Nigeria - Oil lease renewals for Shell and Chevron

The spate of renewal of expired oil leases will continue next month as the Federal Government shifts attention to the ones being operated by Shell Petroleum Development Company (SPDC) and Chevron Nigeria Limited, in joint venture with the Nigerian National Petroleum Corporation (NNPC).

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, disclosed this Wednesday even as it also emerged that the government had concluded plans to sign the Final Investment Decision (FID) for Train 7 of the Nigeria Liquefied Natural Gas (NLNG) Limited to boost the country’s production of liquefied natural gas.

This is part of the ongoing efforts to ensure that the country overtakes Qatar as the second largest LNG exporter.

Speaking in her office in Abuja Wednesday after she endorsed the renewal of the Oil Mining Licences (OMLs) 67, 68 and 70 held by Mobil Producing Nigeria (MPN) in joint venture with the NNPC for another 20 years, Alison-Madueke stated that efforts were in top gear to expedite action on outstanding oil licences that were due for renewal.

She acknowledged that there were outstanding oil production licences due for renewal according to the Department of Petroleum Resources (DPR) and promised that those licences would be renewed by next month.

“Outstanding renewals right now would be the Shell ones and Chevron as well, but I am assured by the Director of the Department of Petroleum (DPR), because we have had this discussion in the last 24 hours that before the end of next month, the Chevron ones will expire, but I’m sure the Shell ones will be signed next month,” She said.

Though no official figure was given, We gathered from a local news paper that the financial consideration for the renewal of the ExxonMobil leases for another 20 was in the neighbourhood of about $665 million.

“I am particularly delighted to welcome you all as we formally renew shallow onshore oil mining leases 67, 68 and 70 for the NNPC, Mobil Producing Nigeria joint venture. I am delighted that after a somewhat lengthy process both parties that is, the government and people of Nigeria and the NNPC/MPN joint venture have arrived at what they consider a mutually fair agreement in which to work together for another 20 years,” she said.

The minister stated that the renewal of the leases was in accordance with paragraph 10 and 13 of the first schedule of the Petroleum Act of 1969 cap V 10, adding that all other pending renewal leases would be expeditiously handled.

“It is my hope that the milestone lease renewal will encourage other investors in the petroleum industry to renew their commitment to the growth and development of the industry with emphasis on gas based industries,” she said.

She further disclosed that the renewal had presented another opportunity for parties to the contract to maximise potentials within the oil fields to foster strategic growth of aggregated gas-based industries.

On the concern that the provisions of the Petroleum Industry Bill (PIB) awaiting passage could invalidate the renewed licences, the Group Managing Director of NNPC, Mr. Austen Oniwon, later told investors at the 2012 Nigeria Oil and Gas conference in Abuja that there would be no conflict.

According to him, business continuity would not wait until the passage of the bill.

He assured foreign and local investors that the ongoing renewal of the licences would fit into the bill, when passed.

“If there is any adjustment that has to be made because of the new law, such adjustment will be made. But we cannot stop continuity of business, waiting for the law to be passed because the PIB is not going to invalidate the licences that have just been issued. We are going to renew additional licences in the coming weeks. Today, we have just done one with ExxonMobil. So, there is not going to be any conflict between the PIB and the licences,” he said.

Oniwon stated that before the end of next month, the Federal Government would conclude the renewal of all the outstanding leases.

He disclosed that Nigeria’s oil industry would require investment outlay of $100 billion in the next five years to meet exploration and production targets.

According to him, the FID for Train 7, an additional train in NLNG would be signed in the second quarter of next year, as part of the efforts to make Nigeria a global giant in LNG production.

Nigeria, with the fastest growing LNG plant in the world, supplying 10 per cent of the world's LNG demands, has been overtaken by Qatar (80 million tonnes) and Australia (81 million tonnes).

NLNG's current six trains have brought into government coffers over $9 billion as dividends paid to NNPC and $10 billion paid the upstream for gas purchased over the years.
With the completion of the Train 6, the NLNG Plant in Bonny Island in Rivers State has an overall capacity of some 22 million tonnes per annum (MTPA) of LNG and 4 million tonnes per annum of Liquefied Petroleum Gas (LPG).

It, however, requires about 3.5 billion cubic feet per day (bcf/d) feedgas intake at full production.

Train 7 will lift the total production capacity to over 30 MTPA LNG and the long delayed decision on the Train 7 has cost the country loss of huge revenue and global market share.

Building Train 7 will create 13,000 jobs and bring in $8 billion in direct foreign exchange to the country.

Oniwon also reiterated the determination of the NNPC and other shareholders in the Brass LNG to seal the FID in the third quarter of this year.

Responding to the renewal of his company’s operating leases, Managing Director of MPN, Mr. Mark Ward, said efforts towards completing the process of the renewal are worth the while in view of the potentials in the field.
Ward noted that Alison-Madueke was handy in offering the requisite leadership, vision and dedication to processes towards ensuring that the renewal would be done in accordance with all of the laws and regulations that would stand the test of time.

“We’ve got very aggressive programme with our senior partner that we will continue to implement aggressively. We’ve got our focus on gas resources which are coming critically important to the nation and we are confident that with our integrated approach to gas supply for power, gas for domestic market; that we will further add to the success of the joint venture,” he said.

Also speaking later at the NOG conference, the Chairman of Shell Companies in Nigeria and Managing Director of Shell Petroleum Development Company (SPDC), Mr. Mutiu Sunmonu, called on the Federal Government to renew the leases to enable oil companies accommodate them in their business plans.

“The earlier these licences are renewed, the better for us, in terms of accommodating them in the business plan. We have always planned on the basis that it is just a question of time before the licences are renewed,” he said.