The management of WalterSmith Petroman Oil Limited is set to change concept of crude oil exploration in Nigeria with its strategic transformation to an integrated energy company. FESTUS OKOROMADU writes on the expected benefits.
Since Nigeria joined the league of Oil producing nations following the discovery of the commodity in commercial quantity in Oloibiri a community in Bayelsa State in 1956, the focus had always been to export the product. Due to what many have described as lack of planning the nation has continued to focus on exploration for export. Consequently both the government and the companies involved in the exploration of crude oil continue to make the sector very complex and of little or no benefit to the ordinary Nigerians. While the government places more priority on the cheap foreign currency it earns from exporting the product, the oil companies take advantage of the nonchalant attitude of government toward transforming the sector to a much more value creating industry to explore the system to their advantage.
The implication is that sixty years after Shell-BP, commenced production of its first oilfield in 1958 neither the company which was then granted the sole concessionaire status then nor other multinational oil companies has a refinery in the country. Worst still, efforts of government through its state owned oil company known as Nigerian National Petroleum Corporation (NNPC) to address the situation by building refineries has run into milky waters. Some experts have attributed inability of the state owned refineries to operate effectively, to the corruption bedeviling the sector in general and the Corporation in particular. Such critics point to the huge amounts usually voted for turnaround maintenance of the country’s four refineries that has never seen them being turned around to refine crude oil in the last 20 years.
The absence of a functioning refinery has left the state oil company, NNPC alongside government with no alternative than to import finished petroleum products into the country. The implication of this is that the country pays higher for its energy needs as failure to refine the crude leads to losing the economic benefit of doing so. This is even as the process of importation has continued to generate controversy.
Evolving New Approach
Faced with the serious challenge of revamping the ailing economy the present administration under president Muhammadu Buhari, has tried in its own capacity to give a new lease of life to the sector through various policy frameworks. One of such is the 7 Big Win launch in 2017. A key aspect of the 7 Big Win Policy is to transform the country into an exporter of refined petroleum products instead of importing. To actualise this, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu has continued to make round the clock in collaboration with the agencies under the ministry to workout modalities.
According to the minister, the strategies being deployed include reviving the existing refineries by sourcing for private investors who will equally manage them later, building modular refineries as well as developing greenfield refineries.
Modular Refineries: The Waltersmith Model
Waltersmith Petroman Oil Limited an indigenous exploration and production company established in 1996 budded for and won the Ibigwe oilfield located within the coverage area of the oil mining license (OML 16) in 2003 after participating in the marginal field licensing rounds designed for indigenous companies. According to the chairman/chief executive officer (CEO) of the company, Abdulrazaq Isa, the firm using wholly indigenous technical workforce, has successfully operated the field revamping its production from an initial 500 barrels per day (BPD) to the current average of 7,000bpd over a period of ten years.
But not satisfied with being merely an exploration and production company, the board of Waltersmith set a new target of becoming an integrated energy firm thus venturing into the downstream sector. In the words of the chairman/CEO, the urge to enter the downstream market is driven by the vision of contributing meaningfully to the country’s energy security and sustainability. To achieve this objective Waltersmith Refining and Petrochemical Company Limited, a subsidiary of Waltersmith Petroman was incorporated to build and operate a modular refinery to commence the refining of the crude oil from the Ibigwe Oilfield in what is now known as oil prospecting license (OPL 2004).The move is definitely a significant milestone for indigenous oil exploration firms operating in the country. If the perception in some quarters that Nigerians must take their destinies in their hands must be realised, other indigenous firms playing in the upstream sector must embrace this transitional strategy of converting their raw materials to finished products. Speaking on the reason behind the initiative during the ground breaking ceremony of the refinery on Thursday, Abdulrazaq stated that the refinery was conceptualised in 2011 with an intent to mitigate the frequent outage of the third-party export Trans Niger Pipeline (TNP) and to optimise the full value of the nation’s crude oil production through in-country refining and providing the petroleum products for the domestic market.
