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Austin Avuru: Three Hard Knocks in The School of Life

By Toyin Akinosho

Austin Avuru, Chief Executive of Seplat, Africa’s largest homegrown E&P firm, most vividly remembers the day the company lost the bid for Oil Mining Lease (OML) 29 in eastern Nigeria.

“That was one of our lowest points in this company because the acreage was going to be a company changing asset for us: it was going to give us the size that we seek”, Avuru reflected, in his office in Lagos, Nigeria, recently, as he prepared to celebrate a milestone that ties his own personal growth with Nigeria’s 60 year trajectory as an oil producing nation.

OML 29 is a sprawling, highly valuable property, spanning an area of 983 square kilometres (or 242,550 acres) onshore and holding some 2.2Billion barrels of oil equivalent, in proved and probable (P1+P2) reserves, in nine fields, according to a 2013 Competent Persons Report by NNS .

To put some context to the figures: Seplat, today, produces, on a gross basis, slightly higher than 60,000Barrels of crude oil and condensates and 400Million standard cubic feet of gas from five acreages, whereas OML 29 alone produces over 80,000BOPD, when there is no vandalism of evacuation pipeline.

“We had the cash on the table but we did not win OML 29. We were only a hundred million dollars away from Aiteo’s bid (to Shell, which was leading a divestment of itself, TOTAL and ENI from the tract). It was insignificant because we were talking about a $2.4Billion bid and $100Miilion was less than 5% of that, so it was insignificant”.

Avuru wonders whether the inability of Seplat to clinch OML 29 wasn’t due to “the politics of who Shell figured would more easily get the approval for the purchase” from the Nigerian government. “Otherwise they” (the company which won the asset) “couldn’t pay for one year after they got it, while we were going to write our cheque immediately because we had our money ready”.

It was the loss of OML29 that made such acreages as OMLs 25 and OML 55 important to Seplat, Avuru noted. “All these issues about OML 25 and OML 55 came because we lost the big fish”.

His disappointment about OML 29, Avuru explained, pales in comparison with a particular challenge he had faced when he was building Platform Petroleum, a marginal field operator. This was before he helped bring Platform, Shebah Exploration and M&P together to create Seplat.

“The biggest setback was the day I woke up and found out that cellar of the appraisal development well that we were drilling in Umutu had collapsed. We borrowed $10Miilion to drill that well and supplemented with our cash and in the end, the well cost us $19Million. We borrowed $20Million for the gas processing plant and our production was declining and we couldn’t borrow more. We were almost in the throes of death. This was in 2009 and that was when I scratched my head and thought ‘this is it’. The only thing that came to our aid eventually was the pipeline network that we had built all by ourselves to the cluster”, he recalled, referring to  a cluster of four oil fields in the Western Niger Delta, which evacuate their crudes into Platform’s facility. “The Ase River Pipeline was generating about $2Miilion in gross revenue in tariff every year. So that revenue stream was enough to negotiate a revolving credit facility with Skye Bank for $5Million. It was that money that we eventually used to work our way back to life”.

Not all of the huge regrets of Avuru’s life in the last 15 years were business related.

“One of the biggest potholes I have had was the day I lost my wife in 2005 after the two of us had inspected the site where we (Platform Petroleum) were building our flow station in Umutu and so on”.

Avuru remarried, several years later, and then this:

“And then the day I had to open my kitchen door to inform my wife that her 57-year-old father, who had been accidentally shot by a police man and was in the hospital, had died.

“I think those were probably my lowest points in the past 15 years”.

Otherwise, much of the path Avuru had travelled, since he left the NNPC in 1992, had been strewn with gold.

At least, so it seems.

Since he left NNPC as a star geoscientist (by his own account), Avuru had worked for Kase Lawal’s Allied Energy (which became Erin Energy, and has since ceased to be a going concern) and moved on to set up Platform Petroleum, from which platform he became the Chief Executive of Seplat, the only African indigenous E&P Company to be listed on the main board of the London Stock Exchange.

In the last 12 years he had been nominated by two successive Nigerian Ministers of Petroleum for the position of the Director of Petroleum Resources and had come terribly close to being appointed to the position of Group Managing Director of the NNPC, the hugely influential state hydrocarbon company. “I had a one-on-one interview with (President) Yar’Adua”.

To mark his 60th birthday on Friday, August 17, 2018, Seplat Petroleum’s management wove a theme around the fact that Avuru was born in the year that Nigeria first exported crude oil. An industry stakeholders lecture, at a princely venue overlooking the Atlantic, entitled 60 Years After: Preparing For A Nigeria Without Oil, was attended by over 300 people, a glittering gathering featuring the country’s top business brass, C-Suite level petroleum executives, energy bureaucrats and ranking politicians.

