OPL 310: Optimum’s Default Clause Termination Letter Invalid, Says Lekoil

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By Emmanuel Addeh

An oil and gas E&P company with a focus on Nigeria and West Africa, Lekoil, yesterday maintained that a letter written by Optimum Petroleum Development Company, operator of the Oil Prospecting Licence (OPL) 310, proposing to terminate the Cost and Revenue Sharing Agreement (CRSA) executed for the facility, remains invalid.

In December, Lekoil, founded by Olalekan Akinyanmi, said it was in talks with Optimum over its share of sunk costs and consent fees which fell due on November 30.

The talks were necessitated after Optimum had conveyed its plan to enforce a default clause to Lekoil in a letter as payments to cover the portion of sunk costs and consent fees, which was allegedly not received as at when due.

In addition to the fees, Optimum highlighted that Mayfair Assets and Trusts Limited, a fully owned subsidiary of Lekoil, had also not made payments to cover general and administrative costs for the year as agreed within CRSA signed by both companies.

But Lekoil requested the deferment of the payments as the company intended to focus its financial and other resources in support of securing funding for the second phase of the Otakikpo development as well as the Ogo appraisal programme.

Working with Optimum, Lekoil said it has identified and engaged an appropriate rig for the appraisal drilling where the service provider has accepted the result of the early performed site survey.

It disclosed that it had resolved similar issues due to the good working relationship between the parties, saying it had been able to receive multiple extensions on outstanding payments and remains hopeful of a mutually acceptable solution being reached.

It was gathered that the clause stipulates that following “cure period,” if a default occurs, Optimum and Lekoil subsidiary, Mayfair Assets and Trusts Limited, will seek and agree on buyer of Mayfair’s 17 per cent interest in the licence.

But in the latest statement from Lekoil, it announced that Mayfair Assets and Trusts Limited, in which the company has a 90 per cent economic interest, has received a letter from Optimum Petroleum Development Company.

It stated that the operator of the OPL 310 licence was proposing to terminate the CRSA executed for OPL 310, but said it was premature.

“As announced on December 11, 2020, Optimum conveyed its enforcement of the default clause within the CRSA.

“Pursuant to the CRSA, the default clause stipulates that following a cure period, if a default has occurred, Optimum and Mayfair shall jointly seek and agree on a buyer to whom Mayfair’s 17.14 per cent participating interest as well as the financial obligation within OPL 310 will be transferred.

“Mayfair will also be entitled to a full reimbursement of all amounts due to it, as a result of past costs spent on the asset, from future production proceeds from OPL 310.

“The company believes that this further letter proposing to terminate the CRSA is not valid as the relevant provisions of the CRSA have not been adhered to by Optimum,” Lekoil argued.

The company noted that it would continue to engage with Optimum to ensure that the appropriate steps outlined in the agreement are followed, stressing that it is also seeking legal advice on the matter.