Nigeria Eyes $500B In Revenue From Renewed PSCs With Oil Majors

By August 24, 2022 NEWS

Nigeria, through its Nigerian National Petroleum Company (NNPC), has made a step towards unlocking over $500 billion in revenue from its oil resources. Only a month after the NNPC transited to a limited liability company, it has executed fully termed agreements for the renegotiated Production Sharing Contracts with contractors in five Oil Mining leases.

Besides the revenue potential for the nation, NNPC noted that the agreements in OMLs 128, 130, 132, 133, and 138, are set to unlock investment in the upstream sector and boost investors’ confidence.

Commenting on the renewed PSCs, group CEO, NNPC, Mallam Mele Kyari, said renegotiations of the assets were in line with the provisions of section 311 of the Petroleum Industry Act (PIA) 2021 with other improvements to the PSCs aimed at driving performance in the PSC operations.

Speaking further, Kyari said the negotiations were completed within the timeframe specified by PIA for all re-negotiated PSCs, stressing that “the “meaning of this is that there is now a great deal of clarity between NNPC Ltd and its partners in the deepwater space.”

Kyari commended President Muhammadu Buhari for his leadership in providing the NNPC and its contractors the opportunity to achieve the milestone through the PIA, thereby offering more opportunities for boosting the nation’s crude oil production and revenue base.

In his remarks, Country Chair, Shell Companies in Nigeria, Osagie Okunbor described the execution of the OML 133 PSC contract as significant progress towards harnessing the deepwater resources of Nigeria.

Also speaking, the Chairman/Managing Director of ExxonMobil Companies in Nigeria, Richard Laing noted that the renewal of the Usan (OML 138) and Erha (OML 133) leases validates his company’s commitment to maintaining a significant deepwater presence in Nigeria, through Esso Exploration and Production Nigeria (Deepwater) Limited.

On his part, Chairman/Managing Director of Chevron Nigeria Limited (CNL), Rick Kennedy said Chevron is proud of its strong partnership with Nigeria and its various partners and remains committed to supporting the country to develop its energy resources safely and reliably.

The recent negotiations will put to rest the protracted dispute between the NNPC and the Contractor Parties in Oil Mining Leases (OMLs) 125, 128, 130, 132, and 133, as well as 138 PSCs). The PSCs and their leases, except OML 130, will run for another 20 years term under pre-PIA laws, while OML 130 is to be renewed under PIA terms.

The PIA in Section 311(2) stipulates that new PSC agreements under new Heads of Terms will be signed between NNPC as Concessionaire and her Contractor Parties within one year of signing the PIA into law, giving a deadline of 15th August 2022.

This provision paved the way for the resolution of lingering disputes which created investment uncertainty and stifled new investments in the nation’s deep offshore assets.

To achieve this, NNPC leveraged the near-end term of the PSCs and the parties’ interest to renew the PSCs as a negotiation currency in bringing the contractors to work towards trading the past for the future.

These renewed PSCs would provide several benefits such as improved long-term relationships with contractors, elimination of contractual ambiguities, especially concerning gas terms, and enable early contract renewal amongst others.

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