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‘We have bold ambitions to quadruple our value through investing, exploration, M&A’

Effiong Okon is the executive director operations at Seplat. He has over 26 years of experience in upstream and integrated oil and gas operations across Africa, Europe, the Middle East, and Nigeria. In this interview with Olusola Bello, Okon speaks on the challenges, new business growth and the successes recorded by Seplat Petroleum. Excerpts:

 

What are your roles as the executive operations director, Seplat?

As operations director, I am responsible for driving all the operations across the company geared towards delivering production. First and foremost, it is about production of oil and gas in a safe and responsible manner, delivering value to all stakeholders. A key part for me is how to lead my organisation in such a way that our folks are inspired and motivated, especially our frontline colleagues who are in the line of fire to deliver on our production promises 24/7. This is a very complex part of our business considering the security, militancy and community challenges in the Niger Delta. We have assets across the Niger Delta, one of the most challenging environments in the world, where the International Oil Companies (IOCs) had challenges operating so had to exit part of the portfolio. We bought the assets from the IOCs and have since then brought in lots of changes in how manage the challenges. We have built strong relationships with the communities in the areas of our operations, they have been empowered through employment, award of contracts, social investments, etc. so they are part of the ecosystem and strategic partners. We have earned their trust and we depend on them and they depend on us too.

My role also includes providing leadership and drive for the company that’s required for delivery of our overall bottom-line financial results. This is achieved through working collaboratively with the other parts of the organisation. As a company we are purpose driven and have very strong values. We have a lot of stakeholders in this system comprising the communities, government, employees, shareholders, amongst others. We make significant economic impact through payment of our royalties and taxes faithfully. Also, the Nigerian National Petroleum Corporation (NNPC) is a big partner in this business. Most oil and gas businesses in Nigeria are Joint Venture (JV) or Production Sharing Contracts (PSCs), the latter is mostly common for Deepwater. For us here at Seplat, our Western asset is in JV with Nigerian Petroleum Development Company (NPDC), an arm of NNPC. In the East, we also have similar model with the National Petroleum Investment Management services (NAPIMS) also a part of the NNPC. We work with different stakeholders to ensure we deliver on our short, medium and long-term objectives.

We are a publicly quoted company listed on the London and Nigerian stock exchanges with strong corporate governance and we do have shareholders and investors who put their money into our business because they believe in us. A strategic part of our business is to maximise total shareholder return, this includes long-term value creation in terms of dividend payments and share appreciation. Critical success factor for us is to add value to the society and help lift people out of poverty.

 

Could you talk us through what you are doing in gas production?

We have been doing a lot in gas production. Today, Seplat is proud to be one of the biggest domestic gas producers in the country with 525 million standard cubic feet (MMscf) installed processing capacity in Oben and Sapele, average gas production is 350 MMscf/d, primarily for the domestic market (power generation), 30 per cent of power generation in the country depends on Seplat gas; and we are also working on powering other parts of the Nigerian economy as we grow the gas business. In 2019 we made the final investment decision on Assa North-Ohaji South (ANOH) greenfield gas project. The project will deliver a new gas asset for the NNPC and Seplat partnership in Imo State. The new gas plant will have processing capacity of 300MMscf/d, alongside condensate and Liquefied Petroleum Gas (LPG) products, targeting the domestic gas market. We are also looking at putting some of that gas into the West Africa gas pipelines. But we must first meet the demand in the Nigerian market before we export. The transformation element of our strategy includes becoming a one billion standard cubic per day (1 Bscf/d) gas processing company

At Seplat, we have been able to work around challenges through partnership, collaboration, and creating value across the entire value chain. For example, Azura Power is one of the biggest Independent Power Projects (IPPs) based in Edo State, we supply gas to the power plant. We are grateful for the opportunity to support the country economy growth programme and we remain committed to transforming the domestic gas sector in partnership with all the key stakeholders.

 

What are the new business growth strategies for 2020?

Seplat started operations in 2010. We bought the first set of assets from Shell and since then have closed additional acquisitions. In 2016, there was a major crisis when the Forcados export line out of the terminal was sabotaged. Like other companies dependent on the Forcados Oil Terminal (FOT), we were unable to export crude and that led to a phase where we had to slow down for survival. The company relied mostly on the gas business until the export line was restored in 2017. There was very serious liquidity crisis then and a slowdown in terms of activities. But thank God we have worked our way out of the woods in the last couple of years and we have been back to investing into the assets again since 2019 to grow production.

