17 September 2013, Lagos – The Managing Director, Midwestern Oil and Gas Company, Mr. Adams Okoene, recently intimated journalist on some developments within the company, and plans for the future.
Could you please tell us about the advent of Midwestern Oil and Gas?
Midwestern oil and gas as a company, was registered 1999 and actually started operations properly in 2005. In 2003, the Federal Government invited bids for some fields, which they had declared as marginal fields. Midwestern was one of the companies that got awarded one of the marginal fields. There were actually 24 awards made and 31 fields put on the market. Midwestern got the Umusadege field in Delta State near Kwale, and this was a field that was previously owned by Total (formerly, Elf).
So Midwestern was awarded 70 percent of the field, and Suntrust was given the other 30 per cent. So it was a forced marriage between Midwestern and Sun Trust because before then, we didn’t know anything about Suntrust, but that brought us together.
As you may know, all marriages usually have one or two problems along the way, especially when it is a marriage of strange bed fellows. But I must say it is credit to both Midwestern and Suntrust that we managed to stay in the marriage and to bring it to the success together.
We had a technical and financial partner called Mart Resources that came on the scene, and we actually commenced operations with them. We initially drilled Umusadege well four and it was not successful. We then decided to re-enter one of the existing wells Total had drilled. We knew there was oil there, and we re-entered it and brought it on stream. So we commenced production at a level of 2,000 barrels per day, bpd, in April 2008. It shows much of the effort we have put into it and as we speak, the joint venture is capable of producing 19,000 bpd.
Although at the moment, we produce between 12,000 and 15,000 bpd. The difference between the capacity we have and what we are actually producing is because of the restriction in the evacuation route through Agip.
You said about 24 companies were given the marginal fields licences, but only a few have come to production, what is the secret of your success?
First of all, it is the Grace of God, because you can be the cleverest, the richest, but if the Grace of God isn’t there, nothing would happen. So I give God the Glory that we have been successful.
Having said that, it takes a lot to bring a field on stream; you need to have the expertise, you need to have the money, and you need to be able to co-exist with your communities. I know some of the awards that were made had all kinds of difficulties. To get the agreement signed was a problem for quite a number of them.
And then of course to get the money you need to develop the field was problematic. The banking industry in this country, their appetite for risk was very low, and therefore if you were looking towards the Nigerian banking industry to fund what you need to do a few years ago; it was a very difficult thing. But that is changing because the appetite for risk for the Nigerian banks is now much better, and the oil industry is high risk, high reward.
So if you were not prepared to take the risk, then you wouldn’t get the high reward that comes. We were lucky we had a technical and financial partner who had some money and was prepared to take the risk on our behalf. This is why I always mention Mount Resources Inc, they came to us; they had the money and they were prepared to take the risk, and we signed an agreement with them to provide what it needed to develop the field.
So we have been successful and we have been able to work the agreement not only between us and Suntrust, the 30 percent JV partner. We are the operator and Suntrust is a non-operator. We have also been able to work the agreement between us and Mount Resources. To a large extent, the success of the field was dependent on our ability to work close to the agreements.
The other part of it is working with the communities. No matter how much money you have or approvals you get from the government, if the communities don’t let you operate you would not be able to operate.
So the final license to operate comes from the communities. So once you have reached an agreement with the communities, and you are able to come to accommodation between yourself and the communities, then you can operate. So those are the key elements that have ensured our success in this field.
How did you overcome the challenges others faced?
We have been working hard; we have been flexible in our approach, and you have to learn to sometimes bend over backwards to accommodate others. If you maintain a rigid position and your partner maintains a rigid position, nobody is going anywhere. I think that is part of the problem those other people have had and they have had other issues as well such as financing, etc. So you have to be prepared to be flexible.
The same thing applies to the situation that Midwestern was in; you have to take a view on any issue. A view that moves you forward and if you say well this is our position we must maintain this position and the other person maintains this same position, then nothing happens.
What is the ownership structure of your company?
Midwestern is a company that is mostly owned by Nigerian entrepreneurs. The Delta State Government has a minority share in the company; they actually have about 20 per cent in the company. The company is owned by entrepreneurs and industry experts.
Recently, Midwestern Oil was accused of not abiding by agreements, which prompted your invitation to the National Assembly, what were the issues?
Yes, I am glad you brought it up. It seems like somebody wrote a petition that we built our facilities too close to living environment and that we are not getting approvals as and when due from government bodies. These allegations are false. The government law says that the centre of the borehole of any oil well must be at least 40 metres from the nearest habitation.
All our wells have a longer distance from the borehole, even to the fence of the location. All our locations are fenced, and it is only outside the fence that you can talk about having a habitation and the distances concerned are a lot more by the minimum specified by the law. We have confirmed this and it is a fact and so that part of the allegation is not true. And in any case, the particular issue at hand, our location, was there before the building came up. So it is not as if we went and built something near the house, it is the other way round.
We were accused of not getting approvals, again it is not true. We have ERA; we have approvals to drill our well, we have approvals to build our locations. As a matter of fact, a few weeks ago, Midwestern Oil got a letter of commendation from the Federal Ministry of Environment that came and audited our environment and our books. Also, at the various events that we invited DPR (Department of Petroleum resources) to, they have always said Midwestern appears to be the beacon of light for all the marginal field groups, and they look towards us to lead the way. So when we were invited by the House of Reps, DPR officials were surprised.
How do you give back to the communities in terms of Corporate Social Responsibility (CSR), because from the way you speak you seem to have a harmonious relationship with them?
I take this aspect of the business as being really critical. It is as critical for me as health, safety and environment. I have three host communities, and I want them to believe in me, I want them to believe me when I say I am going to do something for them. First of all, I believe I would do it and then I agree with them on the plan of implementation.
I want them to see me actually implementing the milestone that I have said I would implement, and then integrity comes in. They believe what you say. When they see you are actually implementing what you said you would do, then trust is built.
If there is no trust, you really cannot get anywhere. I have a budget and plan every year that is agreed between me and the host communities. Once the trust is built on that half of the problem is solved. The other half is being able to stay clear from the internal problems of the community.
Those internal problems would be there, even the best communities have internal problems because not everybody believe that what is good for the community is what is good for them. Some would believe that what enters their pocket is the only thing they want to see.
So if you are going to be successful, you have to be able to manoeuvre your way through those internal issues and still be able to do the things you believe are the things that are good for the communities. But you then have to be able to agree on a system with the community that enables you to do projects and things for the community without the cash ending up in a few pockets in the community.
We have a principle of no cash. We put the money in projects that people can see and the best for a community as a whole. And the fact that we have the Delta State Government on our side and part of the ownership of the company helps. Delta State Government has also said no cash, and when things get difficult, we can always tell the communities not to forget we have a big brother in Delta State Government.