Dr. ABC Orjiakor, Chairman of SEPLAT
…Company recorded monumental achievements as a leading upstream oil and gas firm in Nigeria
…350million scuff of gas supplied to the domestic market
…2020 as the year of gas
-By Felix Douglas
Seplat is one of the indigenous successful companies in Nigeria with operational excellence, skilled workforce and effective partnership. The company was formed purposely to pursue upstream oil and gas opportunities in Nigeria and in particular, divestment arising from incumbent oil companies’ portfolio.
Dr. Ambrose Bryant Chukwuenuka Orjiakor, Chairman of Seplat asserted: “we basically say that the success we had in the oil and gas industry is really anchored around our workforce as well as the host communities.”
Seplat strong commitment to the oil industry is instinctual to its success as one of the Nigeria leading indigenous oil and gas company. One of its candid priorities is building a lasting policy legacy of its host community through environmental stewardship, promotion of healthcare, education, empowerment capacity and infrastructural development with special progress on its communities.
At present, the indigenous company is a major supplier of gas to the domestic market and it is committed towards increasing supply and growing demand particularly in the gas to power.
Mr. Austin Avuru, Chief Executive Officer (CEO) of Seplat, said, “from day one our growth strategy was based on three perspectives, amongst these are- to grow the current asset that we have acquired by our position and also to grow our gas business and we have been consistent in the past ten years.”
Seplat has over the years established mutually beneficial relationship with its partners based on transparency and high standard ethical conduct. This standard dictates how it operates as a business and shapes its engagement with external stakeholders. The company’s best asset is arguable to its workforce who carried on entrepreneurial and competitive view of the founding fathers.
At Seplat, the working environment enforces high performing standard and galvanizes collective competencies of its people towards achievement of company’s objectives. Its core values which include team work, transparency, integrity and accountability have shaped its attitude optimally with sustainable value creation for shareholders and stakeholders.
The company has also been blessed by a dynamic and visionary leadership under its CEO, Avuru. It achieves phenomenon performance standard and trend that is set to be continued by Mr. Roger Brown, its Chief Financial Officer (CFO) who takes over as Chief Executive.
The first ten years of Seplat could be described as a decade of distinction. Yet, the company is not resting on its laurels, it is resolute and passionately committed to grow greater achievement in an unwavering pursuit of excellence.
Speaking at the Seplat Energy Summit 2020 themed, “Business Sustainability and Strategic Leadership in Africa” which coincided with its 10 years anniversary operating in the Nigeria oil and gas space, Dr. Orjiakor, pointed out that Seplat success started from growth of its production, reserves and indeed the first and only company that has taken securities to both the London and Nigeria Stock Exchanges. This was the biggest feat any company has attained in sub-Saharan Africa.
The Seplat Chairman affirmed that the company will continue to be a trail blazer as the business environment changes, it will strongly build an innovative company. Over the years, the company has been known and well respected for its roles in stakeholder management.
Orjiakor revealed in the Energy Summit, that Mr. Avuru having led the indigenous company successfully will be passing the baton of leadership to another well tested hand who has been with the company as CFO for seven years, Mr. Roger Brown.
In his perspective as the special guest to declare the Energy Summit open, the Minister of State for Petroleum Resources, Chief Timipre Sylva, noted that Seplat was awarded some divested assets based on the Federal Government aspiration to developing the indigenous capacity in the Nigeria oil and gas sector about ten years ago. Over the past ten years, the company has recorded monumental achievements and has grown to become a leading independent upstream oil and gas company in Nigeria.
The Minister stated that Seplat has recorded some key achievements in ten years. One is its successful acquisition is the Shell Petroleum and Development Company (SPDC) and Chevron Nigeria Limited (CNL), divestment assets and appointed as operator of nine drilling rigs, 2 swamp drilling badges, 7 land drilling rigs and attain peak activity of 8 drilling weeks concurrently in 2014. “This is highest in the industry in Africa by an operator at the time.” Seplat also increased daily crude oil operation from approximately 14000 barrels in 2010 to the current level of about 60000 barrels within the first three years and sustain the average production.
He said, Seplat has also increased OBEN gas and processing capacity from 19million scuff to 465million scuff. The company is a leading gas supplier to the domestic gas market with about 350million scuff supplied to the domestic market daily.
