Waltersmith’s Industrial Park Will Open To Tenants by End 2024 - Africa’s premier report on the oil, gas and energy landscape.

Waltersmith’s Industrial Park Will Open To Tenants by End 2024

The Nigerian independent, Waltersmith Petroman has operated the Ibigwe field in Oil Mining Lease (OML) 16, onshore eastern Nigeria since 2003 and has been producing crude from the asset  since 2009. It has equity in ND Western, the joint-operator, with NPDC, of OML 34 (gross output in March 2024, ~18,000BOPD, 270MMscf/d). It has taken over operatorship of the Assa field, located in the vicinity of Ibigwe and in January 2024, it emerged that Waltersmith was a member of the consortium of five companies which owns Renaissance Africa, the Special Purpose Vehicle which is acquiring the entire onshore and shallow water asses belonging to Shell  in Nigeria.

Waltersmith’s differentiating philosophy as an energy producer has been to build an industrial complex on the back of its oil and gas assets. For the past seven years, the company has pursued the idea of a phased refinery project; a gas processing plant and a dual (gas and diesel) fired power facility, as centrepieces of an industrial park to service factories, and provide support to industries and other enterprises in a space spanning 90 Hectares. When it commissioned the project’s first phase: a 5,000BOPD modular refinery in November 2020, it was clear that it was on course of delivering the hub it promised. Now Waltersmith is close to opening up its industrial park to tenants.

ABDULRAZAQ ISA, the company’s Co-Founder, President & Group CEO, recently fielded a range of questions by a team of Africa Oil+Gas Report’s journalists.

Below are excerpts from the conversation by Akpelu Paul Kelechi:

Congratulations on the spell of good things. (1)You have been announced as having a significant stake in Renaissance Africa, the company currently in the process of purchasing the entire stake of Shell Petroleum Development Company (SPDC) in Nigeria; (2) You have commenced construction of the second train of the crude oil refinery (3) You have just told us that you are far more optimistic about the company in 2024 than you were, say in 2022-23. Can you walk us through all of these milestones?

The years 2022 to 2023 were a trying period for us as a company. Crude oil evacuation was a big issue. Our crude oil export came to zero because we couldn’t put anything in the pipeline; almost 100% of whatever you put there was stolen. And if you look at our location, we solely depended on the Trans Niger Pipeline (TNP). Trucking was not an option for us as such because the rate they were charging was ridiculous.

We had some drilling challenges, especially with a couple of wells that we had drilled.

We are coming out of the difficulty of those two years now. We have refocused the business

to see our modular refinery as our primary evacuation platform. And we have had to do some extra work in terms of our crude to make sure that it fits the requirements of the Refinery, which now takes 100% of all the crude that we produce from the Ibigwe field. This is an old field, it is declining and all that and so, we are just massaging it. We have a new corporate structure with a team that is really focused on managing such a field and providing the basic feedstock that we need into the Refinery. That has now created some stability in our upstream business.

We started working more with Seplat Energy to provide the balance of the feedstock (2,500 barrels of Oil Per Day) that we need into the plant itself. We now have the basic foundation for growth. In terms of the financial impact, we’ll start seeing it from 2025 and that process has started because of our investment in the refinery expansion; the contractors are on site. The progress is consistent with the plan.

We have taken over Assa Field, following the ministerial consent which took place in 2022. We got caught up in this transition to a new government and the requirements of the Petroleum Industry Act (PIA), involving the conversion from an Oil Prospecting Licence (OPL) to a Petroleum Prospecting Licence (PPL). You then have to have an approved Work Programme before that can be issued. We are following that process now.

Our goal for First Oil from the Assa Field is Fourth Quarter 2024.

You haven’t commenced any well drilling…

No but we’re doing the site preparation as we have finished the seasonal Environmental Impact Assessment (EIA). We started developing the work programme for approval after we got the ministerial consent in 2022. Then regulations issues came and we had to wait because they had to make the development plan consistent with the new PIA regulations so that stalled the whole process. Now we have all the approvals that we need to proceed. For the site preparation work, the contractor is going to site to start the civil works and the stockpiling. We are working on all the contract packages as well. Our goal is that by fourth quarter of this year (2024), hopefully we should get to First Oil and we should be drilling more wells.

