The non-operating Joint Venture (JV) partners of Oil Mining Lease (OML) 18 have appointed the NNPC Eighteen Operating Limited as the operator of OML 18 to replace Eroton Exploration and Production Limited (Eroton).
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Mr. Garbadeen Muhammad, the Chief Corporate Communications Officer, of NNPC Ltd, in a statement on Monday, said this was to curtail further degradation of the asset and revamp the production of oil and gas.
“In order to protect the JV investment in OML 18, the non-operating partners, NNPC Limited (55 percent interest) and OML 18 Energy Limited (“OML 18 Energy” – 16.20 percent interest), jointly owning 71.20 percent equity, removed Eroton as operator of the JV.
“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.
He said while the key business reasons that made the change in operatorship were compelling, it was publicly available information that production had declined from thirty thousand barrels per day (30,000 bpd) to zero.
He 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 said a number of audits and investigations, including by the EFCC, NURPC’s work program audit, and others had been undertaken or were ongoing.
He said some of these audits were regulatory steps that may lead to license revocation under the relevant Laws if drastic steps were not taken by non-operating partners.
“NNPC Limited in particular, as the 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 kilometers 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 currently producing: Cawthorne Channel, Awoba, Akaso, and Alakiri,” he said.
The chief corporate communications officer recalled that in 2014, Eroton acquired the 45 interest previously owned by Shell – 30 percent, Total – 10 percent, and NAOC – five percent, in the then NNPC/SPDC/Total/Agip OML 18 JV.
Following the equity acquisition, he said 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.
He said subsequently in 2018, Eroton farmed-out part of its equity to OML 18 Energy Resource Limited – 16.20 percent and Bilton Energy Limited – 1.80 percent.
According to him, from 2016 to date, OML 18’s net crude oil production has significantly fallen from approximately thirty thousand barrels per day (30,000 bpd) to zero production.
This, he said, was in spite of 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 current zero production status of the asset.
NNPC Eighteen Operating Limited has taken control of the operational and production assets in the block.
It is currently engaging the relevant stakeholders, workers' unions, and communities, among others, to restore operations to their full capability and secure value for all partners and the federation.
