NNPC rescues OML 18 JV from distressed Eroton

Sopuruchi Onwuka

The Nigerian National Petroleum Company (NNPC) Limited has declared transfer of operatorship role in its oil and gas exploration and production joint venture with Eroton on Oil Mining Lease (OML) 18.

Following the retrieval of the operator role, OML 18 Energy Limited now assumes the new role managing the asset on behalf of partners including Eroton whose tenure on the operator role has been described as disastrous by NNPC.

The NNPC and OML 18 Energy Limited jointly exercised their 71.20 percent interest in the joint venture to push aside Eroton which has been the operator in the JV following divestment of the brownfield asset by Shell.

The Oracle Today reports that Eroton had in 2014 acquired the 45 percent operating interest jointly divested by Shell, Total and Eni in the Joint venture on OML 18 which covers 1035 square kilometers of lease area onshore Niger Delta.

According to the NNPC Limited, the block holds some 11 oilfields with total stock tank barrels of significant 714 million barrels (MMbbls) of hydrocarbon liquids, including crude oil and condensate. It also holds some 4.7 trillion cubic feet of natural gas reserves.

Only four -Cowthorne Chanel, Awoba, Akaso and Alakiri- out of the eight developed fields in the 11 field block were producing when Eroton replaced Shell as operator after the 2014 divestment and under the prevailing JOA.

However, Eroton has since sold down its stake and status in the operated asset, conceding 16.20 percent to OML 18 Energy Resources Limited in 2018 and 1.80 percent to Bilton Energy Limited.

But despite the trade on its equity stakes and full cash call responses from JV partners, Eroton appears to have stuck in the middle with financing the operations of the JV in the past eight years.

NNPC stated that Eroton has failed to prove savvy with maneuvering hiccups in production evacuation from the operation sites despite receiving partners’ approval to deploy barges in pushing output to export points.

With the takeover of the management of the asset, Eroton would now revert to non-operating financial interest in the business.

NNPC stated in a release that the switch in the operatorship of the oil and gas producing asset falls in line with the prevailing Joint Operating Agreement (JOA) among the partners.

It added that the nation’s upstream petroleum industry regulator, the Nigerian Upstream Regulatory Commission (NUPRC) and Eroton are being carried along on the compelling reasons driving the changes.

Spokesman, Garba Deen Muhammad, stated that as operator, Eroton failed woefully to glean any value from the asset, leading to the company’s inability to even meet its own statutory tax obligations to government and declare returns to all stakeholders.

The NNPC explained that Eroton also led operations on the asset from output of some 3000 barrels of oil per day to total production wind down; failed to file returns on gas supplies to its affiliate, NOTORE; and allowed its head office to be shut down by the Federal Inland Revenue Service (FIRS) on tax default.

From the statement of the NNPC Limited, Eroton is currently in a battle to save its head from a litany of operational, fiscal and commercial agreement breaches; with regulators and crime agencies vehemently after the company.

“A number of audits and investigations, including the EFCC (Economic and Financial Crimes Commission) NUORC’s work programme audit and others have been undertaken or are ongoing.

“Some of these audits are regulatory steps that may lead to license revocation under the relevant laws if drastic steps are not taken by non-operating partners,” the national oil company declared.

The NNPC declared that appointing another operator became urgent to protect the country’s energy and financial security interests from potential damaging liabilities already accumulated by Eroton.

The NNPC made it sufficiently clear that Eroton became a liability, making it urgent to rescue the JV operations from the company.