Determined to protect the integrity of the country’s Joint Venture (JV) agreements from degradation, and revamp production of oil and gas, the management of Nigerian National Petroleum Company (NNPC) Limited has replaced ed Eroton Exploration and Production Limited as the new operator of oil mining lease (OML) 18.
This, according to the company, was done to protect the JV investment in OML 18, where the non-operating partners, NNPC Limited owns 55 per cent interest and OML 18 Energy Limited (OML 18 Energy) holding 16.20 per cent interest, removed Eroton as operator of the JV.
The Chief Corporate Communications Officer, NNPCL, Garbadeen Muhammad, in a statement, said this was to curtail further degradation of the asset and revamp production of oil and gas.
“This is in line with the provisions of the Joint Operating Agreement (JOA). NNPC Limited and OML 18 Energy further appointed NNPC Eighteen Operating Limited as operator of the JV,” he said.
Muhammad said the change in operatorship had been notified to the Nigerian Upstream Regulatory Commission (NUPRC) and communicated to Eroton.
According to him, while the key business reasons that made the change in operatorship were compelling, it was publicly available information that production had declined from 30,000 bpd to zero.
Muhammad said the persisting inability of Eroton to meet the fiscal obligations of the Federal Government led to the sealing of Eroton’s head office in Lagos by the Federal Inland Revenue Service (FIRS) for more than 12 months due to non-payment of outstanding taxes.
According to him, Eroton is also not able to remit to the JV parties the proceeds of gas supplied to its affiliate, Notore.
He explained that said many audits and investigations, including by the EFCC, NURPC’s work programme audit and others had been undertaken or were ongoing. Some of these audits, he revealed, were regulatory steps that may lead to licence revocation under the relevant laws if drastic steps were not taken by non-operating partners.
“NNPC Limited in particular, as majority shareholder with a unique stewardship responsibility to the Federation, is committed to assuring that the energy and financial security of the country is uppermost in its business decisions.
“Removing an operator in these circumstances is therefore inevitable in order to protect the JV from governmental or third parties action from entities, including Eroton’s lenders and other service providers.
“It is important to highlight that OML 18 is an oil-producing block covering 1,035 square kilometres located south of Port Harcourt and contains 11 oil and gas fields with about 714 Million Stock Tank Barrels (MMSTB) of oil and condensate and 4.7 trillion cubic feet (tcf) of natural gas reserves.
“Eight fields have been developed, but only four are producing: Cawthorne Channel, Awoba, Akaso and Alakiri,” he explained.
Muhammad recalled that in 2014, Eroton acquired the 45 interest previously owned by Shell; 30 per cent; Total, 10 per cent and NAOC, five per cent, in the then NNPC/SPDC/Total/Agip OML 18 JV.
Following the equity acquisition, Eroton became NNPC’s partner in the OML 18 JV and Eroton was designated as the “Operator” in accordance with relevant provisions of the Joint Operating Agreement (JOA) between the parties.
However, in 2018, Eroton farmed-out part of its equity to OML 18 Energy Resource Limited – 16.20 per cent and Bilton Energy Limited – 1.80 per cent.
Muhammad regretted that from 2016 to date, OML 18’s net crude oil production had fallen significantly from 30,000 bpd to zero.
This, he said, was despite the consistent compliance to the joint venture’s funding obligations by the JV partners over the same period.
In recognition of the impact of the challenges in crude evacuation via the Nembe Creek Trunk Line (NCTL), the operator proposed, and partners approved an Alternative Crude Oil Evacuation Process by barging. Eroton is unable to execute this alternative, leading to the zero production status of the asset.
“NNPC Eighteen Operating Limited has taken control of the operational and production assets in the block. It is engaging the relevant stakeholders, workers union and communities, among others, to restore operations to its full capability and secure value for all partners and the federation,” he said.