Expect Nothing Less

At a time when many international companies want to enter the market, what does it mean for Energia to be a wholly indigenous E&P company?

This is a natural resource company and therefore we are dealing with nature and that is indigenous. The owners should participate in the country’s natural endowment. This is what we should be looking to do and we should not expect anything less.

Last year you mentioned plans to build a refinery, together with your partners, with a modular plan scalable to 30,000bpd in capacity. What is the status of this project at the moment?

We have moved forward two steps. We scaled down to a 10,000bpd plant for a start. We have our first license to establish (LTE) from DPR, and we have signed a contract with an EPC contractor in Houston for Front End Engineering Design (FEED), after which we will go into detailed the engineering work, fabrication, installation, and then commissioning. We are also working on several agreements, including a crude sales and purchase agreement in conjunction with our upstream partners, Oando Production and Development Company (OPDC), on a refinery project, as well as product offtake agreements with potential offtakers and project management. Of course the refinery is going to be a completely separate entity as it is downstream, different from our upstream E&P business, which means that we are adding further value in country. The upstream segment will be trading with the downstream company through an arms length agreement. Our plan is to commence clearing the refinery site in 2016 to prepare for the utility facilities construction. This is while the Houston EPC contractor works on the fabrication of the main processing plant. We are targeting 1Q2019 for the plant’s commissioning.

Will the final products from the refinery be for the domestic market or for export?

For now it is intended principally for the domestic market. We operate out of Delta State so we have a certain catchment area and it will not be a big refinery plant.

What impact have poor global oil prices had on Energia Limited and how are you dealing with this challenge?

Anyone who has been in the industry for over two decades will probably have come to respect the cycle of ups and downs. That said, we have all deceived ourselves to the state of the environment. Things have changed because, rather than importing, the US started producing. OPEC used to take the heat, but on this occasion it said no; they all want to maintain their market share. However, this situation creates a wider positive outlook because it is going to make the industry more innovative and efficient. For oil-dependent economies such as Nigeria, it is going to help us look inwards. Nigeria has about 41 different economic sectors, but only six principal sectors are running the economy and, as a result, the rest of the sectors are flat. Some 80% of Nigeria’s revenue and 90% of our FOREX comes from oil. Therefore, what has happened with crude oil prices is a blessing for the country in disguise, forcing Nigeria to reduce reliance on oil. For us, too, we are also realizing that we cannot rely on exporting crude oil and are looking at refineries, gas utilization, LNG, and petrochemicals. Everybody is beginning to look at the total value share to stay in business.

In 2015, Energia Limited temporarily stopped further exploration work. Has that now resumed?

The Minister for Petroleum said recently that we have to start going back into the field and drilling to stop rapidly declining reserves. Nigeria had reserves of some 37 billion barrels but, without further exploration activities, and continuous production, this has now fallen to some 34 billion barrels. Energia’s plan is to probably resume drilling before the end of 2016.

What steps is the government taking to help companies face this tough economic situation?

Before the price fell, the government sat on the Petroleum Industries Bill (PIB), but it is now clear that it has to deal with the reforms. It has also seen that it is not going to be easy within the present structure. Therefore, it is going to phase it in. The first and current phase is the restructuring of the Nigerian National Petroleum Corporation (NNPC), which will be split into components. The National Assembly is supporting the government to ensure that it can get the PIB passed. This will provide the regulatory framework to give investors the support they need. They need to know what terms will guide their investments. The government still has a lot of challenges and only four years to turn things around and we are hoping this will happen.

What is Energia Limited’s role in terms of the social and economic development of the country through CSR programs and employment initiatives?

Energia Limited is probably in the top three companies in our industry in terms of our CSR work per capita. We have done well in the environments we have been working in. One of our communities is literally developing a new city. We give about 4% of our gross revenue to CSR and have a trust fund that we set up to manage this money, whose board meets on a quarterly basis. We have set up a community parliament where we meet to discuss issues. We have established a number of institutions, including a secondary school, and one of our communities is building a new housing estate. We pave roads and we have created and funded a community security program as well. We are working on our vision for an agricultural park and we have an entrepreneurship program, including training and start-up grants. We offer scholarships for education. Plus, we use expert consultants to do economic baseline studies for the planning, development, and implementation of our programs. In short, we apply professional standards to our CSR.

What are your expectations for 2016?

Our goal for 2016 is to remain successful because we believe we are one of the lowest cost producing companies in the country. We produce at $18 per barrel. Even if the price of oil comes down to $20 per barrel we will still be in business. This is our plan.