Can you give us an overview of your operations?
AYO OLUOKUN At our Oil Mining Lease 122, we have a significant amount of gas reserves and small oil reserves. We have been in business for 27 years. We were allocated OPL 460 in 1993 and were the first company to cover an offshore block with 3D seismic data. The OPL period is five years, and if there is commercial production potential, then the government gives the company a 20-year mining lease. At the end of our oil prospecting process, we were the one of the first companies to convert from a prospecting license (OPL 460) to an oil mining lease (OML 122). We did this independently as a Nigerian company without a technical partnership with an international company. We are the second indigenous company to do so, after Conoil PLC. We were able to establish commercial production potential and were the first to do that based on integrated oil and gas production.
Can you provide some insight into your current production status?
EBIAHO EMAFO Eroton Exploration & Production acquired an asset from Shell and started its activities at about 10,000bpd. We have been able to grow our production to a peak of about 75,000bpd in 2019. Over the years, we have done various activities to grow and are in the process of completing our third well. When we acquired the asset, we planned to continuously grow production. We have had some challenges in achieving the objectives we set, but we are progressing in the right direction. The challenges faced are not alien to swamp operations in the Niger Delta, but they could not have been predicted with a 100% degree of accuracy.
What investments have you made?
AO For most of the initial investment, we had to do quite a bit with internal equity. We have several domestic partners who have co-invested with us throughout the OPL period. We also did a great deal of contractor funding. For example, the 3D seismic survey we did was in partnership with PGS Group. We worked with it on a transaction that was a win-win situation for contractor finance collaboration. It brought in its seismic vessel and crew, did the seismic data, and we jointly processed that data together. With this information, we could then get funding from interested parties.
How did the company fund the acquisition of oil field assets?
EE It was a reserve base lending facility put together by a consortium of banks, both local and international. We participated in a competitive bid round (CBR) for the acquisition of the asset (OML 18) and emerged as the winner. Shell divested some of its swamp assets in the Niger Delta, and we participated in this exercise as well. The bid rounds sparked the interest of a number of indigenous operators, who participated aggressively in the bid process. Over the years, we have been able to meet our loan repayment obligations, both principal and interest, thereby reducing our loan facility considerably. We recently refinanced through the Guaranty Trust Bank and have been able to meet all our loan obligations.
Given the new regulations, does it make sense to invest in the gas sector, and what are your goals for 2020?
AO It is extremely challenging, particularly for those with stranded gas resources. For onshore producers, it makes more sense because it is cheaper to develop such projects. Without the right terms and understanding, the gas sector will not develop properly. That is why we had to get approval to deploy floating LNG facilities. That approval came after the government recognized that these particular reserves were in danger of remaining stranded and not monetized. For 2020, our goal is to start production at one of our fields. Then, in addition, we would like to further progress our gas utilization program.
What are Eroton Exploration & Production's key priorities for 2020?
EE We want to keep on working closely with local communities. We want to look at the areas of empowerment, education, and health. We also want to continue growing our gas production by signing contracts with additional gas offtakers. We will pause our drilling campaign in 2020 to plan for future drilling activity in 2021.