People & Money

Experts Advise Marginal Field Operators on Funding Strategy

Leading economic and energy policy experts in the Oil and Gas industry within and outside Nigeria gathered in Lagos last week to discuss and seek solutions to the challenges of raising funds by the new marginal field operators in the country.

The experts at the seminar organised by Arbiterz Media Ltd, shared many examples and insights on how to attract investments into Nigeria’s oil sector sharing ideas on the strategic choices operators, investors, regulators, and the government have to make to achieve this desired goal.

With the theme “from License to Oil: Fundraising for Marginal Fields”, the conversation was organised in five panel sessions, all discussing actions that will boost investments and raise funds for the marginal oil field operations. The first one examined what lenders expect in terms of security, regulatory & fiscal framework while the second panel turned attention to the legal structure and corporate governance issues. The third panel explored the technical nature of reserves and its implication for funding while the fourth panel examined other non-banking alternatives of strategic alliances & farming out versus private equity & capital market. Panelist in the last session turned attention to the new international context of the implication of ESG and climate change.

On the fundamental issues of what potential lenders expect in terms of security, regulatory and fiscal framework, the experts outlined numerous reasons investors may be hesitant to engage in Nigeria’s oil business.

In his submission, Mr. Olumide Esan, Partner, Tax & Regulatory, Deloitte Nigeria said with the enactment of the PIA the country has been able to solve the concerns about the certainty of the fiscal and regulatory environment.

“Lenders will naturally be concerned on the certainty of fiscal and regulatory environment of the country where they are about to lend it. So if you look at that in terms of Nigeria. I think with the PIA enactment we’ve been able to cross that bridge about certainty and it has put us in a positive step.”

Esan however stressed that “the PIA is not enough to fix the appetite of lenders; political instability issues as well as security concern in the east and west of the delta is one of the things that people are concerned about. So we can talk about the fiscals and how positive it is but it must be seen in the light of other challenges that this marginal field operators are facing.”

“One recent encounter with lenders is that people are concerned about how much of what is produced can be evacuated, that remains a concern for lenders. So if we as a nation can address the issue of security with all seriousness and that has to be robust conversation that goes beyond current kinetic approach of military and all that, we will make it easier for marginal field owners to access funds,” he noted.

In the same vein, Dr. Tominiyi Owolabi, Managing Partner, Olaniwun Ajayi/LP; said Nigeria remains a very interesting proposition when it comes to investments in the oil and gas sector but security remains a key concern and the ability to evacuate the produced product remains a major concern for lenders.

L-R: Stanley Fagbule, Managing Director, SellyFak Energy Services Limited; Gbite Falade, MD/CEO, Niger Delta Exploration & Production Plc (NDEP); Chuks Onwunali, Executive Director, Torxen Energy Resources Ltd, Former General Manager, Gas Devt, Conoil Producing Ltd. & former Senior Commercial Advisor, Shell and Afolabi Elebiju, Principal, Lelaw Barristers & Solicitors.

According to Owolabi, the capacity to operate and governance structure are also key considerations for lenders. “Security is a key concern and ability to evacuate the produced product is a major concern. Key for lenders is the capacity to operate. The governance structure is also key because by bringing a lot of people into forced marriage, the ability to take decisions quickly and to respond to issues quickly is also a major consideration.”

He further highlighted that “the environmental consideration is also key for lenders. Especially in these days of energy transition, traditional lenders are beginning to take a back seat. It is interesting to see where they will be getting funding from,”

Also Read: Nigerian Banks Can Finance Marginal Fields and Divested Shell Assets, Segun Ashiru, CEO Dupiaza Energy

Speaking on how the marginal field operators can raise funds for first oil as soon as possible, the experts expressed pessimisms about the new operators achieving first oil quick enough just as some of the 2003 awardees.

The experts noted the high cost of participation during the bid process and the high signature bonus they are asked to pay has eroded the commerciality of the assets, making it difficult to raise fund to commence drilling even after a year.

Expressing opinion on this, Mr. Collins Ibekwe, Subsurface Manager, Energy & Mineral Resources Ltd, said: “if we have to be truthful to ourselves, then we have to look at this holistically. Think outside the box. Those who put it together are short term focused and not long term. Thinking outside the box, I think the right thing to do is to return the money back to this people.”

In the same vein, Mr. Ayodele Fashakin, CEO, Tritekk Consulting Ltd & Former Geoscienec Business Manager, France, Schlumberger; said the NUPRC should see themselves as being involved and work with the awardees in raising funds to achieve first oil and not only raising money for the government.

