HSE & Sustainability Update, July 2024

At Elcrest, we are dedicated to maintaining the highest standards of health, safety, and environmental stewardship. Our commitment to HSE is integral to our operations and culture. We continually strive to improve our practices to ensure the well-being of our employees, customers, and the communities in which we operate.

Sustainability is also at the core of our mission. We are also committed to creating a positive impact on the environment and society through innovative practices and responsible operations.

At Elcrest, our ESG performance leverages valuing the environment and climate, caring for our people, partners, and communities, and living by the strictest governance standards.

ENVIRONMENT AND CLIMATE

Climate Change Risk Assessment:
Elcrest in 2022 undertook a climate change risk assessment and, in 2023, completed a comprehensive description of the transitional risks but did not assess the associated business risks. Further work is ongoing to ensure the identified transitional risks and opportunities are more explicitly addressed using Elcrest’s risk assessment matrix and that specific insights are provided into how they would impact the company’s business.

Gas Flaring:
Although OML 40 has no gas export route or dedicated gas injection into subsurface reservoirs at the moment, the bulk of the produced gas (typically >95%) has been and is flared. Elcrest’s leadership has communicated its aspirations and intentions to reduce gas flaring and GHG emissions as one of the company’s primary commitments. The company believes that the elimination of routine gas flaring from the OML 40 assets should be achievable by the end of Q1 2025.

Elcrest, in order to reduce gas flaring in the short term, is progressing the implementation of a power generation and rural electrification project at Opuama. The Opuama Rural Electrification project is expected to be finished and operational by the end of 2024. This project will only utilize about 6% (0.23 MMscf/d) of the total associated produced gas from the Opuama field (2023 average gas production 4.4 MMscf/d). In the longer term, Elcrest is considering a number of options to reduce and ultimately eliminate gas flaring. The JV intentions in the medium term lie with using 3rd party off-takers (a FGN gas flare utilization initiative) to take and utilize gas at each field’s battery limit (3rd Party Battery Offtake) as the ultimate solution for the elimination of routine gas flaring from all the OML 40 assets.

GHG Emissions:
It is estimated that about 219 kt CO2eq (100%) was produced by Elcrest and its JV partner (100%, or 99 kt CO2eq Elcrest’s equity) due to flaring and fuel combustion in 2023. This is <0x7E>71 kt CO2eq (100%) higher compared to estimated volumes in 2022 (<0x7E>148 kt CO2eq (100%)), representing a 51% increase. As noted above, the increase in 2023 gas flaring is mainly related to the rise in oil production because of the further development of the Gbetiokun and Opuama fields. The CO2 emission intensity for 2023 was 27.7 kg/boe.

Elcrest, in Q4 2023, appointed a consultant to undertake a baseline fugitive methane and volatile organic compound emission survey within both the Gbetiokun and Opuama fields. The amount of methane being released was reported to be relatively low, although the process for quantifying the methane emissions has yet to be established. Nonetheless, the methane monitoring surveys reflect positively on Elcrest’s commitment to proactive environmental stewardship and sustainable practices.

Air, Noise and Water Emissions:
Elcrest continues to carry out environmental compliance monitoring at the OML 40 Fields. The comprehensive monitoring program covers air, noise, meteorological, and water quality measurements, published in well-structured monthly Environmental Compliance Monitoring (ECM) reports. While air, noise, water quality, SOX and NOX emissions remained largely within acceptable and compliant thresholds.
 

Waste Management:
The NEPL/Elcrest JV commissioned a consultant to conduct the first-ever Naturally Occurring Radioactive Material (NORM) survey at their Gbetiokun and Opuama facilities on February 4th, 2024. Employing the rigorous APHA 7110A methodology and adhering to stringent quality control measures, the survey assessed NORM levels in various process areas, compressors, manifolds, generators, and laboratory spaces. The results were encouraging, with all measured NORM levels (0.010–0.017 Rems/hr) falling well below the NUPRC limit of 50 Rems/hr. This positive action by Elcrest brings the JV into compliance with Nigerian EGASPIN 2018 regulations.

Oil Spills:
Elcrest has reported zero immiscible operational (oil/chemical/diesel) spill incidents for three consecutive years (H2 2021–2023) in its KPIs and performance statistics. However, prior to mid-2021 (2017 to H1 2021), a total of 54 immiscible spills were reported, apparently showing a substantial reduction in incidents.

Biodiversity:
Elcrest actively monitors biodiversity within OML 40 and Abiala operational areas and has in place a biodiversity action plan and has a consultant retained for environment and biodiversity monitoring. Development of the Abiala field will take place entirely within the Gelegele Forest Reserve. It is noteworthy that the reserve comprises largely primary rain forest rich in biodiversity (including IUCN endangered species) and is considered to be a critical habitat. Given the reserve’s designation and ecological sensitivity, there is greater ESG oversight given to Abiala works in order to ensure that the biodiversity within Gelegele Game/Forest Reserve is protected, land take and deforestation are minimized, and access to the operating area is strictly controlled to reduce the risk of poaching.

Asset Integrity—Wells:
Elcrest has considerably improved its management of well integrity since 2018 and has put in place an effective well integrity management system (WIMS). Surface well integrity checks (WITs) & annular pressure monitoring (APM) and subsurface well integrity tests (SITs) involving a visual surface inspection of the wellhead but no annular pressure testing are being carried out by field personnel monthly on the active wells. In addition, WITs are carried out on the active wells by a well services contractor every six months as part of the JV’s First Line Maintenance (FLM) effort. The SITs should be extended to include annular pressure testing at defined intervals (as described in the latest WIMS manual).

Elcrest has implemented a fit-for-purpose spreadsheet-based system for monitoring and managing well integrity. This database records information such as the dates of the last integrity assessment, whether the well passed or failed, and A & B annulus pressures.

