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NNPC to Rake in $500 Billion from Renegotiated PSCs

The Nigerian National Petroleum Company (NNPC Limited, will earn not less than $500 billion in revenue from the renegotiated Production Sharing Contract (PSCs) which it signed with oil majors at the headquarters in Abuja on Friday.

Mr. Bala Wunti, the Group General Manager, National Petroleum Investment Management Services, (GGM NAPIMS) disclosed this during the Execution of Renegotiated PSC agreements between NNPC Ltd and its PSC contractors.

He said the agreements comprise the Production Sharing Agreement, Dispute Settlement Agreements, Settlement Repayment Agreement, Escrow Agreement, and cover five Oil Mining Licences (OMLs 128, 130,132, 133, and 138) in the country’s oil and gas sector .

Earlier in his remarks,Mele Kyari, Group Chief Executive Officer (GCEO), NNPC Limited, said the new contract would stop the litigation issues surrounding the 1993 PSCs.

He added:“a major issue for all of us is all forms of litigations.As you do this, it damages relationships and more than anything else, it stifles investment. That is why exactly that situation was brought to the table, that except for one asset, practically did crude oil enter into any new commitment, since 2007.This is clearly related to the disputes around the 1993 PSC, and we knew that as the JIA process was going on the process to put the Petroleum Industry Act, it was very obvious that the resolution or the dispute of the 1993 PSC is a critical part of that bargain.

“Today, we are happy. Our country kept its promise, and I understand very clearly that it would not have been possible except you had some courage of leadership, and all of us must give this credit to President Muhammadu Buhari, who agreed that we must resolve this most amicably. In a manner that benefits the country but also in a way investors recover their cost and make the competitive benefits that they must have from their investments.

“In the end, the PIA recognises all those terms. The fiscal terms are re-engineered to make sure that these terms are met and also allowed us by law to close our disputes amicably so that we stop all litigations so that some terms and conditions will enable us to move forward with our relationship and that is why we are here today.”

He said a major impact of the new agreement was that there would be clearer relationships between the parties.

“We will have clearer agreements in a new PSC that must have recognised all issues that we have in the 1993 PSCs, and those clarities are there. All ambiguities have been reduced to a minimum. Of course, you can never take out ambiguities from the contacts,” he said.

“Over a long period of time, a massive team was put together by all of us, and I must congratulate them. Very tedious work was done by our collective teams leading to the agreement.”

The NNPC Limited described the deal as a major landmark achievement since our transition to a limited liability company under the Company and Allied Matters Act (CAMA).

“The Petroleum Industry Act (PIA) was signed into law by President Muhammadu Buhari on 16” August 2021.

“This law gave NNPC the legal backing to renegotiate all her existing PSCs in conformance to the provisions of the new Act within a 1-year period. The PIA in Section 311(2) stipulates that new PSC agreements under new Heads of Terms will be signed between NNPC Ltd as Concessionaire and her Contractor Parties within one year of signing the PIA into law, giving a deadline of 15° August 2022.

“This provision paved the way for the resolution of lingering disputes which created investment uncertainty and stifled new investments in the nation’s deep offshore assets. To achieve this, NNPC Ltd leveraged on the near end term of the PSCs and the parties’ interest to renew the PSCs as a negotiation currency in bringing the contractors to work towards trading the past for the future.

“These renewed PSCs would provide several benefits such as improved long-term relationships with contractors, elimination of contractual ambiguities especially in relation to gas terms, enable early contract renewal amongst others. The signing of the new PSCs is a key milestone achievement by NNPC Ltd which would ultimately unlock opportunities within the Nigeria Upstream sector.

“The execution of the PSCs will deepen investment and development of Nigeria‘s rich petroleum resources and ensure that the trifold mandate of the NNPC Ltd to ensure energy availability, sustainability, and accessibility is achieved. Ultimately, the new PSCs will provide inflow of Direct Foreign Investment, expanded access to Affordable Energy, Job Creation and Socio-Economic Development” stated the company.

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