NNPC replaces Eroton as new operator of OML 18 asset

The Nigerian National Petroleum Company (NNPC) Limited says it has replaced Eroton Exploration and Production Limited as the new operator of oil mining lease (OML) 18.

Garba Deen Muhammad, NNPC spokesperson, disclosed this known in a statement seen by TheCable on Monday.

Prior to the development, Eroton operated OML 18 situated south of Port-Harcourt on behalf of the Eroton/NNPC joint venture.

The oil firm said the non-operating joint venture (JV) partners of OML 18 appointed its subsidiary — NNPC Eighteen Operating Limited — as the new operator of OML 18 to replace Eroton.

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

“In order to protect the joint venture (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 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 statement reads.

“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.”

NNPC 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.

It added that Eroton is also not able to “remit to the JV parties the proceeds of gas supplied to its affiliate, Notore”.

‘EFCC INVESTIGATING EROTON’

In a related development, NNPC said a number of audits and investigations, including by the “EFCC, NURPC’s work programme audit and others have been undertaken or are ongoing”.

The national oil company said some of the audits are regulatory steps that may lead to licence revocation under the relevant laws if drastic steps are 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 the energy and financial security of the country is uppermost in its business decisions,” it said.

“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.”

‘OML 18’s NET CRUDE PRODUCTION HAS FALLEN FROM 30,000 BPD TO ZERO’

OML 18 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.

According the NNPC, eight fields have been developed, but only four — Cawthorne Channel, Awoba, Akaso, and Alakiri — are currently producing.

“In 2014, Eroton acquired the 45 percent interest previously owned by Shell -30 percent, Total -10 percent, and NAOC – 5 percent, in the then NNPC/SPDC/Total/Agip OML 18 JV,” the oil firm said.

“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 percent, and Bilton Energy Limited – 1.80 percent. From 2016 to date, OML 18’s net crude oil production has significantly fallen from approximately 30,000 bpd to zero production, despite 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 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.”