OPTIMUM Petroleum Development Company and Lekoil have signed a legally binding agreement to advance with the development of Ogo discovery within the offshore OPL 310 block in Nigeria.

Both the companies aim to undertake a two-well programme over the next 12 to 18 months at the discovery. However, the move is subject to receipt of necessary funding and an extension of the OPL 310 licence from the Nigerian Ministry of Petroleum Resources.

The two companies also agreed to the appraisal of the block and its conversion to an oil mining licence. Based on appraisal result, Optimum and Lekoil will undertake a full field development (FFD) programme. The companies also agreed not to pursue with the disputed 22.86% ownership in the Optimum-operated OPL 310, which have delayed the development of the block.

Optimum and Lekoil will now use the stake as a source of potential funding and a security vehicle, if a third party chooses to farm-in to the block.

In 2015 Lekoil paid $13m to acquire shares of Afren Oil & Gas (Nigeria), which held the disputed 22.86% stake in the block.

However, the latest agreement does not address the recovery of the consideration paid by Lekoil, as both the parties plan to resolve the issue simultaneously while allocating the stake to the potential third party.

Under the agreement, Lexoil agreed to pay $3m of previously outstanding arrears to Optimum. The company will also pay $5m as operator’s fee to Optimum for its 17% participating interest.

Additionally, Lekoil will pay 42.85% of $10m to the Nigerian Government following the conversion of OPL 310 to an OML, and another 42.85% of $10m on reaching first oil. It will also pay the fee to the government as prescribed by the Minister of Petroleum Resources for the extension of the licence.

Lekoil CEO Lekan Akinyanmi said: “We are pleased to have come to an understanding with Optimum, the Operator of the OPL 310 Block.

“We look forward to working closely with them to unlock significant value for our investors and all stakeholders, not only with the appraisal potential identified at Ogo, but also with the other promising exploration leads readily identifiable in the OPL310 Block.”