In a bid to boost crude oil production in the country, the Nigerian National Petroleum Corporation (NNPC) has secured a $3.15 billion Financial and Technical Services deal from Sterling Oil Exploration and Energy Production Company Limited (SEEPCO). The funding will be used for the development of Oil Mining License (OML) 13.
The development was disclosed in a press release by the NNPC Group General Manager, Group Public Affairs Division, Ndu Ughamadu. According to Ugbamadu, the deal is a game-changer to oil and gas project financing in Nigeria.
Further details: Basically, the deal was signed by the exploration and production arm of NNPC (i.e., the Nigerian Petroleum Development Company, NPDC), for the development of OML 13. OML 13 is fully owned by the NPDC and is located in the eastern axis of the Niger Delta, covering a total area of 1987km².
According to the statement, the deal is a move to increase the nation’s crude oil and gas reserves while boosting the daily oil production to 3 million barrels.
It was further disclosed that the Federal Government is expected to earn over $10.2 billion in royalties and taxes from the project over the next 15 years, while NNPC would earn over $5 billion after payment of the entire financing obligation.
The deal’s lifespan: The NNPC’s GMD disclosed that the Financing and Technical Services Agreement was for a period of 15 years while the $3.15 billion ceiling funding would be provided by SEEPCO with a 10-year capital investment period and five years for cost recovery.
“The acreage boasts of over 926 million stock tank barrels (mmstb) and 5.24 trillion cubic feet (tcf) respectively of oil and gas reserves. First oil of about 7,900bpd is expected from the project by 1st April 2020, while production is expected to peak at 94,000bpd and 542mmscfd within four years.
Earlier development: The NNPC took possession of OML 13 from its operators in 2016 as a result of non-compliance with the provision of the Petroleum Act on payment of signature bonus and irregular award.
Subsequently, the NNPC announced an exit from a debt burden which rose to $6.7 billion from January 2018, after reaching an agreement with international oil companies (IOCs). The nation has, however, struggled to fulfill this obligation. Nevertheless, production has been relatively stable after FG agreed to continue receiving royalties, taxes and profit from its equity share of Joint Venture oil and gas production.
In the meantime, the Financial and Technical Services Agreement deal is expected to enhance indigenous firms’ participation in the petroleum industry by providing job opportunities to Nigerians. The country’s oil production and reserves are also expected to receive a major boost which will improve the country’s revenue.
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