THE LONG GAME

Nigeria 2016 | ENERGY | INTERVIEW

TBY talks to Wale Tinubu, Group Chief Executive of Oando, on regulatory developments and growth through strategic acquisitions and sales.

Wale Tinubu
BIOGRAPHY
Wale Tinubu is Group Chief Executive of Oando, Africa’s leading indigenous energy solutions provider listed on the Nigerian stock exchange. He serves on the board of various blue-chip companies as Chairman and Director. In June 2015, he was named Young Entrepreneur of the Year by Ernst and Young. In 2011, he was named African Business Leader of the Year by Africa Investor. He obtained a Bachelor of Laws (LLB) from the University of Liverpool, in England, in 1988 and a Master’s of Law from the London School of Economics and Political Science (LSE) in 1989. In 2014, Oando Plc concluded the $1.5 billion acquisition of ConocoPhillips Nigeria business, transforming the company in the country’s largest indigenous oil and gas producer.

What regulatory changes are crucial to motivate better usage of the nation's natural gas resources?

With the crude flux, gas is the current topic of conversation. Recent developments in the gas and power sector such as the privatization of power assets, the upward review of gas-to-power prices, and the review of energy tariffs demonstrate the positive and important changes being witnessed in the sector and is an indication of the long-term direction of the gas sector. The ready and ever-growing domestic power demand also provides a platform to guarantee a vibrant future for the gas sector, and government has also introduced various incentives to benefit investors in both sectors. While the government has performed well in providing fiscal incentives for gas producers, there is room for improvement. The recent upward review of the gas-to-power pricing is key and will play a significant role in ensuring that investments in the upstream gas sector develop infrastructure to enable monetization efforts and process gas to acceptable specifications. The Central Bank is also playing an increasingly active role in ensuring that priority is given to the development of the gas sector. Nigeria has all it takes to emerge as a regional gas hub, serving both regional and international markets. The eagerness of Europe to diversify its gas sources also offers a unique opportunity for Nigeria, which has the eighth largest proven natural gas reserves in the world, to play a significant long-term role in the global energy market.

Oando acquired ConocoPhillips' Nigerian business in 2014 for $1.5 billion, and in July 2015 it sold 60% of its downstream business for $276 million to the Helios-Vitol Group. What do these moves indicate about your long-term strategy?

We are an integrated energy company with investments across the entire energy value chain in downstream, midstream, and upstream operations. The company is focused on growing within the higher margin upstream sector, and we expect to increase returns to shareholders. The enterprise value of our group in 2000 was $50 million, and the value of our group in 2014 was pegged at $5 billion, a fifty-fold increase in our business over a 14-year period. We are executing a plan that we told the world we would do back then, and we have ensured that we have not deviated from our original business plan. The ConocoPhillips transaction is one that sees Oando become the leading indigenous oil and gas producer in the country. Our oil production has increased significantly from 5,000bpd to 54,100bpd. It certainly puts us in the top 100 oil and gas companies globally in terms of reserves and production, and it is a transaction that makes us the first Nigerian company to become one of the partners in an onshore joint venture. The other onshore joint venture partners in Nigeria are Shell, Total, Chevron, and ExxonMobil. This is a significant achievement because we know it has taken millions of dollars in resources to create what we are investing and partnering in today. It also marks the beginning of our transition to become a full-fledged integrated exploration and production company. We have always wanted a substantial portion of our capital base to be invested in upstream activities, and having achieved that, we intend to do more transactions of this nature to expand our footprint within the sector. We expect improved returns due to a higher-value margin from upstream operations, which stands at 25% as opposed to the 1.9% percent margins of downstream activities. As a group, deconsolidation is key for us. We have a listed upstream subsidiary and we will list our downstream and midstream businesses in such a way that we all have three separate Oando on the exchange, allow people to invest in the different areas of operation.