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Oando, reaping benefits of diversification

When early this month news filtered from Ghana, that Oando, a wholly Nigerian oil and gas company had been selected as strategic partner to the Ghana National Petroleum Corporation (GNPC) to develop a $1 billion gas infrastructure and assets for the Jubilee oilfield (Ghana’s biggest oil discovery), the report seem to have validated the strategic intent of Oando’s diversification programme.

Only three years ago, Oando assumed a dominant force in the downstream petroleum product marketing sector of the oil and gas industry and

Oil Rig
Oil Rig

a foremost player on the Nigerian Stock Exchange, but it showed that it was not contented with local ascendancy, when it listed on the Johannesburg Stock Exchange in South Africa. The company is the first Nigerian company to achieve such feat.

But that was not enough. The outlook for Oando was to be the preferred holist energy provider in the sub-Saharan Africa, with business interests in the entire energy value chain.

In actualisation of this value propositions, it gradually reversed its business strategy, diversifying from downstream into upstream oil services, exploration and production, gas and power.

The resultant subsidiaries are: Oando Marketing Limited; Oando Supply and Trading; Oando Energy Services, Oando Gas and Power; Oando Exploration and Production and Oando Refining and Terminaling.  The objective was to position these businesses as independent entities with own management team and systems, which would assume leadership status in the sector each plays.

Gas Development: An Ingenious Approach
The diversification strategy already yielding results as planned. A case of reference is the aforementioned Ghana Jubilee Gas project, which is a testament of how Oando Gas and Power (OG&P) is consolidating its leadership of the midstream sector within the sub-Saharan region. The scope of the highly technical project includes the procurement and development of a 16” x 80km high pressure pipeline, 150mmscf/d onshore-based processing facilities 10” x 40km onshore pipeline, 10” x 123km onshore pipeline, Storage tanks for LPG and Condensate, and ancillary infrastructure

Oando Gas and Power pioneered the piping and distribution of natural gas to industries in Lagos, building 100 km of gas pipeline system in the process. Currently, another 128 km of gas pipeline is under construction the south east region on Nigeria, while it plans to add 100km yearly to the company’s grid. The company will leverage these experiences to build what will become Ghana’s model for gas commercialisation and utilisation. Indeed, Oando has demonstrated its competence to partner International Oil Companies on technical intensive and highly financial oil and gas project. Its recent alliance with Gazprom – Europe largest gas operator and consortium with Saipem on the Ghana Jubilee Gas Project are clear testament.

Meanwhile, the power division of the company is due to deliver an independent power project to the Lagos State Government that will ensure steady supply of electricity to Lagos Water Corporation to enable it meet its objective of supply portable water Unceasingly.

Such impressive milestones continue to be a tradition in other subsidiaries especially with Oando Energy Services (OES) and Oando Exploration and Production (OEPL). Today, OES is Nigeria’s largest indigenous drilling services provider, with five rigs in its fleet. Two of the rigs are executing a $150 million Agip drilling contract.

On the other hand, OEPL is Nigeria’s first indigenous participating company in a producing deep offshore oil block, where it has 15% stake Agip’s deepwater assets  OML 125 and OML 134. It is currently the operator of two oil blocks, OPL 278 and OPL 236, while a Local Content Vehicle partner with Agip in OPL 282 and has a 45% interest in a marginal field. Also, the company currently got the nod of the regulators on 30% acquisition of Akepo oilfield as it bolster its upstream presence through acquisitions of near term and producing assets.

Accelerated Value Extraction
Reflecting on the audacious steps taken barely three years ago, Mr. Wale Tinubu, Group Chief Executive reiterates that “the overriding objective of the expansion programme is optimising shareholder value by strengthening Oando earnings platform and evolving multiple revenue mix. We also have the opportunity of earning a substantial amount of our revenue directly in dollars from our upstream division, which is projected to be responsible for 50% of the Group’s income in the nearest future.

Besides these values, we are intensely building local capacity that is capable of execution excellence, whilst positioning the company as the indigenous partner of choice for oil and gas operations”.

Already, Oando is recovering the cost of investments as fast as it commits them to the diversification programme. In August, 2009, the company commenced crude off take at its Abo fields, the aggregate of which amounts to 730,000 net US barrels. The exercise generated approximately USD $49 million revenue for Oando.

Again, Mr. Tinubu sees the feat as a milestone which underscores Oando’s truly integrated energy solutions status. “With this development, we have also demonstrated our company’s ability to partner international oil operators in transforming technical ideas and huge capital investments into profitable ventures while managing the risks involved”, he adds.

