potential to develop and monetize over 10 billion barrels of oil in place and generate revenue in excess $500billion to stakeholders, and attain energy security for the country,” Wunti said.
Prior to the agreement signing, the Group Chief Executive of NNPC Limited, Mele Kyari said the exercise followed the approval by the federal government for the renewal of the five OMLs for 20 years.
Kyari said he negotiations have been ongoing for almost ten years to resolve the knotty issues in the PSC and deep-water development agreements, adding the signing ceremony narked a major turning point in the history of the Nigerian oil and gas industry.
He blamed the disputes and disagreements that characterized the PSC’ arrangements since 2007 to lack of clarity and understanding of the agreements between the NNPC and its partners, complicated by the law required to regulate them.
“Misunderstanding of the terms of agreement became a major issue for all the partners, leading to arbitration and all forms of litigations.
“These damaged the relationships of the partners and stifled investments in the industry. Except for one asset, the NNPC could not enter into any new commitment since 2007,” Kyari said.
With the PIA process, he said the NNPC took advantage of the opportunity to resolve the disputes over the 1993 PSCs as a critical part of the bargain for the new fiscal terms included in the new law.
He said the series of negotiations between the NNPC and its partners brought new terms that were beneficial to the country and investors, to enable both parties recover their costs as well as make the competitive benefits from their investments.
At the end, he said the PIA recognized all the fiscal terms packaged to ensure all the conditions that resulted in the disputes in 2007 were met, allowing the parties to close their disputes in an amicable manner, such that all litigations were stopped and the terms and conditions would enable the parties to move forward in their relationships.
“With this, we will have much better and clearer relationships with the partners and agreement on the PSCs and recognize all the issues that affected the 1993 PSCs.
“All ambiguities have been reduced to the barest minimum, with Dispute Settlement Agreements put in place to recognize the PSCs, putting aside the extensive disputes the parties had in the past as well as put aside the contingent liabilities of about $9billion,” he said.
The new agreements, Kyari pointed out, would enable everyone have better value for the government, the partners, tax agencies and others involved in the industry.
He expressed confidence that the signing of the PSCs would bring new investments, as uncertainties have been removed, while new investors would come into the industry because of the terms of the PIA, that enable the recovery of costs, ensure competitive benefits to the partners and make Nigeria the environment of choice for investors.
The Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, said with the new PSC’s under the PIA, the country now looks up to the NNPC for leadership, in view of the gale of divestments by the IOCs from the country.
He challenged the NNPC to lead other indigenous operators in the country by turning the country’s weaknesses into strength, adding that the Commission as the regulator wasthe NNPC was fully prepared to take up the challenge.
With the reforms in the industry, Komolafe said the NNPC would, in no time, expand its portfolios and establish its presence in the industry and assume its position like its contemporaries like Petronas of Norway, Petrobras of Brazil and Saudi Aramco.
As a regulator, he said the Commission would continue to create a level playing field and ensure predictable investment environment in the counry.
In his remarks, Country Chair, Shell Companies in Nigeria, Osagie Okunbor, said the execution of the PSC agreement in OML 133 would ensure significant progress towards realising Nigeria’s deepwater oil potentials and revenues.
The Chairman/Managing Director of Exxon Mobil Companies in Nigeria, Richard Laing said the renewal of the PSCs in Usan and Erha oil fields validates the company’s commitment to maintaining significant deepwater presence in Nigeria.
Chairman/Managing Director of Chrvron Nigeria Limited, Rick Kenned, said the company is proud of the strong partnership it has with Nigeria and its partner, adding that the renewal of the PSC agreement strengthens the company’s commitment to help develop its deepwater oil resources.
The signing of the new PSCs is a fulfilment of the requirement of Section 311(2) of the PIA, which stipulates that new PSC agreements under new Heads of Terms should be signed between NNPC Ltd as Concessionaire and her Contractor Parties within one year of signing the PIA into law, ahead of August 15,2022 deadline.
