The Nigeria National Petroleum Corporation Limited has under the umbrella of its non-operating Joint Venture (JV) partners of OML 18 appointed NNPC Eighteen Operating Liimited as operator of OML 18 in replacement of Eroton Exploration and Production Limited (Eroton). This is to curtail further degradation of the asset and revamp production of oil and gas. This is according to recent press release made by GarbaDeen Muhammad the Chief Corporate Communications Officer NNPC Ltd.

According to the non-operating JV partners, which include: NNPC Limited (55% interest), jointly owing 71.20% equity, the  removal of Eroton as operator of the JV has effected the change in the operatorship  OML 18 as in order to protect the Joint Venture (JV) investment in OML 18, which is in line with the provisions of the Joint Operating Aggrement (JOA). Based of th above premise, the NNPC Limited and OML 18 Energy is hereby mandated to appoint NNPC Eighteen Operating Limited as the new operator of the JV.

The change in operatorship has been notified to the Nigerian Upstream Regulatory Commission (NUPRC) and communicated to Eroton.

The non-operating joint venture partners further highlighted the key business reasons that made the change in operatorship so compelling: 

“It is publicly available information that production has declined from thirty thousand barrels per day (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.

“ Eroton is also not able to remit to the JV parties the proceeds of gas supplied to its affiliate, NOTORE. A number of audits and investigations, including by the EFCC, NURPC’s work programme audit and others have been undertaken or are 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,” The Non-Operating JV Partners, posited.

NNPC Limited has stated in a strong term that, as majority shareholder with a unique stewardship responsibility to the Federation, its committed in assuring that the energy and financial security of the Country is uppermost in its business decisions and 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 is important to highlight that OML 18 is an oil-producing block covering 1,035 square kilometres located south of Port Harcourt and contains eleven (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, Eight (8) fields have been developed, but only (4) are currently producing: Cawthorne Channel, Awoba, Akaso, and Alakiri, ’’ Non-Operating JV Partners, further stated

In contrary reactions to the above slated misconduct, San Leon the independent oil and gas production, development and exploration company focused on Nigeria, in its press release has noted the statement published in Nigeria on 6 March 2023 about the operation of the Oil Mining License (OML) 18. 
 
The Company acknowledged the awareness of accredited statement on the Nigerian Petroleum Development Company Ltd (NNPC) website that indicates that the non-operating partners of OML 18, NNPC and OML 18 Energy Limited have removed Eroton Exploration & Production Company Limited as operator of OML 18 on the basis of, amongst other things, zero production from the field at present.
 
“San Leon has contacted Eroton who has advised the Company that this purported takeover of operatorship was done without any legal or contractual basis and, furthermore, that Eroton considers that the action is without any legal effect, through both a lack of due process and a breach of the rule of law.  Eroton is currently taking advice on its legal rights to address the matter expeditiously and considers that it remains the operator of OML 18, “The Company said.
 
The company sighted its previous announcement made where the lack of production from OML 18 as alluded to in the press has been primarily due to the unavailability of Nembe Creek Trunk Line in the last two years and not to production issues suffered by Eroton. 

“This is an industry wide problem due to widespread and well known crude oil theft and sabotage of pipelines in the Niger Delta, “San Leon asserted.

The Non-Operating JV Partners also counted the above reason made by San Leon as not cogent enough and expressed the inability of Eroton to execute the alternative means of transporting the crude despite being an option.

“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, “  

In 2014, Eroton acquired the 45% interest previously owned by Shell – 30%, Total – 10%, and NAOC – 5%, in the then NNPC/SPDC/Total/Agip OML 18 JV. 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% and Bilton Energy Limited – 1.80%. From 2016 to date, OML 18’s net crude oil production has significantly fallen from approximately thirty thousand barrels per day (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.  

San Leon currently holds an initial 10.58% indirect economic interest in OML 18 which is unaffected by the identity of the operator. Further announcements will be made as and when appropriate.