The Nigerian Petroleum Development Company has explained that its recent entry into a strategic alliance agreement with Atlantic Energy Drilling Concepts did not include transferring its production rights.
This was contrary to the substance of a recent petition by a group known as Restoration Niger Delta.
A reliable source in the company said that the agreement between the two parties was neither a divestment of asset nor transfer of operatorship but simply an alternative funding arrangement in order to meet the NPDC’s cash call obligations in the Oil Mining Leases 26, 30, 34 and 42 in question.
It would be recalled that in a petition by Restoration Niger Delta, dated March 4, 2013, the group alleged an untoward transfer of 60 per cent of the 55 per cent equity holding in the form of production rights of NPDC in OMLs 26, 30, 34 and 42 to Atlantic Energy Drilling Concepts.
Dismissing the petition, NPDC stated: “There is no place in the petition where the particulars of NPDC ‘s equity interest in the OMLs were shown to have been transferred whether in part or wholly to Atlantic Energy Drilling Concept Limited in defiance of the intendment of the Procurement Act.”
According to an NPDC source, the allegation that money changed hands between Atlantic Energy Drilling Concept Limited and NDPC was no issue as the entry fee paid by Atlantic Energy Drilling Concept Limited was to acquire the right to fund and not payments for the acquisition of, participating interest in the leases.
A source said further of the deal: “This is a common practice in the industry and complies with international best practice.
“It is thus, to say the least, spurious that while the petitioners raise issues of equity divestment, albeit erroneously, all the ingredients of their submission border on either a display of dearth of the pro-indigenous disposition of the oil industry regulations or a deliberate misrepresentation of facts for mischievous purposes.”
Following the Central Bank of Nigeria’s restriction of excessive lending by banks to the oil industry in the past few years, funding has become difficult, especially in the highly specialised upstream sector.
Investigation showed that the development has pushed oil industry operators, especially those in the upstream sector, to look for alternative funding.
Some of these forms of alternative funding, which are essentially joint venture arrangements and in sync with world best practice, include Illustrative Agreements, Royalty Purchase, Sale Purchase Agreements, Farm Out Agreements, Production Sharing Contracts and Drilling Funds.
The source added: “Alternative funding for oil companies and indeed MDAs has been a welcome development under the present administration’s transformation agenda.
“It is much cheaper and, in this case, a more specialised form of raising working capital. In these times when all should be concerned with cutting production costs in the oil industry, particularly in the wake of huge subsidies, this strategic action by NDPC should be welcomed and encouraged.
“In this financing arrangement, many oil firms that showed interest were considered and the process of due diligence showed that many of such firms were already in huge debts and some were indeed in the CBN caution list.
“All in all, the action taken by NDPC is a strategic one that is fast gaining popularity and global relevance in the oil industry.
“Rather than violate any guidelines in the industry, it has rather shown that the organisation is proactive and very much at home with global trends, and very much attuned to the present administration’s transformation agenda. It is only worthy of commendation and not condemnation.”
Trending
- Police nab man for allegedly abducting, killing cousin in Kaduna
- ICPC Case: Court convicts mother of five for forging late Abba Kyari’s signature
- Ajeromi Gas Explosion: Lagos to pay medical bills of survivors
- Businessman slams N5b alleged defamatory suit against journalist, others
- Pro-Wike group visits Assembly residential quarters, says no need for rehabilitation
- Ibadan residents react to proliferation of prayer mountains
- US man who received first-ever modified pig kidney transplant dies
- JTF uncovers 50 illegal refining sites in Bayelsa forest