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NNPC acquires Addax oil blocs

TSinopec’s Addax Petroleum Development (Nigeria) Limited yesterday handed over its four major oil mining blocks in the country, announcing its departure from the country in the process. This follows the signing of a settlement and exit agreement between the Nigerian National Petroleum Company Limited (NNPCL) and Addax.

In a statement signed by NNPCL’s Chief Corporate Communications Officer, Garba Deen Muhammad, the NNPCL said with this agreement, Addax has ceased to be the Production Sharing Contract (PSC) contractor for the Oil Mining Leases (OML) 123/124 and 126/137.

The NNPCL Chief Finance Officer, Umar Ajiya, signed the agreement on behalf of the company along with the Managing Director of Addax Petroleum, Yonghong Chen, signed on behalf of his company.

“Earlier today, NNPC Limited and Addax Petroleum Development (Nigeria) Ltd signed a Memorandum of Understanding (MoU) on the Transfer, Settlement and Exit Agreement (TSEA) for Oil Mining Leases (OML) 123/124 and OMLs 126/137,” the NNPC stated this on the company’s official Twitter page.

Group Chief Executive Officer of the NNPC Limited, Mele Kyari, said the Addax transfer would boost the production of crude oil from the assets for the benefit of Nigeria. NNPC became a commercial entity in July and is bulking up assets ahead of a planned initial public offering in the second half of next year.

The PSC for the blocks was initially signed in 1973 between NNPC and Ashland and was terminated after 25 years. Addax took over ownership of the four OMLs after the NNPC terminated its contract with Ashland in 1998.

Muhammad, in the statement made available to The Nation, further explained that in 1998, the NNPC signed another PSC with Addax on the blocks and operated through Addax Petroleum for another 24 years.

Also, in April 2021, Nigeria’s oil regulator revoked the four oil mining licenses, citing the company’s inability to comply with targets, but three days after the letter was sent, President Buhari overruled the revocation by the DPR and cancelled the reallocation of OMLs 123, 124, 126, and 137 to Kaztec Engineering Limited/Salvic Petroleum Consortium, a firm DPR picked as a replacement.

The now defunct DPR, in revoking the Addax licence then, cited Addax’s inability to comply with agreed targets.

A panel set up by the Ministry of Petroleum to review the case concluded that Addax had caused the country significant losses in revenue and jobs. The committee headed by a former Senator, Magnus Abe, had said $1 billion had been invested in the contract but Addax Petroleum called it off over an issue that was unrelated to the project. The action put over 3000 Nigerians out of work, the committee said.

But the presidency thereafter restored the leases on OMLs 123, 124, 126 and 137 to the NNPC which is in production sharing contract with Addax Petroleum. The NNPC advised the President that the revocation, if unresolved, will create an unprecedented level of contingent liability of well over $1 billion for NNPC as the party in contract with Addax and reputational damage to the country with possible dire unintended diplomatic consequences.

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