By 2025, we want to have a minimum of 5,000 barrels of oil per day production as our equity crude, meeting a minimum of 50% of the feedstock requirement for our refinery. Our refining capacity will go to 10,000 barrels per day by second quarter 2025. Our gas development work is also going on because we’ll be producing gas from Assa field as well. So that gas and we think we’re going to have a deal with either of the two gas processing plants in the vicinity of the Assa field. Instead of building another gas processing facility; we are going to do a deal with SPDC (which is in the process of being taken over by Renaissance) to put some of our gas into (te Assa North gas processing)  plant and process some of our gas from Assa field there.

We are going to be off-taking our own gas and we are going to be buying gas from third party for our industrial park because gas for us is part of the key to our future.

“We are Opening the Industrial Park to Customers in 3Q 2024-We are fencing the whole park now and the exercise is about 40% complete. We are finalizing the JV negotiations with the power company. Our objective is to officially launch the park by the third quarter of this year (2024).”

So how much gas are you looking at getting from the Assa Field?

About 100Million standard cubic feet per day (100MMscf/d) based on the reserves that our subsurface people have come back to us with, it appears we would be able to do that number.

You don’t need Seplat’s gas (from ANOH) anymore if you have that much?

Our own contingent plan is to buy gas from the Seplat’s gas plants for our customers who are going to be in our industrial park. We are positioning ourselves to be resellers of gas for everybody who’s in the park. We are signing an off-take agreement now with ANOH Gas Processing Company (AGPC) Ltd to take some of their gas from their plants and resell to people who would be here in the Industrial Park. We will use some of it for our own purposes, for our business, we will use some of the gas and the oil and we will also sell to third parties who need gas as feedstock for whatever they want to do who are going to be located in our industry park.

There was a lot of oomph about the Industrial Park, when you commissioned the first train of the refinery. You signed a Technical Support Agreement with United Nations Industrial Development Organisation (UNIDO) and United Nations Economic Commission for Africa (UNECA)”, which involved the UNIDO conducting FEED studies for a fee and also evaluating your architectural plan for the facility. How is that going?

They have finished their work and they have submitted the preliminary report to us and we are waiting for the final report. The terms of reference were for them to help us make a determination whether an industrial park in that location (The Ibigwe field and the adjoining vicinity, in Imo State, Nigeria) made sense. Also, regarding what we are trying to do when we say that our primary raw material for that industrial park is oil and gas. UNIDO has done this kind of work globally and one of the things we wanted was to decide if there would be sufficient gas to generate electricity and provide electricity 24/7 and there will be modern infrastructure in the park.

We wanted UNIDO to determine whether those were sufficient parameters to encourage people to come and locate their facilities where we are. At some point after the work started, the conversation shifted to energy transition and climate change and the position of the United Nations about the world moving away from fossil fuels and so, there was a bit of conflict there. Developing countries responded by saying “this is what we have and we are going to use it” . Eventually we crossed that bridge because the focus was now on gas because gas is a transition fuel and everybody is now accepting it.

The work scope included stakeholder engagement, market engagement and all the key people that were required locally in that region. We had probably about four or five sessions of stakeholder engagements where different businesses, the state government, local governments and the communities were brought in to evaluate what we are trying to do. All of this was coordinated by UNIDO.

They also made a determination about the nature of the infrastructure that we need to have and the size of the infrastructure that we need to have to make that place work and be conducive for an industrial park. We also wanted them to do not just local market sounding for us, but to also do international market sounding. Can it be a potential location for international companies to come locate themselves in or can they help us encourage international companies to come in using their own global platform?

We have always believed that no nation is going to grow without an industrial base so we wanted to leverage on their global reach to see if this can be a potential location for a major industrial conglomerate. This location is close to a major source of oil and gas and we have 24/7 electricity that is going to be powered by gas. Those are some of the considerations for bringing a group like UNIDO in to support us in this whole exercise.

We have finished the FEED for the Industrial Park now and the numbers look good for us; they are helping us set the commercial structure of the facility. Are we going to be leasing land or are we going to be selling land? What should the rates be and so on. They have done a comparative analysis of our competitiveness of the rates. That’s going to serve as a guide for us and as an additional incentive, do we need to have an oil and gas free zone there?

The design that I have just shown you comprises a lot of infrastructure that we have to set up there, security, a military barracks, hotels, accommodation, etc. It’s all going to be within the industrial park and our application for an oil and gas free zone is under process. We are going to have a customs office to look at custom tariff determination of products because if you are bringing in raw materials into our Industrial Park, the customs should be able to process all the papers that you need in the park. These are the things that the study has thrown up that would be incentives to have companies come in and locate there

and we are following that pathway towards its execution.

