- Interview with Dr. Emmanuel O Egbogah,
Executive Chairman, Emerald Energy Resources Ltd. -

Emmanuel Egbogah
Executive Chairman of Emerald Energy

‘Getting finance has not been as difficult for us as for other indigenous companies’

You have over 30 years of diversified geological and petroleum engineering experience in consulting, teaching, research & development across the globe. How have you transferred your extensive technical knowledge of the industry into the your objectives and goals for Emerald Energy Resources?

As you have said, I have been involved in the industry for the last 36 years and I have developed my contacts, expertise and experience in many countries of the world, including the UK where I originally did my doctorate. I was also in the USA, India, Canada, Malaysia and Libya. In fact it is always easier to speak on where I have not been than speaking on where I have. Anywhere there is oil, I have been there. I think all this has helped me to crystallise into specific areas of opportunity that we are currently pursuing in Emerald.

As the Executive Chairman of the company, I have set specific priorities and objectives that we are pursuing and I view the objective of obtaining the financing to be able to organise the company with greatest concern. As you may know, one of the biggest handicaps of local and indigenous company development is financing. In our case, it is not as bad as the others because I have global recognition in the industry. Therefore, getting financing has not been as difficult for us as it has been for other indigenous companies.

People have come to put their money on my name and we have used this to set a private investment programme and you would be surprised that we have investors from as far as Hong Kong, China who are putting their money into our company. So we are doing well in this. I want to be able to complete the mandatory minimum worth programme that the government laid down for those who obtained oil blocs and the results of this would help us to confirm the prospectibility of the oil bloc 229. This is because if you have a good knowledge of what might be there, it helps you to plan for the development of the whole business.

We have about two volumes of research report that we have done that constitute about $10million worth of expenses. We would need to study in and around the oil bloc to be able to identify what we have, the problems that we might likely face and most importantly to establish the prospectibility and profitability of hydrocarbons in these areas. With this, our priority and objective would be to establish the reserve base that we have identified in these prospects. This is because attracting foreign finances is not a joke, as you have to show assets to them to attract them. We need to produce and integrate an operating management plan for the oil bloc and that is what we are currently doing.

The need for this is that those who want to come and invest in this area would need to see a reliable fully developed integrated plan. Because of our expertise, we have dexterity both in geology and petroleum engineering. I am a geologist and a petroleum engineer. This makes a lot of people quickly put their trust on us on what we do. Practically, everything we do is the best in the industry. We are adopting the best practice in the industry.

My key objective would be to uphold the vision of this company. The vision is to quickly establish Emerald as a competent and profitable world-class exploration and production company, which is capable of creating value for its stakeholders through the application of appropriate technology. Once we do this, only the sky is going to be our limit. This is because once you have the appropriate technological equipment; you would be doing a lot of good for yourself because you are able to make the stakeholders happier, you have bigger and better returns as well.

Since the bloc was licensed to us, we have conducted extensive geological, geophysical and other petroleum engineering studies in and around the bloc. This is ostensibly to enable us to understand the geological disposition of the environment including the prospectability and profitability of the bloc. The result of these studies have led to the identification of 11 prospective oil fields within the bloc with estimated reserve base of well over 2 billion barrels of oil.

We successfully drilled our first well last December. At present, the well is suspended and is waiting for the planned, extended testing that will take place this year. The reason for that is that we hope to test the geophysical coverage of the well, which would allow us see the extent of the depositor, and therefore to better complete the wells for maximum utilisation. So everything we do know about the configuration of the oil resource helps in the way you complete it to maximise or optimise its output. This is very important right now; we have just let our bids for this extensive data acquisition programme that would cover our Kula area where we have drilled the first well. This is about $75 million programme that would be completed by second quarter of 2006.

As a follow up to that, what kind of investors have showed interest in the operations in OPL 229?

We have extensive interest in OPL 229 because people who see us believe that these guys know what they are doing and that they would always put their money there. We actually limit people who want to invest in the company, especially the local people. Some of our local people here who are called 'money bags' have money and they want to acquire the blocs but they do not have the idea of the oil business. Because of our vision and mission, we do not accept every investor; only those that we are sure would help project the image and growth of the company. This is because we are a highly professional group. You would not see any general or politician in my company. It is a group of very competent technocrats. So if the opportunities are there, our people are making good use of it.

The Australians are coming this month. We have told them that we do not want to give out more equities. They are very interested in investing in us. They have said, "We invest in a company that we regard a lot. If the company dies, we die with it." So even though we have told them we do not have much room for foreign investors, they say they would still make the trip because they are very keen to be accommodated in the programme.

