Phillips and ExxonMobil Withdraw from Nigerian Offshore Blocks
ExxonMobil and Phillips Petroleum have pulled out from Nigeria's offshore deepwater region, withdrawing their operatorship of blocks OPL 214 and OPL 318, respectively. Officials of the Nigerian National Petroleum Corporation have explained that the two companies merely declined to sign agreements for the operatorship of the two blocks. However, it is believed that the firms might have rejected the Federal Government's decision to hold 30 percent equity in the blocks under the Production Sharing Contract (PSC) arrangement guiding the awards of the acreages.
Nigerian Petroleum Development Company has taken over as operator the two blocks. The blocks were offered to NPDC on the condition that they would be paid for. Exploration and development in the blocks, according to the NNPC chief, would be carried out in partnership with Italian oil firm Nigerian Agip Oil Company. NNPC and Agip signed the PSC agreement yesterday. NAOC's chief operating officer Mr. Cao, who signed on behalf of the company, said work is expected to begin on the first well in the blocks by May 2002.
Industry officials said the issue of the government holding 30 percent equity in the deep offshore blocks held up the signing of the PSC agreements between the NNPC and winners of the year 2000 licensing rounds announced since December last year. The companies had argued that after bidding for the blocks for huge sums, the remaining 70 percent equity was not enough to guarantee profitability. Under the PSC arrangement, the operating firm or the licensee would finance, 100 percent, the development, exploration and production of oil in the blocks awarded on sole risk basis.
This means that the NNPC, representing government interest as the owner of the acreages, would not be required to contribute to the funding as obtainable under joint venture agreements. ExxonMobil, through its subsidiary Esso, bid for OPL214 at the offer price of $20 million. Other partners with Esso in the block are Chevron and Petronas.