Company profile on Seplat

Company profile on Seplat

National advantage
Many foreign oil companies are divesting and rationalising their investments, mostly focusing offshore. Even though the IOCs are seeking to concentrate on deepwater projects, it is important to remember that the Niger Delta still hosts the lion’s share of Nigerian oil production.

Until recently, Nigerian oil firms, lacking the financial muscle to fund large-scale projects have been restricted to taking minority stakes in existing ventures. However, the partial retreat by international companies from the onshore and shallow water fields of the Niger Delta is creating opportunities for Nigerian companies.

At the same time, Abuja has been keen to promote greater participation by Nigerians at all levels of the oil and gas industry, so Seplat’s ambitions are welcomed at the highest level.

The big question is how Seplat and others will be able to make a success where foreign companies have decided to pull out. Firstly, the fact that the company is Nigerian could help.

Many local people feel that the international oil companies have accrued fortunes out of Niger Delta oil and gas, while the region’s citizens have secured relatively little benefit. This situation has created a great deal of resentment. and the IOCs have a history of fraught relations with the local communities. The transfer of these assets to Nigerian companies will not automatically end this bitterness but it could help to soften it.

At the same time, Seplat believes that it is in a better position to understand the problems of the oil producing regions and to respond to local concerns. Seplat and its Nigerian counterparts have another obvious advantage.

Under the existing terms of investment, foreign investors must have Nigerian partners but domestic companies are not required to take foreign partners. In practice, the IOCs have mainly worked with the state-owned Nigerian National Petroleum Corporation (NNPC) but Seplat will have total freedom of investor association.

A strong track record
The company is not acquiring assets from a standing start. It already holds equity in three blocks producing oil, condensate and natural gas fields in the Niger Delta.

The 45% stakes in OMLs 4, 38 and 41 were bought from Shell, Total and Eni in 2010, with the remaining equity still held by the NNPC. Gross operated oil production on the three blocks increased from 13,900 b/d in August 2010 to 61,700 b/d plus 99m standard cubic feet per day of natural gas a day by the end of 2013.

This has been achieved by employing both advanced technologies and drilling new wells on established fields.

Orjiako said: “Seplat is a leader among the emerging indigenous Nigerian oil and gas operators. Our company was founded by Nigerians for the purpose of investing in Nigerian oil and gas opportunities and we are proud to have been the first Nigerian company to acquire and become operator of onshore oil and gas assets from international oil companies.”

The Nigerian company also signed an agreement to buy a 40% stake in the Umuseti/Igbuku field within OPL 283 last year.

Seplat generated income of $880m in 2013, up from $625m the previous year, while operating profits jumped from $330m to $479m over the same period.

The company had total working interest proven plus probable oil and condensate reserves of 111m barrels in October 2013. New fields are being brought on stream on its acreage, including the Okporhuru Field, where production began in May 2013, and which has added 43m barrels of proven and probable reserves to Seplat’s portfolio.

Seplat is also keen to increase its involvement in the Nigerian gas industry. Almost all the elements are in place for a successful gas sector in the country: plenty of reserves, both associated and non-associated; an existing, conveniently located market in the form of the country’s power sector and the potential for a range of new industrial consumers, ranging from fertiliser and cement plants to new liquefied natural gas (LNG) production trains.

Orjiako says: “We also plan to use our strategically located gas infrastructure to rapidly commercialise our gas reserves, as the Nigerian gas market develops.”

Although producers are awaiting the introduction of the gas reforms included in the Petroleum Investment Bill (PIB), the company has already secured new long-term gas supply contracts and sold 16.3bn cubic feet of gas last year.

Seplat and other Nigerian oil companies have spent $5bn in buying assets from Shell, Chevron, Eni and ConocoPhillips over the past five years.

This transfer looks set to continue for the foreseeable future, allowing the firm to set ambitious but realisable targets. It has set a goal of boosting gross operated oil production on its existing assets to 85,000 b/d by the end of 2016, with “at least 100% annual reserves replacement from our existing assets,” Orjiako says.

He adds: “Our forward-looking targets are based on a tangible work plan, in-house operational capability and an innovative host community engagement programme.”


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Written by Anver Versi

Anver Versi, is the award - winning editor of the London - based pan-African business monthlies, African Business and African Banker, was born in Kenya but has been based in London for the last two decades.

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