OML 18: NNPCL, JV Partner Dismiss Eroton as Operator

The non-operating joint venture partners of Oil Mining Lease 18 have appointed NNPC Eighteen Operating Limited as the operator of OML 18 to replace Eroton Exploration and Production Limited.

According to a statement signed by the Chief Corporate Communications Officer, Nigerian National Petroleum Company Limited, Garba-Deen Muhammad, Eroton was dismissed to curtail further degradation of the asset and revamp the production of oil and gas on it.

“In order to protect the joint venture investment in OML 18, the non-operating partners, NNPC Limited (55 percent interest) and OML18 Energy Limited (16.20 percent interest), jointly owning 71.2 percent equity, removed Eroton as operator of the JV in line with the provisions of the Joint Operating Agreement.

“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 and communicated to Eroton,” it read.

NNPC said that 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 barrels per day to zero.

It said the persisting inability of Eroton to meet the financial obligations of the FG led to the sealing of Eroton’s head office in Lagos by the Federal Inland Revenue Service for more than 12 months due to non-payment of outstanding taxes to the Government.

Also, the state oil firm said Eroton was not able to remit to the JV parties the proceeds of gas supplied to its affiliate, NOTORE, adding that a number of audits and investigations, including by the EFCC, NURPC’s work programme audit, and others, had been undertaken or were 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,” NNPCL said.

It added: “NNPC Limited in particular, as the majority shareholder with a unique stewardship responsibility to the federation, is committed to ensuring 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.”

In addition, the NNPCL said it was important to highlight that OML 18 was an oil-producing block covering 1,035 square kilometres located south of Port Harcourt and contained 11 oil and gas fields with about 714 Million Stock Tank Barrels of oil and condensate and 4.7 trillion cubic feet of natural gas reserves.

It said eight fields had been developed, but only four were currently producing and named Cawthorne Channel, Awoba, Akaso, and Alakiri.

Eroton acquired the 45 percent interest previously owned by Shell – 30 percent, Total – 10 percent, and NAOC – five percent, in the then NNPC/SPDC/Total/Agip OML 18 JV in 2014.

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 between the parties.

Subsequently in 2018, Eroton farmed-out part of its equity to OML 18 Energy Resource Limited – 16.2 percent and Bilton Energy Limited – 1.8 percent.

“From 2016 to date, OML 18’s net crude oil production has significantly fallen from approximately 30,000bpd to zero production, despite consistent compliance to the joint venture’s funding obligations by the JV partners over the same period,” NNPCL said.

It continued, “In recognition of the impact of the challenges in crude evacuation via the Nembe Creek Trunk Line, 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, and communities, among others, to restore operations to their full capability and secure value for all partners and the federation.”

Two weeks ago, Eroton announced that it remained the operator of OML 18 Alakiri Gas Plant and Field Logistics Base in the Niger Delta.

It said that it was false for a section of the media to claim that NNPCL had taken over the operatorship of OML 18.

“First, it is important to state that Eroton remains the Operator of OML 18. The issue of operatorship of OML pouch 18 is a contractual one and is governed by the joint operating agreement among participating entities,” the firm said in a statement.