Harboursandport.com: Lagos - An agreement has been reached between operators of the Otakikpo Marginal Field, Green
Energy International Limited ("GEIL") and the Technical Partner, LEKOIL
Oil and Gas Investments Limited ("LOGL") for the execution of the
Otakikpo drilling programme.
The Joint
Venture ("Otakikpo JV") has executed definitive agreements for the
next phase of the Otakikpo marginal field development.
A statement by the company made available to Harboursandport.com read
in part, “Further to the execution of a non-binding Memorandum of Understanding
("MOU")[1], the Otakikpo JV has executed
additional service agreements with Schlumberger which cover the comprehensive
infrastructure upgrades and field management services in relation to the
planned upstream drilling programme.
“The
upstream drilling programme consists of the following:
“· Phased
drilling of up to seven new wells in Otakikpo with project capital
expenditures ("Capex") estimated at US$110.0 million, of which LOGL
is expected to provide funding of US$44.0 million.
“· Drilling of the first two
wells, estimated at US$25.0 million (US$10.0 million net to LOGL), is expected
to increase gross production to approximately 10,000 bopd from the current
gross rates of 5,755 bopd. Existing infrastructure at Otakikpo is capable of
accomodating this incremental production.
“· As a result of the lower oil
price environment and a change of project scope by the Otakikpo JV and other
project stakeholders, these project Capex estimates are a reduction of
approximately 35% on previous estimates of US$170.0 million (US$68.0 million
net to LOGL) as announced on 1 July 2019.
“· LOGL expects to raise,
according to its participating interest, its own portion of the required
funding for the first two wells from a combination of offtake financing from a subsidiary of a major international oil company and cash flow from existing
production. Funding for subsequent wells is expected to come from the cashflow
generated by incremental production.
“· Rig mobilisation is expected
to occur as soon as the partners of the Joint Venture have both raised funding
for the first two wells, according to their respective participating interest.
“A further announcement on the financing and timelines for the
upstream drilling project will be made in due course.
“The Otakikpo JV has entered into an infrastructure sharing and
utilization agreement in respect of the production from the Otakikpo marginal
field with Integrated Hydrocarbon Infrastructure Limited ("IHIL"), a
special purpose company incorporated and owned by GEIL to build, own, operate
and maintain the shared infrastructure facilities, (the "ISUA").
“Pursuant to the ISUA, IHIL will assume the role of facility
operator (from its parent, GEIL) and will build, own, operate and maintain
certain flow stations, pipeline facilities and terminal facilities to be used
for the evacuation of crude oil produced from the Otakikpo marginal field.
“These
facilities will be built outside the Otakikpo area with a view to handle Otakikpo
and other fields within OML 11. IHIL will provide certain services to the
Otakikpo JV such as measurement, sampling, treatment, transportation and
storage of crude produced from the Otakikpo marginal field and injected into
the facilities.
“LOGL
will pay IHIL a fixed tariff for the use of the facilities. There are
conditions to the ISUA becoming fully effective, including IHIL securing debt
financing to develop the infrastructure facilities. Once fully effective, the
ISUA will remain in place for an initial period of five years.
“The Otakikpo JV has also entered into a field management services
agreement with Schlumberger in respect of the overall exploration, appraisal,
evaluation, exploitation, development, production, and associated activities of
the Otakikpo marginal field (the "FMSA").
“The
FMSA also manages the relationship between the parties in relation to certain
services including the operation, management and, where applicable,
decommissioning, of the fields and infrastructure.
“In
accordance with the FMSA, GEIL, LOGL, and Schlumberger will form a
multidisciplinary project management team in which Schlumberger will act as
project execution manager to provide oilfield services and project management
services to assist in ramping up production and long-term field management. “The
Otakikpo JV will pay Schlumberger fees comprising of the cost related to the
secondment of Schlumberger personnel to the Joint Project Management Team
("JPMT"), other specified costs and expenses incurred by
Schlumberger, and a project implementation fee, for the duration of the agreement, in an amount consistent with a market margin on gross incremental
production for the provision of the services to be provided by Schlumberger.
“In accordance with the FMSA, the Otakikpo JV has also entered
into an agreement with Schlumberger for the secondment of certain Schlumberger
personnel to form part of the JPMT for the development of the Otakikpo marginal
field and the implementation of the planned drilling programme (the
"Secondment Agreement").
“During
the term of the Secondment Agreement, all Schlumberger secondees will remain
employees of or contractors to a member of the Schlumberger Group. Subject to
agreement between the Otakikpo JV parties, GEIL as the Operator will be
responsible for paying Schlumberger monthly costs related to the secondment of
Schlumberger personnel to the JPMT, such costs being reimbursable to GEIL by
the Otakikpo JV. The various secondment rates are dependent on the secondment
role that will be carried out.
“To govern the provision of certain products and services for the
upstream development of the Otakikpo marginal field, the Otakikpo JV has also
entered into a master services agreement with Schlumberger for the provision of
various well-drilling and completion products and services to implement the
planned upstream drilling programme. Such services exclude services or products
relating to the development and management of the shared infrastructure.
“Finally, the Otakikpo JV parties have agreed to allocate certain
costs related to the processing and export of hydrocarbons between them which
LOGL would otherwise be obliged to bear under the ISUA and FMSA, and to
implement certain governance arrangements in relation to the management of the
various agreements executed.
Lekan Akinyanmi, LEKOIL's CEO, commented, "We continue to make progress towards
our ambitions to drill additional wells and unlock further value for all
stakeholders from Otakikpo. We are pleased to be working with Schlumberger, a
world-class project execution service provider and we are committed to
advancing this exciting and transformative project that is aimed at increasing
the value and cash generation abilities of the field."
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