Mr. Emmanuel Konyebagu, Managing Director of Platform Petroleum, speaks to Worldfolio about Nigeria's image in the world media, which he believes often focuses too much on the bad news. He also discusses the oil and gas sector, tackling the security issue, engaging with local communities and the Nigerian Local Content Legislation, through which the country is gaining “capabilities and skill sets to increase indigenous participation in the industry”
How important is it for Nigeria to tap into international media and promote a positive image?
Over the years, the media has been unfair about the things that have been going on in this country because they have only concentrated on the few negative aspects of the nation.
This country is blessed in terms of human resources, natural resources, and business opportunities.
However, most investors overlook these good attributes because of the negative publicity brought about by media sensationalism. Country branding campaigns and PR efforts of this nature are necessary to establish a balance between the focus on the bad news, and the good news that actually takes place in the country. It is not about fabricating a new image, but telling Nigeria’s story as it is—the good and the bad. We can talk about the people, natural resources, business opportunities, and so on. This is a key to establishing a more truthful image of Nigeria.
During a recent interview, the Nigerian Minister of Industry, Trade and Investment Olusegun Aganga stated that the country's economic outlook remains bright.
I agree with the Minister’s sentiments. One of the things that attract large corporations is a huge market base. Nigeria has about 175 million people, with a robust middle class segment. Its climate is perfect for agricultural endeavors. As an emerging market, it has a lot of potential. Like all countries, it has its own set of challenges, but they can be overcome over time. There are so many opportunities to explore in this country.
Oil and gas (O&G) revenues comprise 90% of Nigeria’s export revenues, and 80% of the Federal Government (FG) revenues. O&G is the engine that drives the nation’s economy. As the Chief Finance Officer (CFO) of Platform Petroleum, what is your outlook for the industry?
Today, the O&G industry makes up the majority of the country’s revenues. However, before the discovery of oil, agriculture was the country’s main economic driver. We had an assortment of products, from groundnuts to cocoa, rubber and palm oil and so forth. People lived modestly. Education was free except in the South East.
The discovery of oil prompted a massive shift in interests in the Nigerian economy. This was mainly driven by rental income. Apart from the oil revenues, Nigeria earned revenue from other sectors such as telecoms and banking and even entertainment and tourism. Because of anomalies in governance, focus was taken away from agriculture. It did not grow to benefit from the developments in O&G.
To make what we have more sustainable, a lot of effort is being made to diversify the country’s economic base. Reinvestments of O&G revenues help us ensure that in the future, pressure will be taken off the oil industry, and that each sector will meaningfully contribute to the country’s GDP; particularly, agriculture (which we believe should once again take a leading role in the national economy).
All we need is the political will to achieve it. Take Ghana, for example. It was on the threshold of bankruptcy as a nation. A significant number of Ghanaians came to Nigeria. The government managed to revive the Ghanaian economy through agriculture.
They invited people who had the passion for agriculture to come back to the country. It was not hard to make agriculture thrive because they still had the land and the people. Incentives were given to encourage people to go into the agriculture sector. I think we can do the same thing in Nigeria.
Going back to the O&G sector, last year, Nigeria was expected to produce about 2.48 million barrels of petroleum per day; however, it fell short of this projection due to security issues. According to President Goodluck Jonathan, about 10% of the oil was lost because of vandalism and theft.
Security has been a very big challenge in this country. These security issues were not as pronounced until recently. One of the reasons why we face these issues (despite being endowed with vast natural resources) is developmental imbalance. Politically, we are amalgamated as one nation. Economically, we are different. Significant attention is paid to those areas where oil companies operate. The dearth of developments encourages a natural tendency to react.
Take Bayelsa, for instance. There are so many communities where there are several oil wells, but no hospitals or drinking water. This large imbalance causes a natural tendency to react in the face of austerity. Hunger and unemployment serves as sources of discontent and as a result – social problems arise in places where they ought not to exist. Security issues have affected production onshore and offshore, because of activities of militants which have resulted in frequent disruption of production.
The Nigeria Delta Amnesty Programme (NDAP), initiated by the government has significantly helped in addressing the security issues. To further address the militancy problem in the Niger Delta, the government will firstly, make conscious effort toward the development of the oil producing area in terms of human capital development and enhancement of the existing skill sets.
Shell recently divested some of its assets because of community issues. We acquired Shell's block through the Seplat Petroleum Company, in conjunction with Shebah Petroleum Company, and Maurel & Prom. At that time, the acquired assets were producing 12,000 barrels per day, back then; Mr. Austin Avuru was the MD here, while I was in charge finance and admin, and responsible for community relations also. I implemented a community relationship model that we applied in Seplat. That same model which was implemented at a micro level has supported the operations of Seplat in achieving her current production of 60,000 barrels a day.
At a macro level, the government can create policies that address social issues.
They can spearhead initiatives to massively improve their living conditions, their infrastructure, and promote skills development and employment. The companies are doing what they can on their own, but there is a limit to what they could accomplish due to limited budget and scope. The government is in a better position to make a difference at a much larger scale. It is all about having the political will.
The Nigerian Local Content Legislation aims to ensure national economic sustainability by expanding the level of indigenous participation in the O&G industry.
We need to develop the local manpower. Through the LCL, we build in-country capabilities and skill sets to increase indigenous participation in the industry. Government policy to develop local entrepreneurs is a step in the right direction.
Even before the implementation of the LCL, Platform Petroleum has always been purely Nigerian—from our staff to our partners. Our flow station was built by Nigerians. Despite being designed by a foreign entity, our gas plant was also installed by a Nigerian Company.
