Continental Focus, International Reach

Lekoil and Optimum Reach Agreement on OPL 310

Wednesday, September 4, 2019

Lekoil and Optimum Petroleum Development Company have reached a resolution on their issues regarding OPL 310 in Nigeria. Optimum, who is the operator of OPL 310, and Lekoil executed a legally binding agreement to progress appraisal and development program activities at the Ogo discovery.

Optimum and LEKOIL are initially targeting a two-well program over the next 12 to 18 months, subject to receiving an extension of the OPL 310 license from the Ministry of Petroleum and securing the funding needed for the program.

The pair have agreed to drill two additional appraisal-development wells, contingent on the results of the initial two-well appraisal campaign and the associated extended well tests to be undertaken. All wells will be designed to be compatible with an early production scheme.

They have also agreed to progress the appraisal of the block and conversion to an OML as soon as practicable. Assuming a successful appraisal, a full field development (FFD) program will be undertaken and embarked upon by Lekoil and Optimum with an industry partner, discussions on which are at an advanced stage. Assuming granted, which is at the discretion of the Department of Petroleum Resources, the OPL to OML conversion is expected to extend the license by 20 years.

Further to previous announcements, there has been an ongoing dispute as to the legitimate ownership of a 22.86% stake in OPL 310.  This dispute has been the principal reason that development of the block has been delayed. Rather than pursue this matter further, the parties have agreed to use the 22.86% equity stake in the block as a potential funding and security vehicle for the accelerated development of the block by an industry partner or a third party that elects to farm-in to the block to fund field development. The potential funding partner may be sourced by either Lekoil or Optimum.

Lekoil said that while the agreement does not address the recovery of the $13 million consideration previously paid by it with respect to the acquisition of the shares of Afren Oil & Gas (Nigeria) Limited (AOGNL) in 2015 (which held the 22.86% participating interest in OPL 310), it is working with Optimum on a resolution of this matter alongside the possible allocation of the 22.86% to a potential funding partner and remains hopeful that an agreement can be reached.