Unfortunately, the wishes and desires for investment have not been coming from the United Kingdom. They have been coming from North America, Asia and Australia lately because the Australians want to enter Nigeria and West Africa in a big way and they think we are the most suitable vehicles for them to do so.

Local content has clearly been a big issue in the industry with figures, which were once as low as 3%, believed to now be around 15%. What developments need to occur to increase the participation of Nigerians in the Oil and Gas Industry?

Opportunity for the indigenous oil and gas companies abound in the oil and gas sector, but those opportunities do not necessarily materialise for indigenous companies due to weak technological and management capacity. Local content is the buzzword for today's oil and gas industry in Nigeria. But I am not aware of a properly articulated federal government policy on local content in the oil and gas sector of the economy. I am quite critical about this. I have presented a lot of talks on national content development and participation in the oil and gas industry in the country. I say national content, not local content. Local content is all right but it appears to me that people do not really understand what is involved, but when you say national content it makes it quite specific to Nigeria. At a key stakeholders workshop which was held in Abuja on 24 March 2004, I presented an important paper on the topic entitled "Nigerian content in the petroleum sector: Certain Realistic and measurable targets and Matrics." It is also a very key paper that I presented to the Senate Committee on local content.

My idea is to point out the components or what local content is. How to measure it and all that can be done to maximise it. This is because, as I speak, I have my serious reasons for that. In addition to presenting this paper and because of my belief that our people do not understand what is required to make local content development a success? I even brought Malaysians that I worked with to achieve a very successful local content development and participation, to Nigeria. Theirs is one of the best examples in the world. So I thought it would be to the best interest of Nigeria to bring these Malaysians who had successfully used the method and have benefited a lot from it.

These Malaysians came, worked the magic and Nigerians understood. However, it is still very difficult in the minds of people here when we talk about technological transfer. It is a buzzword in the world. Everybody thinks we can transfer it, do it. I tell them you cannot do that. You may be ready to transfer to me, but am I at a level to receive it? The people are not at the level where they can appreciate it. I introduced the concept of "imbibition" of technology, just the same as local content.

The concept of "imbibition" is a slow one. It helps you to gradually and slowly understand certain things. Then you can keep it, it would be sustainable, but all these things are not quite appreciated. It comes today and disappears tomorrow. You finish a workshop and you go and there is no effort to harness all that has been said. That is why I say a government policy that defines how, why and where.

I always say that when you do not understand a problem, you can't design a solution for it. The technologically ill-equipped local contractor does not constitute any growth in local content. Recently, Nigerian President directed that local content in the oil and gas industry be raised from 15 to 45 per cent by 2006 and to 70 per cent by 2010. However, you do not legislate local content, neither do you dictate it. You make a clear policy, put in place a pragmatic legal framework and plan the management of the numerous elements of local content development which include solid educational background, educational foundation technology development, knowledge base. Technical access for how these things can be retained and developed. Again people do not apply themselves seriously to these problems.

Without a clear policy, plan and strategy on the matter, the expected success will only become wishful thinking. At the moment, the government is still struggling for the policy and legal framework for local and national content. The competitiveness can only come with the local development and application of technology and industry based practices. Without that you will only be making noise.

Emerald Energy Resources Limited is a young and dynamic indigenous company, which operates with highly skilled, multi-disciplinary team that achieve optimum field development plan and project economics thereby creating value for its stakeholders.
The company is owned, operated and managed by an international team of petroleum experts, with diversified industrial experience with major oil and gas producers and service providers. It is an integrated, multi-disciplinary team of geologists, geo-physicists, engineers, financial expert and lawyers, each with incontrovertible authority in his field of practise and specialisation. The company's personnel have in their respective former businesses been responsible for the design, implementation and management of major oil and gas projects around the world, and thus have records of superior technical competence and project management.

The company is an example of one that is being built on the bedrock for the best possible know-how and industry's best practices. This is also supported by superior management skills. It has all the ingredients for local content development and can serve as possibly the best example of where local content can be achieved with great success.

Alongside Oil production in OPL 229, Emerald Energy Resources invests in the "hydrocarbon value chain" which includes gathering, processing, transportation and marketing of natural gas and natural gas liquids. How is Emerald Energy's gas business developing?

Emerald is a new entrant into the oil and gas industry in Nigeria, but is not focused in the gas area at the moment, even though Emerald has got a lot of prospective gas in its own blocks. Nigeria has about 187 trillion standard cubic feet of gas reserves, and it will continue to grow and may even reach 500 trillion scf, which makes it the third largest after Iran and Russia as the biggest gas producers in the world. There are on-going developments in LNG in the country, which would help Nigeria to become a leading global supplier of LNG. Currently, the gas policy and legal framework, including monetisation of gas are ongoing, and we believe this would help to further enhance the gas development in the country.

