A Review of the Nigerian Energy Industry

Elcrest, Neconde assume operatorship of OML 40, 42 amid protest

19 May 2015, Lagos – Barely three years after the Nigerian National Petroleum Corporation (NNPC) assumed operatorship of the oil blocks sold by Shell, citing the Joint Operating Agreement (JOA) with the joint venture partners, Neconde Energy Limited comprising Nestoil Group, Aries E&P Company Limited, VP Global, Kulczyk Investments and Kulczyk Oil Ventures have won the operatorship of Oil Mining Lease (OML) 42, THISDAY has learnt.
This development, which has been approved by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, was amid protest by senior oil workers at the NNPC.

Also Eland Oil & Gas Plc has announced that its joint venture company, Elcrest Exploration and Production Nigeria Limited has received confirmation from the Department of Petroleum Resources (DPR) that Elcrest had fulfilled its obligations, including the payment of the requisite premium and fees of $2.3 million, in relation to Elcrest’s appointment as operator of OML 40 for a minimum 10 year period.
According to Eland, the Ministry of Petroleum Resources has advised the NNPC to proceed with the finalisation of the Joint Operator Model Agreement with Elcrest in respect of OML 40 as approved by the Minister of Petroleum Resources.

The Joint Operating Model Agreement has been fully drafted and is currently under review by all parties, while the signing of the agreement is expected in the coming weeks.
“We are delighted to have received consent from the Ministry of Petroleum Resources for Elcrest’s appointment as operator of OML 40. It only remains to complete a revised joint operating agreement between Elcrest and NPDC when a further announcement will be made,” said the Chief Executive Officer of Eland, George Maxwell.

Neconde has also assumed operatorship of OML 42 by the Ministry of Petroleum Resources after the NNPC had initially failed to relinquish the operatorship of these blocks to the new buyers.
In December 2011, Shell sold its stakes in OML 26 to the Nigerian company FHN26 Limited – a unit of Afren plc, for $98 million, while OML 42 was sold for $390 million to a consortium Neconde Energy

Shell also sold the stakes to Elcrest Exploration and Production Nigeria Limited – a joint venture between Scotland-based Eland Oil and Gas and Nigeria’s Starcrest.

Elcrest also took over 10 per cent interests in the block from the Nigerian affiliate of Total and five per cent stake from Nigerian Agip Oil Company Limited, thereby gaining a total stake of 45 per cent. The remaining 55 per cent interest is controlled by the NNPC, which also handed over the operatorship relinquished by Shell to the Nigerian Petroleum Development Company (NPDC).
NNPC had hinged its decision to take over the operatorship of the blocks to the provisions of the Joint Operating Agreement (JOA), which stipulates that Shell can only transfer operatorship to its affiliate or affiliated company and not the new buyers.
Article 1.1.2 (i) of the JOA defines Shell’s affiliates as: Shell in the Netherlands; Shell Transport and Trading Company Plc in the United Kingdom or any other company that is being controlled directly or indirectly by any of these two companies.

However, since none of the new buyers was an affiliate of Shell, the operatorship reverted to the NNPC, which transferred it to the NPDC.

– This Day

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