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Two Valve Assembly Plants, and a Pipe Threading Factory, On the Cards, in Nigeria


Bell Oil & Gas says it is looking forward to commissioning a multi-million-dollar, integrated facility, located at the Lekki Free Zone in the eastern flank of Lagos, Nigeria.

The facility is on a site with a total size of over 15,000 square metres, according to Kayode Thomas, the company’s CEO.

The first phase of the project “comprises state-of-the-art valve assembly, maintenance, testing, painting and production”, which will deliver “Made in Nigeria valves for the oil and gas industry”, Thomas explains.

The second phase of the facility is for piping, pipe threading, machining and production of pup joints, crossovers and accessories. Thomas says that commissioning is at hand. “The facility will also accommodate our composite pipe fabrication services as well as serve as a storage and logistics base for our entire operation”

Bell Oil & Gas is a Nigerian owned service company which produces, supplies, installs, commissions and maintains a range of composite pipes. It is involved in some of the country’s ongoing large E&P projects including TOTALEnergies’ Ikike oilfield development, Nigeria Liquefied Natural Gas (NLNG)’s Train 7 construction and the ANOH Gas Processing Company’s ANOH midstream gas processing project. It is looking forward to participate in such future projects as the Shell led Bonga Southwest/Aparo, a deepwater oil field project.

MEANWHILE, IN PORT HARCOURT, THE LARGEST CITY IN THE NIGER DELTA BASIN, Tag Energy says it will commence the construction of a 3,000 square feet factory for the design, production, and repair of valves of all types and sizes by the year 2025.

The company ordinarily does flange management services; providing solutions for bolting requirements, including torquing, tensioning, stress analysis, and joint integrity quality assurance and quality control (QA/QC), with services catering to “high-integrity sealing of flange joints at chemical plants, refineries and offshore installations, as well as general industrial sites”.

Tag also supplies, services and repairs valves, mostly in engineering facilities in the oil industry. As the company builds the manufacturing facility, it has taken charge, as part of its CSR, of training young people in the eastern Niger Delta at its new valve service centre in Port Harcourt. Tag will “offer paid internships to qualifying students to produce a steady stream of skilled resources for the industry, further reducing our dependence on foreigners for ongoing maintenance and support activities”, says Yemi Gbadamosi, the company’s Chief Executive


Senegal’s New Fortune Favours the Locals

Senegal’s Revised Petroleum Code has introduced a provision that goods and services that could be adequately fulfilled by the local private sector must include majority Senegalese ownership of such companies.

The new law calls for a partnership between an international firm and a local entity, maintaining local ownership of at least 5%, in projects in which the local private sector may lack the technical or financial capacity for.

And regarding goods and services which the local private sector is chronically incapable of providing, foreign entities can fulfill these specific industry requirements independently of local partners.

Local Content Development Fund

The Petroleum Code’s Decree 2021-248 of the Revised Petroleum Code formalizes the operations of a Local Content Development Fund under both the Ministry of Finance and Ministry of Petroleum and Energies, funded by levied fines and other budgetary appropriations. The fund’s objectives are to develop more robust local content development guidelines in partnership with private companies and to improve local capacity through technical training and support for SMEs. Chairing this and acting as enforcer for all local content decrees is the National Local Content Monitoring Committee (CNSCL) created by Decree 2020-2047 – a body with the objective of achieving a 50% local content ratio for Senegal by 2030.

The law mandates international oil companies to submit annual content plans outlining their use of local contractors, suppliers and service providers, and justifying any international preferences for the above in terms of lower price or superior standards. It instructs all oil and gas industry service providers and sub-contractors to open a local subsidiary in the country and to submit all tender bids through a centralized government platform.

Originally published in the April 2022 edition of Africa Oil+Gas Report



BW Energy Reports High Production Cost in Gabon

The Norwegian junior, BW Energy has reported gross production from the Tortue field offshore Gabon, averaged approximately 10,700 barrels of oil per day in the second quarter of 2022, amounting to a total gross production of approximately 975,000 barrels of oil for the period and in line with expectations.

But a key data in the company’s operational update is that “production cost (excluding royalties) was approximately $35 per barrel”, in the subject quarter.

BW Energy does not go any length to explain the reason for such a high number, but it notes that “the overall production cost includes approximately $1Million related handling of the COVID 19 pandemic in the period.