Full details of Austin Avuru’s career trajectory, his misses and hits, as well as blinding insights into how the world of petroleum E&P works in Africa’s largest hydrocarbon producer, is published in the August 2018 edition of the Africa Oil+Gas Report. Please click here…

This publication wishes him many more fruitful years in the service of his country.

 

Seplat Lists On The LSE, Looks To Raise $500Million, By Fred Akanni

Needs cash to expand gasproduction to 390MMscf/d by 2017, crude output to 100,000BOPD..

Nigerian independent Seplat Petroleum has won a three year struggle to list on the main board of the London Stock Exchange. The company, with operated gross daily production of 60,000BOPD of crude and 90MMscf/d of natural gas, intends to use the platform to raise about $500Million, in part for debt repayment, in part for prime acreage acquisition and in large part for aggressive increase in hydrocarbon output, to 100,000BOPD by 2017 for crude and 390MMscf/d by 2017 for natural gas (gross).

Seplat, which also plans a listing on the Nigerian Stock Exchange, is the first company, incorporated in Nigeria, to make the main board of the LSE. Companies from ‘outside the west’, or from the so called emerging markets, have had a hard time listing on the LSE, since “the flotations of ENRC of  Kazakhstan and Bumi of Indonesia in the 2000s tarnished the reputation of the City of London”, the Financial Times reports. “Controlled by foreign tycoons and lured to London by persuasive bankers, each was allowed to list despite a poor record in regard to corporate governance”.Since then, the newspaper explains, “the UK Listing Authority, which acts as the gatekeeper for the London Stock Exchange, has tightened rules for IPOs”. In Seplat’s case, there was also the poor perception of Nigeria as a haven of corrupt businessmen.

Seplat’s application, submitted in 2011, went through such a rigorous scrutiny that, at some point, there were whispers in elite business circles in Lagos that the deal was off. On its own, the Seplat management never contemplated the idea of failure. “A listing on the LSE, imposes the sort of corporate governance that aids our growth as a company”, company sources remark.

SEPLAT was founded in 2009 by Shebah Petroleum Development Company Limited and Platform Petroleum (Joint Ventures) Limited for the purpose of investing in Nigerian oil and gas opportunities.  Maurel& Prom, a French independent oil company, subsequently acquired a 45% equity interest in SEPLAT; this interest was later spun-off to form Maurel& Prom Nigeria S.A (now Maurel& Prom International).In July 2010, SEPLAT acquired a 45% participating interest in, and was appointed operator of, a portfolio of three onshore producing oil mining leases (OMLs 4, 38 and 41) located in the Niger Delta. In June 2013, the Company entered into an agreement for the acquisition of a 40% participating interest in the Pillar Oil operatedUmuseti/Igbuku marginal field area in the western Niger Delta. Seplat also has a similar agreement with Chorus Energy which holds the Matsogo/Amoji/Igbolo fields. Seplat hopes to be able to deliver 100MMscf/d from Platform operated Egbeoma field, Pillar operated Umuseti/Igbuku and Chorus held Matsogo/Amoji/Igbolo fields combined by 2017.

Seplatalso hopes to have completed the de-bottlenecking of the Oben Gas Processing plant to 240MMscf/d capacity by the end of 2014, in order to satisfy some contractual agreements with power companies that are due by 2015. The company is thinking of looping the Sapele Gas Plant to Oben. “The offtake in Sapele has been epileptic so we may as well expand the Oben processing plant and mothball the Sapele plant”, company sources say.

Raising $500Millionis quite ambitious and if it succeeds would rank as perhaps the largest oil industry IPO in London in several years. Officially, Seplat says that the money it raises will be used as follows: (i) $[48] million to repay in full all outstanding amounts under its shareholder loan from MPI S.A.; and (ii) the remainder of the net proceeds to be available for acquiring and developing new acquisitions, and/or pay down any additional debt raised in connection therewith, of both onshore and shallow offshore acreages, assets or joint venture farm-ins. The main source of acquisitions is expected to come from divestitures by various international oil companies”. Seplat is in the running to acquirethe 45% stake held by Shell, TOTAL and ENI, in one of the four Oil Mining Leases (OMLs) 18, 24, 25 and 29, that the three European partners have put up for sale. Shell, which is managing the transaction, is expected to announce the winnersby April 2014.


Midwestern Heads West, Dumps Agip

Midwestern Oil&Gas, the Nigerian independent, has taken a decision to find an alternative to its current crude oil evacuation route. The company is about to construct a 53km pipeline to take the 13,000Barrels Of Oil per Day produced in its Umusadege field to Shell’s Eriemu manifold, where the fluid will be taken into the trunkline to Shell’s Forcados facility. “The pipes have been ordered, we’ve done the survey, we are doing the right of way acquisition”, says Adams Okoene, Midwestern’s CEO.

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