What’s the planned power generating capacity of the Industrial Park’s power plant, based on the generation license that you got from the Nigerian Electricity Regulatory Commission (NERC). Is it 30MW or 300MW?

We have now made a determination, based on the UNIDO study, that the maximum power capacity that we are going to consume in this park in its entirety, when everybody is there, is going to be about 75 megawatts. That’s what the study has shown. But we had already gone ahead and got a 300MW power generation licence. We are going to be deploying this in modules as the uptake of the industrial park grows. Today, our total power requirement as the anchor tenant in this park is two megawatts (2MW). We have determined that for our E&P Business, our refinery Phases 1 &2 business, all we need is 2MW. We have a power company that wants to do a JV with us to set up the power infrastructure. We have our existing power infrastructure that we supply to ourselves, and the way we’re positioning that now is that, those will become backups to us. In working with this company, we have made a determination that we’re going to need a power generation capacity with three feedstock sources. Primarily it will be gas; then fuel oil because we produce fuel oil and then diesel because we also produce diesel. But diesel is the most expensive but we are not focusing on diesel but it is also going to be a third backup so that we are assured of fuel for the power generation system in the park at any point in time.

You are not going to solely depend on gas?

We are not going to depend only on gas and it has been designed as such now. Working together with this company, we are going to build the first 2MW that we are going to supply to ourselves. We have already developed the infrastructure which is based on an arm’s length commercial basis. This power company will sell power to us, we will pay for the power ourselves. The next phase that we are going to build is 30MW, from which our new gas business requires about 7MW of power for each train of the mini LNG. One train of the mini LNG is going to be 10Millio standard cubic feet per day (MMscf/d).

It takes far more power to do the conversion of lean gas to Liquefied Natural Gas than the refinery itself and it is going to be supplied by this same company. The next phase at 30MW which will meet our own expansion plans and some redundancy which will then form the basis for us to say ok, other parties can now come in there and begin to locate themselves there and we can now sell power to them effectively. So that’s the plan until when the uptake increases until additional power is required then we max it out to about 75MW of power by which time this place would have become a real industrial complex with different kinds of activities happening there. That’s why I say for us, this is our future. This is where we want to go.

In order to get adequate crude oil feedstock for the refinery, there was another field that you were trying to acquire: Egbema West. How far has that acquisition process gone?

Our refinery business started as a proactive move against crude theft and we felt that we could collect oil around all that area into a pool here and refine and then, distribute the products. In doing that, we drew a 30 kilometre circle around assets in that area which then included Egbema West. We have approached governments and we have participated in the marginal field licensing round which we were not awarded any and I believe that we are the most qualified.

At the time you announced the groundbreaking for the industrial park in 2020, you declared that you had 90 Hectares of land to spare. Is that still the commitment?

We have almost 90 hectares of land in totality. However, what we are marketing is going to be 65 hectares because we have already used up some of the 90 hectares. When we talk about what is available, it is the 65 hectares that we are going to be offering third parties and ourselves as well as we grow our business. Our gas plant is going to be taking some of it and potentially our Refinery Phase 3 even though we haven’t finalized discussions on that agreement yet.

By February 2025, we’ll have been on our way to where we’re headed together and then, one of the three CEOs of our subsidiary companies and the COO will likely succeed me, take it and run from there.

What would you say is the status of the Industrial Park today, if anyone is interested?

First, we have finished the design. I have just shown you the architectural design; that has been completed even though we’re still fine- tuning it. We have finished the UNIDO study and that took us almost two years plus to complete. We are fencing the whole park now and the exercise is about 40% complete. We are in the process of awarding the architectural design of that entrance that I just showed you. We are finalizing the JV negotiations with the power company and we hope that we will finish that between now and the end of the first quarter. Our objective is to officially launch the park by the third quarter of this year (2024) to say look, this park is ready and if you want to locate in our park, please come. We have land and we can give you land and we know that we can give you 24/7 power; that is the whole goal for us. Because we are already there, we can give you security, power and other things if you want to come there and build in our industrial park.

“Targeting First Oil in 4Q 2024: The Assa Field drilling work programme approval has taken a lot of time. We have now been granted that. The field was awarded to us in 2021 and we got the ministerial consent in 2022 and we started developing the work programme for approval.  Then regulations issues came and we had to wait because they had to make the development plan consistent with the new PIA regulations”

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