TBY talks to Felix Valentine, Managing Director of Energia Limited, on indigenous participation in the oil and gas industry, and the opportunities available for smaller operators.

What is your personal background in Nigeria's oil and gas sector?

I grew up in this industry having studied petroleum engineering as a passion. I started my career with Shell at Port Harcourt. I later moved from Shell to a Nigerian independent oil and gas company, Pan Ocean, in 1993. That was where I began to see things from a local, indigenous perspective. Pan Ocean is the only Nigerian independent joint venture with the Nigerian National Petroleum Corporation (NNPC), operating an oil mining lease (OML) in Delta State before venturing into marginal fields. By the time I left Pan Ocean in 2008, the company was producing 15,000 barrels per day (bbl/d) from its existing OML, with another marginal field asset with Newcross Petroleum, and a second oil block under a production sharing contract (PSC) fiscal regime.

How has Energia Limited become a pioneer for indigenous companies in the oil and gas sector?

Energia started as an idea by some key Petroleum Technology Association of Nigeria (PETAN) members to utilize indigenous capacity and local content to manage an exploration and production (E&P) company. The founding companies include Oildata, Weltek, Sowsco, Ciscon, Skangix, and Ariboil. Others included Pemec, IDD, Ashbert, and ISK, which is a law firm owned by renowned security officer Chief A.K. Horsfall, who is also the Chairman of the Board of Directors of Energia. The company was awarded the Ebendo and Obodoeti marginal fields in the 2003 bidding rounds in a joint venture with Oando by the Department of Petroleum Resources (DPR)/Federal Government, with Energia Limited as the designated Operator in a 55/45 split in favor of Energia. Operations started in 2008, leading to the first oil in December 2009 after revamping an already abandoned Total well by Energia's in-house technology group in collaboration with other local contractors. The company has since carried out further field development with the drilling and completion of four wells back to back between 2012 and 1Q2014 to bring field production capacity to around 10,000 bbl/d, with a technical allowable of 8,000 bbl/d by the DPR. We are presently embarking on an alternate crude evacuation route through a new 53-kilometer, 12-inch pipeline to the Forcados terminal with a member of our cluster company in Delta State. This will free all locked-in crude potential due to restrictions through Agip's Brass Oil Export Terminal. As a company, we are locking in about 5,000-6,000 bbl/d, while the entire cluster of Midwestern, Pillar Oil, and Platform Petroleum with Energia is locking in around 15,000 bbl/d. Besides the export and production restrictions, we also suffer high crude theft ca. 20%-25% of daily injection, which in the past two years has amounted to a huge $200 million loss for the four companies in the cluster. It is as a result of these restrictions and theft, plus the anticipation of a possible global crude glut due to growth in shale oil, that propelled our move for a mini 10,000 bbl/d refinery within our area of operation.

What is Energia's main goal?

Our target is to be the first indigenous company to build a standard crude oil refinery plant. Studies are already underway in Houston with one of the top refining companies. Energia is a success story that was hardly known before. Now, we are becoming a household name in the indigenous E&P industry in Nigeria. We are creating a brand with integrity. We want to set up a local company with an international outlook in terms of transparency in our processes. In terms of success, I think we are one of the most successful because we were able to drill four wells back to back, which is unique for an indigenous company. We have lined up a work program for 2015 and 2016. Our target by 2016-2017 is to post 20,000 bbl/d in production. Our only current limitation is the pipeline export restriction. We can only inject 3,000 bbl/d, and, frankly, this is the major challenge we have since we invested $150 million in drilling and completing the wells and tying the flow lines to the flowstation. And so, we created a joint venture with another independent company, Midwestern, to construct an alternate pipeline to another export terminal. This pipe will soon have the first oil put through it, and it will give Energia, Midwestern, and a cluster of other companies the ability to pump 66,000 bbl/d; of this 21,000 bbl/d will pass through Agip's Brass Terminal, and 45,000 bbl/d through this line to Shell's Forcados Terminal. Between Energia and Midwestern alone we are locking in somewhere between 15,000 bbl/d and 17,000 bbl/d because of the pipeline restriction.

“The Nigerian oil and gas industry will drive the economy in terms of the opportunities we can create."

What is your assessment of the Nigerian Local Content Act?

It is fantastic for the oil and gas industry because Nigeria is growing. There are about 175 million Nigerians, with a projection to reach about 450 million by 2050. With such a population explosion, unemployment will be a major issue, which must be a priority for any government. Oil and gas are non-renewable, and Nigeria must take full advantage of this industry to diversify the economy. Nigerian content is for those who are present now and those who are yet to be born. If Nigeria has 250 million or 400 million people, we'll need to employ all of them, otherwise we will have trouble. In the next 20 or 30 years we need to move the economy out of this developing state and into a developed one. We need to engage the entire population and this is the vision for Nigerian content. So much success has been achieved by the board in this regard. The good news, also, is that other sectors and ministries in the country are adopting the Oil and Gas Nigerian Content Act model. Such growth in Nigerian content in other sectors will bring rapid industrialization of the economy. Nigeria is the country that can do this for Africa. Presently, we have an infrastructure deficit, but there is pressure from around globe for Nigeria to make it, as Africa and West Africa look at Nigeria for leadership in this direction.

You want to industrialize, yet not at the expense of the local communities, because Energia values giving back to the local communities that are impacted by local oil and gas operations. Could you tell us more about that?

Energia's model is, I think, unique and second to none in the industry. I found that if you can share the resources, you will win over the people. They want attention. We dedicate about 4% of our gross production and provide 3% to sustainable projects, and I can assure you we are doing everything above board. We are well liked by everybody. The communities have come to us to say we are sincere. When they have a problem, we share it. Our model has moved away from the benefactor-beneficiary model to the stakeholder and partnership model. We have created a trust fund with our proceeds to superintend the development of these communities. We have also set up a company/community parliament system that engages a wider group of the communities in an interactive setting to discuss any and all issues concerning the environment. We also encourage young people to incorporate limited liability companies that can be mentored into growth, and this we have been doing since 2009.

What is your vision for the future of the Nigerian oil and gas sector?

The Nigerian oil and gas industry will drive the economy in terms of the opportunities we can create. The Petroleum Industry Bill (PIB), when passed, will provide transparency and accountability, and, frankly, we do not have a choice if we are to compete globally. As part of this vision, the government is privatizing the power sector, and we are also opening up the midstream and downstream so that rather than sell crude natural resources, which are hallmarks of developing economies, we will refine and process our natural resources and export finished products. I see Nigeria, if we hold out and I know we will, in 20 years becoming relevant in every global engagement. That is my vision for Nigeria. In every area of trade, technology, industry, and education, the Nigerian opinion will be sought after.

© The Business Year - October 2014