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Energia maximises partnerships to boost hydrocarbon production

Interview - December 10, 2013
Felix Amieyeofori Valentine, Managing Director of Energia Ltd, speaks to Word Report about how teamwork with major multinationals is combining strengths and raising Nigeria’s hydrocarbon output as the nation targets sustained double-digit growth and become one of the world’s top 20 economies.
I am sure you are aware that Nigeria wants to become one of the top 20 largest economies by 2020. There is a lot of diversification going on and GDP growth is strong, estimated at around 7% for the coming years. Given the current state of the economy and the diversification going on, how do you feel the oil and gas industry as a whole can better help the overall economy and the diversification of Nigeria?

Instead of oil and gas, I would call it hydrocarbons, so that I can broaden the base. The diversification of the Nigerian economy is energy driven. The key component at present is mostly gas. We are moving into utilising our huge gas resources to power the economy. Of course, the country is also waking up to see that oil and gas has been mostly upstream. It is an isolated island – only a few people are in the upstream. We have the huge midstream and downstream activities, which have not been fully explored. The Government has attempted to own refineries, petrochemicals etc., but it has not really worked the way it should have. There are increasing discussions. If you have a very strong upstream sector, you must have a midstream and a downstream sector. You have to process your oil and gas to create the total value chain. By every standard, Nigeria with so much gas should be self-sufficient in plastics. We should be able to do everything apart from things that do not come from oil and gas. The industry has the capacity. A few of my colleagues are working on a ‘hydrocarbon corridor’, which will run across the Niger Delta, from River State to Delta State.

For us in the industry, the Government is coming to terms with the fact that upstream alone cannot be sustainable. You only have a few people who are in the upstream sector. People ask why we have so much oil, but yet there is still so much poverty. But if you spread it and get people to talk about fertiliser products, which are gas products, and you have refinery and petrochemicals, you will definitely engage more people from the population. At present the LPG (liquefied petroleum gas) density in Nigeria is even lower than it is in Ghana. We are still using kerosene and firewood. Agriculture itself is heavily dependent on fertiliser, which is from gas in the value chain. The Government also knows this.

You must recognise that Nigerians are very intelligent people – the only problem we have had is this tribal and regional sentiment, which has not allowed us to pool our resources together. We are beginning to realise that we have to benchmark ourselves with other nations – developing and developed – which for me, is the beginning of growth. If you do not do this, you will only struggle and compete within yourselves. The 20th largest economy in the world has a GDP of about $900 billion. It is therefore not going to be easy within these seven years to displace these economies, even if the other economies grow by about 1 to 2%. But it is a good benchmark. We have a lot of work to do. For me, Nigerian policy was mostly centred on Africa – it was not even centred on Nigeria. It was centred on the liberation of Africa. Nigeria spent about $13billion fighting wars for Liberia and Sierra Leone alone. We provided the highest number of soldiers at this time of crisis. Nigeria was more like a big brother. But unfortunately when we were doing that, we were not positioning the country and the economy to compete with the global economy. If you look at economic trends, as at 1970- 1979, Nigeria’s economy was bigger than that of Indonesia but they have since left us far behind now.
I do not see anything wrong with a social vision. When we were in primary school, we did not learn about oil – we learnt about agriculture. I am from Niger Delta, which is an agrarian society. In economics, the major employer is agriculture. Where we are now, believe me is a good starting point. We have tested the GSM mobile system – it still has issues, but it is the fastest growing globally. We have beaten South Africa in this. We know that if Nigeria is focused on its development, and if we do not continue to tear ourselves apart, which is the major problem we have, we will not be at 20 in 2020; I think we are number 30 or 31 at the moment. I think we will beat South Africa by then and move up the ladder. However, we will not be number 20 as that would require almost 20% annual growth rate. We are taking the necessary steps. We are combining a lot of things and getting involved in agriculture and the service sector. That is why they think they will reach the top 20 in 2020. We will probably have double-digit growth, which is what happened with China for about 10 years, for it to move its economy forward.

There are two words/phrases in Nigeria that we use – ‘in the pipeline’ and ‘potential’. We are good at making elaborate plans, but no action. Vision 2020:20 is a good start. But we will not be there in seven years’ time. But we will definitely move in these seven years. We must move in terms of infrastructure – look at what the Lagos State Government is doing with the expressway and the Federal Government contracts for expansion of the international airport in Lagos. Nigeria is trying to build new international standard terminals in five cities to boost our infrastructure.

But it is good news right now. The good news is that we are beginning to realise that we need to compete with South Africa and some European countries, and Asian countries.

You are a consortium of seven key technology companies. How do you see new partnerships further enabling your business and also easing investors’ minds?

It is still the same benchmarking, once you realise the business environment and the challenges. Almost everybody presently at the top in the Nigerian Independent started with the IOCs, and gradually we realised that we also have to demonstrate Nigerian competence. Nigeria is the only country at the moment that does not have any global brand in the oil and gas sector. We do not have a global company. If you go to Asia, they have their own oil and gas companies, and the same goes for Canada, America and the UK. We still use all of that, but we do not have anything for Nigeria. The Nigerian Independent concept is not necessarily about giving jobs to Nigerians. It is about gradually developing indigenous expertise and technology, so that if we are independent, we should also have some independence in terms of the technology of the resources we have. The country must be purely independent in terms of its own economic development.

