“We have had a lot of interest from gas companies, especially in the CNG and mini-LNG space, in the past year. It is exciting and it appears to me that gas is growing more rapidly than oil in this environment.”

Cecilia Aqua UMOREN Managing Director and CEO MILLENIUM OIL & GAS

Nigeria’s next step forward

June 6, 2018

Cecilia Aqua Umoren, the managing director and CEO of Millenium Oil & Gas, talks to TOGY about the harnessing of gas resources in Nigeria, the Petroleum Industry Bill and the potential of marginal fields. Millenium Oil & Gas is a Nigerian indigenous exploration and production company with its headquarters in Lagos.

On financing: “Our problem is access to affordable financing. Unfortunately, the cost of operations is beginning to climb again as there is more stability in this area and therefore more work for the service companies to do, leading to an increase in operational costs.”

On the legal framework: “Laws and regulations on governance have always been in place, but people have ignored them because of lack of implementation. Corruption, transparency and ethics are a big issue in the country but we hope we will see a noticeable change in our lifetime. We are talking about a change now and putting clear regulations in place to drive it.”

On the PIB: “The National Assembly has just passed the Petroleum Industry Governance Bill. This gives people a lot of hope that the rest of the PIB will soon be passed, including the fiscal terms, which is what actually determines one’s investment decisions.”

On upcoming auctions: “For any operator, the dream is asset replacement. There is a lifetime to my reserves. I do not want to be in business for only a decade and then fizzle out. We are all waiting in anticipation of the announcement for the next bid round and hope that there will be a level playing field for everyone.”

Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Cecilia Aqua Umoren below.

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What are the latest updates with regard to the Oza field in 2017?
We started production in September 2017. We did not have the results that we expected; we are producing much less than we thought we would; 900 barrels per day compared with the 2,000 barrels per day planned. We are currently making high water cuts and high GOR [gas-to-oil ratio], however we are happy to be producing and to have cashflow now.
What we carry for prospective investors is reserves of 18 million barrels, but that is a very conservative evaluation. At the time Millenium farmed into the Oza field, Shell had drilled three wells from which they had produced about 1 million barrels.

 

How are you optimising the development?
We want to treat the wells that are producing now. We also have a well that is a candidate for workover and we expect that it should add 500-1,000 barrels to what we are producing already.
In regards to our gas, we expect to have some kind of strategic partnership that will utilise our gas. We have been approached by a few companies on gas solutions, and we need to come up with the best possible solution in the least possible time. Then we will drill additional wells, maybe horizontal wells to drain much of the reservoir at the same time. We are ready for this next phase of development, but our challenge is financing. Should we not get additional financing at this time, we will focus on optimising the existing wells.
In terms of the timeline, we are ready to drill additional wells subject to obtaining the relevant permits, which takes time. Because of this, I do not foresee us drilling another well in 2018.

How is the investment climate?
People are a bit more optimistic about doing business in Nigeria. What was scary for potential investors in the past couple of years was the foreign exchange volatility and the low oil prices. This has stabilised somewhat and people are now living in the new normal of higher foreign exchange and lower oil prices. There is thus some kind of stability in these two regards, so people can look to the future with less trepidation than before. For that reason, people are talking about possible financing arrangements much more than they did in 2017.
Our problem is access to affordable financing. Unfortunately, the cost of operations is beginning to climb again as there is more stability in this area and therefore more work for the service companies to do, leading to an increase in operational costs.
As regards the regulatory framework, the National Assembly has just passed the Petroleum Industry Governance Bill. This gives people a lot of hope that the rest of the PIB will soon be passed, including the fiscal terms, which is what actually determines one’s investment decisions.

What impact do you think the Petroleum Industry Bill will have?
Everybody wants transparency. That is what drives the growth of any economy and what has kept the growth of our economy stultified for a long time. It is exciting for me that we will be at a point at which we will have regulations governing transparency. However, for us, it is a cultural change that needs to happen over time. Laws and regulations on governance have always been in place, but people have ignored them because of lack of implementation. Corruption, transparency and ethics are a big issue in the country but we hope we will see a noticeable change in our lifetime. We are talking about a change now and putting clear regulations in place to drive it.

Are you interested in marginal fields?
Of course. For any operator, the dream is asset replacement. There is a lifetime to my reserves. I do not want to be in business for only a decade and then fizzle out. We are all waiting in anticipation of the announcement for the next bid round and hope that there will be a level playing field for everyone. We are quite excited about it and we hope to participate.

How can local companies manage with higher costs than some competitors?
Local companies can form strategic partnerships with service companies in a bid to utilise their services. They can also continue to focus on cost control and prioritise their activities.
I wish that in the interest of growing the oil and gas industry that the international service companies will reserve some of their portfolios to work with indigenous companies such as ours. For example, they could offer us deferred payment terms or other attractive options to enable us harness their technical competence in order to develop our assets.
I am hoping that these companies know that it is in everyone’s interest to grow the industry. The funding issue and higher cost are problems that we have and we must find creative ways to solve. To attract that kind of funding, indigenous companies will need to show credibility and responsibility and continue with our cost-cutting measures.

How is the gas industry developing?
We have had a lot of interest from gas companies, especially in the CNG and mini-LNG space, in the past year. It is exciting and it appears to me that gas is growing more rapidly than oil in this environment. The government is going along with this agenda, talking to the industry more and creating incentives for them. The number of people who are coming to offer us gas solutions is encouraging and it is exciting to the point that we are wondering whether we should keep our gas and process it ourselves.

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