June 15, 2009

KNOC demands restoration of OPLs 321, 323

By Hector Igbikiowubo
THE Korean National Oil Company, KNOC has urged a High court sitting in Abuja to restore its two oil prospecting licences revoked earlier this year by the Federal Government over the company’s alleged inability to pay in full the signature bonus put at $485 million.

Yar Adua

Yar Adua

In a related development, ONGC Mittal Energy, OMEL has indicated its preparedness to start the first phase of hydrocarbon exploration in Nigeria by August in Block OPL_285.

“We are not asking for damages. We are only asking that our Oil Prospecting Licences, OPLs 321 and 323 be restored to us so that we can continue with the work we are doing,” KNOC lawyer, Robert Clarke was cited by the Agence France-Presse as saying in the Abuja Federal High Court. The licences of the two oil blocks, awarded to the South Korean company in 2005 and which attracted signature bonuses totaling $485 million, were revoked last January by President Umaru Yar’Adua.

The KNOC is challenging the legality of the revocation. Clarke said an alleged petition that led to the revocation was not made known to KNOC and thus the company was given no opportunity to defend itself. But when Nigeria’s petroleum ministry cancelled the licences, it cited what it said was the non-payment of some $231 million promised in return for exploration rights.

KNOC said the $231 million had already been written off by the former Nigerian government in return for the construction of infrastructure, including a power plant and gas pipelines.

The licences were awarded to another consortium, India’s ONGC Videsh and Nigerian affiliate, Owel Petroleum Services Nigeria.

He also said that the revocation did not comply with Nigeria’s Petroleum Act and Deep Offshore and Inland Basin Act which stipulated who should revoke and the procedure for such an action.

Clarke said the KNOC had paid most of what was due on the licences and agreed on a production sharing contract with the state-run Nigerian National Petroleum Corporation before the licences were withdrawn. Judge Abdullahi Mustapha adjourned the case to Monday to allow the Nigerian Government and the new beneficiaries of the re-awarded blocks to address the court.
ONGC Mittal:

OMEL is a joint venture between ONGC Videsh (OVL) and Mittal Investments, the private investment company of India’s Mittal family. “The first rig is to go down in the block in August. The joint venture plans to drill one well during this calendar year and the second in next calendar,” The Hindu Business Line reported Mittal Invesments’ Managing Director, Sudhir Maheshwari saying. OPL-285 is a deep-water block, where OMEL, through OMEL Energy Nigeria, holds 64.33% participating interest and operatorship. The other partners in the block are local Nigerian company, EMO (10 %), and Total (25.67% interest).

It would be recalled that in the bid round held in August 2005, a consortium comprising ONGC Videsh Ltd., ONGC, Equator and OWEL E&P Ltd OWEL, submitted the winning bids for the Oil Prospecting Licences, OPLs for blocks 321 and 323.

The bids included signature bonuses totaling US$485 million. However, the Korean National Oil Corporation, KNOC exercised a right of first refusal granted to it in recognition of a commitment by KNOC to implement a downstream project. After discussion among all parties, KNOC was awarded a 60% interest in the blocks and appointed as operator. A 30% interest was awarded to the ONGC group while the remaining 10% was awarded to Local Content Vehicles, LCVs – Tulip Energy Resources Nigeria Limited for OPL 321 and NJ Exploration Limited for OPL 323.

ONGC declined its part of the award, allowing Equator to take the allocated share. The Government of Nigeria and KNOC consented to this and Equator made payment to the Nigerian Government of a full one-third share of the signature bonuses totaling US$161.7 million.

On 10 March 2006, Equator signed the two Production Sharing Contracts with the Nigerian National Petroleum Corporation and the other parties as a full independent party with a 30 per cent interest. The Company also signed the Joint Operating Agreements with the other participants on 7 June 2007. Since March 2006, Equator has participated fully with the other parties in all of the technical and commercial decisions related to the detailed evaluation of the hydrocarbon prospects and in the preparations for drilling.

The Company has recently been informed by the Ministry of Energy of a decision made by the President of Nigeria to void the allocation of the blocks to KNOC and to restore the status of the ONGC Consortium as the winning bidder subject to their payment in full of the US$485 million signature bonus within 60 days of 6 January 2009.