Waltersmith Plans an Oil Terminal to Export Fuel Oil: “Our Expanding Refinery Has Brought So Much Value” - Africa’s premier report on the oil, gas and energy landscape.

Waltersmith Plans an Oil Terminal to Export Fuel Oil: “Our Expanding Refinery Has Brought So Much Value”

Waltersmith Petroman’s inability to export its crude oil output out of the country in the last 18 months, as a result of the outage of the Trans Niger Pipeline (TNP), has not precluded its access to earning foreign exchange from its Ibigwe field.

 The Nigerian independent pumps its entire 2,500Barrels of Oil Per Day into its 5,000Barrels Per Stream Day (BPSD) refinery, producing diesel, naphtha, heavy fuel oil, and kerosene. Seplat supplies the rest of the crude from its Ohaji South field.

 “50% of the fuel oil produced is exported out of the country”, Abdulrazaq Isa, the company’s Group CEO, told Africa Oil+Gas Report.

Now Waltersmith wants to explore this business opportunity further by installing an oil terminal in Port Harcourt closer to the coast. Currently, it sells the fuel oil at the gate of the refinery in Ibigwe, which is far in the hinterland. With the establishment of the terminal, however, it will truck the product from Ibigwe to the terminal, where offtake vessels from companies like Shell Trading and LITASCO will pick it up for export. “We want to control the delivery from end to end”, Isa told our team.

Excerpts of the second part of the interview, in our C-SUITE series, already published in our February 2024 pdf edition, by AKPELU PAUL KELECHI

Waltersmith started primarily as a crude oil producer but now that you are into refinery as well, has anything changed?

No and as you can see, since I came back, we have restructured the company to get it focused. We have now determined that we want to emerge as an industrial company. Value addition is going to be a key focus area for us. Oil and gas are our raw materials.

Going forward, for every crude that we produce, we want to add value to it and for any gas that we produce and or receive, we want to add value to it as well. We are going to do both simultaneously; we are going to continue to grow our E&P business. Waltersmith Petroman Oil, which is our core company, would continue to focus on oil exploration and production. Once all of this is done, we have Ibigwe now, Assa, and we are also part of ND Western. We will have our operated assets and we also have significant non-operated assets.

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The E&P company will continue to grow by itself and where we can take the oil and gas they produce as raw material, we will take it but then they also look for export opportunities; they will continue to produce and export oil but our ultimate game would be to change the proportion of what goes out to what stays in country for value addition purposes.

We are going to take into refining, petrochemicals, and everything else that can happen there including hydrogen and all that stuff down the line. Right here (in our Industrial Park)  is where we intend to begin to demonstrate all that.

Crude oil generates foreign exchange immediately but all these other products don’t. Or do they? As a company that used to be a primary producer of crude oil, how do you manage the fact that there will be crunches in your foreign exchange earnings now?

I can tell you now that in the last two years or so, I mean, since the TNP shutdown, we haven’t been able to earn any foreign currency from crude export. Yes, there’s none. But we earn FX today from the export of some of the refined products that we have and we really don’t export directly but indirectly. What that has proven to us is that, really, you can take crude and refine it and still generate foreign currency from it. Since we’ve proven this concept, we are now trying to scale up the infrastructure of the facility to export.

You produce diesel, naphtha, HPFO and kerosene; which one of these is the key for export?

Fuel Oil; it’s a good product for the export market. A lot of companies, a lot of countries use it in their mining activities. Some use it for bunkering vessels, power plants use it and cement companies use it as well. So we have established a good export market for these products and we just want to organize it properly; as we are building our refining capacity, we must build the export capability and infrastructure that we need.

I’ve travelled to one or two countries and we have ongoing commercial negotiations with those countries, in those markets, to take our products there. They will be opening letters of credit in our favour for us to deliver our products.

Value addition is the way to go, not just to sell the crude and we see the impact in one of our bottom lines. What I also see is that once the Nigerian refining capacity, controlled by the private sector, significantly covers the domestic demand, the Nigerian market becomes wet in terms of refined products and therefore, export then becomes a major possibility for us as refiners. Even the current restrictions on diesel exports will naturally go away because there is sufficient supply in the markets. We would have excess products so instead of me just focusing on exporting fuel oil alone, I will have the opportunity to export diesel and any other products to the continent as well.

But would we get to the point where a huge fraction of our refined products could be going to the export market because we have sufficient supply back home? If that happens, all of us would be on the continent looking for markets to put our products.