He explained that the 5,000 bpd refinery is the first phase of a much larger development with plans to increase capacity to 30,000bodp as well as process additional products including Petrol (PMS) and Jet Fuel in the not too distant future. “We have already executed an MoU with PCC of China towards the installation of the additional capacity within 3 years, after startup of the 5,000 bodp modular refinery in December 2020. Another stride aim at improving the energy sector is the plan to develop a 300 megawatts of gas-fired power plant. Already, the company has secured a license from the Nigerian Electricity Regulatory Commission (NERC) and the plant will be sited in the same energy industrial estate complex as the refinery and the flow station in the Ibigwe marginal field. According to the Chairman/CEO, “The power plant will utilize processed gas from Weltersmith’s Ibigwe marginal field and from third parties operating gas fields that are within proximity to the Ibigwe field. The power generated will be supplied to the national grid and is expected to contribute towards bridging the power supply gap in the country and create both direct and indirect jobs during the construction and operational phases.”
According to him about 118,000 households and 27,000 commercial/industrial users are expected to be powered through the project.
The testimony of the traditional rural of the host community, Eze, Ekwueme Paulinous Ekwueme at the ground breaking ceremony was evident that crude oil exploration can be carried out in this country without crisis. According to the Eze, his community which hosted Shell Petroleum Development Company the hitherto owner of the Ibigwe Oilfield for several years never had anything to show for hosting the multinational company until Waltersmith took over the site. While commending the board of Waltersmith for their support to the community in terms of provision of social infrastructure and employment, he assured the firm of a peaceful environment to operate. By implication the relationship is win-win to both parties hence there will be no cause for crisis. On his part, the company has promised impact the communities positive. “Waltersmith will remain committed to the development of the communities and making positive impacts on the lives of the indigenous,” Abdulrazaq stated.
Setting The Pace
The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, while acknowledging the ingenuity of board of Waltersmith Petroman Oil for the initiative promised to role out two key policy statement that will definitely change the economy of the country if strictly implemented. These are Clutch Free Mechanism and the Compulsory Retention Of 20/50 per cent of produced crude from local market refining. Both policies no doubt most have been initiated because of the new perspective this indigenous exploration companies are bring on board. While the multinational has hitherto concentrated on exporting crude to the detriment of local refining by refusing to build refineries themselves, the minister stated that investors who are willing to do so are skeptical as they don’t have oil wells. Thus to change the structure the multinationals and other indigenous operators most either choose to build refineries and refine for the local market our sell a specific percentage of their crude oil in the local market. Experts believe that this will transform the downstream sector of the industry in particular and the economy in general.
Funding The Project
Another unique phase of the Waltersmith Refining and Petrochemical Company, is the funding structure. As rightly noted by the minister of petroleum resources, the board of the company proved their sincerity of purpose when they sort for and got a modular refinery license from the department of petroleum resources (DPR) by forging ahead to source for funds to birth their dreams. The project is being executed with a mix financing system which includes 30 percent equity financing by the Nigerian Content Development and Monitoring Board (NCDMB) and $35 million debt facility from the African Finance Corporation AFC).
Speaking at the ceremony the Executive Secretary, NCDMB, Engr. Simbi Wabote explained that the Board’s decision to invest in the Waltersmith’s modular refinery is in line with its vision to be a catalyst for the industrialization of the Nigerian oil and gas industry and its linkage sectors. “We stand with the desire of the Federal Government to give effect to the recent pronouncements on the establishment of modular refineries,”he said. One cannot but agree with Engr. Simbi when he said, Initiatives and partnerships like Waltersmith’s are needed to increase Nigerian Content in the oil and gas sector to 70 percent within the next 10 years. Indeed until the oil and gas sector is redirected to engineer economic transformation of the nation the hope of becoming a developed country may remain an elusive.
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