LAGOS OIL CLUB, NOVEMBER 21, 2011

Challenges of Nigerian Independents: Beyond 2011

Austin AvuruManaging Director/CEO

SEPLAT Petroleum Development Company Limited

KEY DISCUSSION FOCUS

1. THE NO-GROWTH HISTORY OF NIGERIAN INDEPENDENTS.

2. THE EMERGING NEW SHAPE OF INDUSTRY FOOTPRINT

3. IMPLICATIONS FOR NIGERIAN INDEPENDENTS

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THE 20-YEAR HISTORY OF NIGERIAN INDEPENDENT

Dubri Oil (since 1987) is Nigeria’s oldest Independent Producer.

But the Landmark Takeoff of the Indigenous program occurred during 1990/1991.

Between 1990 and 2007, some 52 Indigenous Companies have been licensed to

Operate Leases in the Niger Delta and Anambra Basin.

In 2004, 24 Nigerian companies were licensed to operate 24 Marginal Fields.

Independents’ Operated Production peaked at about 100kbd in 2005. Conoil and

Moni Pulo accounted for 70% of this peak production.

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THE 20-YEAR HISTORY OF NIGERIAN INDEPENDENT

Seven Marginal Field Operators currently produce about 22,000 bopd. Two of

them account for 60% of this figure.

On the average, Independent production over the 20 years from 1990 to 2010 has

stayed below 80kbd, often oscillating between 40kbd and 100kbd.

Average life cycle from First Oil to Peak Production to Rapid Decline is less than

10years for Independents.

Apart from Conoil, most Independents Operations are single block/single field

developments with little or no prospects for sustainable growth in reserves and

production.

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CURRENT INDUSTRY FOOTPRINT

• DeepWater, the tuff of Deep Pocket Multinationals

- Shell

- ExxonMobil

- Chevron

- Total

• In the Traditional Onshore/Shallow Water, five early comers sit on some

88% of the Reserves and Production

- Shell

- ExxonMobil

- Chevron

- Total

- Agip5

CURRENT INDUSTRY ….. (cont’d)

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Shell

Chevron

Mobil

Total

AgipOML 04

OML 41 OML 38

THE EMERGING SHAPE OF INDUSTRY FOOTPRINT

On January 29, 2010, SEPLAT pioneered a Commercial, operated Asset

acquisition transaction with the Shell Joint Venture.

Five more transactions have followed this, and are at different stages of

rancorous closure.

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NPDC/SEPLAT JOINT VENTURE

THE EMERGING SHAPE OF ….. (cont’d)

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THE EMERGING SHAPE OF ….. (cont’d)

OML 42 OML 34

OML 30OML 26

OML 40

NPDC/SEPLAT

NEW ACQUISITIONS

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IS THIS A GAME CHANGER??

But over 52 Nigerian Companies have been awarded blocks in the past 20 years

without any growth in Indigenous Production??

Could the prospects now look more promising??

In the immediate horizon are six possible Independents poised to seize the

moment.

• SEPLAT

• OANDO

• FIRST HYDROCARBON

• CONOIL

• NIGER DELTA

• NECONDO

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These fore-runners can quickly build up Operational and Financial Capacity and

set the pace for a few others to join.

A lot, however, depends on the disposition of NNPC/NPDC

THE KEY GAME CHANGER HERE IS THE ABILITY OF THIS NEW GENERATION

OF INDEPENDENTS TO BUILD OPERATIONAL CAPACITY AND RAISE

SUBSTANTIAL FUNDS TO FINANCE THEIR GROWTH.

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IMPLICATIONS

Production from Nigerian Independents could top 250kbd by 2015.

Annual spend by Independents could top $1.5billion by 2014.

These activities will precipitate a full-blown Exploration/Appraisal Development

Campaign focusing on:

- Deeper Plays

- By-passed Plays

- Small Fields Development

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IMPLICATIONS (cont’d)

The result will be

• Accelerated growth of Nigerian Independents

• Renewed Onshore Exploration, Appraisal and Development Campaigns

• Accelerated Gas Development

• Production/Reserve Growth

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Some 60% of Domestic Gas supply in the West will come from these new

locals.

The Western Franchise of the Gas Master Plan will be hinged on them.

KEY CHALLENGES

Funding

Operatorship/ Capacity / Competencies

Security

Community Management

JV Management - Partnership

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CONCLUSION

There is a window of opportunity now to build a new crop of

medium-sized Independents in Nigeria.

The combination of some PIB (Lease Administration) provisions

and Voluntary Asset rationalisation by the Majors will fuel this

opportunity.

The Unfolding scenario could see the dominance of Independents

in the Onshore Niger Delta.

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THANK YOU

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