By EMEKA EJERE
As the reality of the world moving from oil to alternative energy sources continues to dawn on Africa, the continent has got no choice but to grapple with the challenges that go with a paradigm shift of that magnitude while preparing to harness the potentials of the imminent new normal.
With the instability in oil price, which is a major threat to business survival, Seplat has reengineered its focus to become a foremost player in the gas sector of the economy as it promises more stable and sustainable future given its huge potential in Nigeria.
An appropriate step in that direction is the recent energy summit hosted by Seplat Petroleum Development Company Plc, which turned out to be an assemblage of local and international experts to brainstorm on how Nigeria can play a critical role in Africa’s transition to sustainable energy system.
The inaugural summit held by video conference to mark the indigenous oil company’s 10 years of pioneering participation in oil exploration by Nigerian firms, also saw the formal presentation of its new chief executive officer, Roger Brown, the former chief financial officer, who takes over from Mr. Austin Avuru, who is retiring from the company.
With the Theme: “Business Sustainability and Strategic Leadership in Africa”, the summit provided valuable insights on the challenges and role of energy systems to building sustainable Africa economies. The continent has overtime faced enormous challenges of meeting its vision of accelerated economic and industrial development with limited access to energy for its growing population.
“We need to leverage on Africa over 527 TCF proven natural gas reserves and use that side by side complementary to building up our renewable energy profile as well which Nigeria should be championing,” Audrey Joe-Ezigbo, president, Nigerian Gas Association said at the event.
Seplat is a leading independent oil and natural gas producer in the prolific Niger Delta area of Nigeria. The company focuses on maximising hydrocarbon production and recovery from its existing assets, acquiring and farming into new opportunities in Nigeria and realising the upside potential within its portfolio through exploration and appraisal activities.
According to the company, the focus is more on the opportunities in Nigeria which offer production, cash flow and reserve replacement potential, with a particular focus on the onshore and shallow water offshore areas.
Alongside its oil business, the company has successfully established itself as the pre-eminent supplier of natural gas to the domestic market in Nigeria through substantial investments made in the commercialisation, development and monetisation of the substantial gas reserves that exist on its blocks.
While natural gas was commonly viewed as a by-product from oil production in previous years, Seplat was quick to see the opportunity of the increasing importance of natural gas as a key source of energy for Nigeria. The company has responded by investing in the installation of dedicated gas production and processing facilities and the drilling of gas production wells to meet domestic supply obligations and provide feedstock to power projects that will help increase Nigeria’s power generation capacity.
Rather than being the by-product, natural gas for Seplat is a valuable primary commodity in its own right that will form a significant component of its future growth and success in Nigeria.
Since making its first acquisition in 2010, Seplat has risen to become a leading indigenous oil and gas operator in Nigeria. The company has increased its production and reserves year-on-year and has consistently grown revenues and profits since it commenced operations.
Gross operated liquids production at OMLs 4, 38 and 41 at the time of acquisition was 14,000 bpd. However, through the implementation of a focused re-development work programme and drilling campaign, the company grew this to a peak rate of over 84,000 bpd, representing a six-fold increase and significantly ahead of the peak rate achieved by the previous operator of approximately 56,000 bopd in 1996.
Speaking at the summit, minister of state for Petroleum Resources, Mr. Timipre Sylva, commended Seplat for what he described as its phenomenal achievements and remarkable successes within just 10 years in the Nigerian oil and gas sector.
The minister, who was the special guest, said, “It is worthy to state here that Sepalt was awarded some divested assets based on the federal government aspiration to develop indigenous capacity in the Nigerian oil & gas sector about 10 years ago. And over the past ten year, Seplat has recorded monumental achievements and have grown to become a leading independent upstream oil and gas company in Nigeria.”
In his intervention, the President, African Export-Import Bank, Prof. Benedict Oramah, said the future of the African continent as regards the oil and gas business lies in ensuring more integration.
Oramah said, “Some of the changes we would like to see happening is in regards to policies and regulatory changes, investments in gas and renewable energy space because they are key to changing the narrative of oil and gas business in the African continent.
“We have to be smart as to how we address climate change to create a fair world and solve degradation as sustainability goes beyond social issues because development is done by carrying everyone along but petroleum, gas, renewable energy needs to be done in a cleaner way.”
Seplat chairman, Dr. Ambrose Orjiako, had declared that the event would be an annual platform for the company to continue to shape the narrative on relevant issues in the energy sector. According to him, the company has been a trail blazer for indigenous participation in the oil and gas sector in Nigeria and had since recorded historic accomplishments in various aspects of its business.
“It is time for Seplat to audaciously participate and contribute our voice towards climate change narrative, towards ESG initiatives in the business world,” Orjiakor said.
“Seplat will continue to be a trail blazer and as the business environment changes, we are also a strongly innovative company, our growing gas business will be a first step towards making sure that our operations are aligned with climate change narrative, the ESG initiatives in business environment and it will indeed be our main contribution towards the carbon neutral operations in the energy value chain.”
Austin Avuru, the outgoing CEO of the company said the ESG has become so important that it is function to be driven by the company’s board. He also said that the company is open to even investing in the renewable energy sector.
On the outlook for 2020, Mr. Avuru said Seplat faces the same challenges as the rest of industry in terms of managing oil price volatility and other macro risks, adding that the emergence of the COVID-19 pandemic has thrown in another variable that has impacted the global economy. “As these factors are not in our control we can only make sure that we have plans in place that can mitigate and de-sensitise the business to these risks as far as is possible”, he said.
Commenting on the company’s planned transition, Mr. Avuru said: “I am extremely honoured to have led Seplat for the past ten years, and I am proud of the role it has played in promoting indigenous participation in the Nigerian oil and gas space. My ultimate goal in the transition of the CEO role is for Seplat to achieve even greater things in the next decade, creating a blueprint for others to follow.”
In April 2014, Seplat completed the first ever dual listing on both the London Stock Exchange and the Nigerian Stock Exchange, raising $535 million in an initial public offering that ranked as the largest for a sub-Saharan Africa company since 2008 and the second largest ever for a Nigerian company, demonstrating the international investor appetite for leading Nigerian indigenous players in the oil and gas sector.
Resilient amidst headwinds
At the company’s 7th Annual General Meeting (AGM) held in Lagos in May, Orjiakor had told shareholders and other stakeholders that Seplat remains a resilient business that generates significant free cash flow from a low cost production base; has a balanced portfolio split evenly between oil and gas (which is de-linked to oil price); and is focused on delivering shareholder returns through regular dividend distributions and capital growth. The board had announced a dividend distribution for shareholders with $59 million paid out in the 2019 calendar year (10 cents per share).
According to Orjiako, amidst the current headwinds occasioned by the prevailing global Coronavirus pandemic and low oil prices, Seplat will continue to maintain strict financial discipline over investment decisions, while also embedding high standards of corporate governance and transparency; strong commitment to sustainable business; and effective management of risks with a strong HSE (health, safety and environment)culture.
“I believe that Seplat has an important role to play throughout the energy transition that is set to occur in the years and decades ahead, not least through the impact we can have by scaling up our domestic gas supply business and displacing imported diesel fuels that are being burned for power generation and helping Nigeria benefit from the social and economic multiplier effects that reliable and affordable power availability can bring,” he said.
There is now doubt that by hosting an energy summit of this magnitude, the company is already matching words with action.