Oct. 5, 2020

Victor Okoronkwo


Victor Okoronkwo

Group Managing Director, Aiteo Group

In order to increase volumes in the wake of falling demand, Aiteo Group managed to boost production from 25,000bpd to 90,000bpd in 18 months alone.


Victor Okoronkwo is the Group Managing Director of the Aiteo Eastern Exploration and Production Company. He has spent over 30 years in the oil and gas industry working locally and internationally with the Shell group, where he was power asset manager, commercial gas manager, gas and power business development manager, and general gas manager. He holds a BSc in survey engineering and an MBA. He is an alumnus of INSEAD Business School and the Oxford Princeton Program of energy studies.

Aiteo has become the top indigenous oil producer in Nigeria. How did it achieve this?
Aiteo started as a trading company founded by Benedict Peters. Aiteo Exploration and Production was created in 2014 to participate in the divestment exercise of IOCs, specifically Shell. Aiteo EMP became the preferred bidder to acquire a 45% stake in Shell, Total, and Agip in OML29 in the Niger Delta. Through that acquisition, Aiteo E&P made the largest OFID in the oil and gas industry. However, shortly after the acquisition, the oil price plummeted, and we had to increase our volumes to get more cash to meet commitments and keep the asset going. We deployed pipes and an array of strategies to push production, and within less than 18 months we were producing 90,000bpd, up from 25,000bpd. Currently, production stands at around 70,000-75,000bpd, as this is a nearly 40-year-old asset with many integrity issues. Part of the package we acquired included the operation of a 117-km trunk line, a key national oil and gas infrastructure with a designed capacity of 600,000bpd to carry crude. When we took over the operations of the pipeline, it was operating at over 60% reliability, which we increased to over 80%.

What is Aiteo's contribution to local oil output?
Some 400,000bpd come from indigenous operators, of which the Aiteo JV with NNPC produces about 25%. However, Aiteo also has interests in electricity generation so we also participated through our Aiteo Power sister company in the divestment of the NIPP power project. We are also the preferred bidder for another three power plants. Moreover, our downstream business set up an extensive downstream facility with two tank farms in Lagos and Port Harcourt for a combined capacity of over 200 million liters of product. Aiteo Group has a multi-business line, and our infrastructure sector is managing the pipeline. Together, there is Aiteo Infrastructure, Aiteo Power, Aiteo EMP, and Aiteo Downstream.
What role do you see indigenous companies further acquiring, and what challenges will they find?
Most indigenous companies came into this sector either through direct acquisitions or marginal field distribution, and both these routes require financing. Entry costs were also fairly high. Looking back, even in the midst of challenging business environments, they have done well. For a country that produces 2 million bpd, 400,000—or 25%—by indigenous producers within the space of five to six years is commendable. However, there are still challenges they will face, such as oil theft and pipeline vandalism. In addition, companies need to seek alternative financing mechanisms to get projects off the ground. There are also some deals that certain companies have been doing with technology partners or service providers with NNPC to provide the necessary financing.

Do you expect any consolidation between Nigerian oil and gas companies?
I would not rule it out, though in the immediate term it would be tricky because people have different portfolios of debt they are managing. For consolidation to happen, you need a solution to synchronize these debts to be able to properly value the companies. We are still in the early stages of big indigenous players. As they mature, some consolidation or a joint venture arrangement will become imperative. In Nigeria today, Shell, Total, Agip, Chevron, and Exxon are working together on certain projects, and I see that happening with the Nigerian companies over time.

How is Nigeria progressing with regards to monetizing its huge gas resources?
I do not think Nigeria has a choice. First, people are moving into cleaner fuels, and natural gas is cleaner. Second, electricity is scarce in Nigeria, and gas still provides the cheapest way to increase electricity production. Ultimately, we will come around to utilizing Nigeria's natural gas reserves, which are ranked about seventh in the world and will help us diversify our economy.