Aiteo is Proof that Nigerians can Run Divested Assets successfully – Dr. Onyejekwe

Dr. Chike Onyejekwe is the Group Managing Director of Aiteo Production and Development Company Limited. He is a Geologist by background with extensive depth and breadth of experience in the Oil and Gas industry spanning over 30 years. Dr. Chike has worked in various leadership and senior management positions within and outside Nigeria, covering Exploration, Development, Asset Management, Operations and Management. Along his career line, he had 5 years broadening overseas assignment to The Petroleum Development Company of Oman in the Middle East as Senior Production Geologist/Seismologist, where he was responsible for maturation of appraisal and development opportunities that added significant reserves and production to Sultanate of Oman. On coming back from Oman, he worked in different senior capacities in SPDC which include Divisional Head of Geology, Asset Development Manager, Chief Geologist, SPDC’s General Manager for Exploration before being appointed in 2008 as Managing Director of Shell Nigeria Exploration and Production Company (SNEPCo), Deep-Water operations.
In 2014, Chike retired from SNEPCo and has since taken up the position of Group Managing Director of Aiteo Eastern Exploration and Production Company (AEEPCo), the largest Nigerian upstream independent indigenous Oil and Gas Company which operates the 100km Nembe Creek Trunk Pipeline and the prolific OML 29 block in Niger Delta. Dr. Chike is an alumnus of Ashridge Business School of London and Wharton school of Business USA. He speaks keenly here about his passion, career, Aiteo and the future of Hydrocarbons. Excerpts.

You graduated with an honors degree in Geology from the University of Nigeria Nsukka. What was your inspiration for studying geology? Would you say it was by choice or by chance?

My initial career interest was Medicine or Law like every other young man at the time but before writing my WAEC I began to hear about big oil companies like Shell, Chevron, Mobil etc operating big in Nigeria with large footprints; Oil companies that were involved in discovering and producing the black Gold that net in millions of dollars both to themselves and the country; then my interest changed to wanting to study a course that will make me work in an oil company. That’s how my journey to study geology began; I applied to University of Nigeria Nsukka and got admitted. After my first year in the university, I was opportune to get a scholarship which was back dated to my first year. By some streak of fate, I ended up having all my years of study being paid for. As I got a backdated scholarship, I was refunded my year one fees which I gave back to my father to help train my younger ones, so you could say it was destiny, or by chance – I don’t know.

Who were your role models in the discipline and how has this shaped you from your early days as a young geologist in Shell to where you are currently as the GMD of Aiteo?

I think when you talk about role models; it has to be in stages of one’s career. My role models were dependent on the different stages of my career. In the early stages of my career, my mentor was Mr.Victor Olarenwaju (popularly called “Sir Vy”) who was my supervisor at that time. He motivated me and was equally strict with me (with clear boundaries on familiarity and work), he took me as his son, was always available to mentor and teach me passionately. He was both hard and patient with me (it’s remarkable how he combined both qualities), he transited me from being just a degree geology holder to a practical geologist, made out time always to work through my errors with me; ensured I carried my learning to other projects; all aimed at bringing out the best in me and optimizing my productivity. I must admit that this discipline and coaching passion guided me through virtually all my career as I started moving up the professional and management ladder.

At the supervisory stage of my career, one of my role models was Late Joshua Udofia, who later became the Deputy Managing Director of Shell. He was humble, smart, delivery and quality focused, great in staff development/matters and fighting for Nigerians (qualities that earned him the nick name General). I have to add, that he lacked patience for non-performance. He was easy to approach, totally devoid of arrogance (which is common with some senior management in many companies). Joshua was more of a goal-getter in the company and that inspired me a lot as we had similar things in common. I have other role models, but let me stop here for now.

You are a geologist that has held both technical leadership and senior management positions within and outside Nigeria. There is a commonly held belief that highly technical people do not make good managers, do you agree with that?