We are not competing with the local IOCs, but we are trying to tell them that we can do it, and we can be as safe as they were. We are part of the people and we understand their needs. We can combine the communal element with oil and gas technology, and provide an environment, which is better than what they left. That is our focus.

There is no Nigerian oil and gas brand globally, and that is what is driving some of us. That is what the collaboration is all about. Besides the founding consortium, Energia is also collaborating in a cluster group of five marginal field companies in Delta State. We decided to collaborate as a group and it has paid out for us. We have been talking about a common safety system. It is going to work. Our cluster group is the largest marginal field group at present. You have Midwestern, which has about 15,000 barrels per day (bpd) I think, and in Energia we have 8,000 barrels, and Pillar is about 2,700. Midwestern is targeting 25,000, and by next year Energia will be 13-15,000 barrels. So we will be talking about close to 50,000 barrels within our cluster group.

By the end of this year, your aim is around 10,000 bpd, and by 2014 it should be around 15,000 bpd. What are your plans for production increases in the next five years or so?

For me, it is a natural growth model. You move from the butterfly concept. We are being seen as marginal at the moment, and we want to go into medium, and then from medium to major. This is a natural growth process.

What are the most vital components to reach that stage?

We all have our dreams, but somewhere we try to compare notes. As we speak, we have 8,000 barrels, but our cluster group has a restriction of only 21,000 barrels through the Agip common export line. But between Midwestern and Energia, we have already exceeded 21,000 barrels. Midwestern and Energia are constructing another 53km line that will tie into Shell, which has a capacity of 45,000 barrels. Agip has increased our capacity from 21,000 barrels to 30,000 and we are trying to get the 9,000 implemented. We will have 75,000, which should be enough capacity to handle the cluster growth within this production regime.

That is only in the marginal fields though. Some of the marginal fields have moved to the next level – the medium level. Platform Petroleum Limited has formed Seplat with Shebah to buy Shell blocks, so they have moved from the marginal world to the medium world. They are producing about 50,000 barrels per day. Their target now will definitely be to consolidate that position and grow to become a major producer with 150-200,000 barrels per day. That is what I am talking about. We at Energia and Midwestern individually are already putting our heads together. We are trying to bid and look for partnerships ourselves. Eventually we will hit one, so that this will move equity production to the next level, although not as Energia solely, but together with some willing minds and people with technical strengths or financial partners.

These are the things that we are pursuing. I think that between now and 2015 Energia, Midwestern and maybe Pillar should be playing at the medium level. The only issue we have experienced is that we thought that our pipeline would be operational and the Agip pipeline would have given us more room. Energia has just drilled three successful wells, and for the first time we have achieved that back to back. That has moved our production from 1,800 to 8,000 barrels per day, but we cannot produce all of our oil because of the capacity restrictions we have. That is putting a lot of stress on us, and we do hope that the stress will be relieved soon. We are also looking at the next phase of development. We have three additional wells, and we have already constructed drilling sites and do hope to commence the next phase of drilling by December, 2013.

We believe that by the time we are finished, our pipeline with Midwestern should be operational, to enable us produce at full capacity.

A number of companies are seeking to get listed on the Alternative Investment Market (AIM) in London in order for greater access to financial opportunities and technical partners. How do you see on listing on the AIM in London in these aspects, as well as the NSE and the benefits that comes with it?

I think it is one of the dreams of consolidating and expanding the Nigerian emerging market. At present, you have mostly downstream companies and then the likes of us. Dangote is the richest man in Africa and is heavily in the market. It is a good thing that people are looking at it – it is just a matter of time before you move from private to public. Our partner Oando has been a public company on the downstream side, so it easy to float an energy company in Canada and carry their E&P into the market. Energia is 100% private, and we want to ensure that we consolidate before going public.

Energia’s vision is to be able to leverage on our private strengths and then gradually loosen out to the public. We have a global vision. We will definitely be a public company.

What final message would you like to send to the British readers of our report? Why should they come to Nigeria and partner with you?

You have got to look at the history, the records, the successes and the people involved. Those are the things that matter. You want to look at integrity. Energia has prospects; we are all experts in our various areas. We know what we are doing. We have a vision. You mentioned a refinery – we are already carrying out feasibility studies. We have a global vision. We are looking at the impact of shale oil and America becoming a net exporter. India is currently the biggest buyer of Nigerian oil and India is also investing on its own. Now the whole of East Africa and West Africa have oil, and if all your neighbours have oil, you need to start thinking. We have already started thinking about moving towards a local modular refinery model so that we can be a fully vertically integrated company. The group of people who are affiliated with Energia are technology-driven and financially driven people. We are looking at an integrated company that wants to play in a global market. You can tell David Cameron to send his business people over.