A Review of the Nigerian Energy Industry

The rise of Nigerian oil and gas companies

Foreign oil workers12 May 2014, Lagos – In ways like never before Nigerian companies are on the rise, taking on prodigious challenges and overcoming them. They are increasing participation in areas that for long, have been the exclusive preserve of foreign companies. Increasingly, Nigerian companies have become more assertive, more ambitious and more resilient. No where is this more on display than the oil and gas sector and more recently, the power sector which has seen local indigenous companies in partnerships with foreign companies bid big and win big. It is essentially a sign of the growing assertiveness of the young entrepreneurial Nigerians that are clearly unafraid to take risk. And more than that, the opportunities the local content law has opened Nigerian companies to are unparalleled

However, and unfortunately, there are those who would rather pull down these companies due to selfish reasons rather than feel a sense of pride in their accomplishments. And not surprisingly, some politicians are taking advantage of some of the needless disquiet caused by competition and sour grapes losers to cast aspersion on a process that cannot be said to lack transparency.
Since the multi-nationals, led by Shell, started divesting from some oil blocks and marginal fields, Nigerian companies have put on impressive abilities to raise capital and form alliances with foreign technical partners in the acquisition of these oil assets. This has consequently deepened the level of local participation in the upstream, increased their level of technical competence and sophistication, created thousands of jobs for Nigerians and reduced to some measure, capital outflow from the country.

Simon Kolawole acknowledged this much in his column recently, when he wrote: ‘‘One of the biggest achievements in this democratic experience is in the area of local content. Four years ago, President Goodluck Jonathan signed the bill into law and the story has changed positively. When the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr Ernest Nwapa, was highlighting the achievements sometime last year, I was very encouraged. Many Nigerian companies, hitherto on the margins and struggling to survive, have gained expertise and improved capacity since the law came into being. For the first time in our history, the Nigerian flag is flying high in the oil sector, especially in technical services and engineering.’’
Continuing, he stated further: ‘‘According to Nwapa, over $200 billion worth of procurements and nearly $10 billion worth of research and development (R&D) used to be sourced to North America, while technical services valued at nearly $80 billion and $39 billion worth of engineering works were done in Europe. The Nigerian Content Act meant $191 billion investment was now being retained in-country and hundreds of thousands of jobs in manufacturing, engineering, sciences and technical services could be created in a matter of years. This, I would say, would be more beneficial to Nigerians than the billions of dollars being shared by FAAC every month. The FAAC one goes into government coffers from where we are not allowed to peep into what they are doing with it. Conversely, wealth generated in the private sector will be more beneficial to millions of Nigerians; especially in job creation and knowledge diffusion (we call it technology transfer). In fact, since local content became a matter of law, a company like Shell has sold its interest in four oil blocks to indigenous companies. Many Nigerian companies have become proud owners of upstream assets and this has in turn led to the engagement of indigenous contractors. They have never had it so good. Nigerian companies are now handling lucrative pipeline construction projects. Things can only get better for them. The more patronage they get, the more they are able to improve their capacities. It is a virtuous cycle.’’

