The Korea Electric Power Corporation (KEPCO) has decided to pull out of a Nigerian oil exploration and development project.
The exit will stall an oil exploration and development project which has been jointly led by KEPCO and Korea National Oil Corporation (KNOC) which have been challenged for seven years due to a lawsuit.
The state-run power company liquidated a local subsidiary in Nigeria for the project.
According to KEPCO on May 22, the board members of the KEPCO closed down its Nigerian affiliate, Dolphin Property Limited, established to manage oil exploration and development project in the Gulf of Guinea, the southwestern region in Nigeria. The offshore block exploration project in Nigeria, which was participated in by a Korean consortium, consisted of KEPCO, KNOC, and Daewoo Shipbuilding & Marine Engineering (DSME) in 2005, has been stalled for seven years from 2009.
Accordingly, it is unclear that the consortium will be able to retrieve the investments. In particular, the lawsuit against the Nigerian government, which insists on the confiscation of the project if there are flaws in the contract, is currently pending and the project is still dragging down. The KEPCO has decided to liquidate the local subsidiary because it believes that the project will continue to be stalled, according to industry sources.
Therefore, the future of KEPCO’s other project, to build a 2,250 megawatts power plant in Nigeria is also uncertain. The KEPCO said that it will keep carrying forward the power plant construction project unlike the oil exploration and development project. As the KEPCO has practically pulled out of the project, businesses are paying attention to the future prospect of the project. In 2005, the deep water blocks, OPL 323 and OPL 321, in the Gulf of Guinea in Nigeria was estimated to reserve 1 billion barrels of oil each at that time, and the Korean consortium, consisting of the KEPCO, KNOC and DSME won the blocks with a 60 per cent stake. Out of the 60 per cent, the KNOC owns 40 per cent while the KEPCO and DSME possess around 10 per cent each.
However, the federal government nullified the contract with the Korean consortium in 2009, citing flaws in the contract. Then, it transferred the exploration rights to India’s state-owned Oil and Natural Gas Corporation Limited (ONGC). Accordingly, the Korean consortium filed a lawsuit against the Nigerian government in the Nigerian Federal High Court for reversing its decision to cancel the contract, and won the case in August 2009.
Source : Leadership