Established on September 14, 2006, Professionals Experts and Energy Company (PEECO) is an integrated geosciences/reservoir engineering and technical consultancy company. Managing Director and founder of the company, Chief Ernest Olufemi Akinmade, speaks to Worldfolio about the Nigerian oil and gas centre, and local content within it and about his own company and what it offers its clients. The oil and gas (O&G) industry is such an important part of the Nigerian economy. It contributes 80% of government revenue and 95% of foreign exchange (FOREX) earnings. How would you comment on the current status of the industry? What changes should be made in the industry in the next 5 or so years?
You do not get things done without good systems, policies, finance and human capital. As for our country, we have a clear vision of what we want to do and where we want to be in terms of reserves, production capacity, gas utilization, and other projects that will generate more revenues from our oil and gas industry.
Our problem has always been the ever changing policies due to the involvement of all sorts of government bodies and the high turnover of the leadership and management of the industry. Consequently, those who formulate policies are hardly allowed to stay long enough to achieve the set objectives before they are kicked out for one reason or the other. With new leadership and management comes a new policy which may hardly see the light before another change is made. Until we address these issues, the visions or targets may still be mere mirages. The Petroleum Industry Bill (PIB) is a step towards that direction.
Any document can look all right, but you have to remove the bottlenecks, and ensure that the authority given to the various levels of government to discharge these duties are not tampered with. The bill should be all encompassing taking care of all the relevant stakeholders and should be able to stand the test of time. I would love to see a one-stop shop to regulate the oil and gas business. What led the Professionals Experts and Energy Company (PEECO) to focus on its particular market niche?
Before I formed PEECO, I appreciated the problems that indigenous companies were having, for example with funds, inaccessibility, technical expertise, and so on. If you consider the number of marginal fields and the time they were awarded – contrary to expectations, only a small percentage are producing.
PEECO sought to talk with these indigenous companies from a technical and business point of view to get things moving. The initial experience of that led us to discover some obstacles they were facing, which were ignorance, greed and ego (IGE). We always advise them to avoid these three attitudes which could stop them from attaining their desired field production. A lot of the projects are poised to be successful. In the award of the Marginal fields the wrong set of people was to make joint investments to develop some fields. We have also been involved in managing relationships between indigenous and international oil companies. In addition to the business development we also provide technical services as required through our established partnerships. I am happy with the steps we are taking to help improve local participation in the Nigerian oil and gas industry and the business development in general. We have evaluated assets outside Nigeria and we are also encouraging Nigerian companies to look outside the country for viable exploration and production activities.
What key attributes do you consider when conducting your evaluation?
We look into possible problem areas. The stakeholders, their profiles, type of assets desired or asset to be developed. We then carry out our due diligence on the client and its request and financial capability. Each request has its own set of problems. We found that new investors mostly find it hard to work with new indigenous companies. There is always a relationship problem based on distrust which we need to help them sort out before working on the assets. How does PEECO set itself apart from other consultancy companies?
Depending on what we have to do, we get the best people for the job. Teams are constituted and jobs are executed on a per project basis. We do not claim to know everything, but we do go out of our way to use the best brains to accomplish what we have to do. How does PEECO continue to add value to the project after the initial stages?
We help build up the client’s company by managing part of the work program. We advise them to do a lot of outsourcing of the required operational services by getting them good service providers. This allows for efficient and timely project execution. I have been fortunate enough to have experienced such working with ENI. ENI takes on challenges believing that almost anything is possible if you focus on making it work (which is true). I believe there is always a way out of tough situations. We are currently working with some companies to get them move ahead with their projects. We encourage our clients to explore inter companies collaboration to build and share the same production facility to be cost effective. However, it seems every company is keen to have its logo on a facility wholly owned by the company which can be very expensive. That is another issue that needs to be addressed because most of the indigenous companies are yet to buy this idea.. Nevertheless we are always available to assist our clients.Right now, indigenous companies are responsible for only 10% of the production in Nigeria. They are hoping to increase that to 100% by 2020. How do you see this becoming a reality?
By 2020, I don’t think the indigenous companies will attain 100%. The remaining 150% of reserves to be discovered and produced especially in the deeper offshore and deep onshore will require huge investments which will have to come from outside Nigeria. For the growth of the indigenous participation in the Nigerian oil and gas industry, new partnerships will have to be developed with foreign investors in order to have access to bigger exploration and development projects. I also doubt if my country is thinking of outright nationalization. Investments have always been protected in the country.
Even for the Nigerian Content development, we have to learn to crawl before walking and learn to walk before running. Today we have series of technical agreements which do not fall in line with the initial concept, which is to see Nigerian services and fabrication play a major role in the oil and gas industry. We need to create a solid foundation and encourage strong partnerships and motivate them to set up fabrication bases in Nigeria to serve every area of our economy including the oil and gas industry.
