BackONGC Mittal gives up oil block in Nigeria
The Nigerian government refused to relieve the company of a $6 billion downstream investment commitment
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New Delhi: ONGC Mittal Energy Ltd (OMEL), a joint venture between ONGC Videsh Ltd and Lakshmi Mittal’s Mittal Investment Sarl, has relinquished an oil block in Nigeria after the African nation refused to relieve it of a $6 billion downstream investment commitment.
OMEL had in 2005 won right to explore for oil and gas in the offshore OPL-279 and OPL-285 blocks after committing to invest $6 billion (around ₹ 36,600 crore) in an 180,000 barrels per day (bpd) greenfield refinery, a 2,000 megawatt power plant or a railway line from east to West of Nigeria.
It paid a signature bonus of $50 million for OPL-285 and $75 million for OPL-279.
People with knowledge of the matter said the company had in 2012 relinquished deep-sea block OPL-279 after prospective hydrocarbon zones did not offer any viable commercial development.
It offered to continue with the other block, OPL-285, provided Nigeria relieved it of the $6 billion commitment. Since Nigeria did not agree to the waiver, OMEL transferred its 64.33% stake in the block to partners Total SA of France and EMO Exploration and Production Ltd, a local Nigerian company.
Prior to the transfer, Total held 25.67% interest and EMO the remaining 10%.
After this relinquishment, OMEL is left with just the Al-Furat project in Syria with China’s CNPC International Ltd. However, the oil and gas field has been shut since late 2011 after the European Union imposed oil trade sanctions on Syria.
OMEL had in February 2007 signed a production sharing contract (PSC) for OPL-279 and OPL-285.
As per the memorandum of understanding (MoU) for the blocks, the Nigerian government was to offer OMEL 120,000 bpd (6 million tonnes a year) crude oil lifting rights on a commercial basis, two deep-water exploration blocks that would attract a signature bonus structured to reflect an appropriate carried participation in a proposed 180,000 bpd refinery and assurances of liquefied natural gas (LNG) off-take.
Further, upon commercial discoveries of hydrocarbons in the two blocks and assured uplift of crude, the Indian combine would invest $6 billion in Nigeria on construction of railways, 2,000 megawatt coal/gas based power plants and commercial agriculture, and upgrade the Petroleum Training Institute in Delta State.
The Nigerian government had the right to decide the order of priority.
However, the downstream commitments had not been stuck to and OMEL has therefore requested Nigerian National Petroleum Corp. for waiver of investment obligations attached to the PSC of the blocks for entering into Phase-II, people with knowledge of the matter said.
This downstream commitment has been found to provide a negative return as per a study conducted by Foster Wheeler on behalf of OMEL.
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