AGF: Oil mining licence transferable

By IAfrica
In Nigeria News Feed
Feb 23rd, 2014
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The Attorney-General of the Federation and Minister of Justice, Mr. Mohammed Bello Adoke (SAN), has said the Nigerian National Petroleum Corporation (NNPC) can transfer its interest in Oil Mining Leases to its subsidiary.

He also said a holder of an Oil Mining Lease (OML) or Oil Prospecting Licence (OPL) can assign its interest, provided the consent of the Minister of Petroleum Resources is obtained.

He said when Total, Agip and Shell decided to sell off their entire 45 per cent participating interests in some OMLs in the Shell/NNPC JV arrangement (with Shell as the operator of the OMLs) to some indigenous oil companies, NNPC exercised its right to become an operator in the OMLs.

Adoke has written the Minister of Petroleum Resources to determine whether due process was followed by NNPC/ NPDC in engaging the Strategic Partners

Adoke made the clarifications in a letter to the Senate Committee on Finance probing the alleged unremitted $49.8billion oil revenue and status of $6billion paid to NPDC by NNPC instead of the Federation Account.

The minister’s report is against the backdrop of issues surrounding the engagement of some indigenous oil firms (as Strategic Partners) in OMLs 30, 34, 26, and 42.

The strategic partners were engaged following the disposal of 45 per cent participating interests in the affected OMLs by Total, Agip and Shell

The letter reads: “I am of the considered view that the NNPC can legitimately transfer its participating interest in the Oil Mining Leases (OMLs) to its wholly owned subsidiary, the Nigerian Petroleum Development Company (NPDC) as no law, to the best of my knowledge and information, precludes such a transfer.

“It is instructive to note that by virtue of paragraphs 14-16 of the First Schedule to the Petroleum Act, CAP. P.10 LFN 2004(NNPC Act) and Regulation 4 of the Petroleum (Drilling and Productions) Regulations 1969 as amended, a holder of an Oil Mining Lease(OML) or Oil Prospecting Licence (OPL) can assign its interest, provided the consent of the Minister of Petroleum Resources is obtained.

“Furthermore, Section 6(1) (c) of the NNPC Act empowers the NNPC to establish and maintain subsidiaries for the discharge of its functions. The NPDC was thus incorporated as a limited liability upstream subsidiary company of NNPC to carry out its upstream operations as envisaged by the law.

It is pertinent to note that the transfer of the participating interests in the OMLS in question, relates to a joint venture arrangement between NNPC on the one hand and Shell Petroleum Development Company of Nigeria Limited, Nigerian Agip Oil Company Limited(Agip) and Total E& P(Nigeria) Limited(formerly Elf Petroleum (Nigeria) Limited), Total on the other.

“This relationship is governed by a Joint Operating Agreement (Shell/NNPC JOA) and Article 19.2 of the Shell/ NNPC JOA empowers any party to the agreement to transfer all or part of the participating to its affiliate at any time, upon notice to other parties and subject to any necessary government consent. I have been made to understand that all the requisite consents were obtained.

“It is apposite to note that in all the JV agreements, the NNPC has been a non-operator. However, Article 2.6.1 of the JOA provides that in the event that the operator resigns, a successor operator shall be appointed among the non-operators except they agree to appoint a third party as the operator.

“It further provides that in the event that one of the non-operators is to become the successor operator, it shall be entitled to nominate one of its affiliates as the operator.

“I have been made to understand that at different times between 2010 and 2011, when Total, Agip and Shell decided to sell off their entire 45 per cent participating interests in some OMLs in the Shell/NNPC JV arrangement (with Shell as the operator of the OMLs) to some indigenous oil companies, NNPC exercised its right to become an operator in the OMLs.

“Since NNPC was the only remaining non-operator and pursuant to the provision of Article 2.6.1 of the JOA, it transferred the operatorship of the OMLs to NPDC, its upstream petroleum subsidiary company. It follows therefore that the transfer was within NNPC’s authority.

On whether due process was followed by NPDC in engaging Strategic Partners, the AGF said: “This issue relates to the factual circumstances and internal workings of the Ministry of Petroleum Resources, Department of Petroleum Resources (DPR), NNPC and NPDC.

“To enable me respond to the issue in question, I have written to the Hon. Minister of Petroleum Resources to request for relevant information. I am yet to be availed the relevant information and therefore plead with the committee to suspend consideration of this issue pending when the information is received.”

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