The statement said Eroton is not able to remit proceeds of gas supply to the JV parties
The Nigerian National Petroleum Company Limited and OML18 Energy Limited, both non-operating partners of Oil Mining Lease 18, on Monday announced the removal of Eroton as the operator of the joint venture in line with the provisions of the Joint Operating Agreement (JOA).
Garba Deen Muhammad, the chief corporate communications officer of NNPCL, in a statement on Monday said the move is to curtail further degradation of the asset and revamp the production of oil and gas.
The partners appointed NNPC Eighteen Operating Limited as the new operator, the statement said. Both entities jointly own 71.2 per cent equity in the JV.
"The change in operatorship has been notified to the Nigerian Upstream Regulatory Commission (NUPRC) and communicated to Eroton," the NNPCL said.
"While the key business reasons that made the change in operatorship are compelling, it is publicly available information that production has declined from thirty thousand barrels per day (30,000 bpd) to zero."
The statement explained that 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 added that Eroton is also not able to remit to the JV parties the proceeds of gas supplied to its affiliate, Notore.
It said 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.
"NNPC Limited in particular, as a 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," it added.
The statement explained that removing an operator in these circumstances is therefore inevitable to protect the JV from governmental or third parties actions from entities, including Eroton's lenders and other service providers.
The NNPCL said OML 18 is an oil-producing block covering 1,035 square kilometres located south of Port Harcourt. It contains 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.
The statement said that eight fields have been developed, but only four are currently producing, including Cawthorne Channel, Awoba, Akaso, and Alakiri.
It said in 2014, 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.
It added that 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, it said in 2018, Eroton farmed-out part of its equity to OML 18 Energy Resource Limited and Bilton Energy Limited.
It said 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 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 worker's unions, and communities, amongst others to restore operations to their full capability and secure value for all partners and the federation," it said.