How different are your host community plans for upstream Oil&Gas production from that of your refining plant? Where do they coalesce? What are the key objectives of your host community relationships?

There really is no difference because they are co-located in the same area. Our view of this big issue of community  engagement, quite frankly is like the issue of Nigeria and its crude oil sales and the sales proceeds. What we have been used to is producing oil, exporting crude oil, the international communities receive the crude from you and they give you money and say go and use the money to develop your environment.

That is why we are here today; this whole concept of 3% of your OPEX, dedicate it in a pool then you and the community should sit down and decide if you should build a market or healthcare or this or that. Believe me, in another 10 years, come back and we will still be where we are talking about this same thing. But this right here, (points his fingers at the plan of the industrial park on his table), is the solution to the development of the Niger Delta: building industrial clusters because when you add value to these things, you begin to create development. You will see it reflected in modern infrastructure in the communities. As a necessity, there will be need for a modern hospital to support our industrial park. I won’t go and locate a hospital in Owerri to serve this place. We have to build the model hospital here to support this, it will be hospital that would also serve the Communities.

We are producing electricity and here, there will be modern schools to support this, not village schools. There’ll be modern schools because here in the industrial park, you would have enlightened and educated people living here in the industrial park. There will be residential real estates in these communities that will be built to support this. Then you begin to have modern infrastructure, employment for people in the communities, economic empowerment for them and that’s how the development is going to happen. Not by crude oil extraction and exporting and dedicating 3% of your OPEX and putting it in a pool to go and build market and town halls for people.

Value addition infrastructure must be built within the area where we’re producing this oil. The consequence of all that would then translate into economic development for the Communities, economic empowerment for the Communities and people can see the difference in what you are doing.

When I go to Ibigwe, it’s a totally different world and you see it. From the bad roads we drive through in the communities to entering this park to having internet to seeing modern infrastructure there. The difference is like night and day. What human being would not aspire to live like that? It is when we begin to build industrial infrastructures that allow the whole community to integrate that you begin to see the impact when you see the transformation it has on the people. We should do things that will add value to our oil and gas.

“I believe I’m going to be the last person who will be a CEO of a company leading an IPPG. It needs to become an institution by itself that can truly represent the industry and make a case for the industry.”

 From where you sit as the chairman of the Indigenous Petroleum Producers Group ( IPPG), do you think domestic consumption of Compressed Natural Gas (CNG) would be cheaper than Premium Motor Spirit (PMS) in the long run?

Naturally because gas is cheap. But of course, again it comes down to building infrastructure to carry out the conversion process and making the requisite investment and that is how this transition can happen. Fortunately we are now beginning to have refineries instead taking the crude out and importing PMS to distribute locally. As long as we are producing the gas locally. and making the investment in the Industrial infrastructure that would then produce the CNG and then we can also invest in the CNG facilities and in these vehicles s o t h a t t h e transition can happen. Naturally it is going to be cheaper.

But do you think the international price of gas would affect our CNG market?

We are producing gas in Nigeria. The aspiration has been that we want to move gas pricing away from a regulated environment to a free market environment; willing-buyer, willing-seller concept in order to incentivize investment into gas production. But I don’t see how we would price gas domestically to the point where it will become more expensive than imported gas. It means we are doing something wrong. God has given it to us as a natural resource and if we are producing it at the cost that is more expensive than it is being imported, then we are not doing something right. If you want to create an incentive for gas producers, government can do it because we’ve always said that gas is supposed to be an enabler; it’s also a transition fuel. Through an incentive system, government can decide it wants to let gas reach out to every nook and cranny of this country to influence a lot of the things that we do. We can do that to incentivize gas production and make sure that it is cheap enough to make it available to so many people.

When Waltersmith was going to invest and take a stake in ND Western, it took 8%. Did it become an incorporated JV or did you stand alone?

That’s what we did. You know, all of us contributed our equities and it became ND Western so it is an incorporated JV. So that JV is standing alone as an incorporated entity. And each of us is still running our own businesses and that is the consortium that we formed. In the new consortium, named Renaissance Africa Energy Company, ND Western is on its own, different. All of us are in that consortium and we contributed differently to this consortium and that is why we say there are five of us: ND Western as an entity, First E&P, Waltersimth, Aradel are the Nigerian entities and Petrolin as the international entity.

What is the frame of your gas business partnership, which will deliver the Mini LNG in the Industrial Park?

