The non-operating Joint Venture (JV) partners of Oil Mining Lease (OML) 18 has appointed NNPC Eighteen Operating Limited as the operator of OML 18 to replace Eroton Exploration and Production Limited (Eroton), to curtail further degradation of the asset and revamp production of oil and gas.
This was revealed in a statement signed by Garba Deen Muhammad, NNPC spokesperson, made available to BusinessDay on Monday which stated that the removal of Eroton as operator of the JV conforms with the provisions of the Joint Operating Agreement (JOA) and that the Nigerian Upstream Regulatory Commission (NUPRC) and Eroton have been notified of this new development.
OML 18 is an oil-producing block covering 1,035 square kilometres 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 (tf) of natural gas reserves, eight of which have been developed while only four (Cawthorne Channel, Awoba, Akaso, and Alakiri) are currently producing.
According to the statement, this action was taken in order to protect the JV investment in OML 18, the non-operating partners, NNPC Limited (55 percent interest) and OML18 Energy Limited (16.20 percent interest) who jointly owns 71.20 percent equity.
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“While the key business reasons that made the change in operatorship are compelling, it is publicly available information that production has declined from 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,” it stated.
The NNPCL said that Eroton is unable to remit to the JV parties the proceeds of gas supplied to its affiliate, NOTORE amid undertaken and ongoing number of audits and investigations by the EFCC, NURPC’s work programme audit and others, adding that 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.
The NNPCL said 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, however following the equity acquisition, Eroton became NNPC’s partner in the OML18 JV and was designated as the Operator in accordance with relevant provisions of the JOA between the parties and in 2018, it farmed-out part of its equity to OML18 Energy Resource Limited (16.20 percent) and Bilton Energy Limited (1.80 percent).
Despite consistent compliance to the joint venture’s funding obligations by the JV partners, Eroton was unable to execute the crude Oil Evacuation Process by barging which saw the OML 18’s net crude oil production drop to zero and 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.
“NNPC Limited in particular, as 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 added.
The company said following NNPC Eighteen Operating Limited’s takeover, it is currently engaging relevant stakeholders, including workers unions, communities, amongst others to restore operations to its full capability and secure value for all partners and the Federation.
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