More trouble as NNPCL faults sale of NAOC assets to Oando

The Nigerian National Petroleum Company Limited has faulted the alleged sale of Oil Mining Licenses 60, 61, 62, and 63 to Oando Oil Limited by the Nigerian Agip Oil Company.

NNPCL raised concerns about the alleged divestment in a letter signed by the Managing Director, NNPC Exploration and Production Limited, Ali Zarah, dated September 4, 2023, and addressed to the Managing Director, Nigerian Agip Oil Company Limited, Maitama, Abuja.

The letter, which was seen by our correspondent in Abuja on Wednesday, had its reference as E&P/MD/05.23 and was titled, ‘Purported divestment of Eni’s shares to Oando Oil Limited.’

It read in part, “Our attention has been drawn to various reports circulating on different media platforms in relation to an alleged divestment of NAOC’s participating interest in OMLs 60, 61, 62, and 63 to Oando Oil Limited. “A duly signed press statement allegedly emanating from OOL dated September 4, 2023, affirms the fact that NAOC has assigned its entire 20 per cent participating interest in the said OMLs to OOL.

“Whilst we are yet to confirm the authenticity of the said divestment, we would like to note that the purported assignment, if true, would have the following far-reaching contractual and legal implications in relation to the Joint Operating Agreement dated July 1991 governing the operations of the NAOC/NEPL/OOL Joint Venture:

“1. Clause 19.11 of the JOA provides that ‘No party may assign or transfer its interest or any part thereof without the prior written consent of the other parties, which consent shall not be unreasonably withheld’.

“By virtue of this provision, a party seeking to transfer part or the whole of its participating interest in the joint venture is obligated to seek the prior written consent of the other parties.”

The NNPCL stated that “in this instance, NAOC did not inform NEPL (NNPC E&P Limited) of any proposed assignment of its participating interest to OOL or any other party, nor did NAOC seek and obtain the mandatory pre-divestment written consent and approval from NEPL in accordance with Clause 19.1.1. of the JOA.”

The letter stated that it was “imperative for you to note that failure to obtain NEPL’s prior written consent and approval with regards to the alleged transfer of your interests in the joint assets constitutes a grave breach of the terms of the JOA, and NEPL reserves its rights in relation to the said breach—including NEPL’s entitlement to invalidate the purported assignment to OOL.”

The national oil company further argued that under the terms of the JOA, the assignment of interest had implications for the transfer of operatorship.

“Clause 2.4.1(i)(c) of the JOA provides that the operator shall cease to be an operator and shall be removed by the non-operators if the operator assigns or otherwise disposes of, other than to an affiliate, all its participating interests.

“Furthermore, Clause 2.6.1 provides that in the event of cessation of operatorship arising from the above circumstances, the parties shall appoint one of the non-operators as successor operator.

“We have highlighted the above provisions of the JOA to underscore the point that the purported assignment, even if valid, should by no means translate to the transfer of operatorship to OOL. If NAOC’s divestment turns out to be valid, it will become incumbent on NEPL and OOL to decide on a successor operator.”

NNPCL noted that as holders of 60 per cent participating interest in the NEPL/NAOC/OOL JV, “we are indeed concerned that the entire purported assignment was executed without due compliance with the terms of the JOA. We expect that all parties to the JOA will observe and comply with the terms of the JOA.”

It added, “In view of the foregoing, we request NAOC’s confirmation to NEPL of the authenticity or otherwise of the reported divestment to enable us to determine our next steps with regard to the management and operations of the assets.”

When contacted to confirm the authenticity of the letter, which was copied to other executives of the national oil firm, the Chief Corporate Communications Officer, NNPCL, Garba-Deen Mohammad, affirmed its originality.

He said, “The letter was sent by NEPL, an NNPC Ltd. subsidiary. But please note that it is not an objection to the transaction. NEPL is only drawing attention to certain important clauses in the JOA, which might have been overlooked in error. Adherence to those clauses will protect the transaction now and in the future.”Punch