“Second quarter revenue is expected to reflect approximately 32,500 barrels of quarterly Domestic Market Obligation (DMO) deliveries with an under-lift position of around 247,000 barrels at the end of the period”, the company explains.

There were no BW Energy liftings from the Gabon operations in the quarter.  “BW Energy had a cash balance of $123Million at 30 June 2022, compared to $111Million at 31 March 2022. The increase is due to the previously communicated April payment of $114Million for the Company’s March lifting, offset by continued investments in the Hibiscus / Ruche development project.

At the start of the period, the Company had commodity price hedges for a remaining total volume of 1.04Million barrels for 2022 and 2023, of which 37% is for 2022, BW Energy notes. “These were a combination of swaps and zero-cost collars that will allow for future cash flow stability for ongoing development projects. BW Energy has recognised unrealised crude oil hedge losses in the amount of $4.1Million for the second quarter”.

NNPC Gets a Court Injunction Against ExxonMobil Sale of its Nigerian Assets

A Federal High Court in Abuja has fixed, for July 15, 2022, the hearing of a motion against the sale of shares of ExxonMobil’s Nigerian unit to any third parties.

The court, presided over by Justice S. B. Belgore, had on July 6, 2022, granted an injunction sought by Nigerian National Petroleum Company (NNPC) Limited, restraining Mobil Producing Nigeria Ltd and Mobil Development Nigeria Plc from selling, trading, allocating, transferring, or disposing of their shares in their interests covered by or connected to the Joint Operating Agreement between them and the NNPC.

The order restrains “sale of assets covered in Oil Mining Lease 68, Oil Mining Lease 69, Oil Mining Lease 70 and Oil Prospecting Licence 94, to anybody, person (s), company, consortium or entity howsoever described pending the determination of the claimant/applicant’s motion filed on the 5th of July or when the judicial tribunal is duly constituted and can make interim preservation orders.”

NNPC has stepped up, in public, its determination to take over the subject ExxonMobil assets since Seplat Energy Plc, Nigeria’s largest homegrown, private sector led energy company, announced in February 2022, that it had entered into an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (“MPNU”) from Exxon Mobil Corporation, Delaware.

Ghana’s Taxman on the Chase After Nigerian E&P Company for Debt

Nigerian independent Oranto Petroleum, with its partner Stone Energy, has still not honoured an outstanding surface rental invoice of $67,438.36 on a Ghanaian upstream acreage.

Ghana’s Public Interest Accountability Committee says that the debt had been incurred since February 2013.

But the Ghana Revenue Authority GRA explains that Oranto hasn’t paid, even when contacted.

“GRA must find and compel Oranto/Stone Energy to pay the outstanding invoice with applicable penalties for the period during which it has been in default”, the PIAC warns in its latest (2021) annual report.

“GRA has indicated that Oranto has been located in Angola, Chad, and Mozambique. It has subsequently made contact with the Company but no payment has been made”, PIAC explains in the report.

PIAC pleads with the Tax agency: “GRA should collaborate with the relevant authorities in these jurisdictions to retrieve the principal together with the interest. GRA must take this step 7 Authority, since the issue has assumed a crossborder dimension, it has escalated beyond the GRA, and is being handled at the ministerial/governmental level, as a matter of principle”.

OPEC Secretary General meets Nigerian President Muhammadu Buhari

By OPEC Secretariat

The President of Nigeria, HE Muhammadu Buhari, received OPEC Secretary General, HE Mohammad Sanusi Barkindo, and an accompanying delegation from the OPEC Secretariat in Abuja, Nigeria.

The meeting took place in part to honour Barkindo’s two-term tenure as Secretary General of OPEC.

In attendance were HE Timipre Sylva, Nigeria’s Minister of State for Petroleum Resources and Head of its Delegation to OPEC; Mele Kyari, Group Managing Director of Nigerian National Petroleum Corporation (NNPC) and the country’s National Representative to the Organization; and other senior officials of Nigeria’s petroleum industry.

During the meeting, President Buhari said: “Welcome back home!” adding, “We are proud of your distinguished achievements at OPEC. You were able to successfully navigate the Organization through turbulent challenges.”

Minister Sylva echoed the President’s remarks, thanking the Secretary General for his six years of leadership.

