LEKOIL signs definitive pact for Otakikpo marginal field devt

LEKOIL has announced that the Otakikpo Joint Venture which is made up of Green Energy International Limited,, the Operator of the Otakikpo Marginal Field, and the Technical Partner, LEKOIL Oil and Gas Investments Limited have executed definitive agreements for the next phase of the Otakikpo marginal field development.

The Company has a 90 per cent. economic interest in the field. 

Further to the execution of a non-binding Memorandum of Understanding (MOU), 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 phased drilling of up to seven new wells in Otakikpo with project capital expenditures estimated at $110 million, of which LOGL is expected to provide funding of $44 million; Drilling of the first two wells, estimated at $25.0 million ($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 would recuce capex by approximately 35% on previous estimates of $170.0 million (US$68.0 million net to LOGL) earlier 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 cashflow 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.

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’).

The JV 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.

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.

Speaking about the agreement, an elated LEKOIL’s CEO, Lekan Akinyanmi, said ‘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.’

Leave a Reply