San Leon, the independent oil and gas production, development and exploration has said that its economic interest in OML 18 is not impacted by a possible change of operatorship of OML 18. From all indication, it is obvious San Leon is on the side of Eroton
San Leon noted that after the NNPC took over OML18, Eroton had emphasised that it remained the operator of OML 18 in line with the provisions of the Joint Operating Agreement governing OML 18 (“JOA”).
Eroton stated clearly that “the purported attempt by the non-operators of OML-18; NNPC Limited (NNPC) and Sahara Field Production Limited (Sahara) (now known as OML 18 Energy Resource Limited) to appoint NNPC Eighteen Operating Limited as operator of OML 18 is a breach of the JOA as any dispute whatsoever between the parties must be addressed by the dispute resolution provisions of the JOA.”
Eroton said there can be no removal of an operator without following these procedures and 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 noted 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 bbls/d and increased production to over 50,000 bbls/d of dry crude (75,000 bbls/d of gross liquids) in less than 24 months.
The company said it 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.”
San Leon noted that since Q4, 2021, “the government of Nigeria has received virtually zero crude oil from any company utilising the Nembe Creek Trunk Line, 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.”
I noted further that the criminal activities in the Niger Delta continued to adversely affect the entire region forcing Eroton’s crude oil receipts to drop steadily in 2021. The situation culminated 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 was said to have subsequently undertaken alternative means of evacuating its crude oil from OML 18 using barges, a project funded entirely by Eroton and without no financial support from its partners.
Eroton further states that the allegations of improper actions by it are baseless and unfounded and categorically denies any fraudulent acts as stated in the in certain press reports.
San Leon currently holds an initial 10.58% indirect economic interest in OML 18 which is unaffected by the identity of the operator.
By Bosco Agba