The Minister said: “Mr Barkindo has steered the heavily loaded Declaration of Cooperation (DoC) ship through … turbulent waters, against all formidable obstacles,” adding, “He spearheaded the historic ‘Algeria Accord’ in September 2016, which paved the way for the equally historic DoC between 23 oil-producing countries – a feat that had never been achieved in the oil industry.”

“Mr Barkindo is a strong believer in multilateralism and cooperation,” Minister Sylva highlighted.

In return, the Secretary General said: “I and my colleagues from the OPEC Secretariat are deeply honoured by your audience, Mr President, as well as of the honourable Minister Sylva and other senior officials of the Nigerian oil and gas industry.”

He also briefed the President on oil market developments and the vital role played by the Declaration of Cooperation in stabilizing the global oil market over the past six years.

Barkindo’s term as Secretary General ends on 31 July 2022. Also today, he delivered a keynote address at the Nigerian Oil and Gas Conference and Exhibition in Abuja, which runs from 4-7 July 2022.

Nigeria joined OPEC in 1971. The country marked its 50th Anniversary in OPEC last year.

Afreximbank: Recent Actions Call for Caution Around Africa’s Energy Bank

By the Editorial Board of Africa Oil+Gas Report

Africa Export Import Bank  (Afreximbank) recently signed a Memorandum of Understanding in Luanda, Angola, seeking to create an investment fund in the energy sector for member countries of the Africa Petroleum Producers Organisation (APPO).

It’s a positive gesture, given the financing constraints that await the continent as it tries to monetise its hundreds of billion barrels of crude in this twilight epoch of the fossil fuel era.

Owned by 51 African countries and a clutch of private African and foreign investors, Afreximbank has, in the past few years, played some noteworthy role in the continent’s energy finance.

But in the months prior to the Luanda Memorandum, the Bank has acted in ways that call for a bit of review. Some of the lending and/or proposals to lend that the bank has announced, have been quite intriguing, if not incredulous.

$5Billion is a rather huge amount of money to raise for a project that commits to process a mere 176Million cubic feet per day of natural gas and condensate

A startling call was the $274Million senior reserve-based lending facility to Mars Exploration & Production Company Limited to facilitate that company’s acquisition of 51% equity interest in Oil Mining Leases (OMLs) 123, 124, 126 and 137 from Addax, a Sinopec owned subsidiary in Nigeria.  “The financing package will help boost oil production for the country as it incorporates a $50Million tranche to increase daily production from 25,000 barrels per day to 50,000barrels per day by 2023”, a statement by the bank noted.

As of the time of the bank’s announcement, in November 2021, the Addax acquisition ownership position was in murky waters. It started with the head of the Department of Petroleum Resources (DPR), the country’s regulatory agency-as it then was-sending a letter of revocation of the leases to Addax in late March 2021, and, within 48 hours of said revocation, awarding the licences to the KEL/Salvic Consortium. Then, following the protest of the Chinese Government (owners of Addax), President Muhammadu Buhari overruled the regulatory agency and restored the licences to Addax.  From this cloudy scenario came the request for financing by Mars Exploration & Production Company Limited, who then reportedly held 51% partnership in the licences, to 49% held by KEL/Salvic Consortium. At the time Mars was negotiating the transaction with Afreximbank, the case was in court and the presidency was under pressure by the NNPC to cancel the deal.

Fast forward to January 2022 and Mars Exploration had lost the assets. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), one of the two successor agencies to the DPR,  declared the award null and void.

It looks rather odd that such a high profile institution as Afreximbank should have been so anxious to play the financier role for asset acquisition in such hazy circumstances.

ON DECEMBER 8, 2021, AFREXIMBANK REPORTED signing a Memorandum of Understanding (MoU) with UTM Offshore Limited, to raise $5Billion for the development of Nigeria’s first floating liquefied natural gas (FLNG) project.  The deal is in two parts and would see the continental bank raising $2Billion to support the first phase with a commitment to fund the second phase of the project by another $3Billion.

Promoters of the UTM LNG have a seemingly compelling public narrative: they have been granted a License to Establish (LTE), also by DPR, for the installation of an FLNG unit on ExxonMobil operated Oil Mining lease (OML) 104; it has awarded the pre-Front End Engineering Design (Pre-FEED) contract to JGC Corporation of Japan and appointed KBR Owners Engineer. UTM also says that Vitol, a major global energy and commodities trader, has joined the consortium as an off-taker for the LNG. And then there is the sentiment about being be the first of such a project developed by an African company on the continent.”