And in yet another remarkable feat of achievement, many local firms have been awarded 60 percent of crude oil lifting rights. And as the Minister of Petroleum, Diezani Alison-Madueke, the major inspirational force behind the aggressive implementation of the local content law, explained, it was all in furtherance of building local capacity.
Hear her: “When we unveiled the Nigerian content law a few years back, the overriding principle was to grow indigenous capacity in an aggressive manner and I am happy to report that today, in the oil and gas sector, Nigerian content has been placed on the path of irreversible progress.”
She further noted that the oil lifting award to local players remained in line with the aspirations of President Jonathan to effectively transform operations in the country’s petroleum industry. According to her, the advent of the Nigerian content law, has encouraged indigenous investments in critical infrastructure such as marine vessels, petroleum depots and jetties, among other infrastructure.
“We have seen robust indigenous investments in marine vessels of various categories and wholly-owned Nigerians vessels have increased astronomically through the years. These vessels are the category one and category two types. Investments in reception, storage and distribution facilities such as jetties, depots, trucks, vessels and modern retail outlets have more than doubled over the past few years and this has helped to increase the nation’s sufficiency level in petrol,” she added.
While the rise of Nigerian companies may well signal the new renaissance of Nigeria, not everyone seems to be pleased at this development. As those who lost out always look for flaws, genuine or otherwise, to undermine the process. Only recently, opposition APC, apparently trying to play the political script, called to question how Aiteo and Taleveras were able to out-bid other companies to emerge preferred bidder. It went on to cast aspersion on the integrity of the two companies in the Shell divestment by trying to draw a link with their participation in the swap deal of NNPC and the alleged missing $20billion.
The interesting point to note here is that, the party’s complaint had nothing to do with the transparency of the bid process, but the age and alleged inexperience of the companies that won the bid.
The party took its complaint further with a call on the House Committees on Petroleum (Downstream), Petroleum (Upstream), Justice and Senate Committee on Finance to investigate Aiteo and Taleveras solely because the two companies had been engaged by the NNPC to lift some of its crude in exchange for imported petroleum products.
The APC further wondered whether there was a connection between the crude oil swaps and the $2.85 billion winning bid both firms had submitted for Shell Nigeria’s prolific oil block – Oil Mining Lease (OML) 29 – that the Anglo-Dutch multinational is selling with its 97-kilometre Nembe Creek oil pipeline.
The party described as “incredulous that the two firms, with a track record as oil marketers (not exploration and production firms) of less than five years’ experience, could have submitted such a huge bid”, adding that this had put into glaring context what might be the opacity of the barter programme.
But in a swift reaction to the party’s statement, Chairman of the House of Representatives Committee on Finance, Hon. Abdulmumin Jibrin, who is also a member of the APC, cautioned the party against jumping into the wrong conclusion over the crude oil swaps and the bid submitted by Aiteo and Taleveras for the Shell oil block and pipeline.
He said while he would not want to take issue with the party, as is a loyal member of APC who believes in the ideals and aspirations of the party, he deemed it necessary to advise the party where a mistake has been made. Jibrin further pointed out that given the depth of knowledge his committee and others in the House have on NNPC’s finances, the party should have consulted its members before the statement was issued on the call to probe the swap programme, Taleveras and Aiteo.
Giving more insight into the crude oil swaps, he said his committee, for instance, had received several petitions on the programme in the past, and having carried out its own independent review of the transactions, he had come to the realisation that “a lot of information out there on the swap template is over-exaggerated”.
He said: “Our House committee has been neck deep in querying and investigating NNPC, Department of Petroleum Resources, Accountant General of the Federation and the Federal Inland Revenue Service on a frequent basis about several transactions that impact on the oil revenues paid into the Federation Account. This includes such transactions as crude oil lifting by companies in exchange for petroleum products. While the importation of petroleum products is not ideal for a crude oil-producing country, but these are transactions that were put in place following NNPC’s inability to meet domestic demand for petrol and other products from its refineries.”
He also cautioned the APC against being dismissive over the pedigree of Taleveras and Aiteo, stating: “It is not the age of a company that matters, but its ability to deliver.”
Also, commenting on the statement by the party that the $2.85 billion bid submitted by the two firms for the Shell oil block showed that they were stupendously wealthy, Jibrin said this was not indicative of the liquidity of Aiteo and Taleveras as companies are known to raise such funds through a combination of debt and equity.
“As is the case with most transactions, oil firms are known to hedge their risk by utilising their network of contacts to pool together their sources of funds.
“I do not believe $2.85 billion is sitting in the bank accounts of Taleveras and Aiteo. Even the likes of (Aliko) Dangote finance their big-ticket transactions through debt and equity coming from various partners. This is even more imperative for oil firms, which are known to enter into partnerships to spread the risks associated with E&P activities. So rather than make statements that might look like we are trying to undermine indigenous oil firms, we should encourage them as part of our goal to build local content in the oil and gas sector,” he said.