Last year, we started drilling with 4 rigs contracted to deliver the infill wells across our assets. We also progressed several brown field and capital projects, this way we are back to growing production out of our existing assets portfolio. The second part of our growth strategy is mergers and acquisition (M&A). We acquired Eland late 2019, a UK-listed company with interest in Nigeria by virtue of its investment in the Elcrest JV. Elcrest is a JV between Eland and Starcrest, the acquisition gives us working and economic interests in the Nigerian assets, which is also a JV with NPDC.

For oil and gas business, you can only grow through three means. The first is through investing in your existing portfolio by drilling development wells and building new facilities or upgrade the existing ones. The second means is through exploration drilling to test new plays, deeper opportunities and in field appraisal/extension in existing assets. So, for us, this year exploration is key, we have just completed a major portfolio rejuvenation study work across our western and eastern assets, which has delivered some very attractive prospects and we’ll be drilling the prospects in the year. The third path for growth is through M&A so we are constantly scanning the horizon and proactively engaging companies for opportunities. It was in the press recently that quite a number of the IOCs have also expressed their interest to exit part of their portfolio so we are working this space.

As a company we have bold ambitions to grow so keen to quadruple our value through all the means explained above. We have a roadmap to materially transform the company over the next 5 years. There are several transitions happening, namely, oil and gas industry reforms in Nigeria, energy transition to a less carbon world as the advocacy for climate change increases, digital transformation as oil and gas businesses play catch-up, leadership changes in our company as the founding CEO steps down and a new CEO takes over the mantle of leadership.

We are proud of the achievements we have made since inception during which we have established a very strong credibility in the market and the future looks very bright for Seplat. It is quite difficult to have credibility and integrity in this part of the world. Attracting finance or any form of investment into Nigeria from overseas is very difficult, however, we have proved that Seplat is a shining example of a company with strong corporate governance, integrity, credibility, trust with strong focus on its bottom-line, and a company that can attract credible investors and deliver value to all its stakeholders. These attributes are key for our long-term sustainable value delivery and growth.

At the 43rd Society of Petroleum Engineers (SPE) conference and exhibition in 2019 you talked about the adoption of contemporary technology to drive the oil and gas industry. Can you shed more light on this?

In oil and gas exploration perspectivity, appraisal, development and production activities, we acquire a lot of information with billions of dollars invested (seismic, well logs, cores, process, etc.). Unfortunately, we haven’t been good at maximizing the value of the acquired information, part of the problem has been limitations with processing capacity and complexity with the required algorithms.

If you recall, 20 to 30 years ago, the computing system back then wasn’t well developed like what we have now. Today, easily we can build algorithms to solve all sorts of problems with varying complexity at very high speed. Digitisation is not new in oil and gas industry, we have been slow at it compared to the Fintech or e-Commerce industry. For example, way back in 1992 in Petroleum Engineering field studies work, we used neural network to train data acquired from very few wells to predict reservoir properties in areas without wells drilled, and this resulted in huge cost savings. Just imagine, onshore/swamp well then costs over US$ 20m while shallow to deepwater  wells were in the US$60 to over US$100m range. So, we had to deploy technology using limited data available to help make our field development projects economically viable to attract investments.

 

We have also been too inward focused. This has changed a lot now with new technology from huge investments in R&D, advent of high processing capacity, digitisation and learning from other industries, all driving digital transformation. We have been looking at other sectors to learn or adapt technology so not just oil and gas. In the past, oil and gas companies were very much insular, closed, inward looking and arrogant. But now, we are looking at applying military technology for most of our oil and gas operations, a good example is use of drones or aerial unmanned vehicles (AUVs) so we don’t have to send people to dangerous locations to do inspections. Robotics is also becoming common for activities in very risky environment, nuclear technology for hydrocarbon logging in wells, blockchain for supply chain, etc.

 

What’s your advice for upcoming professionals?

My advice is to start with having a clear purpose and being well grounded in the fundamentals of whatever profession you chose so that the basics are fully understood then leverage on technology to grow capability. The early years of a long-term career journey should have resources invested in building a solid foundation then strive to be globally competitive. They shouldn’t really follow the current trends in the society where our value system is completely messed up with so much focus on money. They should start with trying to solve a problem in the society or the world. If you look at the legacy of Mark Zuckerberg (Facebook), Steve Jobs (Apple), Bill Gates (Microsoft), they stared by focusing on solving problems for the world and then became rich by delivering world class products and services through innovative thinking. We live in a very competitive world with huge problems and opportunities, so professionals need to get out of their comfort zone, be bold, take risk, fail, fast, forward, try to look for something that is worth solving in the society so we can leave a good legacy for mankind, lift people out of poverty, improve the lives of millions of people across the world.

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