Asset Integrity – Production Facilities:
Elcrest has put in place an OML 40 Asset Integrity Dashboard and reports a wide range of plant reliability and integrity KPIs covering equipment and plant availability, the status of statutory inspections, Tier 1 and Tier 2 process safety events (leaks), corrosion leaks, and preventative maintenance compliance on Safety Critical Equipment. The KPIs show that the availability of plants and equipment in 2023 was high at 98% and 92%, respectively (target of 95%). In 2023, only one Tier 2 process safety event (a wellhead cap leak) was reported against a target of zero.

Asset Integrity—Export Facilities and Pipelines:
The NEPL/Elcrest JV utilizes two crude oil tankers (the MT Westmore and the MT Bondi) and a crude oil shuttle tanker (the MT Elisabeth G Spirit) to transport crude from Gbetiokun to the Benin River Valve Station on the OML 40 export line.

Robust pre-startup safety audits and certification checks were carried out by Elcrest on these vessels. The two storage vessels appear to be in reasonably good condition and to be relatively well managed.

Reducing Our Carbon Footprint:
Via our energy efficiency initiatives, we have included upgrading our facilities with LED lighting, smart HVAC systems, energy-efficient machinery, and gas-powered rural electrification projects. These initiatives have reduced our energy usage by 15%.

Promoting Circular Economy:
We have successfully implemented comprehensive waste reduction programs, achieving a 40% decrease in landfill waste through recycling, composting, and reusing materials. Our goal is to reach zero waste to landfill by 2025.

Water Conservation:
Our water conservation measures have led to a 25% reduction in water usage across our operations. We are currently focused on implementing rainwater harvesting systems and wastewater recycling technologies in our facilities.

PEOPLE PARTNERS AND COMMUNITIES

Community Health, Safety and Security:
The Elcrest/NEPL JV continued undertaking projects and actions relating to community health and safety during 2023. Elcrest has continued to run a cottage hospital at Opuama, including extending a contract for the deployment of a medical team to provide medical support to the OML 40 communities. This is an important benefit for the communities, providing much-needed medical care in the absence of other medical facilities. Medical Outreach is another commendable project providing medical services to remote communities and is intended to be carried out every 3-5 years. It was last carried out in 2019 and is planned to be carried out next in 2024.

Elcrest undertook a study to identify ecosystem services used by the communities in OML 40 and prepared an excellent biodiversity awareness presentation aimed at communities (in 2022). and staff (in 2023).

HSE Management Systems, Policies and Risk Management:
Elcrest has a structured approach to Health, Safety, and Environmental (HSE) management that is reflected in its comprehensive HSE MS framework, comprising a set of policies, manuals, and procedures executed by competent and capable resources. Recent (2023) upgrades to its HSE Management System manual, including alignment of this with the ISO 14001 and ISO 45001 standards, underscore the company’s drive to adopt international best practices.

Emergency Response:
Elcrest has been actively enhancing its Emergency Response Plan (ERP), as evidenced by the latest revision issued in February 2024. This reflects the company’s commitment to continuous improvement and responsiveness to changing regulatory requirements and operational needs.

Social Performance and Stakeholder Engagement:
During the reporting period of January to December 2023, Elcrest continued to maintain active engagement with communities, attending meetings, executing CSR initiatives, and advancing compliance with the Petroleum Industry Act (PIA). Key achievements in 2023 included the extension of the contract to continue running the cottage hospital, sponsoring scholarships and cultural activities, progressing the community electrification project (47.25% progress as of December 2023), undertaking dredging for the community at Agodoba Creek, and a one-off emergency project to deliver relief materials for communities affected by the recent (2023) flooding.

Generally, good relations have been maintained with the host communities. A number of Freedom to Operate issues were successfully managed and resolved in 2023, possibly in part due to the new AMT organization, and it is notable that there has also been a reduction in production deferment due to third-party bunkering and sabotage.

Occupational Health and Safety:
Elcrest prioritizes Occupational Health and Safety (OHS) with a proactive commitment toward safeguarding its workforce. The company conducts local risk assessments to identify workplace hazards and implements necessary mitigation measures. Formal reporting to management is facilitated through monthly HSSE dashboards and quarterly performance reviews, offering insights into safety metrics and organizational performance.

The company has achieved commendable safety milestones, reporting no fatalities, Lost Time Incidents (LTI), Restricted Work Injury Cases (RWI), or Medical Treatment Cases (MTC) in 2023. Despite typical upstream industry exposure, including heavy machinery and hazardous chemicals, Elcrest has maintained a major incident-free record for over three years, which can be attributed to its strong safety culture, adherence to protocols, quality training, and effective risk management practices. Notably, Elcrest recorded close to 10 million Lost Time Injury (LTI) free manhours from July 2020 to December 2023.

Community Water Projects: Elcrest has partnered with local communities to support water conservation projects, including building clean water access points and educating residents on sustainable water practices.

Social Responsibility Initiatives:
Elcrest’s continuous investment in the communities where they operate is demonstrated through their recent projects, which include building schools, providing scholarships, and supporting local healthcare initiatives. Over the past year, Elcrest’s community programs have benefited over 15,000 people.

STRICTEST GOVERNANCE STANDARDS.

Elcrest has in place policies on corporate governance and sustainability. They include:

• Anti-Bribery and Corruption Policy
• Anti-Fraud Policy
• Gifts and Hospitality Policy
• Anti-Discrimination, Bullying and Harassment Policy
• Conflict of Interest Policy for Directors and Employees
• Corporate Communications Policy
• Risk Management Policy
• Whistleblowing Policy
• Diversity & Inclusion Policy

These policies are aimed at strengthening corporate government within Elcrest.