April 15, 2024

San Leone Energy concludes deal on OML 18, set to boost production

Olubunmi Martins
San Leone Energy has announced the completion of arrangements giving it substantial equity ownership in OML 18, an asset previously held by Shell Petroleum but ceded in part to Eroton Exploration through a joint venture arrangement with the Nigerian National Petroleum Company Limited, which holds a 55% stake in the asset.
Details of the transaction set out in different layers, involve the reorganization of debts and equity interests amongst the parties controlling the remaining 45% of the asset.
In the statement confirming the conclusion of the transaction, the company said that a series of agreements approved by its shareholders have led Midwestern Oil and Gas Company Limited to consolidate its holdings in San Leone Energy.
This arrangement, the company explained, includes the participation of Link Infrastructure (Malta) Limited also coming into a single holding in San Leon Energy.
OML 18, until now, has been embroiled in disputes with members of its host community over resource control agitation and the demand for environmental sustainability values—a situation which has also led to the near paralysis of the Trans Niger Pipeline, which connects the asset to the Bonny Export Terminal.
The Trans Niger Pipeline corridor, built by Shell Petroleum, is the largest export route in Nigeria with a capacity to process 1.2 million barrels per day(bpd) , but its efficiency has come under severe vandalism attacks and outright theft of crude oil by indigenes who insist that corrective measures be put in place for economic inclusion and safer operating environments by exploration oil companies.
The severity and persistence of those attacks have led Shell Petroleum to exit most of its onshore oilfields, and parcels of those fields were then awarded to indigenous players by the government as marginal fields.
Shell Petroleum, however, still retains significant onshore assets which are held in a joint venture arrangement with the state-owned oil company, The NNPC Limited.
OML 18, until it was vacated by Shell Petroleum, was producing above 40,00bpd, but this volume dwindled to as low as 10% owing to disruptions.
Wood Mackenzie described the asset as ” a large block located to the south of Port Harcourt and contains 11 oil and gas fields. Cawthorne Channel, Awoba, Akaso, and Alakiri are the only four that are currently producing.
The terrain of the block is a mangrove swamp, and it is heavily intersected by wide rivers and creeks. Field facilities are mounted on semi-submerged piled platforms, and drilling requires a swamp barge. The block has been in production since 1970.
San Leone Energy has disclosed its intention to build its own pipeline infrastructure and ring-fence the asset for optimum production while also creating job opportunities for the host community as a more practical measure to prevent agitation and wilful damage to the asset.
This posture is similar to what other producers are doing to gain the confidence and cooperation of communities where they operate, and the results are encouraging, said Engr. Segun Adebayo in a conversation with EnergyDay.
The Nigerian government recently approved the Petroleum Industry Act with provisions to manage the concerns of hydrocarbon host communities, in a move that is believed to re-stabilize oil production, eliminate the incidences of theft and prevent pipeline vandalism.
The new law provides an equity share and rewards to communities that host oil producers. It also spells out punitive consequences against vandalism and arson.
Nigeria, though, is producing below its OPEC quota of 1.8 million bpd with 50% of its actual production lost to theft and pipeline vandalism, but increasingly,  Independent Producers and Private Operators have stepped up infrastructure development plans that come with the power to take custody and control of their production output.
The Nigerian government is progressing on reforms of the petroleum sector with a priority on gas production and fiscal provisions to encourage investments while also tackling security issues across the country, particularly around oil and gas infrastructure assets.