Profile of Bidders of Shell’s 4 Oil Blocks
The bidders for the four blocks are Dangote/Dansa, Midwestern/Mart/Notore and Sahara Consortium for Oil Mining Lease (OML)18; Vertex/Seplat/Maurel & Prom/VP Global, Glencore/Neconde, Transcorp, Aiteo/Taleveras for OML-29 and Lekoil, Crestar, GreenAcres/CCC/Signet Petroleum, NDPR/SAPETRO and Essar are for OML-25.
Others are Sahara Consortium, PanOcean/Newcross, Shoreline, Aiteo/Taleveras for OML-24.

Aiteo, which prides itself as one of Africa’s fastest-growing energy leaders, is an integrated energy group with a clear vision for the future and the experience and assets necessary to provide oil and gas on a regional and global scale.
Founded by the Peters brothers, Benedict and Francis, Aiteo is strategically focused on exploration and production; bulk petroleum storage; refining of petroleum products; trading, marketing and supply as well as power generation and distribution.
Founded in 1999, the company operated under the name Sigmund Communnecci Limited before it changed to Aiteo during a rebranding exercise. According to the company, the new brand signifies not only a change in name but a change in culture and strategy to propel the company to new heights.
Since its inception, Aiteo has been a trail blazer in the petroleum sector, helping to grow the downstream petroleum sector and providing constant availability of high quality refined products worldwide.
In 2008, the company committed to building comprehensive energy capabilities and services from exploration through retail delivery of finished petroleum products plus upstream asset, power, refinery projects to downstream storage
Today, Aiteo is a full-spectrum, integrated energy company with services that span marketing and distribution of refined petroleum products, Aiteo has one of the largest private storage facilities for refined petroleum products in sub-Saharan Africa.
PWC audited statement placed Aiteo Group turnover in the region of $11billion and a credit line of about $1.55billion for various near term projects.

Only recently, it emerged preferred bidder in Shell’s divestment on OML 29 said to be the largest oil asset in sub-Saharan Africa, coming on the heels of another major win in the federal government power asset privatisation programme where it emerged preferred bidder in Aloaje power asset, the largest power plant in Nigeria.
The company is working on opportunities to responsibly develop energy resources in some of the world’s most significant basins, including the huge potential of the Niger Delta basin in West Africa’s offshore fields and of the Benue Trough.

Dangote Group
Behind Dangote/Dansa is business mogul, Africa’s richest man and the 25th in the world, Alhaji Aliko Dangote.
The Dangote Group is one of the most diversified business conglomerates in Africa with a hard-earned reputation for excellent business practices and products’ quality with its operational headquarters in the bustling metropolis of Lagos.
The group’s activities encompass manufacturing and importation of cement; manufacturing and refining of sugar; refining of salt; milling of flour and semolina; manufacturing of pasta; manufacturing of noodles; manufacturing of poly products; port management and haulage and real estate, among others.
Since inception, the group has experienced phenomenal growth on account of quality of its goods and services, its focus on cost leadership and efficiency of its human capital. Today, Dangote Group is a multi-billion dollar company poised to reach new heights in every endeavour competing with itself to better the past.
The group’s core business focus is to provide local, value added products and services that meet the ‘basic needs’ of the populace. Through the construction and operation of large scale manufacturing facilities in Nigeria and across Africa, the group is focused on building local manufacturing capacity to generate employment and provide goods for the people.

Midwestern Oil and Gas Company
Midwestern Oil and Gas Company Limited commenced operations in 2001 and upstream activities in 2005. The company is owned by the Delta State Government and a group of Nigerian entrepreneurs.
In 2003, the company was awarded 70per cent interest in Umusadege Field located in OML 56 which is situated at the northern area of Delta State. Midwestern is the operator of the field in a strategic alliance with Suntrust Oil Company Nigeria Limited and Mart Energy Services Limited.
Sequel to field activities, first oil was achieved by the stakeholders of Umusadege field in April 2008 at flow rates of around 3,000 barrels of oil equivalent (bopd) from re-entry of the Umusadege-1 well. This has been rapidly increased to approximately 15,000bopd through additional development drilling.