But $5Billion is a rather huge amount of money to raise for a project that commits to process a mere 176Million cubic feet per day of natural gas and condensate, from reservoirs located in about 120 metres of water and deliver just 1.2Million Metric Tonnes Per Year (1.2MMTPA) of LNG. A comparable project is in operation almost round the corner from the UTM project. It cost all of $1.2Billion to install Africa’s first Floating LNG project: neighbouring Cameroon’s Hilli Episeyo, designed to produce 2.4 MMTPA of LNG, (twice the volume of LNG that UTM project will deliver) with a storage capacity of 125,000 cubic metres. The 294 m long floating plant is moored 14 km off the coast of Kribi in Cameroon.

Okay, the Hilli Episeyo is a converted floater.

So, let us consider an FLNG project with a new build vessel: The Coral South FLNG, project, which involves upstream drilling in ultradeep (>2000metre WD) waters, off Mozambique, with capacity of 3.4MMTPA, or 490Million cubic feet per day is projected to cost $5.1Billion, and the projected start date is September 2022. The volume is about thrice the UTM project and the reservoirs are in thousands of metres below the sea level, compared with the shallow water that UTM’s targeted reservoirs are located. Another African Floating LNG project is the Greater Tortue-Ahmeyin FLNG project, to valourise gas reserves in water depths exceeding 2,500 metres, straddling Mauritania/Senegal. The 2.5MMTPA project comes with an invoice of less than $2Billion.

Wait: There’s one more deal we are curious about: Afreximbank  signed a non binding term sheet with Eroton, a Nigerian independent producer of crude oil and gas and operator of Oil Mining Lease (OML) 18, for a prospective $750Million senior secured reserve-based lending facility, the purpose of which, in addition to refinancing Eroton’s current senior bank debt (of approximately $196Million), is to provide funding which will be used by Eroton to acquire an additional 18% interest in OML 18 from two of the other partners the acreage!!!, subject to agreeing documentation and relevant consents, thereby taking Eroton’s interest in OML 18 to 45%.

We are more comfortable with two other deals; one for oil and gas production, the other for power generation (a clear case of an attempt to build infrastructure and ameliorate energy poverty). These two are:

  • A $1.04Billion debt transaction with NNPC comprises a pre-export/shipment finance facility underpinned by a forward sale agreement (FSA) and offtake contracts from the state hydrocarbon firm acting as the borrower and seller. Through the FSA, NNPC will deliver 35,000 barrels of crude oil per day. With the ca. $1Billion to NNPC, it is understandably a pre-export finance facility backed by production.
  • Afreximbank support will also finance, with a $50Million facility, the initial capital required by Geometric Power, a power generation and distribution company, to acquire electrification rights to the Aba Ring Fenced Area and also support the commissioning and commencement of operations of the Aba Integrated Power project in the commercial hub of South-eastern Nigeria. The bank had earlier advised the project sponsor, on restructuring and arranging gap capital in the $332Million recapitalisation funds for the Aba IPP Power Project. Even though our analysts note that, as the Aba IPP project has struggled to be delivered in the last eight years, the merchandising economy and the industry in the city of Aba has gravitated to uptaking natural gas from Shell Nigeria Gas to run their generators in the absence of efficient power supply, and whereas we habour a healthy skepticism about how the Aba IPP has been financed over time, we think that funding a power project at this scale in Africa is always the way to go.

In Africa Oil+Gas Report’s conversations with investment bankers about these transactions, we get feelers like:

  • “It is chunky, but not unusual”
  • “Afreximbank is a well-funded institution with quality risk minded staff. It raised lots of cash recently in the international market. It has a broad and very supportive shareholder base as well, which is capable and willing to provide additional liquidity as needed”.
  • Afreximbank takes a stab at financing projects that are important, but may be such that conventional lenders cannot readily come up with.

Yet our misgivings do not go away. Now, as Afreximbank finds itself at the forefront of Africa’s energy fund scheme, it may want to review its own portfolio choices in order to be a surefooted leader.

This is a slightly updated version of the report we published in the November 2021 edition of the Africa Oil+Gas Report monthly journal, distributed to paying subscribers. The only changes are in the first two paragraphs. The article is republished on this platform for public service purposes.


