Oil remittance: Only NPDC can remit royalties and taxes under SAA – Atlantic Energy

OML 34Yemie Adeoye

15 February 2014, Sweetcude, Lagos – FOLLOWING the controversy over non remittances of oil proceeds to the federation account alleged by the Governor of Central Bank Of Nigeria, CBN, Mallam Sanusi Lamido Sanusi, Atlantic Energy has denied claims that NNPC handed over oil blocks to the company under the Strategic Alliance Agreement and that it has not met its tax and royalty payment obligations.

Atlantic Energy makes it clear that what it got from NPDC was remuneration in kind for taking the risk in funding 100% of NPDC’s operating and Capital activity costs in the oil wells where the joint venture partners had divested and that licence holder pays the royalties and taxes.

“The fact of the matter is that NPDC as license holder is the only party that can and must deduct and remit to the various government agencies the Royalties and Taxes due on the blocks like any other license holder in Nigeria, irrespective of whether there is an SAA or PSC in place or not. This is the sole duty of the license holder and cannot be undertaken by the SAA counterpart. NPDC fully complies with this requirement to pay all the Royalties and Taxes due on the blocks under our SAA. Furthermore, AE pays the applicable taxes on its activities’ and profits in addition to the above.”

The explanation and clarification follows the latest revelation by the Governor of the Central Bank of Nigeria, CBN, Mallam Sanusi Lamido Sanusi, that the Nigerian National Petroleum Corporation, NNPC, withheld $20 billion oil revenue from the federation account with illegal transfer of proceeds from certain oil wells to two private firms.

The CBN Governor last week alleged that NNPC handed over OMLs to NPDC which then handed over to two Nigerian companies, Atlantic Energy and Seven Energy and transferred revenue that should come to the Federation to private hands.

“The unfortunate and misleading statement totally mischaracterizes the relationship between Atlantic Energy and NPDC. It is indeed cause for grave concern that despite Atlantic Energy’s past effort to clarify, in the public domain, the nature of its relationship with NPDC the facts of this matter continue to be deliberately distorted by otherwise knowledgeable persons,” a statement from Atlantic Energy said.

Explaining the partnership with NPDC from which it was receiving such remuneration, Atlantic Energy said, “In 2011, Shell Petroleum Development Company, Shell, Total E&P Nigeria Limited, Total, and Nigerian Agip Oil Company, Agip, divested their interest in OMLs 26, 30, 32 and 42 (the divested OMLs) to various Nigerian companies.

“Around the same time, the NNPC simultaneously exercised its right under the joint operating agreements, JOAs, governing the divested OMLs and assumed operatorship of the OMLs. The NNPC subsequently assigned its interest in the Divested OML as well as its new role of operator to its subsidiary NPDC.

“In May 2011, NPDC entered into a strategic Alliance Agreement, SAA, with Atlantic Energy in relation to the divested OMLs. Under the SAA, Atlantic Energy has undertaken to, among other things, provide NPDC with the required technical capacity, assist NPDC in funding its share of the costs of petroleum operations through payment of its cash obligations, and also provide technical training to NPDC’s staff. In return for the foregoing, Atlantic Energy simply receives remuneration from the NPDC and does NOT have any ownership interest of any kind whatsoever in the Divested OMLs.

“For the avoidance of doubt, the SAA model is not uncommon in the oil and gas industry. Indeed, it has been successfully adopted in Malaysia, China and Iran as a toll by national oil companies like the NNPC to meet cash call obligations as well as to develop local technical capacity.

“Atlantic Energy had made investment in hundreds of millions in the relevant OMLs including the payment of the entry fees prescribed by the SAAs.

“Among other significant investments and contributions, Atlantic Energy has in furtherance of the SAAs, invested in a number of key projects including the upgrade of OML 34 area to a 360millon standard cubic feet of gas per day producing facility. This all important plant is the single largest gas supply facility for the Escravos-Lagos pipeline system which distributes critical gas feedback to power plant in the South East Nigeria and to a number of countries in the west African region.”

The statement said production optimisation activities and infrastructure improvement initiated by NPDC and Atlantic Energy following the SAAs had arrested production declines in the underdeveloped fields comprised in the relevant OMLs, thus resulting in increased production year-to-year.

“Furthermore, on account of Atlantic Energy’s contributions, NPDC has recorded significant step-change progress in understanding the subsurface reservoirs and surface facilities in the areas comprised in the relevant OMLs, thus resulting in a 200 per cent increase in certified reserves and of 200 million barrels of crude oil in new fields development plans,” the statement said.

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