As Gbetiokun flows, Eland lines up exploration

Eland Oil & Gas is beginning to reap the rewards of its second field in Nigeria’s Oil Mining Licence (OML) 40 starting up, allowing it to move into exploration plans.

The Aberdeen-based company posted its first half results on September 11, with revenues of $106 million, from $67.4mn in the same period of 2018. This was despite a slight decline in realised prices, from $69 per barrel to $66.

OML 40 provided 9,948 barrels per day net to Eland during the period, from 7,716 bpd in the first six months of 2018. This is set to increase in the second half as the new Gbetiokun field ramps up.

The second half will also see a move into exploration for the company, with the Amobe well to be drilled. “Work on the well should begin in the first week of November and it will take 30 days,” said Eland’s CEO George Maxwell to Energy Voice. “Amobe is a high-impact well for Eland, which could double the reserves position of the company.”

Eland has a debt facility but can only use these funds for certain activities, which does not include exploration. Historically, the company has presented itself as a near-term development and production company – so Amobe is a departure. “It gives us upside excitement. There’s an opportunity to step out into Amobe and it’s very much in the ethos of near-term production, it’s only 7 km from the Opuama flow station.”

Such is the confidence of Eland that the company is planning it as a production well, rather than a conventional exploration. Maxwell noted that it had plans for an extended well test (EWT) on Amobe and a dual completion. Netherland Sewell and Associates (NSAI) has a mid-case estimate of 78mn barrels on the well, with a 42% chance of success.

Exports

A recurrent problem for operators in the Niger Delta has been that of pipeline losses and stoppages, owing to sabotage and illegal bunkering. Eland’s links are relatively short, helping it avoid some of the complicated accounting that would come from a number of producers into one link, but it has been working on upgrading its export options.

Oil from OML 40’s Opuama run via a 36 km link to Otuamara, where it joins a Shell Petroleum Development Co. (SPDC) line to the Forcados terminal. When Eland bought OML 40 in 2012 the pipe had been unused, and holding products, since 2006, without any maintenance having been carried out. “We replaced a number of sections on the link,” Maxwell said, but it also became necessary to upgrade its capacity, from a 12-inch diameter to 16 inches.

Oil began flowing through the new line in the second half of 2018, with Eland’s share of costs at $38mn. “This gives us 100,000 bpd of capacity,” the CEO continued, although explaining that not all of this was oil, there was also some water, which was removed at the terminal. Construction of the link was also informed by knowledge of where tapping takes place. “The new line is relatively deep, so not easy to get into, and also the area is inhospitable.”

Losses between the flowstation and a new metering unit at Otuamara has been reduced to less than 3%.

On the rise

Operating profit was flat, at $40mn, versus $39.1mn. “Revenue growth has come about from the increased production from 10,000 bpd, which we’ve monetised. But we are also spending quite a bit on capex and opex – the company has moved into a major construction phase,” Eland’s CFO Ronald Bain told Energy Voice.

During the first half a substantial amount of work went into bringing the Gbetiokun field into production, with first oil achieved at the beginning of August. While the field is on the same licence, OML 40, as Opuama, there is a “totally separate evacuation route”, Bain continued. “The second half will see production bump up further.” Output from Gbetiokun is rising and is expected to reach 20,000-22,000 bpd gross, around the same amount as Opuama.

Drilling

One problem that has taken a toll on Eland’s work has been the OES Teamwork rig, with the company’s statement saying this had “adversely affected” production growth, pushing back the start of production from two wells on Gbetiokun.

There have been some problems with the rig’s power and pumping capacities, Maxwell said. The company had brought in a barge to assist in 2018. Logistical issues had disrupted maintenance issues so the rig had been returned to operations while still lacking some functionality. “We decided to just manage,” the official said. “It added three and a half weeks to work on Gbetiokun-4 but it was a considered risk, otherwise we would not have even spudded the well yet. It was important for us to achieve our guidance, the economics of the wells are less important, we just need the volume of production as there are fixed evacuation costs.”

Problems with the OES Teamwork rig are now in the process of being resolved, with the arrival of required pumps. The rig has been taken down and will then move to drill Gbetiokun-5.

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Craigmill, Pitcaple, Inverurie, Aberdeenshire, United Kingdom, AB51 5HP
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