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Tuesday, March 14, 2023
Eroton Exploration & Production Company, operator of Oil Mining License 18 (OML 18) in Nigeria, issued a press release this week stating “that it remains the operator of OML 18 in line with the provisions of the Joint Operating Agreement governing OML 18,” following numerous reports that authorities have unlawfully appointed a new operator.
In its press release, Eroton has emphasized that it remains the operator of OML 18 in line with the provisions of the Joint Operating Agreement (JOA) governing OML 18 and that the move is in complete breach of the contract and has issued Notice of Arbitration to JOA partners NNPC Limited and Sahara Field Production Limited (now known as NNPC Eighteen Operating Limited.)
Eroton cites that there can be no removal of an operator without following the procedures of the HOA contract as the process is designed in such a way that notice requirements cannot be waived, and the removal of an operatorship can therefore not be carried out, without following the process provided in the JOA.
Eroton has issued a notice of arbitration to NNPC and Sahara in accordance with the terms contained in the JOA to defend its legal rights. Furthermore, Eroton has received a legal opinion that it continues to remain as operator pending such resolution and that this will be upheld by the courts of Nigeria. Eroton further notes that the action taken by NNPC and Sahara sets a damaging precedent in the oil & gas industry in Nigeria because due process has not been followed.
Eroton took over operatorship of OML 18 in 2015 with a production of 6,000 bpd and increased production to over 50,000 bpd of dry crude (75,000 bpd of gross liquids) in less than 24 months. Eroton was also recognized by NNPC as being one of the two operators with the lowest technical cost per barrel in the industry over that time period. This performance 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 Niger Delta area since 2020.
Since Q4, 2021, the Government of Nigeria has received virtually zero crude oil from any company utilizing the Nembe Creek Trunk Line (NCTL), a pipeline that is partially owned by NNPC, owing to the force majeure declared by the NCTL operator and the widespread vandalism and crude oil theft recorded in the region. These criminal activities in the Niger Delta are well known and continue to adversely affect the entire region. For example, Eroton’s crude oil receipts dropped steadily in 2021, culminating in zero receipt in November 2021 at Bonny Terminal. This was despite efficient wellhead production data showing produced volumes of over 500,000 barrels of oil for the same month. Consequently, and in agreement with its partners in OML 18, Eroton shut in the wells.
Eroton also states that recent media reports accusing the company of various infractions and fraudulent activity are false and malicious and it will continue to pursue legal remedies to secure its rights to OML 18.
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