Nigerian Government Revokes Addax’s PSC Licences, Re awards them immediately

By Macson Obojemoimien

The Nigerian government has revoked the four Production Sharing Contracts (PSCs) operated by Addax Petroleum in the country.

The PSCs are in respect of Oil Mining Leases (OMLs) 123, 124, 126 and 137, all operated by Addax Petroleum Development Nigeria Ltd (APDNL) and Addax Petroleum Exploration Nigeria Ltd (APENL).

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

The government has, almost immediately, awarded those assets to Kaztec Engineering Limited/Salvic Petroleum Resources Limited (KEL/Salvic) Consortium, consisting of two Nigerian owned independents, with effect from March 23, 2021, with the approval of President Muhammadu Buhari.

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(70%-30%: 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.

 



9 comments

  1. Agbuza Monday Aidelojie says:

    I hope DPR will not over looked d statutory liabilities incurred by Addax due NDDC throughout d period Addax was d operator of these Omls under PSC regime.
    Thank u

  2. Kelechi says:

    If this development holds true, it will be good to see how the relevant Government agencies concerned with this change and the new management from the new investors, will work together with PENGASSAN, to resolve all Industrial Relations issues around the impact of this change on the incumbent workforce of Addax; particularly on the stability of their employment tenure with the new investors and all the attendant employee liabilities hanging on Addax before now.

    We want to believe that this sudden change of guard will in no way afflict or affect the workers if properly managed.

    Kelechi

    • Kenedy says:

      Good decision taking by the government, Addax is the most wicked company on earth

    • Bayo says:

      I hope all the personnel liabilities, both current and retirees, will be considered in this new arrangement. I feel for the personnel who having been used to the best practices of the multinationals would have to face the practices of the locals. They are not known for honoring mutual agreements when it comes to buy over of companies. Examples abound in the country. Pengassan and NLC, we are watching you. Best of luck to all the current personnel

      Bayo

  3. BeeDee says:

    The more you look the less you see; this does not pass the smell test.

  4. Kinglsey says:

    Hmm….the oil politics in Nigeria is deep, very deep.
    Let’s hope the entire arrangements favour all interested parties.

  5. TAABAA KPOOBARI says:

    I see addax petroleum going to court for this action being taking by government. I know one of addax offshore field being operated by BW Offshore, honestly speaking, the production output per day is very poor 5-7 thousand barrels per day. There are about 16 wells but only about 5 wells are currently working. I pray addax sees the truth in this revocation.

  6. TAABAA says:

    Nigerians working with BW Offshore will be greatly affected, except there is proper negotiations. Did DPR give any notice prior to this time to Addax or just woke up and took this decision. If no then addax may go to court

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