We have embraced the need for local content even before the law was passed. We believe that developing national manpower is a fundamental need for us to grow the sector.
International oil companies (IOCs) are concerned in producing and repatriating their profits. They are not very conscious about developing the local economy. The task now falls on us local entrepreneurs. The Nigerian Content Development and Monitoring Board (NCDMB) was set up to ensure industry compliance for LCL. Proper sanctions are given to those who fail to meet the requirements. Contractors with capabilities should have access to contracts. It is important that the LCL is made to work. It should be stringently enforced.
Platform Petroleum was awarded the Egbaoma Field in 2004, becoming one of the first companies to develop and operate a marginal field. This was coupled with the FG’s no-flare policy. What has attributed to the company’s success since it started in 2002?
You cannot talk about Platform Petroleum without taking about Mr. Austin Avuru. He was a driven young man who knew which direction he was heading. A technocrat to the core, Mr. Avuru believed in professionalism. When he founded this company (along with a group of other Nigerians), he had a clear vision of where he was going.
In 2005 (a year after the field was awarded), we started our first well re-entry. The key component to our success was principally the vision of our Founding MD. The partnership we had with Newcross Petroleum was another success factor. They supported us, and provided the initial financing. There were also the people whom Mr. Avuru recruited to run the race with him. The Board (mostly comprised of professionals in the field) has been very cooperative.
They understood that this was a long-term project. They have been patient and supportive. Having a stable board that understands the company vision helped us move forward. Good community relations also contributed to the company’s success.
How would you describe the relationship between Platform Petroleum and Seplat?
Prior to the formation of Seplat, Platform Petroleum had already approached Shell for the acquisition of OML 38 while SPCL was also going to shell for OML 4 & 41. In one of our meetings in London, Shell advised the 2 companies to go back home and form a vehicle to jointly pursue assets. We did as they recommended by setting up Seplat with SPCL.
After the formation of Seplat, we got M&P as a financing partner with 45% equity in the Shell divested interest. Platform Petroleum, on the other hand, owned 24%, while SPCL got 31%. That was the structure. Platform Petroleum, SPCL and M&P are the 3 companies that own Seplat.
By the time it was set up, M&P brought in the CFO, SPCL brought in the Chairman and Platform Petroleum brought in the MD. Seplat is an entirely different entity and is not fully owned by our company. Platform Petroleum is just one of the shareholders.
Platform Petroleum registered an initiative involving flare gas recovery. It is the country's fourth Clean Development Mechanism Project. This entails an installation of a huge pipeline. How is this new endeavor progressing?
The project had some setbacks and internal issues, which we spent a major part of last year resolving. You see, we tried to divest our gas plant last year but some issues arose that constrained us to keep the project on-hold. Having resolved these issues, we shall be resuming the pipeline project in the current year. The 45-kilometer pipeline is being driven by Seplat. The venture was conceived by Seplat and Platform Petroleum as part of our overall gas development plan and hopefully anticipated its completion by the tail end of this year or early next year.
Platform Petroleum gets an average of 2,000 barrels of oil per day. You recently shared the company’s goal of increasing this to 10,000 to 15,000 barrels of oil per day in the next 10 years. What does the company plan to do to achieve such an impressive target?
We have a meeting scheduled to discuss our strategies. When we commenced operation sometime between 2007 and 2008, we attained a peak production of about 2,800 to 3,000 barrels of oil per day.
Efforts to enhance our production level via a drilling campaign in 2009-2010 was, however, not successful owing to various operational challenges that were beyond our control. That set us off to a high level of debt (about US$40 million) because the 2 wells we attempted to drill failed in succession. We had to step back and appraise our current position in terms of our debt profile.
Even with a very low level of production, prudent management allowed us to meet all of our obligations. We thereafter adopted a strategy of focusing on low cost, low risk work over activities to clean our balance sheets. As we speak, we are on a 3well-over campaign, one of which has just been completed. Overall, we target to attain a production level of 3,000 to 3,500 barrel of oil per day at the end of the campaign in March, 2014.
It is all about having a sustainable production. Even with 3,000 barrels, we are focused on having it at a sustainable level which we believe is comfortable enough to meet our obligations, and make an impact in the community and our staff.
Having said that, what is the main objective of Platform Petroleum in the near future?
First of all, we are looking at creating wealth for the stakeholders. That means that we have to be efficient in our production process. We have to be both profitable and liquid. We have to grow organically as well as by acquisition of more fields. We are not interested in fast cash. We want to create value for our stakeholders. Cash will come once we implement the right strategies.
The stakeholders, the government and our staff should be happy with us because we consistently meet our obligations. It might interest you to know that for the past 4 years, we have had zero staff turnover. Likewise, we were commended by the Lagos State Government (LSG) for being one of the companies that promptly pays its taxes.
In our host communities, we have legacy projects (under the project we have with Newcross). Over the last couple of years, we have completed several infrastructural projects such as building town halls, water projects etc.
We also have skills acquisition programmes, educational assistance programmes, healthcare, and so on. We are truly interested in adding value to our host communities. We recognize that we cannot do it alone. The community cannot do it alone either. It has to be a joint effort for us to work together effectively because; we all have a common goal.
What kind of business opportunities can be explored with Platform Petroleum?
Platform Petroleum is into exploration and production (E&P). There is equity investment in our fields. If you are looking for the first avenue for getting into the Nigerian E&P industry that you can use as a springboard to get into the main industry, Platform Petroleum is a company with the integrity and technical competence that you need. There is scope to drill additional wells, we can invest in infrastructure such as delivery pipeline. We can go into gas development, refinery and so on. Platform Petroleum is a platform for future investors.