Nigeria moves to revamp oil & gas assets

Nigeria's oil and gas sector is undergoing a major revamp as the Nigerian National Petroleum Company (NNPC) and its non-operating joint venture partners have appointed NNPC Eighteen Operating Limited as the new operator of OML 18, replacing Eroton. The move comes amidst concerns over the degradation of the asset and a significant decline in production at the oil well. Gbenga Biobaku, Partner at Gbenga Biobaku and Co, discussed the implications of this decision in an interview with CNBC Africa. The situation at OML 18 had been deteriorating over time, with production levels plummeting due to challenges in the Nembe evacuation routes and internal issues among the joint venture partners. Despite attempts to find alternative evacuation routes, including the use of barges during the unavailability of the Nembe line, production eventually dropped to zero. Additionally, the operators failed to meet their work programme obligations to the government. As a result, NNPC and its partners decided to take action, leading to the removal of the existing operator and the appointment of NNPC Eighteen Operating Limited. The joint venture agreement provided NNPC Limited with the authority to make this change, citing grounds such as non-performance and failure to meet obligations as justifications. While Eroton may have the right to challenge this decision based on the terms of the joint operating agreement, questions remain about procedural compliance. Biobaku highlighted the need for regulators to be more vigilant in ensuring that operators fulfill their obligations and urged the NNPC to exert pressure on non-compliant parties. The situation at OML 18 serves as a cautionary tale for the industry, underscoring the importance of effective governance, oversight, and adherence to contractual obligations. Moving forward, stakeholders must prioritize transparency, accountability, and proactive intervention to avoid similar shortcomings in the future. The NNPC's decision to overhaul OML 18 reflects a commitment to enhancing efficiency, productivity, and sustainability in the Nigerian oil and gas sector.