Addax Petroleum’s OMLs Experience Major Drop in Oil Production

In a recent report by the Nigerian National Petroleum Company Limited (NNPC), it was disclosed that the production from assets operated by Addax Petroleum had significantly decreased from 130,000 barrels per day to 7,000 barrels per day. This substantial decline comes amidst disputes with the federal government and poses a challenge to Nigeria’s current OPEC deficit.

The NNPC’s quarterly publication of its activities illuminated the breakdown of the Production Sharing Contract (PSC) on Oil Mining Leases (OMLs) 123/124 and 126/137, which arose due to Addax Petroleum’s reluctance to make further investments in the assets. This ultimately resulted in a sharp decline in budgetary allocation from over $2 billion to just $200,000 as the company exited the assets last year.

Following the termination of the 24-year deal with Addax Petroleum Development (Nigeria) Limited, the assets were transferred to the concessionaire, NNPC. The history of the PSC for the oil blocks, which was initially signed in 1973 between the NNPC and America’s Ashland before subsequent agreements with Swiss and China’s Sinopec, was fraught with complexities and disputes.

The newly named Antan Producing, a Special Purpose Vehicle (SPV), under the management of the NNPC, has set its sights on increasing production from the current 15,000 barrels per day to 30,000 barrels per day. With the support of the parent body, NNPC, the new Managing Director, Sagiru Jajere, is optimistic about resolving the issues and restoring the assets to their former production capacity.

Jajere highlighted the need for further investment in the assets in order to sustainably increase production. He emphasized the importance of making the business attractive to potential investors and addressing the fiscal terms that have deterred investments in the sector, expressing confidence in the potential of the assets to produce over 50,000 barrels per day in the long run.

The report also cited challenges with Addax, including the withdrawal of financial incentives and lack of investment in the assets, which led to a decrease in production from 130,000 barrels per day to 7,000 barrels per day. Victoria Iroro, Head of Business Services, acknowledged the government’s decision to take over the assets and operate them under the newly formed Antan Producing Ltd as a means of restoring confidence in the workers.

Furthermore, the Head of Operations of the SPV, Jeremy Nnajiofor, outlined plans to enhance security measures and address integrity issues to prevent further shutdowns of the wells and restore production to over 100,000 barrels per day.

The situation with Addax Petroleum’s OMLs serves as a clarion call for increased investment and proper management in the Nigerian oil and gas sector to maximize production and meet international obligations. As the NNPC takes the helm in restoring these assets, the hope is for a resurgence in production levels that will benefit both the government and stakeholders in the industry.