Addax Petroleum Loses Four OMLs as FG Revokes, Reassigns Lease

There are indications that the Federal Government has revoked and reassigned four Oil Mining Leases OMLs belonging to Addax Petroleum in Nigeria. The OMLs are 123, 124, 126, and 137 located in the Niger Delta, all operated by Addax Petroleum Development Nigeria Ltd (APDNL) and Addax Petroleum Exploration Nigeria Ltd (APENL) fall in the category of Production Sharing Contracts, PSCs.

The OMLs have been immediately awarded to Kaztec Engineering Limited/Salvic Petroleum Resources Limited (KEL/Salvic) Consortium with effect from March 23, 2021.

Sources say that this development was as a result of Addax Petroleum’s inability to meet up with targets as regarding “royalties” on the assets and had been issued with different letters at various times to the effect. The oil assets had also been left dormant for too long.

Production Sharing Contracts (PSC) account for about 24% of the nation’s crude oil and condensates reserves, while Joint Venture (JV) arrangements account for approximately 48% of the aggregate reserves. Notably, 45% of Nigeria’s aggregate reserves reside in the offshore terrain while 29% are on land. Swamp accounts for the remaining 26%.

While licenses of both OML 123 and 124 were awarded in 2002 and are expected to expire in 2022, those of OML 126, 137 issued in 2004 and 2007 respectively would expire in 2024 and 2027 respectively, according to details from DPR’s latest Nigerian Oil Industry Annual Report 2018.

The alleged revoking and re-awarding of the oil assets almost immediately have raised brows especially because the DPR is currently working on a bid round of acreages, and the Department was expected to have at least put back the assets in the basket for bidding.

The re-award letter to Kaztec and Salvic gives 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 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”, adding that the DPR 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 the handover process.

Addax’s inability to meet up with exploration targets, its portion in the domestic gas supply obligation for E&P companies will now be deferred. The E&P company was expected to supply 40% gas in 2019, 40% in 2020, 60% each in 2021, 2022, and 2023.

The DPR’s latest report for 2018 puts Addax’s obligatory gas supply at zero percent. In 2018, a total of 773,825,133 barrels of oil was produced at an estimated daily average production of 2.12 million barrels of oil per day, which is 2.4% over the average for the year 2017. This volume was produced by forty-seven oil producing companies, with Addax contributing an annual production of 10,765,022 barrels, averagely 29,513b/d. This amounts to a percentage production of 1.39 percent.

 

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