The decision of Oando Oil Limited (OOL) to acquire Nigerian Agip Oil Company (NAOC) from Italian oil & gas company, Eni, could result in legal implications, following the allegation of contractual breach.
In a letter by the Nigerian National Petroleum Company (NNPC) Limited, it was revealed that Eni didn’t adhere to the procedures of disposing or transferring interests held in the joint venture.
Eni, through Agip, is the operator of the Oil Mining Licenses (OML) 60, 61, 62, and 63, which it co-owns with the NNPC E&P Limited and Oando, both of which holds 60 per cent and 20 per cent respectively.
The remaining 20 per cent is held by Agip, which Eni intends to sell to Oando, giving the latter a 40 per cent stake in the OML joint venture.
NNPC said the joint venture contracts require a partner to inform other stakeholders of its decision to divest its interest or stake before agreeing to transfer its assets, however, Eni or Agip didn’t adhere to the requirements.
Failure to seek the consent of other parties involved in the joint venture would have far-reaching contractual and legal implications, according to the government-owned Oil firm.
“Our attention has been drawn to various reports circulating on different media platforms in relation to an alleged divestment of NAOC’s participating interest in OMLs 60, 61, 62, and 63 to Oando Oil Limited.
“A duly signed press statement allegedly emanating from OOL dated September 4, 2023, affirms the fact that NAOC has assigned its entire 20 per cent participating interest in the said OMLs to OOL.
“Whilst we are yet to confirm the authenticity of the said divestment, we would like to note that the purported assignment, if true, would have the following far-reaching contractual and legal implications in relation to the Joint Operating Agreement dated July 1991 governing the operations of the NAOC/NEPL/OOL Joint Venture:
“1. Clause 19.11 of the JOA provides that ‘No party may assign or transfer its interest or any part thereof without the prior written consent of the other parties, which consent shall not be unreasonably withheld’.
“By virtue of this provision, a party seeking to transfer part or the whole of its participating interest in the joint venture is obligated to seek the prior written consent of the other parties,” part of the letter signed by the Managing Director, NNPC Exploration and Production Limited, Ali Zarah, reads.
The letter, dated September 4, 2023, was written to the Managing Director, Nigerian Agip Oil Company Limited, Maitama, Abuja, to convey NNPC’s concern over the deal.
Aside from what it describes as a breach of the terms of the joint venture, NNPC said transferring the interest of Agip to Oando doesn’t also automatically hand the buying company the operator status, as parties in the joint venture must agree to another operator.
“Clause 2.4.1(i)(c) of the JOA provides that the operator shall cease to be an operator and shall be removed by the non-operators if the operator assigns or otherwise disposes of, other than to an affiliate, all its participating interests.
“Furthermore, Clause 2.6.1 provides that in the event of cessation of operatorship arising from the above circumstances, the parties shall appoint one of the non-operators as successor operator.
“We have highlighted the above provisions of the JOA to underscore the point that the purported assignment, even if valid, should by no means translate to the transfer of operatorship to OOL. If NAOC’s divestment turns out to be valid, it will become incumbent on NEPL and OOL to decide on a successor operator,” NNPC informed Agip.
The NNPC said ENI should confirm its intention to dispose of the interests in Agip to Oando to enable the government’s Oil corporation to decide on its next line of action.
Meanwhile, the concerns raised by the NNPC come at a time when Seplat is also finding it difficult to complete the acquisition of MPNU from ExxonMobil, as the NNPC has been blocking the deal.