L-R: Dr. Abimbola Agboluaje, Founder, Arbiterz Media Limited; Ayodele Fasakin, CEO, Tritekk Consulting Limited & Former Geoscience Business Manager, France, Schlumberger; Abdur-Rasheed Tunde Omodiya, Managing Director, QSOL Consulting DMCC, Former Regional Manager, Schlumberger; Folashade Ambrose-Medebem, Managing Partner, TPR Africa & Former Director, Communication, Public Affairs and Sustainable Development, Lafarge Africa Plc; Emmanuel Afimia, Managing Consultant/CEO, Enermics Consulting Limited; Asiata Atinuke Agboluaje, Partner, Tax & Regulatory, Deloitte Nigeria; Gbite Falade, MD/CEO, Niger Delta Exploration & Production Plc (NDEP); Afolabi Elebiju, Principal, Lelaw Barristers & Solicitors and Stanley Fagbule, Managing Director, SellyFak Energy Services Limited at the conference.

On non-banking funding alternatives, the panelist expressed that those alternatives are quite limited and getting smaller and new owners must take a different approach in getting value from marginal fields.

Mr. Gbite Falade, MD/CEO, Niger Delta Exploration & Production Plc; while sharing the past experience of his company in raising funds in the past noted that because of the whole palaver about carbon emission lenders are no longer lending.

“If regulator will allow people with know how to take the lead in taking licenses as in other climes, investments will be safe in their hands.” He therefore advice the new owners to take a different approach in getting value from marginal fields.

In his key note address at the seminar, Engr. Gbenga Komolafe, Chief Executive Officer, Nigeria Upstream Petroleum Regulatory Commission (NUPRC), says the newly passed Petroleum Industry Act (PIA) has provided a safety net for financiers to provide funds for the development of oil and gas in Nigeria and the marginal field operators can leverage on this to raise funds for their operations.

“The PIA under section 95 (5) has also made provisions for holders of license or lease by way of security, to assign, pledge, mortgage its interest, in whole or in part under the applicable license or lease provided the consent of the Commission is obtained. This provision has provided a safety net for the financiers to provide funds for the development of oil and gas assets in Nigeria. The marginal field operators can therefore leverage on this provision to raise funds for their operations.”

According to Komolafe, “there are various options opened to the marginal field operators and investors to raise funds for marginal field development. These include private equity, capital market, strategic alliance and debt financing.”

He said the commission is improving due diligence protocols to enable investors and operators access information prior to taking investment decision and encouraging synergies in the use of shared facilities.

According to him, the commission is also developing regulations to enable ease of implementation of the PIA and concerted efforts are being made in collaboration with stakeholders to tackle security issues in oil and gas assets.

He listed some of the past and ongoing activities of the commission to include the drafting of regulations to give clarity to the PIA and enable ease of implementation of the provision of the Act.  He said the commission has delineated the 57 marginal fields’ areas and engaged awardees to resolve issues arising from the 2020 marginal field award as well as concluded drafting of model license document, which is critical for issuing PPL to awardees.

He said the timeline to issue the PPL for petroleum operation to commence is by the end of June and the commission will engage the stakeholders for inputs and seek alignment at a scheduled meeting in the month of May.

NUPRC boss said the commission is committed to its mandate to optimize revenue for government and investors alike and urged participants at the event to join hands in building confidence so as to attract robust investment and funds to the upstream petroleum industry in Nigeria.

L-R: Anthony Osae – Brown, Bureau Chief, Bloomberg Nigeria; Dr. Tominiyi Owolabi, Managing Partner, Olaniwun Ajayi LP; Dr. Abimbola Agboluaje, Founder, Arbiterz Limited and Asiata Atinuke Agboluaje, Partner, Tax & Regulatory, Deloitte Nigeria.

Other leading legal and financial experts and experienced oil and gas sector professionals at the conference include; Mr. Anthony Goldman, Promedia Consulting Ltd/Former Africa Analyst, economic Intelligence Unit & Africa Editor, Financial Times;  Asiata Atinuke Agboluaje, Partner, Tax & Regulatory, Deloitte Nigeria; Dr. Sam Amadi, Director, Abuja School of Social & Political Thoughts; Dr. Ayodele Oni, Partner, Bloomfield Law Practice; Mr. Taiwo Oyedele, Fiscal Policy Partner & Africa Tax Leader, PwC Nigeria; Mr. Mathias Akhideno, Wells Engineering Discipline Manager, Shell Neitherlands; Mr. Toyin Akinosho, Managing Partner, Upstream Information Update-Energy Intelligence Consulting;  Mr. Stanley Fagbule, CEO, Selly-Fak Energy Services Ltd; Mr. Chuks Onwunali, Executive Director, Torxen Energy Resources Ltd/Former GM, Gas Development, Conoil Producing LTD & Former Senior Commercial Advisor, Shell; Mr. Afolabi Elebiju, Principal, LeLaw Barristers & Solicitors; Mrs. Folashade Ambrose-Medebem, Managing Partner, TPR, Africa, Former Director, Communication, Public Affairs & Sustainable Development, Lafarge Africa Plc; Mr. Abdul-Rasheed Tunde Omidiya, Managing Director, Qsol Consulting DMCC, Former Regional Manager, Schlumberger amongst others.

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