Hope of winners bidders dashed,NNPC has 1st right of refusalTurns out to be more complex than seller's right to assign operatorship and the issue of asset relinquishing. It looks like NNPC holds the first right of refusal which it appears was not offered.
https://newtelegraphonline.com/hope-winners-bidders-shells-assets-dashed/
Hope of winners bidders of Shell’s assets dashed.
The Federal Government has ruined the hope by winners and bidders of Shell Petroleum Development Corporation’s (SPDC’s) $3 billion oil blocks to secure operatorship of the assets, New Telegraph has learnt.
Investigations by this newspaper revealed that the winners of some of the assets have deployed consultants/representatives to meet with the Federal Government’s representatives in the partnership (Nigeria National Petroleum Corporation (NNPC) on how they could secure the operatorship of the oil blocks. Shell, which is selling its stakes in the fields, is currently the operator of the blocks. Aiteo/Calaveras won OML 29 and the Nembe Creek Trunkline in conjunction with four other companies in the consortium, having submitted a $2.5 billion bid for the assets.
OML 29 is the most prolific oil lease under the current asset sale. Pan Ocean Oil Corporation Nigeria Limited, operator of the NNPC/Pan Ocean Joint Venture, clinched OML 24 valued at between $500 million and $1 billion, while Lekoil, Crestar, GreenAcres/CCC/Signet Petroleum, NDPR/SAPETRO and Essar submitted bids for OML 25. Under the on-going divestment programme, Midwestern Oil & Gas Plc/Mart Resources/ Suntrust Oil, which partnered the Erotron Consortium, won the bid for OML 18.
OML 24 currently delivers 25,000 barrels of oil equivalent per day from three fields and outputs eight million standard cubic feet per day of gas (MMscf/d). The divestment by SPDC is part of the Anglo/Dutch giant’s plan to dispose off $15 billion of assets globally in 2014 and 2015. Although the Nigerian National Petroleum Corporation (NNPC) declined comment on the outcome of the meeting, “because this could affect the on-going transactions.”
New Telegraph gathered from a source at the corporation that the Federal Government has turned down request by the prospective new owners on operatorship of the blocks. “Government has resolved to invoke the Joint Operation Agreement (JOA), which it had with Shell and other international oil companies (IOCs). With this, the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC, will take over the operatorship,” the source close to the deal told our correspondent on phone at the weekend.
Out of all the assets divested by Shell so far, the new buyer, Seplat Petroleum Development Company, operates only OMLs 4, 38 and 41. But in accordance with the JOA, the operatorship of other producing assets sold by Shell, including OMLs 26, 30, 34, 40 and 42, were transferred to NPDC, rather than the new buyers.
The JOA between Shell, NNPC, Total, Nigerian Agip Oil Company and other IOCs operating a joint venture arrangement with NNPC provides that an operator of a producing asset can sell its interest to a third party but cannot transfer the operatorship to the new buyer.
Article 19.4 of the JOA states: “Subject to Clause 19.1 and 19.2, if any party has received an offer from a third party, which it desires to accept, for the assignment or transfer of its participating interest, it shall give the other parties prior right and option in writing to purchase such participating interest as provided in sub-clauses 19.4.1 to 19.4.2.” However, SPDC, as the operator of SPDC/NNPC Joint Venture, has no powers to transfer its operatorship to a third party without the written consent of the NNPC.
According to the JOA, SPDC can only transfer operatorship to its affiliate or affiliated company, with Article 1.1.2 (i) of the JOA defining Shell’s affiliates as Shell in the Netherlands; Shell Transport and Trading Company Plc in the United Kingdom or any other company that is controlled directly or indirectly by any of these two companies. The implication of the JOA is that if an operator sells its interest in an oil block, the operatorship will revert to NNPC and not to the new buyer.
“However, the prospective winners and owners of the Shell’s asset remained undeterred and hope that they can structure a new arrangement that would enable them operate the assets themselves,” the source said. They are concerned that they would be investing too much acquiring the oil blocks and have started making overtures to NNPC to give them the green light to operate them.
“They are in discussions with the NNPC to see if they can get the operatorship, given what happened with past blocks – OMLs 26, 30, 34, 40 and 42 – sold by Shell,ç he said. Meanwhile, the Federal Government has said that it was targeting increased production from indigenous companies particularly the NPDC.
Oil production from Nigeria, Africa’s biggest crude exporter peaked at 2.55 million barrels per day in January, the country’s daily production statistics has showed. The statistics, which detailed all crude production from both the IOCs and the indigenous oil companies showed that the Nigerian Petroleum Development Company (NPDC) led the park of Afren, Seplat, Oando, Conoil, WalterSmiths, Brittania-U and other Nigerian firms to contribute about 10 per cent of the total production.
“The NPDC produced 140,000 barrels last week, the day that total crude production from Nigeria stood at 2.55 million barrels,” managing director, Victor Briggs, said, to corroborate the statistic during a no-hold bared media chat at the Benin head office of the company. “Presently, the NPDC produces 140,000 barrels per day (bpd) while we deliver 410 million standard cubic feet (scuf) of gas per day (mmscf/d). Our target is to increase this oil production to 160,000bpd by the end of this year and we also plan to raise the daily gas production to 600 million standard cubic feet (mscf/d) by end of the year.
“The production by indigenous companies is more than eight per cent, contrary to what some want the people to believe, it is about 10 per cent,” he said, while showing the daily crude production report of Wednesday, February 5, 2014. In the same vein, Opuama field operated by NPDC has started production on February 4, following successful testing and commissioning of the field facilities, oil firm, Eland said.