A Review of the Nigerian Energy Industry

Transcorp slashes farm-in funds for OPL 281

09 February 2012, Sweetcrude, LAGOS – Transnational Corporation of Nigeria (Transcorp) has accepted reduced farm-out funds from a South African joint venture of SacOil and Equity Energy Resources over a Nigerian onshore block of which it is the operator.

SacOil and joint venture partner, Equity Energy Resources, both bought 20% stakes in the OPL 281 field, located in Nigeria’s western delta region, last year.

The agreement then was that the two South African companies would pay Transcorp $32.5 million (an initial farm-in fee of $12.5 million for the stake, $7.5 million upon necessary approvals and an additional $12 million when oil was found).

But under a new term, which SacOil unveiled in a statement, Wednesday, the three companies have agreed to cut the farm-in fees from a total of $32.5 million to $24.5 million.

Transcorp would, under the new arrangement, also pay 60% of capital expenditure costs on the project till first production, as against the previous arrangemnt whereby SacOil and EER were to take care of the costs.

The statement by SacOil quoted Transcorp chief executive officer, Obinna Ufudo, as saying his company was now poised to lead the project to production.

“The revised agreement is in line with Transcorp’s vision of building a pan-African energy business with strong indigenous operational capabilities,” Ufudo said.
SacOil chief executive officer, Robin Vela, expressed delight with the revised terms.

“All costs are now carried proportionately to the equity owned by Transcorp, EER and SacOil. SacOil and EER will be actively involved in the operations through the operations and management committees,” Vela said.

The change came about following a change of control at Transcorp, with the company now aiming to eventually take full responsibility for operation of the OPL 281 field.

Located 25 kilometres from the Forcados Crude Export Terminal, the onshore block covers an area of 138 square kilometres.

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