ICYMI: NNPC’s takeover of OML 18 is illegal… we’ve approached the court, says Eroton

The management of Eroton Exploration and Production Company Limited says it remains the operator of the oil mining lease (OML) 18, and has approached the relevant courts to defend its legal rights on the operatorship of the asset.

Eroton had acquired 45 percent of the OML 18 after Shell Petroleum Development Company divested from some of its onshore assets in 2015.

Since that time, the company has operated the asset, situated south of Port-Harcourt on behalf of the Eroton/NNPC joint venture.

However, last week, the Nigerian National Petroleum Company (NNPC) Limited said it had replaced Eroton, and taken over as the new operator of OML 18.

NNPC said the action was taken to curtail further degradation of the asset and revamp production.

Speaking on the matter in a recent statement, Emeka Onyeka, managing director of Eroton, emphasised that the company is still the operator of OML 18, adding that its position was in line with the provisions of the joint operating agreement (JOA).

‘NNPC, SAHARA ENERGY BREACHED JOA PROVISIONS’

The managing director said any dispute between the parties are reserved exclusively for resolution under the dispute resolution clause of the JOA.

He, therefore, said the actions of the other joint venture (JV) partners — NNPC and Sahara Energy — remain illegal and run contrary to the rule of law and in total breach of the terms and conditions stipulated in JOA.

Onyeka said Eroton “as the operator of OML 18”, remains committed to transparency, integrity, and due process.

“This statement is necessitated by the false information recently disseminated in the media on the status of operatorship of OML 18 and about Eroton Exploration and Production Company Limited,” he said.

“In complete breach of the terms of the joint operating agreement (JOA) governing OML 18, and with total disregard for due process, the non-operators of OML 18; NNPC Limited (NNPC) and Sahara Field Production Limited (Sahara) (now known as OML 18 Energy Resource Limited) appointed a company, NNPC Eighteen Operating Limited as operator of OML 18.”

Onyeka said Eroton, which was validly “appointed operator of OML 18 via a legal and contractual process involving all the participating entities in the JOA, has approached the relevant courts to defend its legal rights”.

In addition, he said Eroton has issued a notice of arbitration to NNPC and Sahara in accordance with the terms contained in the agreement.

“On the basis of the lack of any grounds for the purported takeover of operatorship in accordance with the terms of the JOA governing the block, lack of due process and flagrant breach of the rule of law, Eroton has taken considered legal opinion to the effect that the status quo ante continues to remain the position and same will be upheld by the courts of Nigeria,” he said.

“This is despite any contrary public statements by any entity, in the interim period. If this action taken by NNPC and Sahara is allowed to persist, it poses a threat on all the JOA’s in Nigeria involving both multinational and indigenous oil and gas companies, because due process with regard to dispute resolution has not been followed.

“Thus, there can be no removal of an operator without following the laid down procedures and processes in Article 2.4 of the JOA. The process is designed in such a way that notices requirements cannot be waived and the removal of operatorship cannot be carried out without following the process provided in the JOA.”

Speaking on the exploits of the oil firm, Onyeka recalled that Eroton took over operatorship of the asset in 2015 with “a meagre production [capacity] of 6,000 bbls/d and increased production to over 50,000 bbls/d of dry crude (75,000 bbls/d of gross liquids) within a period of less than 24 months”.

He said this was considered a spectacular achievement at the time by both the NNPC, regulators, and the entire industry.

“Eroton, as operator, was also recognised by NNPC as being one of the two JV operators with the lowest technical cost per barrel in the industry over the time period,” Onyeka added. 

‘OML 18 WAS SEVERELY IMPACTED BY COVID-19, CRUDE OIL THEFT’ 

He said operatorship of the asset continued until the oil industry became severely impacted firstly by COVID-19, and then by the unprecedented level of crude theft and sabotage in the Niger Delta area from 2020 till date.

According to Onyeka, since the fourth quarter (Q4) of 2021, the federal government has received virtually “zero crude oil” from any company utilising the Nembe Creek Trunk Line (NCTL).

He described the NCTL as “a pipeline that is partially owned by NNPC (not operated by Eroton), as its primary evacuation route owing to the force majeure declared by the NCTL operator and the widespread vandalism and crude oil theft recorded in the region”.

“The activities of criminal elements in the Niger Delta are known to all and continue to adversely affect the entire region and the nation’s proceeds from oil. For example, Eroton’s crude oil receipts steadily dropped at an alarming rate in 2021, culminating in zero receipt in November 2021 at Bonny Terminal,” he said.

“This was despite efficient wellhead production data showing produced volumes of over 500,000 barrels of oil for the same month, thus meaning that all the approximately 500,000 barrels of crude oil produced, processed, and delivered into the NCTL was stolen. Consequently, and in agreement with the JV partners, Eroton shut in the Wells.”