NNPC Eighteen Operating Limited has been appointed operator of Oil Mining Lease (OML) 18 by non-operating Joint Venture (JV) partners to replace Eroton Exploration and Production Limited.
In a statement, Garbadeen Muhammad, Chief Corporate Communications Officer at NNPC Ltd, said the decision was made to curtail further degradation of the asset and revamp oil and gas production.
NNPC Limited and OML 18 Energy Limited, who jointly own a 71.20% equity stake, removed Eroton as an operator, in line with the provisions of the Joint Operating Agreement.
The change in operatorship has been communicated to Eroton and the Nigerian Upstream Regulatory Commission.
Reasons for change in operatorship
The change in operatorship was made due to Eroton’s inability to meet the fiscal obligations of the Federal Government, including the non-payment of outstanding taxes, and remitting to the JV parties the proceeds of gas supplied to its affiliate, NOTORE.
In addition, Eroton’s head office in Lagos was sealed by the Federal Inland Revenue Service (FIRS) for over 12 months due to non-payment of outstanding taxes.
The change in operatorship was also due to the decline in production from approximately 30,000 barrels per day (bpd) to zero. NNPC Limited and OML 18 Energy Limited noted that some audits and investigations, including by the EFCC and NUPRC, were undertaken or were ongoing.
These audits were regulatory steps that could lead to license revocation under the relevant laws if drastic steps were not taken by non-operating partners.
About OML 18
OML 18 is an oil-producing block located south of Port Harcourt, covering 1,035 sq km and containing 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.
Eight fields have been developed, but only four are currently producing: Cawthorne Channel, Awoba, Akaso, and Alakiri.
Eroton acquired a 45% interest previously owned by Shell in the NNPC/SPDC/Total/Agip OML 18 JV in 2014. Eroton became NNPC’s partner in the OML 18 JV, and was designated as the Operator in accordance with the Joint Operating Agreement.
In 2018, Eroton farmed out part of its equity to OML 18 Energy Resource Limited and Bilton Energy Limited.
Challenges and Audits
Since 2016, OML 18’s net crude oil production has fallen from approximately 30,000 barrels per day to zero, despite consistent compliance to the joint venture’s funding obligations by the JV partners over the same period.
In recognition 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.
However, Eroton has been unable to execute this alternative, leading to the current zero production status of the asset.
Muhammad 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.
He added that Eroton is also not able to remit to the JV parties the proceeds of gas supplied to its affiliate, NOTORE.
NNPC Eighteen Operating Limited has taken control of the operational and production assets in the block and is currently engaging with relevant stakeholders to restore operations to full capacity and secure value for all partners and the federation.