Last Thursday Nigeria’s national oil company, the Nigerian National Petroleum Corporation (NNPC) reached a gentleman’s agreement with China National Offshore Oil Corporation (CNOOC) Limited and the South Atlantic Petroleum (SAPETRO) aimed at resolving disputes over Oil Mining Lease 130.
An Oil Mining Licence (OML) allows full-scale commercial production in a lease area. The Department of Petroleum Resources issues this. It is granted to Oil Prospecting Licence (OPL) holders on the discovery of oil in commercial quantities, (at least 10, 000 barrels per day). It grants the lessee an exclusive right to prospect, explore, produce and undertake marketing activities in connection with the specified acreage for 20 years.
The nature of the three-party agreement comprised NNPC signing a Heads of Terms (non-binding but with moral force) with CNOOC Ltd and SAPETRO to bring to an end a dispute on Oil Mining Licence (OML) 130.
Discovered in 2003, the lease area is located in water depths of around 1, 600 metres, 200 kilometres offshore Port Harcourt, and 20 kilometres southwest of the Akpo field, located on the same licence. Akpo was brought on stream in 2009. Nine years after, Egina was brought on stream. This means the offshore licence holds the Egina and Akpo fields.
To be located 20 kilometres apart and on the same lease, area means both the Egina and Akpo oil fields are interconnected. An oil field consists of a reservoir in the rocky strata of the Earth which traps hydrocarbons. An impermeable or sealing rock layer covers the reservoir. Typically, industry professionals use the term oil field with an implied assumption of economic size.
This is why NNPC’s agreement, as captured in a Heads of Terms signed with the two companies represents a major milestone towards the resolution of all disputes related to OML 130 production sharing contract (PSC). The state-owned and run oil company did not disclose what the dispute was about or what the terms of the resolution may be.
The licence is covered by both a PSC and a production-sharing agreement (PSA). Cnooc Ltd has a 90 percent stake in the PSC and Sapetro 10 percent. Total is the operator of the block. Nigeria receives a share of the profit oil from the PSC, but not the PSA.
The Chinese company bought a stake in OML 130 in early 2006. In addition to the two producing fields, there are also the Egina South and Preowei finds.
Akpo produced 44,000 barrels of oil equivalent per day in 2019 net to Cnooc Ltd. Egina started producing in January 2019 and reached its planned peak of 200,000 boepd in May. Of this amount, the Chinese company’s net share was 68,000 boepd.
The Ministry of Petroleum Resources awarded the Oil Prospecting License (OPL) 246 to SAPETRO in 1998. The block covers a total area of 2,590km² (1,000 sq. miles) and lies 120-160km due South of Port Harcourt, in water depths of about 1,100m – 1,800m.
Exploration drilling started in 1999 and with five wells on a row leading to discoveries of Akpo condensate field in 2000, later, oil fields – Egina Main, Egina South, Preowei, and Kuro (which was suspended as a dry gas/minor oil discovery).
Following successful appraisal drilling, 50 percent of the OPL was converted to an Oil Mining Lease (OML) in 2005 to cover Akpo, Egina Main, Egina South, and Preowei fields.