Let me first of all dissociate myself from that notion that technically proficient people don’t make good managers. If I take geologists and play back memory lane and come right up to where we are today, if I am not mistaken, Geologists have dominated senior positions in the industry and they have done excellently well in moving the industry forward. To say the least, I am one of them. Having said that, I must also admit that many technical people who don’t make good managers are mainly because they get too involved in their technical details, and they find it difficult coming out of their comfort zone. The challenge with such highly technical people is that often times they find it difficult to look at the bigger picture outside their discipline, e.g. how will what they are working on feed into other people’s deliveries and when? etc. A highly technical geologist focuses so much on the details such that after achieving 90% solution, they can end up spending so much time to complete the remaining 10%. Often times the time spent on the 10%is so much that you wonder if such details are required to mitigate the risks. Let me give you another example, some geologists working on maturing a prospect are so focused on maturing those prospects, often times not considering whether -as in the case of a discovery, whether the oil can be easily “Final Investment Decisioned” (FID) in the nearest future. A technical professional aspiring to leadership position must ask themselves some business questions assuming he finds oil; can I monetize the oil? Where will it go to? Where will I flow the oil? Where will the discovery sit in the basket of company ranked projects for funding? Etc. He must be concerned about how to realize value from that asset. He must look at what can be achieved with the 90% solution with focus on the economics and end product. A management person looks at the near-term and long-term values, monetizing assets, discoveries, facilities, reserves and life cycle ROI.

In subsurface evaluation, is it possible for highly competent technical professionals to drill a dry well?

Oh Yes. The fact that you can mature a good prospect even with amplitude support is not a guarantee that when you drill you will find oil, there are other fluids that can give similar responses. I have heard experiences in the past where everyone was so sure, looking at amplitudes that we have oil or gas and when we drilled it was a dud well, at best it was a depleted zone . That is why Geologists put a probability of success (POS) on prospects, because of these probabilities. Normally a good exploration prospect can have between 30-45% POS (much higher in most exploratory appraisal prospects). Even with all the confident predictions, until you drill, you are never certain; this is one of the reasons geologists and reservoir engineers run risk/probability analysis. That further tells one of the chances that a wild-cat drilling might be successful or unsuccessful even after all the brilliant technical jobs have been done. In investments, you don’t plan your Final Investment Decisions (FID) with upsides, rather you work with what you are confident of recovering, because even when you encounter hydrocarbon, you are not sure of the lateral extent of the accumulation until you appraise (to define extent and narrow down the uncertainty range between the high and the low volumes) . However, one way of recovering part of your drilling expenses in a discovery well is to do an extended well production testing. With this a company can recover part of the expenses pending when the full field appraisal is completed and Field Development Plan put in place, ready for execution.

What are some of the challenges facing the Nigerian Petroleum Industry today? What solutions can you proffer?

The challenges bedeviling the industry are numerous including; funding, security, human resource / experience skill-gaps, oil price volatility, the future of oil (discontinuation of fossil fuel use by certain countries) etc. We are also challenged in the sense that the United States that used to be a net importer of crude is now a net exporter. One might then ask if the world is saturated with oil. Some countries are putting timelines to banning the use of fossil fuel. As at today, can we realistically do without fossil fuel? The electric cars are gaining more attention globally but how many can afford electric cars which are very expensive. I believe that apart from other numerous bye products of oil (which are many), which the world requires on a daily basis, we need for instance, gas to power plants to generate electricity, aviation fuel, LPGs, Petrochemical feedstocks etc. Consequently, I believe that hydrocarbon will still be with us for quite some time (especially here in Africa). There are also cases of vandalization of pipelines and crude oil theft; these are sources of revenue losses to companies. For the funding, we all know the cash call funding has not been enough to carry out the planned activities of most of the Independents

