The Business Year

Tunde J. Afolabi

NIGERIA - Energy & Mining

The Proactive Path

Managing Director, Amni International Petroleum Development Company

Bio

Tunde J. Afolabi is the Managing Director & CEO of Amni International Petroleum Development Company Limited. He holds a degree in Geology from Franklin & Marshall College, Pennsylvania, and a Master’s degree in the same field from Tulane University, New Orleans. He is also a Doctor of Technology from Ladoke Akintola University of Technology in Ogbomoso. He is a professional geologist with over 35 years of oil and gas exploration and production experience at international companies.

"The most important thing to know is the imperatives of the oil and gas business."

You recently acquired a 100% stake in AMNI. Can you explain the reasons behind the decision to do so?

First of all, I acquired majority stake in the company. Secondly, the majority of the shareholders who had divested or sold their shares are well advanced in age, and thus have little appetite for risk. The oil and gas business is quite a risky one, and companies who do no invest in their growth will not only stagnate, but also eventually die. Therefore, the decision to bring on board those not averse to taking calculated risks in business was not a difficult one to make.

Many of the larger IOCs are currently retreating from the country and selling their assets in the Niger delta region. Does the company have any interest in acquiring new oil fields in the area?

We participated in the Shell OMLs 71 & 72 tenders, which we did not win. There are other IOC assets we are looking at. This process is more like reserve-based lending, and, fortunately, we have some ongoing production and are therefore able to leverage this to raise equity. The local banks are aggressive in terms of supporting successful indigenous companies, and the majority of companies to have won these blocks are indigenous. As indigenous players, we bring a different perspective to operating in these environments than the IOCs’ current way of doing business. There are opportunities for people who know the terrain to make a significant impact.

“The most important thing to know is the imperatives of the oil and gas business.”

What does it mean for you to be first among indigenous companies in a sector that is largely dominated by foreign companies?

It is rather like being the first child of a large family. You suffer all the knocks until your parents learn what it takes for those after you to prosper. It was a difficult period in which most of the licenses granted to indigenous companies were far from bankable. There was no fiscal regime by which to value the return on asset investments, Nigerian banks were busy financing short-term (three-month) lending for product importation, and technical partners who were more street smart came in droves to extract their own pound of flesh. Believe me, it was tough, but today we are grateful to be able to recount a success story. Now we are talking about prospecting for gas. FNLG, methanol, and gas to liquids have become buzzwords for indigenous companies. We have indeed come a long way.

Is that where you want to focus your business from now on?

No, we cannot produce someone’s oil unless they have some way to treat the gas. You also have non-associated gas that can be treated in the long-term at dedicated facilities. Today, we have over 3.2 TCs of gas. This can comfortably support two trains of 5,000 tons of methanol or equivalent product per day. We are now looking in this direction to capture the value of the gas, and we need to be proactive and look for the right market, and not wait for the market to come to us.

As the current President of the Nigerian Association of Indigenous Petroleum Explorers and Producers (NAIPEC), what advice would you give to a company interested in the industry?

The most important thing to know is the imperatives of the oil and gas business. Some people know the downstream business well and believe it is just as easy to operate in the upstream. However, investing $50 million downstream is quite substantial with manageable risks. $50 million in the upstream will drill only one well, which could easily be dry. So, be prepared, have professionals around you, and have some faith.

Diezani Alison-Madueke, the current Minister of Petroleum Resources, foresees an oil and gas industry where 60% of all companies here will be indigenous by 2015. What is your opinion of this?

By the grace of god, everything is possible. Nigerian production is at 2.4 million barrels of oil per day (bbl/d). Indigenous companies are struggling to produce 10% of this. By 2015, we should be able to achieve 15% market share. By 2020, perhaps we can reach 60%. The IOCs are the ones with the necessary funds for deep-water production. There are a further 20 or 30 billion barrels of oil in deep-water. I do not foresee much competition between IOCs and the indigenous entities for deepwater play. The IOCs are leaving more difficult terrain, onshore production, and operating where they have better control and more experience in deep-water production.

As a geologist by training with over 40 years of experience in the field, where do you see the next opportunities in Nigeria’s offshore sector?

IOCs are going to keep moving further and further offshore and keep divesting their assets onshore, or in shallow water. The opportunities in Nigeria lie in gas. I think we should be able to capture the opportunities within the West African region before looking elsewhere. I believe that it is easy to succeed if you are not too avaricious and do not have people siphoning your resources elsewhere. I believe in the future of the country and its youth, and I think that people like myself can serve as positive role models for future generations.

From a regulatory standpoint, which improvements would you like to see for indigenous companies?

The new Petroleum Industry Bill (PIB) is taking care of the complaints we have had regarding the fiscal terms under which we operate and opportunities to compete for assets that have been divested by the IOCs. It is difficult for indigenous companies to operate on the same fiscal terms as the IOCs, which are operating large reserves, whereby there is a need for a more favorable fiscal regime.

© The Business Year – September 2014

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