Inability of the Nigeria Petroleum Development Company (NPDC), the exploration and production arm of the Nigerian National Petroleum Corporation (NNPC), to optimize values from oil mining leases (OMLs) 40 and 42 has prompted government to transfer operatorship of the oil blocks to Elcrest and Neconde respectively.
Enquiries by The UNION showed that government had responded to outcry by partners to NPDC in the joint venture who have consistently complained about the inability of NPDC to meet its funding requirements and the operator’s poor project management and slow process flow.
Other companies that partner NPDC in joint venture operations like Seplat Petroleum have also been complaining of the company’s incapacity to timely meet its funding requirement in the joint venture, a situation they blame for poor project delivery and unmet targets.
However, despite the outcry against the poor performance of NPDC in operating the assets relinquished by Shell and partners, the management has allegedly mobilized the labour unions in the company to oppose the transfer of operatorship.
The NPDC branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) had staged a protest opposing the stripping of operatorship from the company, calling on government to reverse the move. But industry analysts see the labour involvement in key government decision as political.
A source in one of the companies that partner with NPDC in the assets stated that giving operatorship of the assets to NPDC in the first instance was huge mistake given the company’s poor record of performance and its exposure to political pressure.
“I work for one of the partners on these assets and I can tell you that whoever came up with the idea of giving operatorship to NPDC was damn wrong. In addition, have u seeing Seplat’s annual report? NPDC owes hundreds of millions of dollars in cash calls,” our source declared.
Another source from NPDC who commented anonymously said: “We need to be realistic and do what this right. I am all for a strong and technical visible NPDC but the truth is, NPDC is not there yet!”
Other sources blamed the decision of government to transfer operatorship of the assets to private players on poor contract management by NPDC and the inability of the company’s management to drive production growth like its private peers in the past three years.
According to an audit report by PricehousewaterCoopers (PwC), the inability of NPDC to fully develop all oil fields under its operatorship has limited the expansion of the nation’s oil and gas industry, according to secondary sources.
Stakeholders and analysts have thus recommended that indigenous private firms with capacity and expertise should be granted the right to operate those assets to ramp up the exploration and production in the country.
They said the NPDC lacked the sufficient funding capacity to carry out the expected development on the assets.
The pressure and scathing criticisms trailing NPDC’s performance at operating key JV assets might have informed the decision of government to revisit assignment of operatorship on the divested assets.
Neconde and Elcrest purchased 45% stakes in OMLs 42 and 40 respectively from Shell, TOTAL and ENI in 2012; First Hydrocarbon Limited, Shoreline Resources and NDWestern bought stakes in OMLs 26, 30 and 34 respectively between 2011 and 2012, but the operatorship of the assets were not granted with the purchases.
The companies have lamented NPDC’s lack of capacity to continue as the operator of the acreages, arguing that they could have done better in growing reserves and production from the assets if theyt were granted operatorship.
With the transfer of operatorship to Elcrest and Neconde, government may have yielded to pressure to return the assets in the efficient hands of the private sector.
In pressing for reversal of the transfer of operatorship, PENGASSAN commenced a limited-two hour per day -strike on May 4, which lasted until May 11. It then gave a three day warning that should end by midnight of May 14, 2015.
Transferring operatorship of JV assets from multinational oil firms to efficient indigenous oil firms has proved very successful in the strings of divestment programmes by multinational firms that have operated the assets for decades.
Government had granted indigenous Seplat Petroleum operatorship of the first set of three assets divested by Shell and partners in the Niger Delta. It also allowed Seplat operatorship of the first two assets so far divested by Chevron in Nigeria.
Also, the three Nigerian companies who purchased assets in the latest round of divestment by Shell and partners have all been granted operatorship of the acreages.
Newcross was the first to receive consent-for its purchase of 45% of OML 24, in October 2014. The company declared average of 29,000 barrels of oil per day from OML 24 in February 2015. Also, the Aiteo led consortium received consent for purchase of OML 29 last December.
Eroton, the Special Purpose Vehicle made of partners Midwestern Oil and Gas, Suntrust and Mart Resources had some weeks ago received ministerial consent as well as operatorship.