NUPRC Amplifies its Well Audit Process, to Increase Nigerian Crude Production

By John Otoba, in Abuja

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is targeting a ramp up of the country’s crude oil output through its routine, technical process engagement with oil producing companies.

Shut in wells are interrogated, reservoir surveillance is scrutinized and enhanced recovery methods are vigorously embraced, the agency says.

“The Commission recognizes that the formulation of all-inclusive strategies to increase crude oil and gas reserves requires thorough consideration of all factors militating against efficient and effective exploration and production operations”, says Gbenga Komolafe, CEO of the NUPRC.

In the six months since he took charge of the new regulatory commission, a creation of the Petroleum Industry Act, “we have become more deliberate and swifter in implementing strategic actions and initiatives aimed at increasing our crude oil and gas reserves and production”, Komolafe explains, adding:

“The Commission has initiated a massive campaign dedicated to the identification of oil and gas wells producing below capacity, through:

  1. Inventorisation of shut-in wells and analysis of the inventory to map the reasons for shut-in and devise measures for quick reopening;
  2. Using well and reservoir surveillance activities in identifying poorly performing wells and workover candidates for quick intervention;
  3. Embracing and adopting new technologies and advanced recovery techniques for unlocking some identified stranded oil and gas resources”.


Chevron Evolves New Leadership Structure to “Further Enhance Execution”

Chevron Corporation has announced a simplified organizational structure and senior leadership changes intended to strengthen execution and pace to deliver on the company’s objectives of higher returns and lower carbon.

“Effective October 1, 2022, the company will consolidate its Upstream, Midstream and Downstream business segments under a new executive vice president, Oil, Products & Gas, who will oversee the full value chain. As part of this change, the company is consolidating into two Upstream regions – Americas Exploration & Production and International Exploration & Production”, the oil major says in a release.

The company is also organizing its Strategy & Sustainability, Corporate Affairs and Business Development functions under a new executive vice president, Strategy, Policy & Development.

“The changes build on the company’s enterprise-wide transformation in 2020, which has produced improved operational and financial results. The new leadership structure is expected to enable a more integrated approach to capital allocation, asset class excellence and value chain optimization, and facilitate more effective external engagement and business development impact”, the release states.

“We’ve made significant progress over the last two years, and these changes position us to further enhance execution across all aspects of our business as the energy system evolves,” declares Mike Wirth, Chevron’s chairman and chief executive officer. “It will also bring strategy, policy and business development into tighter alignment as we focus on leveraging our strengths to deliver lower carbon energy to a growing world.”

The company made the following personnel appointments, effective October 1, 2022:

Mark Nelson was named executive vice president, Strategy, Policy & Development

Nigel Hearne was named executive vice president, Oil, Products & Gas

Clay Neff was named president, International Exploration & Production

Bruce Niemeyer was named president, Americas Exploration & Production

Balaji Krishnamurthy was named vice president, Chevron Strategy & Sustainability

In addition, the company made the following personnel announcements:

Jay Johnson, executive vice president, Upstream, was named executive vice president, senior advisor, effective October 1, 2022, and will support the transition until January 31, 2023. Mr. Johnson has more than 41 years of service to the company.

Jay Pryor, vice president, Chevron Business Development, will retire after more than 43 years of service to the company, effective July 29, 2022.

Steve Green, president, Chevron North America Exploration & Production, will retire after more than 24 years of service to the company and its predecessors, effective September 30, 2022.

“I’m confident that our new team will continue to effectively lead the company in delivering the affordable, reliable and ever-cleaner energy that enables human progress,” said Wirth. “Their contributions will be essential in enabling us to advance our objectives of higher returns, lower carbon.”

Those Who Cut Corners Find It Easier to Get Regulatory Approvals

By Austin Avuru

Reflections on My 20 Years of Building Oil Companies

The military juntas who ruled Nigeria between 1966 and 1999, combined the worst of the world’s two main ideological persuasions; communism and capitalism, which sharply opposed each other until the collapse of the Berlin Wall in 1989.

Nigeria’s dictators ruled by enforcing state control of the levers of economic activities; they encouraged poor taxation practices and neglected “the big four”. Their dysfunctional reign led, inexorably, to a predictable collapse of the economy.