This has contributed to the growth in the nations power generation capacity and supports the government diversification agenda. Seplat is currently operating and managing 3 flow stations and have achieved quite a bit. These achievements are commendable and needs to be emulated by other indigenous oil and gas companies.
The Minister spoke on four cardinal points at the Energy Summit: the global impact of Covid-19 pandemic on the oil and gas industry, Covid-19 and Nigeria oil and gas industry, strategies to sustain the Nigeria oil and gas industry including business sustainability and diversification.
He declared 2020 as a year of gas for Nigeria. The global Covid-19 pandemic has indeed taken on the global oil and gas industry with cascading impacts to other sectors. It is not only a health crisis; it is both an economic and security threat to nations especially when revenues from oil and gas sources cannot fund government budget.
However, “it is not a death sentence but an opportunity to see things from different perspectives and act differently”. The global world economy is forecasted to decline by 3.4% in 2020 due to the impact of the pandemic compare to 2.9% growth globally in 2019. From the Organisation of Petroleum Exporting Countries (OPEC) analysis, global average oil demand decline with about 8.49 million barrels per day and oil prices went down as low as $10 per barrel in April 2020 due to the economic impact of Covid-19 coupled with the fall out between Saudi Arabia and Russia on the agree volume of crude oil supply to energy market which led to a global supply glut leading to crude oil supply and demand imbalances. Thus, leading to a drastic drop in oil prices.
Going forward, the Minster added, that global upstream investments will continue on a decline and recovery is likely to come beyond 2022. For instance, in the US, total oil rig count decline significantly from 678 rigs in March 2020 to 287 rigs in June 2020.
He revealed that the areas impacted by the Nigeria oil and gas sector are as follows: market and revenue instability, demand and supply imbalance, revenue decline due to low oil prices, pressure on Nigeria crude Oil Selling Price (OSP) due to supply glut and lack of buyers. There were production uncertainties due to refinery shut downs in major refining center across Europe and Asia. The decline in demand of crude oil due to global lockdown, investment deferment and cancellations resulting in huge losses from potential investments, associated benefit such as employment and taxes to the government. Project delivery risk, reduce access to capital and slow down progress of project execution.
Chief Sylva stated that the huge revenue losses due to share drop in oil prices arising from supply demand imbalance have significantly impacted the Nigerian economy occasioned by project deficit and delivering charging, project bench mark was revised for example from $57 per barrel to $27 per barrel. Project leakages, job losses in the private sector among others. These were all impacted due to the pandemic.
What are government strategies to strengthen the oil and gas industry in Nigeria? Curtailment of crude oil price production. Nigeria join OPEC plus counterpart in the historic May 1st curtailment of crude oil production to rebalance and stabilize the global market. The aim of the production cut is already being met as oil prices are rebounded from its 2020 lowest point of $10 per barrel to the current price of $43 per barrel as at 23rd May 2020 and still appreciating. Though conditioned on the compliance level of OPEC member countries.
Nigeria is expected to comply with an OPEC quota 1million 412000 barrels of crude oil per day for the months of May, June and July, 2020.
The second strategy is emplacement of industry wide cost curtailment measures. Addressing capital allocation to priority project with low cost of production, achieve unit of operating cost of $10 per barrel without jeopardizing growth. Through the Nigerian National Petroleum Corporation (NNPC), the government has rolled out strategy to achieve $10 per barrel unit operating cost to ensure cost discipline including downwards negotiation of all contracts and other business obligations. It negotiates contract to achieve minimum of 30% cost reduction.
The fourth strategy by the government is to diversify. It started this by declaring year 2020 as the year of gas in Nigeria. The diversification of portfolio to non-oil businesses to cushion the effect of future crash in crude oil prices. It has also commenced the National Gas Expansion Programme to make its position clear on gasification.
On the 16th January, 2020 the government inaugurated an inter-agency committee saddled with the responsible of coordinating with concerted efforts to ensure the penetration of domestic utilization of Liquefied Petroleum Gas (LPG). Its objective is to encourage LPG, CNG and energy for the domestic market. This will drastically reduce the massive outflow of the nation’s foreign exchange currently being experienced in the importation of Premium Motor Spirit (PMS).