We need to consider what the required inputs are. These inputs are items that have been locally produced that could be used in our economy and the oil and gas industry. There are chemicals that can be locally produced for industry use. There are non-toxic chemicals that we could produce here for effective environment remediation. These products are 100% Nigerian. However, there may be a certain requirement for which the technology may not be easy hence Research and Development should fuel the growth of the Nigerian Content. We are growing and heading towards that direction of increasing our local fabrication capacity. We can expect some teething problems but the government has to support the Nigerian Content program financially. This means that the banks should always be ready to support Nigerian initiatives in fabrication for the oil and gas and manufacturing industries.
While there are several things that could be done in Nigeria 100%, Our target of reaching 75% to 100% in total by 2020 is a hard task for which we seriously ought to have been prepared, What are PEECO’s strategies in acquiring more local and international clients?
Apart from being consultants, we would like to see an increase in reserves and the production capacity in Nigeria as well global availability of oil and gas. This includes the improvement of our in-house facilities in the areas of asset management (AM), support to operations, geological and geophysical activities, and so on.
We are working on a lot of things with several partnerships. We are associated with the Century Group one of the fast growing indigenous companies in Nigeria in the Exploration and Production activities.
Among the chief things companies should have are the right people, ample funds, and the right and most modern equipment. We help our clients get well equipped and deliver what they need the best way we can. If we are very successful locally, clients in the international arena will have confidence in us. However, we have ventured into the West African region on behalf of some clients.In terms of power privatization, how is PEECO positioning itself to work with the new private companies?
We have been evolved in the IPP program. As you know, there are three parts: power generation, transmission and marketing. Each part has its own set of issues. We are working with clients on the area of gas supply for power generation. We have carried out studies for gas development and utilization especially stranded gas.
In the area of marketing power, the demand for power is high in a fast growing economy such as ours but revenue collection is inefficient. If the revenue collection system is not efficient, funds would not be available to develop, maintain, improve and sustain service delivery. Personally, I like and support the whole process of privatization. The companies are comparatively doing better. The focus should now be on more power generation and efficient power transmission and distribution.
Maintaining transmission and distribution is challenging because at the local levels, transformers are frequently faulty and may take months to restore them thus affecting distribution. Consequently, the power may be available, but to faulty transformers.
As for power generation, the locations of these IPPs are not optimal as well as the availability of the gas. Today, we are talking about using gas to generate power. We initially made a mistake by abandoning electricity generated from hydro resources and coal. By keeping these other sources of power generation they could have helped maintain the power requirements locally and compliment the power from Kainji Dam. Because of the Kainji hydro power, almost all the other plants were abandoned. Unfortunately, Kainji Dam as the new source of power was not big and efficient enough to fulfill the nation’s requirements. Currently, we have IPPs which lack adequate gas supply and cannot generate the needed power.. We have to urgently address such.
In the establishment of IPPs, the element of the Nigerian content is paramount but we need some flexibility to allow complete IPPs to be imported for the time being and installed, while local companies should be encouraged to supply the required gas . This will solve our energy requirement in the short term providing the needed pad to launch our long term plan.
In managing the Gas Master Plan (GMP), Gas-gathering companies are allocated areas. The first thing to do when investing in an IPP is to deliver gas to it. We have to identify fields to be dedicated to power generation and then locate the IPP close by. We need pipelines to gather gas, the pipeline network would require significant funding hence the need for investors in gas transmission. . We need to solve our energy requirement in the short term to guarantee the long term solution. Only the private sector can successfully drive the program.As the MD and Founder of PEECO, what legacy would you like to leave behind?
When I leave, I would like PEECO to move on from being a good consulting company to an efficient and successful Oil and Gas company. Consulting companies are constantly looking for jobs and paid. In the case of PEECO, we invest our knowledge, time and contribute financially where necessary to be part of some projects for which we take some equity and partly cash to guarantee the company’s survival and growth.
God willing, I hope that this company survives in the long-term. We hope we can continue to find partners who are committed to the sustainability of our endeavors; who have the fortitude to share our vision and jointly provide the best services to our clients. How does PEECO make things easier for those who want to invest in the Nigerian O&G sector?
It depends on the inquiry we get. We interview our clients and ask them what areas or assets they are interested in. We are honest about what they should expect. We ask them about the size of their proposed investment and come up with recommendations best suited for their situation (e.g., areas they can invest in and can take to market within the short-term, a cocktail of assets they could explore, etc.). We can source local partners for them and can initially midwife their business in Nigeria.