Mart Resources
Promoted by Mr. Wade Cherwayko as Chairman, Mart Resources is an independent international oil and gas company focused on production and development opportunities in the prolific Niger Delta region. Mart is publicly traded on the Toronto Stock Exchange (MMT) with 356 million shares on issue and an estimated market capitalisation of C$531 million as at April 1, 2014.
The Umusadege marginal oil field in Delta State is Mart’s core strategic asset and is being developed in partnership with Midwestern Oil and Gas Plc and Suntrust Oil.
In June 2007, Mart, Midwestern and Suntrust re-entered the Umusadege-1 (UMU-1) original discovery well and production tested two of the thirteen oil-bearing sands present in the well. UMU-1 came on production in April 2008 at sustained oil rates of 2,400 barrels of oil per day (bopd).
The well still produces at over 2,000 bopd after five years of production. The field produces in excess of 10,000 bopd, with anticipated increases to field production rates as a result of the 2013 drilling programme and increases to export capacity.
Mart’s net proved plus probable (2P) oil reserves in the Umusadege field at December 31, 2012 were 17.7 million bbls of oil, with a further 5.4 million bbls of possible reserves.

Neconde Energy Limited is a Nigerian Exploration and Production (E &P) company, which started operations officially in December 2011.
Ernest Azudialu Obiejesi; Tunde Folawiyo and Akintola Debayo-Doherty are the promoters of Neconde.
The company currently is in a joint venture with NPDC (Nigerian Petroleum Development Company) on OML 42 which is a large license containing previously discovered oil fields in the Niger Delta area. This lease was acquired from Shell Petroleum Development Company in November 2011.
OML 42 is a 814 square kilometre lease originally awarded in 1962. Initial production commenced in 1969 and aggregate production from the five fields discovered within OML 42 reached a peak of approximately 250,000 barrels of oil equivalent per day (boe/d) in the 1970s. Production, which was primarily oil, continued until the first part of 2005 when the producing fields were shut-in due to security issues in the Niger Delta area.
Production at the time of the shut-in was more than 50,000 barrels of oil per day (bopd) and more than 80 million cubic feet per day (MMcf/d) of natural gas.
The current production from OML 42 is approximately 10,000 bopd and the partners are working diligently to increase this production.
On OML 42, there are five fields and numerous wells. Some of the fields located in OML42 include; Odidi Field, Jones Creek, Batan Field, Egwa Field and associated facilities.

Sahara Group
Tope Shonubi, Tonye Cole, and Ade Odunsi are behind the Sahara Consort. The current focus of Sahara Group is to replicate in the energy sector its achievements in the oil and gas sector.
The company’s business activities include oil and gas exploration and production; trading of crude oil and refined petroleum products; gas processing and marketing of Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG); bulk liquid storage and terminaling; supply and distribution of refined petroleum products offshore and onshore and operation and management of power plants
With offices in Nigeria, Ghana, Cote d’Ivoire, United Arab Emirates, Switzerland and Singapore, Sahara Group also has affiliates and operations in a few more countries around the world.
The Sahara Group functions as the management entity for all the operating companies in the group, providing corporate shared services. Daily management of the companies is decentralised and vested with their respective managing directors
Sahara Group won the Oil Prospecting Lease (OPL) 274 in the last Federal Government’s oil block licensing round and recently, Enageed Resource Limited, a member of the Sahara Group, recently recorded one million man-hours loss time injury (LTI) free on the ongoing additional 126 square kilometre seismic acquisition on the oil block..
Enageed, which hit the record in March 2014, has been shooting seismic over the difficult terrain of the 126 square kilometer in the Depo-belt of the Niger Delta basin using the Nigerian company, Integrated Data Services Limited (IDSL), as the seismic contractor.
The seismic operation for the 126 square kilometer seismic started in June 2013 and ended in April 2014. Over 1500 men were involved in the operation on the field which is wholly marine and cut across two states of the federation. In addition, five camps were situated through the prospect area and over 100 boats daily were used in this acquisition.

