NNPC Ends JV with Eroton, Says Action Meant to Halt Further Asset Degradation

•Maintains partner under probe, may have its licence revoked

•Laments production fell from 30,000bpd to zero under Eroton

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

The Nigerian National Petroleum Company Limited (NNPC) yesterday announced that it had ended the Joint Venture (JV) relationship between the national oil company and Eroton Exploration and Production Limited to stop the jointly-owned asset  from further degradation.

In a statement yesterday, signed by the Chief Corporate Communications Officer, NNPC Ltd., Garba Muhammad, the NNPC stated that the non-operating JV partners of OML 18 have now appointed NNPC Eighteen Operating Limited as the new operator of Oil Mining Lease (OML) 18 to replace Eroton.

“This is to curtail further degradation of the asset and revamp production of oil and gas,” the NNPC stated.

According to the statement, in order to protect the JV investment in OML 18, the non-operating partners, NNPC Limited (55 per cent interest) and OML 18 Energy Limited (16.20 per cent interest), jointly owning 71.20 per cent equity, removed Eroton as operator of the JV in line with the provisions of the Joint Operating Agreement (JOA).

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

While the key business reasons that made the change in operatorship are compelling, the national oil company noted that 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 12 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 NNPC noted.

The NNPC stated that in particular, as a majority shareholder with a unique stewardship responsibility to the federation, it was committed to assuring that the energy and financial security of the country is uppermost in its business decisions.

It added that removing an operator in these circumstances was 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 highlighted that OML 18 was 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 (tcf) of natural gas reserves.

According to the NNPC, eight fields have been developed, but only four are currently producing including: Cawthorne Channel, Awoba, Akaso, and Alakiri.

In 2014, the NNPC noted that Eroton acquired the 45 per cent interest previously owned by Shell – 30 per cent, Total – 10 per cent, and NAOC – 5 per cent, in the then NNPC/SPDC/Total/Agip OML 18 JV.

Following the equity acquisition, Eroton, it said, became NNPC’s partner in the OML 18 JV and was was designated as the operator in accordance with relevant provisions of the JOA) between the parties.

“Subsequently in 2018, Eroton farmed-out part of its equity to OML 18 Energy Resource Limited – 16.20 per cent and Bilton Energy Limited – 1.8 per cent.

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

In recognition of the impact of the challenges in crude evacuation via the Nembe Creek Trunk Line (NCTL), NNPC said the operator proposed, and partners approved an alternative crude oil evacuation process by barging.

However, it maintained that Eroton has been 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,” the NNPC stated.