The Nigerian Oil and Gas industry is very closely-knit, where all the major players know and depend on each other for survival. These relationships are priceless, particularly at periods of down turn in oil price, slow and dimming investment and the overarching need for synergies in facilities management.The weak institutions in emerging economies like Nigeria also contribute to the declining issue of transparency in the management of our natural resources.As companies struggle to survive,Compromises and solutions are brokered every day between regulators,the Government and players in the murky and dangerous waters of Nigeria Oil and Gas space. It is very common for Companies with similar interest to come together and form association to push mutually beneficial agenda through the windy approval processes.Indigenous Companies that have survived in the Nigerian Oil and Gas terrain have mastered the act of effective collaboration in dealing with the constant dynamic political and social power games. Some of the Companies include SEPLAT, Sahara Energy, Neconde, Belama Oil, AMNI all of which have created tremendous value for their stakeholders.
In this state of affairs, there has been varying levels of concerns about the multiple regulatory institutions operating in the oil and gas sector which often create bottlenecks and has capacity to stifle the industry. But even then in the wake of the penchant of companies operating in the country to cut corners, cheat their investors and government ultimately imperiling the economy, there has been calls for strong regulations and clear headed regulators to curb such corrupt practices.The recent case of Afren has opened dummy eyes to the capacity of some smart oil men, who utilizing the hard earned resources of investors,are able to pillory the oil assets of the nation down the drain while impoverishing their stakeholders. Regulators, investors and so many industry players are yet to come out from the after effects of the fall of Afren!.
It is for this reason that industry watchers are bemused by the antics of some new companies that are yet to learn the ropes but would pretend to be highfliers. Take the case of a company like Lekoil Oil and Gas Investments Ltd that has lately engaged in constant battles with industry regulators at the direct expense to their London shareholders. Unfortunately, most of these struggles by Lekoil are unnecessary and are always at the detriment of the shareholders who demand value for money. It’s recent sponsored publications in the media on its current battles to take over Ogo field “OPL 310” in a cowboy-like manner is a case in point.It does not take too much effort to see Lekoil’s hand in a sponsored article in many news papers complaining of “slow” approval of its intentions to manipulate the system to hijack Ogo field. In an article published in The Leadership of 30 March, 2017, titled How Regulatory Approvals impacts oil and gas Operations in Nigeria, the writer Chika Izura stated inter alia: “Another instance is the ongoing delay of “Ministerial Consent” of Lekoil’s participating interest of 17.14 per cent and 22.86 per cent in OPL 310 which it acquired from Afren Investments Oil and Gas Nigeria Limited (AIOGNL) through its subsidiary, Mayfair Assets and Trust (Mayfair).The deal was consented to with a written approval by Optimum Petroleum as required under the Joint Operating Agreement (JOA). Ministerial Consent was applied for the 17.14 percent interest in 2013. The Department of Petroleum Resources completed the customary due diligence process in 2014 and in 2016, Lekoil met with the Minister of Petroleum Resources to follow up on the 17.14 per cent participating interest consent.The minister agreed to review and approve all outstanding requests following a presentation by the Department of Petroleum Resources (DPR), which was scheduled for early March 2016. Sadly, the DPR presentation is still pending till date. ……Industry experts have warned that these kind of delays in approval process could portend a huge loss to a company like Lekoil that has spent over $120 million to date on OPL 310 and funded the first $50 million towards drilling an exploration well and side track that resulted in the significant “Ogo” discovery – one of the largest in the world.
But only uninformed “industry experts” will make such conclusions on a deal which is shrouded in underhand dealings and lack of transparency.The writer may not have gotten the whole story and the gaping hole can be likened to a tenant in a house, who was packing out of a house and decided to bring another tenant without getting the consent of the landlord of the house and when the landlord shows up, the new “illegal tenant” now purportedly boasts around as having bought the house from the tenant!
Our independent investigation revealed that prior to its running aground, Afren which holds 40 % participating interest in Ogo field sold 17.4 % “commercial interest” to Lekoil through its subsidiary MayFair . The Operator of the field who was not carried along initially was said to have agreed later upon some conditions which was allegedly not met by Lekoil. As soon as Afren went underground, Lekoil again entered into bilateral agreement with Afren to buy its remaining 22.86 % stake in the field, again without the Operator’s consent and other shareholders. Lekoil now wants to hoodwink the Regulators to force the hand of Optimum company to take over 40 % of the field in this manner.Optimum, the Operator in a published statement recently expressed its unwillingness to sign the deal based on so many issues including lack of Technical capacity.By and large, it is a case of Lekoil trying to get to equity without having clean hands!.
Our findings reveal that efforts by the DPR to resolve issues amicably have not yielded positive report since Lekoil stubbornly reneges on endorsing agreements between the parties. This may be as a result of the fact that the Company had gone ahead and continues to spread untruths to her investors and stakeholders on the situations of negotiations between the parties. The Company has subjected the Optimum, the operator of the field to private and public ridicule and it is clear that relationships between the two Companies may never be cordial again. Investors’ confidence seemed to have nose-dived and this is the reason for the abysmally performance of the Company’s shares compared to contemporaries in the past two years. Besides it’s woes, experts in subsurface seismic analysis with insight into the Ogo field have confirmed the field is more a gas field than and oil play. For a deepwater gas field, experts confirmed that it would take not less than 10 years at the right gas prices before the field could be developed. This perhaps explains why no major Oil Company has shown interest in farming into the field
Indeed the lack of technical capacity of Lekoil alluded to by Optimum, strikes some chords in the industry which was recently apprised of the loss of over $20million to endless fishing operation on a field in Rivers state where the company acting as Technical Partner acquired a rickety Rig to complete one of the wells. Although,Lekoil had increasingly maligned the regulators, the same DPR was instrumental in saving the Company when it spent 9 months on the fishing operation due to the award of critical well services to a Company belonging to a director of the Company. The losers in the prolonged fishing operation are Lekoil’s long-suffering investors and the Operator of the field. Industry watchers are worried that instead of honing its technical capability,Lekoil’s only interest is being noticed in the public space with bogus and extraordinary news releases some of which bear little with reality.
It is Lekoil’s current attempt in setting up respected public institutions against each other, that shows that this young Company have not learnt from successful and enduring indigenous Companies.All of the successful indigenous Companies that have been stoically breaking hitherto unreachable barrier have reached their milestones by being painstaking in their conduct, building and developing long-lasting relationships and more importantly operating transparently.Although many sympathetic observers credit the company with ability to raise investable funds in a difficult economic terrain but the question of what value they have returned to their shareholders hangs on its managers given snippets of high cost of its operations and avoidable cost overruns on the few project exposures.
As the OPL 310 saga unfolds, industry wonks are watching with keen interest which party will win this slugfest, although in Nigeria, it is conventional knowledge that no Company embarrasses the Government and expect favors on other issues. But while this grand standing with Regulators last, Afren Investors are still on the edge having not agreed to allow Lekoil take over substantial part of its investments.Yet all eyes are still on the court matter involving Lekoil and Afren Shareholders on the disputed take over bid.The true story of Lekoil is still emerging.How it ends up depends on how it’s managers play the game well in the industry.
Ofem writes from African Energy Confidential, Abidjan
