A leading indigenous oil and gas firm, Petrolex Oil and Gas Limited, announced its readiness to take the oil and gas sector across the value chain by storm by committing over $6 billion investment. In this interview with OLATUNDE DODONDAWA, the Chief Executive Officer of Petrolex, Segun Adebutu, explained why his company took such a project to develop the sector. Excerpts
How do you intend to bring in the barges that will provide feedstock to the refineries? And how much are you investing in totality to the upstream and downstream projects in the next few years?
Thank you very much, these are all interesting questions. Petrolex has invested a lot and I think very smartly too. We presently have till date water vessels that can take 20,000 tonnes and we have 16 barges.
When we first came in here, we realised that dredging was not sustainable as an option and if you find out about these things you will know that we have to include pipelines which we came up with in phase as our objectives.
What we did was that we went to a country that faces similar challenges, which is Netherlands. They have narrow channels that are shallow but they are still able and capable to move their products up and down. So, they came in, they did a survey and gave special barges to be able to operate which is what was done.
We spent close to $15 million building that route. What this essentially means is that from my STS point, whether it is in Marina or wherever, we can bring in the vessel into the channels and beat it into our size so we don’t need to dredge. That’s not to say some dredging hasn’t been done because space hasn’t been created.
We have finished the final engineering, using the micro turning technology. A 32-kilometer pipeline will go all the way and exit at a platform. What that means is that unlike an SPM, it can take two to three supermassive vessels that can take as much as 200,000 tonnes of petroleum product, be it crude or whatever. Then it can be converted there and it can cover as much as 200,000 metres a day by the pipeline into the facility. The reason we require that kind of volume is because that pipeline is not just pumping in or out product. There is a gas pipeline in it and also a pipeline that will handle the feedstock from the crude to the refinery.
Now in terms of the investment, we have budgeted $3.5 billion for the refineries. By including the auxiliary cost, that comes to about $8.5billion. Over the next 10-15 years, the group would have invested in the upstream, midstream and downstream, a whopping $15 billion.
The Federal Government has set 2019 as deadline to stop importation of refined petroleum products. Do you think you can play a vital role in this? Secondly, we know that there are long queues across the major cities of Nigeria. Do you think you have a solution to this and what role do you think you want to play in ensuring that we don’t have a repeat of this?
If you have a petrol station and you have products, and you can’t buy or sell, you can’t deliver to the population. Right now, we have a capacity when we perform optimally, we will provide 60-80 per cent of the requirement of the same products in the country. So, if our operations run well, I would think that we would have an impact on the distribution of petroleum products in the country.
The government has a target of 2019 to stop importationand to export, I can’t speak for the government I can only speak for myself. We have a target to be operational by 2021 and 2022 and that point we will be refining 250,000 barrels per day. It may be 25- 35 per cent of what the nation requires in terms of refining capacity.
And at that point, we will have an impact, not an absolute impact but an impact not the less. On 2019, I can’t promise what I can’t deliver. What I know is that refinery will be ready, pipelines will be ready, fertiliser plants will be ready, tanks will be ready but not the refinery.
Obviously, we are not the only player in the market. There are other companies that have similar ideas in terms of vertical integration, in terms of refining and in terms of distribution. So I am believing that the government has more information about my other players in the market than I do.
With the kind of investment you are making here, what gave you the audacity to embark on this kind of project in this critical period?
I started trading in oil and gas in 2004, so it was not just something I just began. But it was evident something had to be done. I grew up in Apapa and I knew what the challenges were. And I said I must invest whatever I make in trading or whatever in something that makes sense. Yes, I want to make money, but to help the industry is something that has to be done. Last year, when I launched my foundation, a reporter asked me why was I doing it? But I told him to the question should have been ‘why are you not doing it? It takes less than N100,000 to feed children living with HIV-AIDS.
God forbid, if something happens in Apapa, it will affect the whole distribution of products across Nigeria. Despite the fact that Apapa is operating, there are still queues, what will happen if we can’t supply. It has to be done. Everyone blames the government, but private sector entrepreneurs like myself make money and invest somewhere else.
But I have decided to invest in Nigeria. I believe that it is a system that will work. I made money and borrowed money to get these things done because I have faith in the country and I have faith in the system and I think everybody in the private sector has to contribute. How can we be the seventh largest producing country in the world and we can’t even fend for ourselves but rely on some countries? South Korea does not produce oil but they have a refining capacity of 3 million barrels per day. UN estimated that by 2030, Nigeria’s population will be 300 million. They estimated that by 2050, our population would be larger than the USA. And we don’t have a functional refinery! Most them are working at 10 per cent capacity.
Who are the main financiers of these projects?
FCMB and WEMA Bank have been very supportive. We have private equity funds, and right now we are talking to EXIM bank and financiers on the Asian continent. I was with the Ogun State governor, Ibikunke Amosun with representatives of South Korean companies to sign an agreement. The firm is funding 70 per cent of the refinery, through their EXIM bank and their contractors. Others have come, and many have come and matched their offer, which means that there might be some sorts of hybrid arrangement. But we have been able to attract investors and investments simply because we have shown a proof of concept and we have shown that we are willing to do the right thing. No shortcut, we are dedicated, though it’s taken a few years but we have got it done.
Are you looking at acquiring assets or you are looking at partnering with some companies in the upstream?
Marginal field round is coming and we are putting in bids to take over some assets alongside our partners. We have technical capacity and they have financial capacity. We learn as we go along. My sojourn into upstream is in a bionic stage. I have been doing S&D for downstream since 2004, so as a businessman, I must know my limitations because I cannot know everything. I will easily look for partners to partner with me and add to the value chain. We are participating in the bid rounds, hopefully we win. And if we don’t, anybody that wins, we will approach him and tell him we are ready to invest in their business by forming a partnership with them to guarantee feed stocks.
What’s your contribution to your host community to avoid hostility?
Why would they sabotage me? We have over 2,000 workers from this community. We have supported them. The youths, the aged were all carried along. So, there is no reason to feel left out. No reason to feel they are not part of us. Before I decided to build anything here, I have always been part of this community.
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