Tony Elumelu
Elumelu

BY EMEKA EJERE

The Tony Elumelu-led Heirs Oil & Gas (HHOG), recently strengthened the pursuit of its leadership goal in the Nigerian Oil & Gas sector with assemblage of industry figures, with decades of considerable global and regional experience.

The move which saw the appointment of OsayandeIgieho, a former vice-president of Royal Dutch Shell in Hague, Netherlands and former chairman and CEO of Shell Garbon, as Chief Executive Officer, effective May 4, also announced a non-executive board, with Elumelu himself as chairman.

This comes barely four months after Heirs Holdings Limited’s (HH) portfolio company, HHOG, completed the acquisition of OML17 in January 2021, in one of the largest oil and gas financings in Africa in more than a decade, with a financing component of US$1.1 billion.

The transaction represents a further implementation of the HH Group strategy of creating the leading integrated energy business in Africa through a series of strategic portfolio holdings.

Shell had announced in 2018 its plan to put certain Nigerian assets under review, including the OML17 block. Elumelu, who was already a favourite candidate at the time, has since raised the necessary funds to expand his oil and gas assets.

Known for his activities in the field of power generation, Elumelu is already present through various companies in the upstream oil sector. Transcorp thus operates in association with Nigeria National Petroleum Corporation (NNPC) the small onshore block OPL 281.

Tenoil, a subsidiary of Heirs, also owns the marginal Ata field, which is expected to come on stream soon (3,500 barrels per day expected by mid-2021).

A capacity of 27,000 barrels/day

Shell, through its Nigerian subsidiary SPDC, was the operator of the license, which is also 55% owned by the NNPC. The operation was carried out through TNOG Oil & Gas Limited, a subsidiary of the two main groups in the Elumelu’s galaxy, namely the private company Heirs Holding and the Transcorp group listed on the floor of the Nigeria Stock Exchange.

The OML 17 block, which holds oil and gas reserves, has a production capacity of 27,000 barrels/day. Its 2P reserves (proved and potential) amount to 1.2 billion barrels, according to TNOG. It has 15 gas and oil wells, six of which are producing, according to Wood Mackenzie, a research company.

Dominated by the NNPC, the local Nigerian oil sector has about twenty domestic operators ensuring (before the Covid-19 crisis) about 20% of the production of the country with, among its leaders, Aiteo Eastern E&P Co (Benedict Peters) or Seplat.

Elumelu’s transactions have already received the approval of the government of President MuhammaduBuhari. For several years, the federal government faced with the stagnation of the country’s production and the inefficiency of NNPC, have been pushing through various measures to increase the local content of projects as well as structure the private oil sector. This goal has been reaffirmed several times in recent months by Minister of Petroleum, Timipre Sylva.

Nigeria’s overall long-term objective is to reach a production of 4 million barrels per day, a very old target that has never been met. At the beginning of 2020, the country was producing only 1.76 million barrels per day, a figure that has since fallen to 1.4 million barrels due to the global crisis.

To boost the sector, Nigeria is finalizing a new Petroleum Industry Bill, currently under final discussion at the National Assembly. While international companies have made heavy investments in recent years in the Nigerian offshore, the reform of the sector comes against the backdrop of a certain disengagement of these operators from onshore blocks, as in the case of the sale of OML17 by Shell, Total and ENI.

Taming the gangs

Mr. Elumelu is not unmindful the risk associated onshore asset of this nature in terms of security and compliance in a region marked by sporadic actions of armed groups. The Niger Delta region is also known for its frequent environmental problems, often linked to the actions of armed gangs or smugglers.

Little wonder in a tweet commenting on his acquisition of OML17 Elumelu stated that “as a native of the Delta, I have always believed that the region deserves better (…). With TNOG our approach to Afrocapitalism underlines our commitment to inclusive development and shared prosperity with our host communities.”

For oil analyst Antony Goldman, the opportunity ahead is for Tony Elumelu to “show a capacity for managing costs, transparency and environmental and community issues that ultimately make the licence unattractive for Shell and its partners.”

But Chief Executive Officer of Heirs Oil and Gas, Samuel Nwanze, believes those risks can be mitigated by diversification into other parts of the energy sector.

“The nature of the Nigerian economy means that it continues to be reliant on oil – and truly, we need to get power, robust, accessible, reliable, and plentiful, to industries, to services and to consumers. This is why our Group has developed the largest installed electricity production capacity in Nigeria, the recent purchases of the Afam Power Plants, our turnaround of the Transcorp Power Plant, our work on our other oil and gas assets, all leading to a single goal – sustainable, robust, and widely available power, that will drive schools, hospitals, and industries,” Nwanze told the media.

“We were leading supporters of President Obama’s ‘Power African Initiative’ where Heirs Holdings committed $2.5bn to increase affordable and accessible power in Africa and was the single largest private sector investor in this initiative – and we welcome the Biden Administration’s renewed focus on Africa.

“On the oil price, we cannot predict – what we are focused on is ensuring that we have a business which is sustainable, creating economic and social wealth and delivering on our strategy to power Africa.”

In an earlier written statement, Elumelu stated that: “The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector…We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.”

The team

The MD, Igiehon joins from the Royal Dutch Shell (Shell), where he was previously a vice-president with the Group in the Hague, He brings over 27 years of experience and expertise in the oil and gas sector with Shell, where he held a series of senior management positions.

Mr. Igiehon previously served as Chairman and Chief Executive Officer of Shell Gabon, where he led the successful turnaround of the operational, safety and financial performance.

The Board of HHOG is made up of distinguished private sector and senior industry leaders. Tony O. Elumelu, who serves as the chairman is also the Chairman of Heirs Holdings, the United Bank for Africa (UBA), Transnational Corporation of Nigeria (Transcorp), and Founder of the Tony Elumelu Foundation.

Sally Udoma previously served as general counsel for Chevron Europe, Eurasia, and the Middle East Exploration and Production. She was general counsel for Sasol Chevron Consulting Limited and managing counsel at the London Legal Service Centre for Chevron Global Upstream and Gas. She has also served as general counsel and general manager for Chevron Nigeria Limited.

Anil Dua is a founding partner at Gateway Partners Limited, a private equity fund specialising in dynamic growth markets, including Africa, the Middle East and Asia. Prior to this, Mr. Dua worked for over 35 years with Standard Chartered Bank in Asia, Africa, Europe and the US, where he held various roles, including Regional CEO West Africa and Regional Head of Origination and Client Coverage, Africa.

Ahmadu Kida Musa, who previously served as Deputy Managing Director of Total Exploration and Production Nigeria Limited, has over 32 years of experience in the Oil and Gas industry and brings considerable expertise in Nigerian oil and gas.

Stanley Lawson currently serves on the board of Transcorp. He is Managing Partner at Financial Advisory & Investment Consultants Ltd. Dr Lawson previously occupied the position of Group Executive Director-Finance & Accounts at NNPC.

Samuel Nwanze is the Chief Finance Officer at Heirs Oil and Gas. Prior to this he was the Chief Investment Officer at Heirs Holdings responsible for investment and capital management.