NNPC Limited yesterday announced the takeover of the operatorship of oil mining lease (OML) 18 from Eroton Exploration and Production Limited.
This follows the appointment of one of its subsidiaries, NNPC Eighteen Operating Limited as operator of OML 18 to replace Eroton.
A statement by NNPC spokesperson, Garba Deen Muhammad, posted on the company’s website, said the move “is to curtail further degradation of the asset and revamp production of oil and gas.”
As a result, NNPC Eighteen Operating Limited has therefore “taken control of the operational and production assets in the block and is currently engaging the relevant stakeholders, including workers unions, communities, amongst others to restore operations to its full capability and secure value for all partners and the Federation,” it said.
The statement reads further: “In order to protect the Joint Venture (JV) investment in OML 18, the non-operating partners, NNPC Limited (55% interest) and OML 18 Energy Limited (“OML 18 Energy” – 16.20% interest), jointly owning 71.20% equity, removed Eroton as operator of the JV 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.
The change in operatorship has been notified to the Nigerian Upstream Regulatory Commission (NUPRC) and communicated to Eroton.
“While the key business reasons that made the change in operatorship are compelling, it is publicly available information that production has declined from thirty thousand barrels per day (30,000 bpd) to zero.
“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 twelve months due to non-payment of outstanding taxes to the Government.
“Eroton is also not able to remit to the JV parties the proceeds of gas supplied to its affiliate, NOTORE. A number of audits and investigations, including by the EFCC, NURPC’s work programme audit and others have been undertaken or are ongoing.
“Some of these audits are regulatory steps that may lead to licence revocation under the relevant Laws if drastic steps are not taken by non-operating partners.”
Defending the takeover of operations of the oil block covering 1,035 square kilometres located south of Port Harcourt, in Rivers State, NNPC said it is in line with its responsibility as the majority shareholder to ensure energy and financial security of the country
“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 added.
While the key business reasons that made the change in operatorship are compelling, it is publicly available information that production has declined from thirty thousand barrels per day (30,000 bpd) to zero.
About OML 18
OML 18 is an oil-producing block, which 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.
In 2014, Eroton acquired the 45% interest previously owned by Shell – 30%, Total – 10%, and NAOC – 5%, 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.
Subsequently in 2018, Eroton farmed-out part of its equity to OML 18 Energy Resource Limited – 16.20% and Bilton Energy Limited – 1.80%.
However, NNPC alleged that “From 2016 to date, OML 18’s net crude oil production has significantly fallen from approximately 30,000 barrels per day (bpd) to zero production despite consistent compliance to the joint venture’s funding obligations by the JV partners over the same period.”
It added that “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.”