SEPLAT Petroleum
Formed in 2009, SEPLAT Petroleum Development Company is backed by Anambra business mogul and medical doctor, Dr. Ambrosie Bryant Chueluka, ABC, Orjiako and the founder of Platform Petroleum, Mr. Austin Avuru.
The company, an independent oil and gas exploration and production company, is the first Nigerian indigenous company to be listed on the Nigerian Stock Exchange and the London Stock Exchange. In July 2010, it acquired a 45per cent participating interest in, and was appointed operator of, three on-shore producing oil and gas leases located in the western Niger Delta basin of Edo and Delta states (Oil Mining Leases (OMLs) 4, 38 and 41) which include the Oben, Ovhor, Sapele, Okporhuru and Amukpe fields. SEPLAT was the first indigenous oil company to acquire such assets and be awarded operatorship.
Since SEPLAT commenced production in 2010, the company has increased oil and gas production in each year of operation. Today, SEPLAT has become a leading indigenous independent oil and gas operator in Nigeria. From a gross operated oil production of 14,000 barrels per day at inception, the company has maintained a remarkable production growth trajectory, rising to current gross production from operated assets is circa 60Mbopd.
The total working interest production in 2013 was 8.4 MMbbls, representing a 56per cent increase from the 5.4 MMbbls achieved in 2012.
On 1 June 2013, SEPLAT, through its wholly owned subsidiary, entered into an agreement with Pillar Oil to acquire a 40% participating interest in the Umuseti/Igbuku Fields. The Umuseti Field is currently producing circa 2,500bopd with net share to SEPLAT of 1,000bopd. These provide a strong platform for significant potential growth

South Atlantic Petroleum (SAPETRO) is an indigenous Nigerian oil and gas exploration and production company being promoted by General Theophilus Danjuma (rtd.) and his wife, Senator Daisy Danjuma. The company is focused on creating value in the pursuit of rewarding exploration, development and production opportunities in Africa. The company has a balanced portfolio of assets, which provide a strong platform for growth.
In Nigeria, the company has interest in deep-water Oil Mining Lease (OML) 130 and OPL 246, where the prolific Akpo deepwater field has produced over 200 million barrels of condensate to date. The block’s second multi-billion dollar deep water project, Egina, is expected to come on stream in 2017.
Also in West Africa, SAPETRO has a 100% operating interest in the Block 1 concession including the Sèmè oilfield, offshore the Republic of Benin. Sèmè field is a brown field and has a long and proven production history stretching back to 30 years. This is complemented by Block 1, in deeper water, which contains strong exploration prospects and resource potentials. Redevelopment works are current on-going with first oil expected this year.
In East Africa, the company has majority operating interests in two contiguous deep-water blocks in the Mozambique Channel: the Juan de Nova permit area located in a French overseas territory, and Belo Profond in Madagascar.
SAPETRO is currently the second largest operated acreage holder in all offshore East and Southern Africa and are well placed to play a leading role in one of the world’s major emerging hydrocarbon provinces.

Shoreline Natural Resources
Kola Karim and Britain’s Tony Buckingham are the promoters of Shoreline Natural Resources. Shoreline Natural Resources Limited, known as Shoreline, is a Nigerian company formed between a subsidiary of Heritage Oil Plc, which has a strong technical team, and Shoreline Power Company Limited, which has a strong network of relationships in the Nigerian oil and gas community.
Founded by Buckingham, Heritage Oil Plc is an independent upstream exploration and production company listed on the Main Market of the London Stock Exchange. Kola Karim’s Shoreline Power Company is a subsidiary of Shoreline Energy International Limited, a leading private Nigerian energy and infrastructure company. The partnership between them seeks to establish Shoreline as one of the leading indigenous companies in the oil industry in Nigeria.
Shoreline owns a 45per cent participating interest in OML 30, which covers 1,097 square kilometres and is located onshore in the Niger Delta.
It includes eight main producing fields and a 45% interest in the segment of the Trans-Forcados pipeline between the Eriemu manifold and the Forcados River manifold

Taleveras Group
Promoted by Igho Sanomi, the Taleveras Group was incorporated as a parent company in 2004, by merger of various segments of the company’s businesses. The company is a fully integrated company offering strategic solutions in energy, power and construction services.
Taleveras’ energy activities are primarily centered on the physical sourcing and marketing of oil on a worldwide scale.
Taleveras Group also pursues upstream activities with a major focus on acquiring oil assets with viable proven reserves on a structured basis. The group’s current consolidated global turnover is presently in excess of several billion dollars and anticipated to increase in coming years, with the current Combined Bank Lines of Credit in excess of $1billion.

