The Nigerian National Petroleum Company (NNPC) Limited extended its contract with its multinational oil company partners for five major oil blocs on Friday.
According to NNPC Limited, the deal might put an end to the long-running disagreement between the state-owned firm and the contractor parties in Oil Mining Leases (OMLs) 128, 130, 132, and 133, as well as 138 PSCs.
The contracts are the Production Sharing Agreement, the Dispute Settlement Agreements, the Settlement Repayment Agreement, and the Escrow Agreement. The deal was signed at the NNPC headquarters office in Abuja.
The signing of the new PSCs, according to NNPC, is an important milestone accomplishment for NNPC Ltd that would eventually unleash the potential in the Nigeria upstream industry.
It said that the execution of the PSCs would enhance investment and development of Nigeria’s vast petroleum resources, as well as guarantee that the NNPC Limited’s trifold objective of ensuring energy availability, sustainability, and accessibility is met.
Mele Kyari, Group Chief Executive Officer of the NNPC Limited, stated at the occasion that the accord was part of the corporation’s 2017 dispute resolution and renewal strategy, which intended to secure out-of-court settlement of all complaints relating to the 1993 PSC and agree on conditions for their renewal.
“This is a major landmark achievement since our transition to a limited liability company under the Company and Allied Matters Act (CAMA),” Mr. Kyari said.
“The Petroleum Industry Act (PIA) was signed into law by President Muhammadu Buhari on 16th August 2021. This law gave NNPC the legal backing to renegotiate all her existing PSCs in conformance to the provisions of the new Act within 1 year.
“A major issue for all of us is all forms of litigation. As you do this, it damages relationships, and more than anything else, it stifles investment. That is why exactly that situation was brought to the table, that except for one asset, practically did crude oil enter into any new commitment, since 2007,” he said.
“This is clearly related to the disputes around the 1993 PSC, and we knew that as the JIA process was going on the process to put the Petroleum Industry Act, it was very obvious that the resolution or the dispute of the 1993 PSC is a critical part of that bargain.
“Today, we are happy. 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 recognizes 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 litigation so that some terms and conditions will enable us to move forward with our relationship and that is why we are here today,” Kyari added.
“Today, we are on the verge of making history, the history to resolve all pending disputes in our PSCs with a potential to develop and monetize over 10 billion bbls and generate revenue in excess of US$ 500 billion to stakeholders, and attainment of energy security for the country,” he said.
“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 the security of energy supply, sustainability of Energy Supply, and accessibility is achieved”
Nigeria’s production sharing contracts began in 1993 and were later followed by PSCs in 2000, 2004, 2005, 2007, and 2010. The PSC in Nigeria was primarily prompted by finance issues encountered by joint venture agreements, which resulted in a decrease in output and income.
Mr. Wunti said that since the PSC was introduced into Nigeria’s hydrocarbon production equation, the different PSC arrangements had produced and monetized over 5.9 billion barrels of oil equivalent. Over the previous two decades, the PSCs have contributed for around 40% of Nigeria’s oil output.
The event was attended by the NNPC Board Chairman, Margary Okadigbo, the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, the Chief Executive Officer of the Nigerian Downstream and Midstream Petroleum Regulatory Authority, Farouk Ahmed, the Executive Chairman of the Federal Inland Revenue Service, Mohammed Nami, the Group General Manager of the National Petroleum Investment Management Services Bala Wunti, the Chief Financial Officer of the Nigerian Petroleum Investment Management, Umar Ajiya and many other industry stakeholders.