We have a JV with an American company for this gas business, because they have some proprietary mini LNG technology and that is why we are working with them. We have a

company called Waltersmith-Chester LNG. Chester is an Pittsburgh, America, based company. It is in the mini LNG space. We own 51% and they own 49%. We are developing the solutions together.

For your succession plan, you have three CEOs as well as the COO, in the Waltersmith Petroman Group. One of them will take over from you as Group CEO in two to three years’ time. But you’re still going to appoint a CEO for your gas business. Will he/she also be part of the scrutiny for who succeeds you?

As we mature the gas business, we have to have a CEO for the company but we are not there yet. We are developing it as part of our strategic growth plan. I’m going to be group CEO for the next three years. And we are setting some basic parameters for ourselves; specific business goals that we have determined that we want to achieve, some indicative revenue forecast for the period which is based on a long-term strategy. And so, I’m starting the journey and we are making good progress in that regard and we see that improving from year to year.

By the time I leave, which will be by February 2027, we should have achieved at the minimum: our upstream business should be providing 50% of our feedstock in our 10,000 barrels per day refining capacity. We should be well on our way with the construction of the condensate refinery because ultimately, we want to be at about 40,000 barrels refining capacity between our crude line and the condensate refinery. That’s our game plan.

So once those things are accomplished, we are laying the critical foundation for the future; for the new Group CEO to take over and he then starts his own journey from there and the goal for him will be to consolidate on building our industrial capacity because that’s really the future for us. Building that industrial and manufacturing capacity within our complex. Whoever is going to lead our refining business would then have to start thinking what aspect of petrochemicals should we go into. Energy transition can also happen from there; hydrogen.

That’s the future that I see for us as a company; by that time, I can ease out and I would rather be playing a non-executive role than an executive role because on the 7th of this month, (February 2024) which is three days from today, I’ll be 63 so if I give myself another two years, I will be 65. I think I would have done my bit then. We have created a structure now where we have these three CEOs today: the E&P guy, the Refinery guy and the Energy Infrastructure guy and the Gas person who would ultimately join us later. We also have our COO. We all meet every Wednesday physically to engage and have very robust discussions on the business across board. We call it GEC, Group Executive Committee so all of us sitting there understand the business.

We also have the Group Investment Committee where everybody comes to compete for Capital. So everybody sits there and talks within the context of their business; how much money the business is generating and this is how much this business needs. Everything is on the table.

 Let me just ask you this last question: as the chairman of the IPPG, how would you describe the achievement that you’re most proud of?

IPPG itself as a brand! You know, when we started IPPG in April 2015, Demola (Adeyemi Bero) and a few of us sat down and said we needed to have a voice for indigenous producing companies and four of us became the board of trustees and that was how we started to reach out to people. Demola was our first chairman subsequently, I have now taken over from him.

 So it’s a four year term?

Yes; two years per term and I am in my last phase now. I think the primary accomplishment is that you are talking about IPPG. Nobody knew about IPPG before. We have created the visibility and we have now become a known advocacy platform for the voice of the indigenous players. At least now, people know that the indigenous players actually exist. In the past, NNPC as the determinant player did not even think that we existed but now, they know that we exist. That’s just the first phase.

I believe that even me, I’m out living my usefulness in the IPPG as the IPPG chairman and I say that with every sense of responsibility. I think I’m getting to the point where I’m not supposed to be the voice of the IPPG. IPPG requires an independent leadership. IPPG does not require any CEO of any of its companies being the face of IPPG. It requires a more focused leadership because right now, I’m dividing my time between IPPG and Waltersmith;

IPPG needs more focus than that because, when this divestment p r o c e s s i s completed, there will be nobody else but IPPG. OPTS will be no more and it is IPPG that will be

the platform that will speak for the industry. I believe I’m going to be the last person who will be a CEO of a company leading an IPPG. It needs to become an institution by itself that can truly represent the industry and make a case for the industry.

Is there an active search for that person?

No, it is just me saying it now and I’m going to share that with my colleagues to say that’s the direction we have to go, given the enormity of the responsibility that is going to befall the IPPG going forward. That becomes really critical for us to take that decision and I am going to take it upon myself to engage the council and our members so that the process will start. We need to institutionalize the IPPG like some of these other organizations have done; we need to do that. I guess like the LCCI. We need to have a leader that is strong, knowledgeable, research oriented and that has the facts in his hands that can make a strong case. We are apolitical but we are a business based organization and we need a leader that will lead it as such.

Do you play golf?

Not anymore since I hurt my back. But I like to travel.





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