A Review of the Nigerian Energy Industry

Amni terminates production sharing, technical services agreement with Afren

07 April 2015, Lagos – The crisis-ridden United Kingdom-listed Afren Plc is facing fresh trouble as its Nigerian partner, Amni International Petroleum Development Company Limited has terminated the Production Sharing and Technical Services Agreement (PSTSA) with Afren Energy Resources Limited, the Nigerian subsidiary of the UK firm.

Afren logo
Afren logo

It was gathered that the relationship between Amni and Afren, a technical service provider to Amni in the operation of Okoro Oilfield had hit the rocks following the termination of the Okoro further field development project in Oil Mining Lease (OML) 112 by Afren without Amni’s consent.

Under a notice of default and termination issued by Amni, the Nigerian firm gave Afren 30 business days to remedy the default or face termination of agreement.

But Afren was said to have failed to provide evidence that it had taken any steps to cure the events of default.

Afren was also said to have publicly confirmed in its recent release of the preliminary agreement on interim funding and refinancing structure and operational update that it did not intend to execute the Okoro full field development plan as approved by the management committee according to the PSTSA.

Following the failure of Afren to remedy the default, Amni has terminated the PSTSA with the UK firm

The Chairman and Chief Executive Officer of Amni, Mr. Tunde Afolabi in a letter dated March 26, 2015 and addressed to the Chief Executive Officer of Afren, stated stated: “We refer to our notice of default and termination dated February 4, 2015 issued in accordance with clause 15 of the PSTSA due to the material default of Afren Energy Resource Limited thereunder.

“We further refer to clause 15.2 (d) which provides that Amni is entitled to terminate the PSTSA in the even that Afren fails to remedy or cure its default in full within thirty (30) business days from the default notice,” the letter added.
Amni said it acknowledged the receipt of Afren’s letter dated March 16, 2015 purporting to respond to its notice letter.

“However, such letter does not address any steps taken by Afren to cure the material defaults set forth in the Amni notice letter.”

Instead the Afren letter only offers a disingenuous explanation for Afren’s breach of the PSTSA and an offer not capable of acceptance by any reasonable person, which includes Amni: (i) waiving its rights under the PSTSA; (ii) accepting half of the liability for Afren’s breach of the WAV contract; (iii) agreeing to negotiate Afren’s liability; and (iv) agreeing in advance to changes in security documents without providing any details whatsoever. We do not believe this proposal was made in good faith and do not accept any part of it as a reasonable resolution for Afren’s material breaches of the PSTSA, “it stated.

The company added that Afren has failed to respond to its notice letter or otherwise provide evidence to it that Afren has taken any steps to cure the events of default set forth therein.

“Consequently, we hereby give notice to terminate the PSTSA in accordance with clause 15.2(d) with effect as of and from the date of this letter.

Additionally, it is the intention of Amni to pursue monetary damages suffered by Amni as a result of Afren’s breach of the PSTSA and willful misconduct, “Amni said.

– This Day
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