Promoted by Mr. Tony Elumelu, Transnational Corporation of Nigeria Plc (Transcorp) was incorporated on November 16, 2004 with the objective of creating a truly Nigerian conglomerate with the ability to compete successfully on a global scale.
One of the founding goals included setting up a company capable of mobilising local and international capital in the development of world-class enterprises, under strong Nigerian management and leadership.
Today, Transcorp is a publicly quoted conglomerate with a diversified shareholders base of about 290,000 investors, the most prominent is Heirs Holdings Limited, a pan-African proprietary investment company.
The Trranscorp portfolio comprises strategic investments in the hospitality, agriculture and energy sectors. Its notable businesses include Transcorp Hilton Hotel, Abuja; Transcorp Hotels, Calabar; Teragro Commodities Limited, operator of Teragro Benfruit juice concentrate plant, Nigeria’s first-of-its-kind juice concentrate plant. There are also Transcorp Ughelli Power Limited and Transcorp Energy Limited, operators of OPL281.

Local Beneficiaries of Crude Oil Lifting-Contracts
The provisional names of the 38 companies that were awarded contracts to lift crude oil by the Federal Government through the Nigerian National Petroleum Corporation (NNPC) from June 1, 2014 to May 31, 2015 which was obtained exclusively by THISDAY, comprises 21 indigenous companies; eight international oil traders; two foreign refineries; two subsidiaries of the NNPC and three countries, represented by their state-owned National Oil Companies (NOCs).
According to the document, 23 indigenous companies were awarded contracts to lift a total of 690,000 barrels per day of crude oil during the one-year period, representing 59 per cent of the 1,179,000 barrels per day awarded to the 38 beneficiaries.
The list also showed that eight international oil traders got an allocation of 240,000 barrels per day, representing 20.5per cent of the whole allocations, while two foreign refineries got 60,000 barrels per day, or 5.1per cent of the allocations.
Two subsidiaries of the NNPC were awarded contracts to lift 90,000barrels per day, which translates to 7.7per cent, while three countries, represented by their NOCs also got 90,000barrels per day.
A breakdown of the allocations showed that each of the 21 indigenous traders got an allocation of 30,000barrels per day.
These companies include; A-Z Petroleum Products Limited; Hyde Energy Nigeria Limited; DK Global Energy Resources Limited; Aiteo Energy Resources,; Avidor Oil and Gas Company Limited; Azenith Energy Resource Limited; Barbados Oil and Gas Services Limited; Century Energy Services Limited and Crudex International Limited.
Other beneficiaries include, Eterna Plc; Bono Energy; Taleveras Limited; Mezcor SA; Sahara Energy Resources Limited; Tridax Energy SA and Tempo Energy SA.

 The rest include, Ontario Trading SA; Voyage Oil & Gas Limited; Elektron Petroleum Energy and Mining Limited; Ibeto Petrochemical Industries Limited and Emo Oil and Petrochemical Company.
Also included in the list are eight international oil traders, which got an allocation of 30,000 barrels per day of crude oil each.

 They include, Addax Energy SA; Elan Oil Limited; Mercuria Energy Trading SA; Springfield Ashburton Limited; Petro/Ietnam Oil Corporation (PV Oil); Sullum Voe; Vitol SA and Delaney.
Two foreign refineries – Fujairah Refinery Limited and PTT Public Company Limited received an allocation of 30,000bpd each; while two subsidiaries of the NNPC – Duke Oil and Calson were awarded 30,000bpd each.
The NNPC also entered into bilateral commitments with the Republic of Malawi; SINOPEC of China and Indian Oil Corporation Limited, with each of these entities receiving 30,000bpd.

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