Western economies, where free enterprise have taken root, have enjoyed the benefit of building a culture of tested governance and regulatory structures over a long period of time; a culture that has supported entrepreneurship and wealth creation in those countries. So, a twenty-year-old Mark Zuckerberg could create Facebook and build it along “traditional” governance structures that supported its growth into the behemoth it is today. Conversely most businesses in Nigeria struggle to survive their founders.

Using Seplat Energy as an example, in the Nigerian oil and gas industry, we shall examine a few case reviews:

  • Regulation and the Reward System

Regulatory effectiveness is very critical in a free-market economy as it supports fair competition, rewards efficiency, punishes bad and illegal practices and generally promotes value creation. In Nigeria, and in our industry, sometimes you get punished for doing the right thing and too often your competitors smile home with higher rewards because they are allowed to cut corners.

The assets that Nigerian independents bought from Shell between 2010 and 2013 (about thirteen leases in total) were all due for license renewal in 2019. Historically, the fee is a discretionary nominal sum imposed by the Minister of Petroleum Resources. This time, the regulator decided to calculate the fee based on reserves.

When Seplat Energy bought our asset in 2010, the working interest 2P reserves was 71MMBO. By 2018, after spending some $3Billion, we had increased operated production from 14,000BOPD to 65,000BOPD and quadrupled reserves to 283MMBO. Our competitors who acquired assets with three times our reserves size, but who had done nothing to increase production or add to their reserves ended up paying the same renewal fee as us! We were punished for our exemplary investment drive and efficient operation of our asset, leading to substantial value addition. You would have thought that as reward for our efforts, and as incentive to motivate others, our renewal would have been practically free.

Under our strict governance rules at Seplat Energy, we pay all our statutory dues promptly (royalty, taxes, lease rentals, flare penalty and even debt service obligations). Sometimes you wonder what benefit you derive from being this prudent when your competitors get away with failure to make these payments, sometimes for years. While you are struggling to balance your books, your less efficient competitors are awash with cash.

We have very stringent governance rules about related party transactions (RPT’s). They must be fully disclosed and contracting with related parties must be at arm’s length. In fact, effective the end of this year, RPT’s have been banned entirely. However, the reverse is the case with most of our peers. Subsidiary companies of the operator, or companies owned by the Operator’s principals execute all the contracts, ostensibly at outrageous costs. Of course, due to extremely high operating and capital costs, the operating company is perpetually in the red and liable to only minimum taxes. All the financial rewards are taken up-front at the level of rendering services and executing contracts. The efficient company like us becomes the ultimate loser.


When an institution is faced with a major crisis or where its survival is at risk, the INEDs are the first to jump ship, or blow the whistle on the company. The company collapses, they save their “reputation” and move on to take even bigger board seats on account of the reputation reinforced by their role in pushing the company over the cliff.

All of these anomalies happen, are in fact prevalent, because of a business and regulatory environment that is steeped in corruption, nepotism and sometimes just sheer incompetence. In almost all cases, those who cut corners find it easier to obtain regulatory approvals.

Even in cases of asset divestments by IOCs, they are acutely aware that a critical element of the sale process is obtaining government approval. A lot of times they are forced to bend their own rules to accommodate a bidder that is perceived to have the backing of those who will give the approvals. We have been involved in transactions where we ticked all the boxes (particularly in demonstrating ability and readiness to pay) and another party is chosen who is unable to pay.

Between 2014 and 2016, we had over $750Million tied down on two assets that we paid for but could not secure regulatory approval for. Eventually we had portions of these monies refunded to us, but over $200Million remains unrecovered till date.

But, perhaps the most injurious government segment to productive entrepreneurship and the entrenchment of good corporate governance in Nigeria is the judiciary. Too often, the judiciary has become a valuable tool in the hands of those who cut corners to hunt, harass, or simply torpedo the activities of genuine entrepreneurs working to create lasting value.

After we won Oil Mining Leases (OMLs) 53 in a bid conducted by Chevron in 2013, a bidder who did not win sued the sellers and held all of us to ransom for two years through an injunction they obtained. We fought all the way to the Supreme Court just to vacate the injunction! It took another three years to finally extinguish the case. Usually, the suing party has very little to lose, other than legal costs, while you have hundreds of millions of dollars tied down in an asset you cannot take possession of because of the court’s injunctive orders. Even a simple trade dispute could result in a court shutting down your offices or blocking all your bank accounts. The sheer knowledge that your investments can be totally destroyed by some treacherous judicial pronouncements, corruptly procured, can make even some brave investors avoid environments like ours.

