Following the strategic alliance agreement (SAA) entered into with the Nigerian Petroleum Development Company (NPDC) in relation to oil mining leases (OMLs) 26, 30, 34 and Atlantic Energy, Septa strategic alliance with NPDC confers no ownership interest 42, Atlantic Energy Drilling Concept and Septa Energy have invested the sum of $635 million into the oil blocks.
NPDC, the exploration and upstream subsidiary of the Nigerian National Petroleum Corporation (NNPC) was said to have entered into the SAA with Atlantic Energy in May 2011, following the NNPC’s assignment of its interest in the OMLs to NPDC.
According to the two emerging indigenous exploration and production (E & P) companies, the SAA which is meant to provide financial services for the operatorship of the oil blocks, did not vest ownership interest of any kind on either Atlantic Energy or Septa Energy in the four oil blocks divested by Shell, Agip and Total a few years ago.
A top official of one of the companies stated that the actual amount paid to NPDC as entry fee prescribed by the SAAs was $135 million, contrary to reports that the firms merely put down $50 million, adding that another $500 million had been spent to develop the oil fields.
Describing as untrue and a “figment of the imagination” reports that the two firms were lifting as much as 60 percent of NPDC’s share of the crude under the joint venture arrangement with other companies, the official said only 10 per cent of NPDC crude was lifted as profit oil.
“$135 million was paid to NPDC and it was fully receipted and not the $50 million that was reported. Then another $500 million has since been spent to develop the oil fields. That money was borrowed at a high rate of interest, which is already affecting the companies’ bottom line,” he said, expressing doubts that in the next five to six years the company would be able to break even.
“We are always shocked by the figures we hear and see in the papers; they are so far from reality that sometimes we wonder whether they are referring to the actual agreement or something else.”
Continuing, he said the participation of the firms in the technically complex and capital-intensive venture should encourage other Nigerians to venture into it. “Ours is a testimony that local participation is gradually coming of age. But instead of encouragement, what we get is a rash of attacks and criticism that undermines everything we have invested in this country – time, money, hope and aspirations.”
The official said they were venturing into aspects of the oil and gas sector that were the exclusive preserve of foreign multinationals, stressing that there was nothing new or wrong in agreements of that nature. He added that in 2001, Italy’s Agip adopted the SAA model with NPDC as a viable arrangement for optimal development of its oil fields.
“International oil companies (IOCs) had financial service agreements with NPDC, so there is nothing new about it. I can tell you here that most IOCs are surprised and unhappy at the capacity of indigenous companies to perform in this area.
“We have surprised them with our capacity to raise the required finance; they didn’t give us a chance, so we are not surprised at the attacks. It is to the credit of the Local Content Act that indigenous companies like ours are now considered worthy of being big players in a sector that was largely seen as the exclusive preserve of the IOCs.
“Come and see the resources we have invested. Come and see the foreign manpower we have attracted and you will begin to understand that we believe in the country.”
He further stated that the agreements had widened the scope of local content, expanded capacity and reach of indigenous companies, which for the first time are providing major financial muscle that NPDC lacked to ensure uninterrupted operations of the blocks.
“By virtue of the provisions of the SAA, Atlantic Energy has undertaken to, among other things, assist NPDC in funding its share of the entire costs of petroleum operations, provide NPDC with the required technical capacity to function as operator of the relevant OMLs and provide technical training to NPDC’s staff.
He said among other significant investments and contributions, Atlantic Energy had invested in a number of key projects, including the upgrade of the OML 34 area to a 360 million standard cubic feet of gas per day producing facility.