OML 118: RENEWAL OF PRODUCTION SHARING CONTRACT AGREEMENT BY NNPC AND PARTNERS
After years of protracted disputes over interpretation of the fiscal terms of the production-sharing contracts, the Nigerian National Petroleum Corporation (NNPC) and its Production Sharing Contract (PSC) partners – Shell Nigeria Exploration and Production Company (SNEPCo), Total Exploration and Production Nigeria Limited (TEPNG), Esso Exploration and Production Nigeria Limited (EEPNL) and Nigerian Agip Exploration (NAE) – have executed agreements to renew Oil Mining Lease (OML) 118, the first deep-water block developed in Nigeria, for another 20 years.
It is expected that over $10bn of investment would be unlocked by this contractual deal in the Bonga bloc. While the projection is that the renewed PSC will yield over $780million in immediate revenues to the Federal Government, it is believed that it would concurrently free the PSC partners from over $9billion in contingent liabilities.
Indeed, the renewal of the OML heralds a rebirth of clear and fair framework for the development of the huge deep-water assets in Nigeria and renewed confidence of investors in the system, thereby enhancing foreign direct investment. It is hoped that this feat will be duplicated in salvaging other contractual arrangements in Nigeria muddled in long disputes.