Eroton speaks on OML 18 takeover by NNPCL

Eroton Exploration and Production Company Limited says it remains the operator of Oil Mining Lease 18, in line with the provisions of the Joint Operating Agreement (JOA).

The company in a statement on Monday said it was a validly appointed operator of OML 18 via a legal and contractual process involving all the participating entities in the JOA. It added that it has approached the relevant courts to defend its legal rights.

The Nigerian National Petroleum Company Limited and OML18 Energy Limited, both non-operating partners of Oil Mining Lease 18, recently announced the removal of Eroton as the operator of the joint venture.

Garba Deen Muhammad, the chief corporate communications officer of NNPCL, in a statement 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.

The Nigerian Upstream Regulatory Commission (NUPRC) and Eroton were also informed of the change, the NNPCL said.

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.

Eroton Reacts

But Eroton in a statement posted on its website said it has issued a notice of arbitration to NNPC and Sahara in accordance with the terms contained in the JOA.

“On the basis of the lack of any grounds for the purported takeover of operatorship in accordance with the terms of the JOA governing the block, lack of due process and flagrant breach of the rule of law, Eroton has taken considered legal opinion to the effect that the status quo ante continues to remain the position and same will be upheld by the courts of Nigeria,” the statement said.

“This is despite any contrary public statements by any entity, in the interim period. If this action taken by NNPC and Sahara is allowed to persist, it poses a threat to all the JOAs in Nigeria involving both multinational and indigenous oil and gas companies, because the due process with regard to dispute resolution has not been followed.

“Thus, there can be no removal of an operator without following the laid down procedures and processes in Article 2.4 of the JOA. The process is designed in such a way that notices requirements cannot be waived and the removal of operatorship cannot be carried out without following the process provided in the JOA.”

The management added that Eroton took over operatorship of OML-18 in 2015 with a meagre production of 6,000 bbls/d and increased production to over 50,000 bbls/d of dry crude (75,000 bbls/d of gross liquids) within less than 24 months.

“This was considered a spectacular achievement at the time by both the NNPC, the Department of Petroleum Resources (DPR) (now NUPRC), and the entire industry. Eroton, as the operator, was also recognised by NNPC as being one of the two JV operators with the lowest technical cost per barrel in the industry over the time period. This stellar and unique operatorship of the asset continued until the wider industry became severely impacted firstly by COVID-19, and then by the unprecedented level of crude theft and sabotage plaguing the country in the Niger Delta area since 2020 till date.

“Additionally, it is important to state that since Q4, 2021, the federal government of Nigeria has virtually received zero crude oil from any company utilising the Nembe Creek Trunk Line (NCTL), a pipeline that is partially owned by NNPC, (not operated by Eroton) as its primary evacuation route owing to the force majeure declared by the NCTL operator and the widespread vandalism and crude oil theft recorded in the region.

“The activities of criminal elements in the Niger Delta are known to all and continue to adversely affect the entire region and the nation’s proceeds from oil. For example, Eroton’s crude oil receipts steadily dropped at an alarming rate in 2021, culminating in zero receipts in November 2021 at Bonny Terminal,” it said.

The company explained that this was despite efficient wellhead production data showing produced volumes of over 500,000 barrels of oil for the same month, meaning that all the approximately 500,000 barrels of crude oil produced, processed, and delivered into the NCTL were stolen.

“Consequently, and in agreement with the JV partners, Eroton shut in the Wells.

“Eroton therefore proactively undertook an alternative means of evacuating its crude oil from OML-18 using barges. Despite obtaining approval from NNPC for the barging project, the non-operators (NNPC and Sahara) withheld the funding leaving Eroton to single-handedly fund the project,” it said.

It claimed that the recent publication incorrectly utilizes certain information to accuse Eroton of various infractions.

“We wish to clarify and state that these allegations are baseless and the due process of the law in line with the JOA has been breached in the futile attempt to displace the valid and subsisting operator of the Joint Venture.

“We hereby reiterate that Eroton remains the operator of OML18 in line with the provisions of the JOA as any dispute whatsoever between the parties is reserved exclusively for resolution under the dispute resolution clause of the JOA. The actions of the other JV partners (NNPC and Sahara) remain illegal and run contrary to the rule of law and are in total breach of the terms and conditions stipulated in JOA.

“Eroton, as the operator of OML18, remains committed to transparency, integrity, and due process, and urges the public and stakeholders to disregard any misinformation as we continue to operate in compliance with all applicable laws and regulations,” the statement said.