DPR Revokes Addax PSCs’ Licences — Economic Confidential

DPR Revokes Addax PSCs’ Licences

The Federal Government has revoked the four Production Sharing Contracts (PSC) operated by Addax Petroleum Development Nigeria Limited (APDNL).

The Director, Department of Petroleum Resources (DPR) Sarki Auwalu, who made this known on Tuesday in Lagos, listed the affected oil blocs to include Oil Mining Leases (OMLs) 123, 124, 126 and 137, adding that the government has awarded those assets to Kaztec Engineering Limited/Salvic Petroleum Resources Limited (KEL/Slavic) Consortium, said to consist of two Nigerian owned independents with the approval of President Muhammadu Buhari.

He said a meeting had been scheduled for tomorrow (today) for the preliminary takeover of the assets by the new operators.

Auwalu, in an interactive session with reporters, said the government’s action was prompted by Addax’s failure to operate the oil blocs and thereby not adding value to the assets, a development he likened to sabotage.

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He said over 50 per cent of the assets under Addax’s control were undeveloped and were not being operated “in a vigorous manner and that constitutes revenue loss to the government”.

He added that the average reserved assets remained flat underlining the fact that activities around the oil blocs have not been improved upon.

The DPR chief also said that investigation overtime, equally revealed that crude oil production around the oil blocs has been declining due to inadequate investment, pointing out that significant gas flaring persisted, in his words, “contrary to our desire to move the economy to gas.” He also said that Addax was never known to have supplied gas to the domestic gas market.

Auwalu said APDNL is fully aware of the on-going development, saying all the affected parties have been interacting. “It is the outcome of the regular interactions that have led to this action which makes it necessary for us to recommend to government to take this necessary action,” adding: “The license has been awarded to a new consortium that will assume the new assets on the same terms.”

Meanwhile, the oil and gas sector has accepted a proposal by the DPR to intervene in the procurement and supply of the AstraZeneca vaccine to its workforce, as well as contribute the same volume to government’s effort in providing same to the general public.

The measure, Auwalu said, would require about $109 million to accomplish.

He said for every dose of the vaccine procured for the oil industry workers, the same quantity would be supplied to the government and distributed through the approved protocol, saying that there would be neither involvement of the DPR nor the oil firms, except at the level of funding by the affected oil firms.

The decision was conveyed in a letter signed by the Director of the Department of Petroleum Resources (DPR), the industry regulatory agency.

The re-award happened so swiftly after the revocation letter, in a matter of three days, leading to the Easter Holiday weekend, that the process signals itself as unusual.

The key reason adduced by the state for the revocation was lack of compliance with work programme targets. The properties are all producing assets on which royalties are being paid and revocation is hardly applied on for work programme issues, even though government publicly frowns upon companies “sitting” on acreages without working them. OMLs 123 and 124 were expected to expire in 2022 while OMLs 126 and 137 December 2024 and May 2027 respectively, according to the Nigerian Oil Industry Annual Report published by the DPR.

The apparent haste of the re-award also raises questions as to why the acreages are not put in a basket for a bid round, considering that government is working on a bid round of acreages, which it hopes to commence after the conclusion of the ongoing Marginal Field bid round, expected to wrap up by May 1, 2021. The national consensus around acreage offerings, which has now found its way to the Petroleum Industry Bill, is that the minister ceases discretionary awards of acreages and that hydrocarbon properties, once they become open, are part of periodic, transparent, licensing sale.

The award to Kaztec and Salvic grants Production Sharing Contracts (PSC) arrangements for OMLs 123, 124 and 126 (70per cent-30per cent: KEL/Salvic-NNPC production ratio split for each asset) and Sole Risk arrangement for OML 137. The government says that the conditions governing the award include the payment of Good and Valuable Consideration and Minimum Work Programme Commitment for each of the assets, “which shall be communicated to you in due course”. The DPR says it will, very soon, invite KEL/Salvic Consortium, Addax Petroleum Development Nigeria Ltd (APDNL) and Addax Petroleum Exploration Nigeria Ltd (APENL), which it describes as “the previous operators of the assets” and the NNPC -the concessionaire, to a meeting to begin preliminary handover formalities accordingly.

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