and IOCs to grow production. The Alternative funding arrangement discussions (to replace cash call) is still ongoing and progressing. Until ongoing discussions and efforts are concluded, it will still be a challenge for most JV companies to raise huge funds required to execute their planned development projects to grow production to a certain number..There is so much competition for funds in the country so this will still be a challenge in the foreseeable future.
What are some of the challenges you think indigenous E&Ps operating in Nigeria are facing and how can they surmount them drawing from your Aiteo experience?
First of all, people need to know that Aiteo acquired 45% working interest in SPDC/JV divested block of OML 29 and NCTL. OML 29 is a world-class asset that is bigger than most IOCs operated assets in Africa and Asia. I have also to let you know that the two assets (OML 29 and NCTL) were acquired with facilities from a consortium of eight banks.
It is a huge facility. When people make reference that Aiteo is producing so much, we remind them that we also have huge bank debts to contend with and service quarterly. We have an Executive Vice Chairman of Aiteo Group Mr Benedict Peters, a gifted, passionate entrepreneur who has a vision of growing the asset to become number one independent in the country, and to date he has achieved that. He has set another target for the company in our growth path of the asset. How did he achieve this? He believed in having the best technical and management personnel with proven experiences in oil and gas companies to run the asset and he went first to hire highly skilled people (across the entire workforce to the management) to position and grow the asset. When Aiteo took over the asset, we increased the production by over 100%. (from 33kbo/d at take over to 90kbo/d in 3-4 months). One thing that has been demonstrated is that Nigerians can run these assets. We have since focused on growing production while also focusing on asset integrity maintenance. Most of these divested assets are old and aging; lots of asset integrity maintenance, corrosion control etc. will be required and monitored closely. We have to identify, plan in advance to carry out predictive maintenance, preventive maintenance, and reactive maintenance as operations dictate. We are also faced with the issues of crude theft which sadly has become a major revenue loss to us and the country. Do not also forget that when we took over the asset in 2015, the oil price went south so you can imagine how we survived and at the same time serviced our debts. We did not retrench our workforce. If we have made it through those periods, it tells you how resilient the company is. On corporate governance, compliance is key. We have employed highly skilled compliance personnel to look at every area of our activities to ensure all the compliances are tracked, and flagged. Just to remind you that we are just over three years old, took over the assets from Shell in 2015. Mind you without structures in place we couldn’t have been where we are today. We are still improving and consolidating and have further strengthened our organization with more human capital.

Where do you see Aiteo E&P in the next five years? Some new companies grow their productions in the first few years and only to experience severe decline in the latter years?

Aiteo is part of the Aiteo/NNPC Joint Venture (JV). We have put in place a diverse technically sound team to carry our operation. We have a five year rolling JV programmes, which defines our growth path, our yearly development projects, operations, budget, HSE activities etc, which we use to secure approvals from NAPIMS before execution. We also have a large resource base which underpins our 5 year rolling plans. Looking at our debts, we have to work this asset to meet up with facilities repayment commitments. We have a robust resource base, work programme, skilled resources, very supportive board , world class asset and structure that will see us growing production rather than declining. From where I sit today as the GMD, I only see the growth of the company in many years to come and not a decline at all. .

How does Aiteo manage community issues?

We have a strong partnership with the communities where we operate. Most of our field staff are community members and that further shows the relationship we have built with the community working collaboratively with them. That our staff live within the community area, commute to and fro to well heads, flow stations, execute projects, etc, are clear indications that we have a good relationship with the communities and see them as stakeholders too. We employ field staff from communities and train them to deliver. Many of our contracts are given to and executed by communities, so they also see the facilities as theirs too.
What are your views about evolving strategies for sustainable petroleum business in a fluctuating oil price regime like what we are experiencing now?
There are no hard and fast rules. The oil business is a high risk – high reward business. There are many variables that drive the strategies, e.g., operating environment, country risks, business assumptions etc. Also, at what price or price range should one screen for profitability? There should also be focus on cost, skills, whether you are dealing with green field or brown field asset developments, efficiency of operations etc. Whatever the strategy, full field life circle economics, profitability and sustainability of the business must be considered and reviewed continuously as at when required; such reviews allow one take advantage of low price regime to renegotiate e.g. with contractors on contract price reduction etc.
Source: Aiteo

Leave a Reply

Your email address will not be published. Required fields are marked *