VICTOR OKORONKWO, AITEO E&P MANAGING DIRECTOR
Aiteo is an international energy group, a conglomerate that has many executive management teams looking after its downstream interests; power, infrastructure, mining and upstream businesses.
Aiteo Eastern Exploration and Production Company Limited, E&P, made a single largest investment decision within the upstream space since 2014 when it acquired 45% participation interest of Total, Agip and Shell in the Oil Mining Lease, OML 29. It was over $2.5 billion of investment.
The company has demonstrated capacity like other indigenous companies that participated in the International Oil Companies, IOCs, divestment demonstrated capacity of being able to play within the E&P space.
It has also shown quite a lot of Social Investment initiatives. Through its social investment initiative, it has assisted and supported Nigeria’s senior national team, the Super Eagles and its investments in Nigeria’s football saw a lot of achievement as the country made a major milestone in the game.
The Managing Director of Aiteo Eastern E&P Limited, Mr. Victor Okoronkwo, gave a snapshot of the sub-Saharan African economic and the opportunities it presents for energy growth. He made this known at the Nigeria Oil and Gas Conference at the ‘Thought Leadership’ session during the opening ceremony.
He shared his thought for both incoming and outgoing GMDs of Nigerian National Petroleum Corporation, NNPC, who are also leaders of the oil industry in Nigeria.
Okonrokwo stressed that the emergence participation and contribution of indigenous producer group in Nigeria to which Aiteo belong has made tremendous impact in the oil industry. The expectation particularly in the wake of recent government announcement of selling down its Joint Venture participation within the JV E&P companies is enormous.
He told the audience at the opening ceremony that the man behind the scene is the founder of the Aiteo Group, Mr. Benedict Peters. In 2018, he won the Forbes Oil and Gas Executive Award.
The resource base of Aiteo in OML 29 that it operates, its hope is to grow oil production about 250, 000 barrels a day. In the medium to long term, its aspiration is to be able to grow its gas production which is about 60 million scoff per day to nearly 300 million scoff per day.
The Aiteo MD said the company is looking forward to be able to achieve this through an investment portfolio of about $5 billion in the medium to long term. This include looking at the infrastructure laid, part of its assets is management on operations of Nembe Creek Trunk Line, NCTL, which is more than a 100 kilometres long and very strategic oil delivery infrastructure for the nation.
THE SUB-SAHARAN AFRICAN ECONOMY
He revealed that the sub-Saharan African economy has a growing population estimated to reach about 1.2 billion population in Africa by 2040. Within that space several estimates put Nigeria to over 300 million people and this comes with the consequential demand for energy.
Okonkwo made an observation on mobile phone penetration, “It may interest you to know that more Africans have access to mobile phones than they have access to electricity. Incidentally, you cannot operate the mobile phones without some form of electricity. That provides enormous opportunities for investors to play in that space.”
Sub-saharan Africa has the resource base and Nigeria stands in the forefront of it. Okoronkwo asserted that “The challenge we have is how to tap into this resource base to be able to grow in the new economy. But the key and underlining issue will be how the respective countries, policies and regulation in the industry will either enable or hinder this growth.”
He alluded to the fact that Nigeria is 60% electrification access with 3000 megawatts of power generation although there is conflicting figure between what is transmittable and what is available that can be generated. But what has not been disclosed is what the gas supplying companies are owed. This is one of the hindrances.
Notwithstanding, there is a global shift away from fossil fuel. Okoronkwo submitted that because of Nigeria’s fossil fuel resource base it stands a better chance to be able to utilize that to prepare for the post-fossil fuel economy. The country has to assess where it is and plan for the future.
He disclosed that Nigeria in its 2020 target will expect to grow oil reserves to about 40 billion barrels. The country is to project production to about 3 million barrels by 2020 as well. What gives the country the confidence to make this target because it is the largest producer in Africa and 13th largest in the world. Nigeria’s 2019 budget, the significant contributions are expected to come from the oil and gas sector.
This cannot be achieved if there is no collaboration and cooperation between the government and the industry. Moreso, even within the IOCs and indigenous players. In Nigeria’s 2019 budget 42% of it is expected to come from the oil and gas industry generating about N3.7 trillion. This is expected to produce about 2.3 million barrels per day. But the budget has already in-built deficit. Although the government expectation is that the deficit will be funded in part from the sales of its participation in the JV companies. Through this, some aspiration has been established which is growth of production and the reserve base. The oil and gas industry still remain a key sector to help accelerate government objectives.
CHALLENGES OF THE OIL INDUSTRY
There are some key concerns on delays in reforms within the industry which might hinder objectives that have been set out. These issues can constitute nuisance to the progress of the industry such that it will have severe investments implications.
The Aiteo MD pointed out that gas serves as the only option to cushion the effect of challenges that might arise in the industry. One thing that is worrisome is that most investments in the E&P space have had to avoid Nigeria. “Why are the investments moving away from Nigeria? The government should seek more collaborative ways of working with the industry to be able to redirect the flow of these investments, he added.”
Okonronkwo made it known that despite the challenging environment, the indigenous players have shown a lot of resilience and have demonstrated substantial maturity to be able to manage the upstream asset. There has been substantial contribution by production growth and some within that club has started diversifying by building mini refineries in part as a way of combating the perennial oil theft, pipeline vandalization and business impact that is being experienced.
Indigenous producers also face a number of limitations in being able to achieve full potentials. The foray of indigenous players into the oil industry was enhanced through participation in the IOCs asset sell down and for which they borrowed a lot of money. This was during the increase of oil price. When oil price gone down, it didn’t affect the debt hence the indigenous producers continue to suffer not being able to manage the volatile industry space and service the substantive debt they owed.
According to Okoronkwo, another challenge is the issue of oil theft and facility vandalization. Indigenous companies do not have diversification in their portfolio like their counterparts, the IOCs. Most of them are concentrated in particular areas, whenever there is disruption, they experience high risk and bear it.
In addition, indigenous producers also face a lot of pressure on their cash flow and it is coming from multiple fines and fees that are continuously leveled on the industry with heightened host communities expectation not understanding that when a company moves from an IOC space to an indigenous company space, it does not have a lot of large cash base like the IOCs. The community expectation goes high with severe pressure.
Oil theft is a serious negative impact on the operations of the industry but more on the indigenous producers that are playing a lot more on the onshore space as the IOC exit that space.
Okoronkwo advocates that the federal government will have to work with the industry to look for ways to combat the menace oil theft and vandalism.