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Can Les Blair Save Eland Oil and Gas from Itself in Nigeria?

(AFRICAN EXAMINER) – AIM-listed Eland Oil and Gas Plc is battling several crises, mostly self-inflicted in the Nigeria E&P cycles.

The Company’s flagship asset, the Opuama and Gbetiokun field in OML 40 has reportedly reached plateau production leaving the Company and its partner, the Nigerian NNPC battling to sustain production with increasing water production from some of its critical wells.

Industry experts blame the Company from flowing these wells at unsustainable rates which give the demanding London investors the initial boost in share prices, but not advisable in the long run for the reservoirs, the company and the Government.

The plans of the Company to drill its way out of this production challenge has not been fruitful since its 2018-2019 drilling campaign has been saddled with problems peculiar to the corrupt Nigerian E&P system.

News in the industry is that the local drilling rig forced on the Company by the Government controlled- NAPIMS continues to develop several mechanical problems mid-way into the drilling campaign.

This has caused significant cost and schedule overrun to the project. At report time, the Company boasts of actively looking for a replacement rig, which will have negative effect on the drilling schedule.

Geologist that are familiar with OML 40 believe that Eland’s situation is worsened by some geologic and subsurface disappointments in the last two wells that have been drilled in the Gbetiokun field.

The unexpected geological failures point to the fact that the Company may have finished drilling all the low-hanging sweet spot wells in the concessions and are now forced to drill more geologically uncertain step-out wells.

The other strategy of the Company in improving its diminishing reserves to production ratio is to acquire other producing assets or Companies in Nigeria. However, Eland has failed to make and sustain powerful alliances with the principled Buhari-led Government.

This may not be unconnected to the fact that the Nigerian Businessmen behind the Company are from the opposition party, the PDP.

Its other asset, the Ubima field in which it holds 40% participating interest has lied fallow for over 5 years with no concrete field development plan. A review of Eland’s 2019 final statement shows that the Company does not have a plan to develop this stranded field in the next 5 years.

This is not surprising since the marginal field’s location is very far from export infrastructure and the reserves may not justify the investments required to successfully bring the molecules to the market.

In reaction to this challenge, the Company has curiously resorted to a “Po Boy” untested method of trucking about 1000 bpd of crude oil from the field through the volatile Niger Delta communities.

It is surprising that the Company’s UK investors and regulators approved this evacuation method, but desperate times call for desperate measures.

The good news, however, is that the founder of the Company, Les Blair has come back as a strategic advisor to the company working behind the scenes.

He is a thorough-bred power broker with keen understanding of the unique Nigerian political system.

He is the architect of the Company’s acquisition of its two assets and Eland now depends on him again to charm his way into getting the much-needed acreages for the Company.

Industry watchers are keenly observing this gentle giant as Eland despairing reserves to production ratio may depend on his uncanny ability to provide the much-desired reversal.

John Crown-Toller writes from Accra, Ghana.

 

 

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