So, if it is much more rewarding to do the wrong thing, why have some of us continued to insist that there is no alternative to sound corporate governance in any entrepreneurial journey? This is because of my firm belief in “the thirty-year rule”. Any business enterprise that is not built on firm and tested governance structures will ultimately fail within thirty years. In geographies where regulations are firm and effective, it would take no more than five years for such businesses to unravel. In Nigeria, it takes as long as thirty years because of the weaknesses I highlighted earlier, but happen it must eventually.

The banking sector is the most glaring example. We went from 126 banks to 24 in twenty-five years. When the smoke cleared only those that had adopted some measure of good corporate governance survived. The top five are now major African Banks. In the upstream oil and gas sector, the dominance of seven international oil companies is being replaced by a motley crowd of over twenty Nigerian independents. This transition kicked off about eleven years ago. My observations over this period of time only reinforce my thirty-year rule. I can confidently predict that, in the next ten to fifteen years, the ones that fail to build a culture of proper corporate governance will drop off the race. Their promoters might amass a lot of wealth, but the businesses themselves will collapse.

Let me now, in my final reflections, discuss two key elements of a proper governance structure which, in some cases, present some contradictions.

The first is the CEO/Chairman conundrum, which I believe is not unrelated to our culture of “the king and his subjects”. The UK Code of Corporate Governance as well as the Nigerian, revised Governance Code, require a clear separation of roles and powers between the board and management as between the Chairman and CEO for all public companies. However, very often, the Chairman turns out to be the “big man” with a large ego who perceives himself as the big boss to whom the management team, led by the CEO, reports.

The board is responsible for the strategic direction of the Company and supervises management performance using the appropriate governance structures in place. But very often the chairman assumes the clothing of the board, with the CEO reporting to him, as he takes on several executive decision-making roles. This has often led to unproductive tensions and power plays between the CEO and Chairman. And because of the level of control the Chairman usually has on the board, he is able to rally the board behind him in such power plays. Not surprisingly, where there is a loser, it is often the CEO.

In my ten years at Seplat Energy, I probably spent up to 20% of my productive time managing my relationship with the Chairman, and in some cases by extension, my relationship with the board.

The second is the role and powers of the independent non-executive directors, (INEDs). There are three broad classes of directors: Executive Directors are the most senior management staff who sit on the board. These are usually the CEO, and a couple of other top management staff like the CFO, COO, Commercial director, etc. Then there are the Non-Executive Directors who, very often, are representatives of key shareholder groups on the board. The third class are the INEDs who have no equity stake in the company, are not related to any key shareholder and have no business relationship with the Company.

For a premium listed company in the UK, only an INED is recommended by the governance code to be Chairman of the board. Even for a standard listed company, where a non-executive director may be chairman, the key board committees of Nomination, Remuneration and Finance must be chaired by INEDs. The senior INED (SINED) is generally seen as the conscience of the board and protects the interests of minority shareholders. Where the Chairman is not an INED, the regulators and minority shareholders hold the SINED in higher trust than the chairman. This is all because the whole governance code is designed to save the company from insider abuse by the key owners and the management. But herein lies the contradiction. Who is more likely to “shed his blood” to save an institution… the one with significant vested interest or the one whose only interest is to save his reputation?

Why have some of us continued to insist that there is no alternative to sound corporate governance in any entrepreneurial journey? This is because of my firm belief in “the thirty-year rule”. Any business enterprise that is not built on firm and tested governance structures will ultimately fail within thirty years.

In particular, when an institution is faced with a major crisis or where its survival is at risk, the INEDs are the first to jump ship, or blow the whistle on the company. The company collapses, they save their “reputation” and move on to take even bigger board seats on account of the reputation reinforced by their role in pushing the company over the cliff. True, their judgments at major decision-making gates are generally more balanced and unbiased, but I have never seen them to be as deeply committed to the survival and prosperity of the company as the NEDs who have a stake to worry about.

Excerpted from ‘My Entrepreneurship Journey’, a Memoir by Austin Avuru, founding CEO, Seplat Energy. The book is due to be published in August 2022 by Radi8 Publishers.



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