Fresh OML 130 gas supply deal to earn NNPC, others $760m revenue

The Nigerian National Petroleum Corporation (NNPC) yesterday stated that, along with its partners, the national oil company was set to earn over $760m from various fresh agreements on gas supply.

The deals on the Oil Mining Lease (OML) 130 included a Production Sharing Agreement (PSA), Production Sharing Contract (PSC), Gas Supply Purchase Agreements (GSPAs) and Gas Entitlement Agreement (GEA).

The agreements which are part of the corporation’s gas commercialisation programme involve Total Exploration and Production Nigeria (TEPNG), China National Offshore Oil Corporation (CNOOC), South Atlantic Petroleum Nigeria Limited (SAPETRO) and Prime 130 Limited.

The sale structure under which the agreements were executed is designed to provide a clear delineation for the allocation of the gas sale proceeds to all the participating parties, including midstream handling and transportation.

“This is a very proud moment for all of us. I understand all the delays, they are completely unavoidable. It is desirable for us to have full alignment of all parties before we proceed.

“The end result is that there would be clarity around our relationship and we would be unlocking resources that have been on the table for many years.
“We now have a clear line of sight around gas revenue of up to $250 million and also another $510 million that is applicable to the rest of us,” Group Managing Director, NNPC, Kyari said during the event.

He noted that apart from the revenue boost, the agreements have also opened up an opportunity to have the dispute settlement deal for the OML 130 PSC and ultimately to have a renewed production sharing contract which would now guide the relationship, going forward.

On the Petroleum Industry Bill (PIB) that has just been passed, the GMD assured the parties that the fiscal terms proposed in the oil reform legislation remain some of the most attractive in the global oil and gas industry, noting that investors have no cause to worry.

In his response, Managing Director of TEPNG, Mr. Mike Sangster, expressed delight at the signing of the agreements, adding that the parties were committed to the terms of the contract.

OML 130 is a deep water block located 130 kilometres offshore Niger Delta at water depths of well over 1000 metres.

The block contains the producing Akpo and Egina fields and Preowei discovery.

Originally known as Oil Prospecting License (OPL) 246, the asset was awarded in 1998 to SAPETRO and was later converted to OML 130 in February 2005 after commercial discovery of oil in Akpo and Egina in 2000 and 2003 respectively.

At conversion, the federal government, represented by NNPC, exercised its rights as concessionaire of the block in April 2005 by entering into a PSC with SAPETRO as contractor and TUPNI as operator.

This was for 50 per cent of the interest in OML 130 PSC and a PSA between TUPNI, SAPETRO and PRIME 130 for the other 50 per cent interest in the OML 130 block.

In April 2006, SAPETRO farmed-out 90 per cent of its contractor interest in the OML 130 PSC to CNOOC.

The remaining reserves on the block are estimated at 1 billion barrels of liquids and over 1.2 trillion cubic feet of natural gas.

Gas from the block was transported and sold to the Nigeria Liquefied Natural Gas (NLNG) via the Akpo-Amenam Gas Pipeline and was funded in kind by the PSC under the Gas Utilisation Agreements (GUAs) for a consideration of 1TCF of gas which was achieved in July 2018, thus terminating the GUA.

It was projected that the parties would agree on the post- 1TCF regime for the monetisation of the gas upon the expiration of the GUA.

However, due to underlying disputes on the PSC and other reasons, the new regime was never agreed upon.