The Aiteo Eastern Exploration and Production Company operates key strategic business of oil infrastructures in Nigeria and a major stakeholder across the energy value chain with huge investments in the country.
At the ongoing Nigeria Oil and Gas Conference holding in Abuja, the new Managing Director, Mr. Victor Okonkwo, spoke with journalists at the sideline of the event in an interview, that the company has lost $2 billion either on daily or monthly basis due to oil theft and vandalism.
Okonkwo also commended the host communities for their support towards the company and its activities.
Excerpts:
Can you provide more details about Aiteo’s plan to boost production output to 250 000 as part of its long-term plan?
As I did say during my presentation, Aiteo is one of the biggest single investment decision makers up to 2014, when it invested over $2.5 billion in acquiring OML 29 asset. At the moment, Aiteo has a development plan which has been submitted to the company’s joint venture partner, the Nigerian National Petroleum Corporation, NNPC, because the government is exiting cash call with joint venture while negotiating an alternative financing package to be able to fund about $5 billion of investment that will move production to 250 000 barrels a day and increase gas supply to about 300 billion scuff a day which will be enough to power more than 1.2 Gigawatts of electricity in Nigeria.
How will the project be financed?
It is going to be a cocktail of financing options depending on the alternative financing mechanism we are working out with our joint venture partner, NNPC.
You spoke on the challenges facing the indigenous players ranging from oil theft and vandalism. Can you explain in monetary terms how much Aiteo has lost on daily or monthly basis?
At first, Aiteo operates a very key strategic business of oil and gas infrastructure in Nigeria which is the Nembe Creek Trunk Line, NCTL. It is over 100 kilometres and designed to carry about 6000 barrels of oil per day. Increasingly, there have been a lot of incursions into that pipeline leading to outages of our production and sometimes shutdown. This pipeline not only does it deliver Aiteo’s crude to the terminal, it carries crude for five other companies including Shell.
If we look at the shutdown impact in financial terms, as a result of these oil breakages and theft is over $2 billion for the past four years. This is what we have lost not just as a company but also as a nation. These include consequential royalties and other revenue that ought to be accruing to the government is lost just because of the activities of these vandals. That is why we are calling on government to collaborate with them to find out a lasting solution to this menace.
Aside the use of technology, what other options are you using to secure some of your assets?
Technology plays a major part in the industry and Aiteo has developed new ways. Firstly, to make sure that we work in a very conducive environment with our host communities because they are key. Our host communities are very important to us and at this point I like to give it to the communities of Nembe who are hosting majority of our production and they have been supportive in Aiteo’s goal to achieve its objectives.
In terms of investment proposal, what is the time line you are looking at?
Aiteo is looking at the next three to five years and that is the portfolio of about $5 billion. This is subject to how we agree on the alternative financing package with our joint venture partner which is NNPC.
In the JV assets some shares may soon be sold, what is you view on this?
The government proposed sell down of its joint venture participation is a very good way to help the existing private joint venture partners to further capitalize and consolidate their positions. Our expectation is that in line with joint venture agreement between us and the government, the existing joint venture partner will have the right force refusal. If you are listening to the discussion happening at this conference, you will recognize that the first way of divestment by the International Oil Companies, IOCs, happened in the period when the oil price was high and they were able to do it. I believe that the government expects to rip more multiplier effect out of this sell down of asset. The indigenous players and existing joint ventures partners are willing to work with government to ensure that their objectives are actualized.
Is Aiteo going to increase its stake in those assets?
Of course, we are existing joint venture partner, we expect the right of force refusal. We are 45% of OML 29 and the government is 55%.
During your presentation, you spoke on challenges of the power sector, is Aiteo also going to invest in power plants?
The Aiteo group is a major stakeholder in Nigeria’s energy value chain, particularly in power because it has an investment outlay within the power domain in excess of $2 billion. Aiteo is looking forward and hoping that the whole asset power privatization exercise will conclude very soon.