The Minister submitted that Nigeria has enormous natural gas reserves about 203 trillion cubic feet (tcf) and well efficiently utilized and monitised to enable significant growth in power generation and across the country so as to meet the substantial energy depreciation and provide significant contribution to the overall economy development of the country through emergence of wide range of industrial clusters around fertilizer, petrochemical, manufacturing and agro business among others. These will create lots of jobs among Nigeria teeming and growing population.
On his part the CEO, Financial Derivative Company Limited, Bismach Rewane, renowned Economist said, with regards to economy, most African countries including Nigeria are oil and agriculture dependent. In terms of Gross Domestic Product (GDP), Nigeria contributes 17.6% while south Africa has 14.8% total GDP of Africa.
Rewane opined that the size of a country’s economy does not determine its growth, “bigger economies in Africa are probably slower than the other.” The fastest growing economies in Africa, remain Ethiopia, Kenya and Ivory Coast. However, the leading export for Africa is South Africa with 31.2% Nigeria follows with 28.2% and the leading export is oil and gas. For import, South Africa has the highest with 40% of total import in Africa followed by Nigeria with 18.2%. Thus, there is balance of trade surplus with a current account deficit in the continent.
Adding his voice to the Energy Summit, the Group Managing Director (GMD) of NNPC, Mele Kyari made it known that Seplat is one of its efficient partners which is reflected in the growth trajectory that the company has attained in the last ten years. The key element of the oil business which is the cost of production shows that Seplat is among the most efficient producing companies, the combination of this has made it one of the cherished partners in oil and gas business.
The GMD noted that the target of $10 per barrel production cost which is a target for upstream, Seplat may not be at that level at present. But going forward, the indigenous company will be among other oil companies that will achieve the feat in 2021.
Emphasizing on Africa’s economic sustainability, he said contribution of the oil and gas industry cannot be excluded. Nigeria is a net importer of Petroleum products. The continent still needs oil till 2040 and Nigeria will constitute about 25% population in Africa as it contributes 20% of growth in the continent.
Kyari affirmed that the focus for Nigeria is on its huge gas resources which will be harnessed for the power industry.
Being an indigenous oil and gas company, the Executive Secretary of the Nigerian Content Monitoring and Development Board (NCDMB), Engr. Simbi Wabote, posited at the Energy Summit, that Seplat is the poster child of local content development in Nigeria. Wabote recalled when Seplat got the acreage from Shell, the fear within the organization was if the company was going to “stand up to the game in order to produce that asset and give Nigeria the hope that the country can manage things for themselves.”
Engr. Wabote stated that at inception, Seplat field was producing about 10000 barrels of oil when Shell owned the field. Surprisingly, the company has been able to attain 60000 barrels per day target which shows that Nigerian content is working. This is the direction that “every nation in Africa must go.”
Representing the gas sector at the Seplat Energy Summit, co-founder and Deputy Managing Director, Falcon Corporation Limited and President, Nigeria Gas Association, Audrey Joe-Ezigbo, projected that stakeholders’ conversation on transition in Africa should not be a mere deliberation without action. She said Africa holds a fifth of the world’s population and it is the youngest fastest growing population that is increasing mobility and globalization.
According to Audrey, “if we don’t get things right in the continent, we will see increasing levels of migration to other regions which will negatively impact advanced communities.”
Emphasizing on the issue of energy transition, population growth is increasing including urbanization, industralisation and productivity while energy demand will be tripled across the continent. But natural gas and renewable will be the highest contributors for demand growth. Thus, there is need to build domestic demand and consumption market in Africa which Covid-19 has shown to the world.
In the light of this, Africa should leverage on its over 527tcf of natural gas reserves and used it to build the continent renewable profile. There should be improvement in technology transfer in local capacity by addressing issues that constrain investment in Africa whether it is regulatory around sanctity of contract.
The NGA President said inconsistency, commercial, technology and infrastructural challenges must all be addressed in the continent going forward.
She commended Seplat and Total for leveraging gas as energy for Africa and deepening local content. There is need for collaboration in Africa to create more regional gas hub for definite gas agenda for the continent. Audrey advocated that gas is a key transition fuel to leverage on resources in the continent by building energy capacity and creating jobs.
The Seplat Energy Summit was indeed a success story of an indigenous operator in Nigeria oil and gas space. The company’s progress in ten years of its existence is not only a leading light but an example for indigenous entrepreneurs in Nigeria and Africa as a whole.
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