Addax Petroleum exits four oil blocks, transfers assets to NNPC

The Nigerian National Petroleum Company (NNPC) Limited says Addax Petroleum Development Nigeria has transferred four major oil mining leases (OMLs) to the national oil company after exiting from the assets.

The deal includes OML 123, 124, 126 and 137.

Addax is owned by Sinopec, a state-owned Chinese firm.

According to a statement by NNPC, both parties, on Tuesday, signed a memorandum of understanding (MoU) on the transfer, settlement and exit agreement (TSEA).

Umar Ajiya, NNPC’s chief finance officer (CFO) and Yonghong Chen, Addax’s managing director, signed the agreement for both companies, the national oil firm said.

With the agreement, NNPC said, Addax has ceased to be the production sharing contract (PSC) contractor for the four OMLs.

It said the dispute has now been amicably resolved to pave way for the much-needed investment and growth on the oil blocks.

“Today, a new page was turned in the history books of the Nigerian oil and gas industry,” the statement reads.

“The protracted dispute on OMLs 123/124, 126/137, operated by Addax Petroleum Nigeria Limited, has finally been laid to rest, paving the path for much-needed investment and growth on the oil blocks.”

Addax took over ownership of the four OMLs in 1998 after the NNPC terminated a contract with Ashland, which had operated the OMLs since 1973.

However, according to the statement, the firm’s PSCs were associated with significant intricacies, complexities and attendant disputes.

The statement noted that the deep-seated disputes threatened the cordial diplomatic relations between Nigeria and China.

“Consequently, the assets have suffered a significant lack of investment as multiple historical litigations have hindered the attainment of the desired objectives of value creation to the PSC parties, government, and other stakeholders,” it said.

“In 2021, issues around the revocation of the licences were reconsidered and the upstream industry regulator, the NUPRC, advised that the asset be returned to the concessionaires, NNPC Limited, to ensure clean and amicable exit for Addax.”

NNPC further disclosed that on January 25, 2022, it commenced formal engagements with Addax and the Nigerian Upstream Petroleum Company (NUPRC), followed by a series of meetings to ensure a swift closeout of the exit discussions and formalities.

Speaking on the deal, Mele Kyari, group chief executive officer (GCEO), NNPC, in a virtual address, said the deal would boost the production of crude oil from the assets for the benefit of Nigeria.

Kyari was quoted as saying the NNPC has assembled a transition management team to manage oil production and develop the gas potentials of the acreages.

He charged the team to work towards restoration of the assets’ potentials.

The NNPC leader said readjustment is expected to be swift and efficient, adding that there will be no excuses for production losses/deferment as  has proven that it is ready to provide all the necessary support required.

Kyari said with good asset management in place, a production increase of 10,000 barrels of oil per day (bpd) — from 6,000 bpd — is expected before the end of the year, and total production is expected to be doubled in 2023.

He described the deal as another laudable achievement by the national oil company that is set to deliver additional value to the country through increased oil production and gas monetisation from the resource-rich acreages.

In April 2021, the defunct department of petroleum resources (DPR) revoked the four Addax licences over poor development of the assets but three weeks later, President Muhammadu Buhari restored the licences.