After series of legal battle, oil exploration and production company Lekoil Limited has decided to drop legal actions against Ministry of Petroleum Resources over government’s failure to grant consent to its (LEKOIL’ s) investment in Oil Prospecting Lease (OPL) 310, offshore Nigeria, following acquisition of interests previously held by Afren Plc in the oil block.
OPL 310 is an offshore license which includes the potentially large Ogo oil discovery, which is located in shallow water offshore Lagos. With estimated production volumes of 120,000 boepd, at today’s oil price, the Ogo field alone stands to generate over $3 billion in annual revenues.
According to information from Lekoil, the company received a letter from Ministry of petroleum resources on May 14 stating it would not consider re-awarding the company the license, which expired on 10 February, unless a suit filed against the Minister of Petroleum Resources was withdrawn.
“Ownership of OPL 310 has accordingly reverted to the Government in line with Petroleum Act,” Letter from ministry of petroleum to Lekoil said.
The letter further warned that failure by Lekoil and others to withdraw the suit within thirty (30) days of the Letter which was dated 8 May 2019, but received by Lekoil on 13 May 2019 excludes any consideration of re-award to Optimum Petroleum Development Limited, Lekoil and their affiliates or subsidiaries.
“The company has decided to withdraw legal action. The company will also continue engagements with the regulator and Optimum Petroleum Development Company Limited, the operator of OPL 310, to conclude agreements and resolve all outstanding issues. Further updates will be provided as and when necessary,” Lekoil said.
How it all started?
In February 2013, Mayfair Assets and Trust Limited, a subsidiary of Lekoil, farmed into Afren Investments Oil and Gas Nigeria Limited’s (AIOGNL) interest in OPL 310 for a 17.14 percent participating interest and 30 percent economic interest. Ministerial Consent was granted for the interest on June 9, 2017.
Afren, the parent company of Afren Oil & Gas that held interests in the OPL 310 license, was put into administration and its assets put up for sale on July 31, 2015.
Lekoil agreed with the administrator of Afren to acquire the shares of AIOGNL, which held a 22.86 percent participating interest in OPL 310 on December 1, 2015. This interest was also subject to Ministerial Consent from the Minister for Petroleum Resources.
The acquisition meant that Lekoil would hold a consolidated participating interest of 40 percent and an economic interest of 70 percent in OPL310 and would become the technical and financial partner of Optimum Petroleum Development Company, the operator and local partner in OPL310 which retained a 60 percent participating interest.
An application for the transfer of the 22.86 percent interest was duly made by Afren Nigeria in January 2016. In March 2016, Lekoil was notified by the Ministry of Petroleum Resources that the necessary due diligence exercise would be conducted that month.
The due diligence exercise did not take place and has not been rescheduled by the Department of Petroleum Resources since then.
As a result, Lekoil applied to the Federal High Court last year for a declaration that was expected to expedite the consent process, and preserve the unexpired tenure in the license. It is expected that a hearing will be held on Thursday, November 29.
