Posted on Tuesday, 04 November 2014 17:48

Oil and Gas: Nigerian banks have come of age - Wale Tinubu

By Nicholas Norbrook

 Wale Tinubu, Chief executive officer, OandoThe market now understands that developing oil deposits in Nigeria is not just reserved for foreign companies, says Wale Tinubu, Chief executive officer, Oando.

The Africa Report: You have finally taken control of the ConocoPhillips assets in Nigeria. Why did it take so long?

We signed in December 2012, but the launch date was September 2013. Our market cap at the time was $300m, and we had to absorb a company that was worth $1.7bn. It was always going to be quite complex to raise the funding. We did three rounds of equity in tranches of $350m, $200m and $250m, and three rounds of debt financing of $450m, $250m and $100m. This took time. We had some regulatory delays, which was inevitable. It took another six months to get consent from the regulator. But what is six months when these things are going to be producing for the next hundred years?

The deal gives you the Brass River oil terminal, the Kwale-Okpai gas plant and the associated pipeline network. What opportunities does that bring?

These facilities are designed for 300,000 barrels per day [bpd] of production, and we are only currently at 100,000bpd, so there is a lot of latent capacity available. That's important when we seek to ramp up production. The facilities often take a lot longer to develop than drilling a well. You are talking about challenging terrain and swamp.

With today's security concerns, it's good to know that it's already in place. We have our own export pipeline and terminal, so we don't have to pay handling charges to the majors, which oftentimes is very expensive.

We have over 40 different discoveries that have been drilled, mapped and are available to be linked into the existing production system. We also have a 480MW power plant, with phase two already approved on the same location, to off-take gas from the same gas fields. We can inject this power into the national grid, so there are a lot of things from the infrastructural side that will help us exploit this opportunity.

How do you now fit into the Nigerian energy landscape?

It's transformational because this makes us the largest indigenous producer. We are the largest indigenous reserve holder by far, and it makes us the first indigenous company to be a joint-venture [JV] partner with the NNPC [Nigerian National Petroleum Corporation]. The JV status was reserved for the majors and we will be the first indigenous JV partner with an interest in several blocks, not just a farm-in on one block.

Are you ready for all the associated cash calls that come with that?

It's a mature asset, and those cash calls are already part of our financial planning. It runs right now at around $25m a month. We will be generating cash flows of up to half a billion dollars net on an annual basis, so we are more than ready for the cash calls.

What does it say about the Nigerian banking sector that it could follow you on this acquisition?

Nigerian banks have come of age. With every deal we do, we de-risk the Niger Delta. Among those who helped us are FBN, FCMB, Diamond Bank, Ecobank and Zenith Bank. Nigerian banks brought nearly half of the total financing and were ready to give more if the international banks were unwilling to take the risk.

The market now understands that developing oil deposits in Nigeria is not just reserved for foreign companies. Local banks have given their backing to our company because we service our debts and pay dividends to global shareholders. We have Asian banks in our consortium, banks from America and lots of Europeans who say: "We trust this company." ●

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