LONDON (Alliance News) - Eland Oil & Gas PLC on Monday said the closure of the Forcados pipeline system in the Niger Delta led to a 77% fall in the amount of crude oil being lifted in the first half of 2016.
The company's flagship asset is the producing OML 40 licence that contains the Opuama, Gbetiokun, Polobo, Abiala and Amobe fields alongside the Ubima field development asset that also lies in Nigeria.
Although OML40 was producing around 4,400 barrels per day at the end of 2015, the Forcados terminal which transports that production was shut down in February because of security issues after the terminal was hit by "sabotage".
Production in 2016 was averaging 4,230 barrels of oil per day up until the terminal was shut in February. Although the production rate was much higher than the 2,190 barrels being produced per day a year earlier, overall production was lower in the period as a result.
A total of 38,200 barrels were lifted in the first half of the year compared to 163,100 barrels a year before.
Royal Dutch Shell PLC is the operator of the Forcados terminal, and Eland is awaiting news of when it will be reopened. However, Eland has found two alternative export options in order to diversify its options to ensure similar incidents do not happen in the future.
Eland has identified a barging option to utilise a tie-in point on the Benin river, which would allow Eland to ship oil using a shuttle vessel to an alternate terminal. The company has received barging proposals and expects to implement the operations subject to the economics and the start-up of the Forcados terminal.
The company said it also is evaluating potential routes for a plan to build a 6.0 kilometre pipeline which would extend an existing pipeline. The new pipeline would link the nearby terminal with the OML40's existing export pipeline.
Eland is hoping to advance both of those export options, meaning it will have three export routes available once Forcados is up and running.
Elcrest, the company partnering Eland on OML40, re-completed the Opuama-3 well in April and achieved an initial flow rate from two separate horizons that was way ahead of expectations at 10,500 barrels of oil per day.
Eland said, once flow rates have been optimised, the Opuama field should be producing over 10,000 barrels of oil per day when it is restarted.
"Since the Forcados shut down, the company has used the downtime to perform critical maintenance activity and equipment re-certification at the Opuama flow-station, which have now been completed. This will ensure high equipment uptime once Forcados comes back on line," said the company.
"In addition, work has been completed to maximise efficiency of our production and reduce operating cost per barrel. Dewatering of Opuama production currently takes place at Forcados at a cost in the region of USD2.50 per barrel. Our full de-watering initiative, in conjunction with the water shut off work completed on Opuama 3 will considerably reduce operating costs and allow production and transport of dry crude," added Eland.
At the other, non-producing Ubima field, Eland is hoping to get production up and running quickly by re-entering the Ubima-1 well, with work expected to start in the second half of 2016.
"Production from the Ubima Field will diversify the Eland portfolio, bringing in a secondary cash flow stream while appraising the larger upside on the block, and remains an exciting opportunity for the company in the second half of 2016," said Eland.
Alongside work on Ubima, Eland also plans to re-enter the Gbetiokun-1 well lying with OML40 this year.
Eland had cash of USD20.6 million at the end of June and the work programme for this year is fully funded.
The company separately said Monday that Henry Obi has been appointed as a non-executive director to represent Helios Natural Resources, a significant shareholder of Eland.
Obi is replacing Richard Norris, who had been the representative of Helios since September 2014.
Eland shares were up 1.9% to 27.0 pence per share on Monday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