The total investment on the oilfield, which currently produces approximately 32,000 barrels per day (BPD), will be recovered completely with two more successive cargoes lifts. The need to diversify could not have come at a better time than when Oando’s traditional downstream marketing has been nurtured to maturity and continues to reinforce its Such impressive milestones continue to be a tradition in other subsidiaries especially with Oando Energy Services (OES) and Oando Exploration and Production (OEPL). Today, OES is Nigeria’s largest indigenous drilling services provider, with five rigs in its fleet. Two of the rigs are executing a $150 million Agip drilling contract.

On the other hand, OEPL is Nigeria’s first indigenous participating company in a producing deep offshore oil block, where it has 15% stake Agip’s deepwater assets  OML 125 and OML 134. It is currently the operator of two oil blocks, OPL 278 and OPL 236, while a Local Content Vehicle partner with Agip in OPL 282 and has a 45% interest in a marginal field. Also, the company currently got the nod of the regulators on 30% acquisition of Akepo oilfield as it bolster its upstream presence through acquisitions of near term and producing assets.

Accelerated Value Extraction
Reflecting on the audacious steps taken barely three years ago, Mr. Wale Tinubu, Group Chief Executive reiterates that “the overriding objective of the expansion programme is optimising shareholder value by strengthening Oando earnings platform and evolving multiple revenue mix.

We also have the opportunity of earning a substantial amount of our revenue directly in dollars from our upstream division, which is projected to be responsible for 50% of the Group’s income in the nearest future. Besides these values, we are intensely building local capacity that is capable of execution excellence, whilst positioning the company as the indigenous partner of choice for oil and gas operations”.

Already, Oando is recovering the cost of investments as fast as it commits them to the diversification programme. In August, 2009, the company commenced crude off take at its Abo fields, the aggregate of which amounts to 730,000 net US barrels. The exercise generated approximately USD $49 million revenue for Oando.

Again, Mr. Tinubu sees the feat as a milestone which underscores Oando’s truly integrated energy solutions status. “With this development, we have also demonstrated our company’s ability to partner international oil operators in transforming technical ideas and huge capital investments into profitable ventures while managing the risks involved”, he adds. The total investment on the oilfield, which currently produces approximately 32,000 barrels per day (BPD), will be recovered completely with two more successive cargoes lifts.

The need to diversify could not have come at a better time than when Oando’s traditional downstream marketing has been nurtured to maturity and continues to reinforce its leadership position in the sector. Presently, one in five cars on Nigerian roads drive on fuel sold or distributed via Oando’s over 500 retail outlets and strategically located terminals.

Its Supply and Trading subsidiary is Nigeria’s largest independent and privately owned oil trading company, maintaining presence in the world’s product freight market. With additional assets of three Terminals, two Lubes Blending Plants and 9 LPG filling plants, Oando Marketing maintains a dominant stature in the Nigerian oil and gas sector, while further radical upgrades of the facilities are ongoing to meet its sub-Saharan leadership aspirations.
With a track record of a first mover instinct and excellence driven capability, Oando is clearly demonstrating its determination to be the beacon of the local content involvement in the Nigerian oil and gas industry as well as the global presence.

Judicious Funds Utilisation
There is no doubt that despite the ingenuity of the programme, the driving force was the capacity of Oando’s Management to astutely utilise capital to grow the business into a successful and foremost downstream player and then incrementally diversify to other high margin and dollar dominated sectors of the oil and gas industry, until it has established itself at every point of the energy value chain. The company has been riding on the back of this efficiency to deliver a 50% year on year profitability over the past 5 years.

In 2004, the company successfully raised capital from the Nigerian Stock Market to recapitalize and maximise operational efficiency after the Agip merger with Oando. Further debt financing from a consortium of Nigeria’s foremost banks, led by First Bank, enabled investments into its gas business, which today has a 100 km of pipeline system in Lagos, the first city in Nigeria to have such infrastructure. The gas infrastructure development has now berth in the South East, with another 128 km pipeline system running from Akwa Ibom to Cross River states under construction.

Oando’s consistent performances have engendered it to offshore financiers like Merrill Lynch, Citi Bank, Standard Bank, BNP Paribas and Standard Chartered which have provided lucrative credit lines for the company to fund its upstream expansions. Oando’s recent crude offtake from one of its upstream assets worth $49 million is a testament of ingenuous funds optimisation.

The company has also set aside $500 million to fund a five year plan for its rig services business. With $250 million already spent and five rigs in its fleet, Oando has assumed leadership postion as Nigeria’s largest indigenous drilling service provider.

Oando believes its strategy is worth benchmarking in the cause of building more indigenous oil and gas corporate giants as intended by the local content policy


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