Nigeria is really a gas country with some oil in it. The potential for gas in this country is extremely high. We have identified significant gas condensate in many of our prospects to the extent that so far we have estimated about 3 to 15 trillion standard cubic feet of gas.

We are involved in a programme called Integrated Natural Gas Development for Nigeria, (INGUP), which is a multi-stream petrochemical plant that would take gas and produce various kinds of liquids from ethanol to various high level chemicals. By 2015 we are targeting the creation of a massive plant that would carry out various petrol-chemical activities, which would gulp about $3 billion. We are talking with some Chinese investors who are extremely delighted to fund the project 100 per cent as we ensure that the product would be made available to China.

The Government has recently unveiled this year's available oil concession, with the offshore blocks, especially, receiving much interest. Do you have any interest or aspirations for the bidding?

This question had also been asked about our interest to participate in the Joint development Zone and we say we have no plan to do so because that requires very deep pocket and the kind of technology for deep-sea exploration is huge. We only operate in areas that we know we have plans to participate. We are developing partnerships with one Canadian, one UK and one Australian company that have applied to bid jointly with us. Those are the types of partnerships and alliances that we develop. Each one of them brings something special to the table. One brings operation experience, another brings financing and we bring management. It is a carefully constructed Consortium. We have received a lot of requests from companies that are wishing to bid with us but we have chosen these three outfits.

The Federal Government has issued an environmental guideline, which is expected to be complied with by 2008. What is your own view about environmental regulation in this country?

There are environmental regulations in Nigeria. I do not believe that those regulations are being complied with. So there is severe degradation in the land. If you go to the oil producing areas in Nigeria, you would feel sorry for the people who live there, and you would feel sad that the government of this country is not doing enough to protect the environment and the people. So making an act to say total flareout in 2008 is not the only act required to control the environment.

Even the flare out declaration, in my own view, cannot be achieved. You need a plan that would be sustainable. The government is used to making announcements, which direct that certain actions take effect, but no plans are made to accommodate all those pronouncements. The environmental degradation would continue for a while until the government has a serious action to combat it.

The problem is not gas alone. There are severe deleterious environmental effects in the area where oil and gas activities are done. Because the government has not brought some discipline to its own policies in that regard, it has not been able to bring the oil companies to order. I have operated around the world and I know it is a serious thing. Here, nobody is serious about environmental issue. People die in towns and villages because of these problems, but it does not seem to be highlighted or talked about.

On our part, if you go to where we operate, we are very conscious about environment; how to protect the environment, how to protect the community. I am sure we have achieved something great because if you go and tell the community where we operate that you want to do something against us, they would mob or even kill you right away, because they would tell you that they have never seen an establishment as nice as this. Every bit of our drilling waste is trucked from our location to the land. It cost us $1.2 million to do that alone. Not a single spill and nothing is done to the water. We try to maintain that and we would continue to do so.

Right now, we are working with MTN to provide telecommunication facilities to all the area. These are people-oriented projects that would cost us about $10 million and it is currently on going, despite that we are small and have not started to produce a barrel of oil. The community demanded this telephone facility from us. We are also providing them with fishing nets, boats and so on. Also today the community celebrate Emerald Christmas in the area. We join them in the celebration. This is the first time a community would be identifying with an oil firm in the country. They have also promised to do everything to protect our business.

Nigeria currently produces 2.5 million barrels of oil per day. What do you think needs to be done to enhance the capacity of oil production to the target of 4 million barrels per day by 2007?

In terms of capacity, Nigeria has the capacity to move up to 3 million barrels. However, a little bit of support infrastructure would be required to make that smooth sailing. That is an area I would advise Funsho Kupolokun (Group Managing Director of NNPC) that works need to be done, because we need a lot of clean up and support for the infrastructure, because some of them have passed their time. They need to be refurbished. All the wells need to be reconditioned so that they can operate at the capacity required for them to do so. If these are not done, it would lead to severe problems that might be more expensive to fix. If we do all those remedial work, we would be able to re-create and achieve the capacity that we want. With the current development in the offshore, it is easy to achieve this.

Some time ago, we had a public lecture on this and I brought my African Oil Policy Initiative from Washington D.C, where we advocated that Nigeria should look at their options within the OPEC. Many people thought I was advocating that Nigeria should leave OPEC. That was not the case, but the OPEC twine that binds Nigeria should be reviewed because I presented information for the first time to show that when the OPEC Formula was written, it did not include off-shore production, and now that Nigeria is going to have a lot of off-shore oil production, we need to include that into the OPEC document so that Nigeria can have increased quota. Without the equation re-written, you cannot present a strong case. No OPEC country was producing from deep offshore. It is something new.

What role do you believe Emerald will be ready to play in the new developments?

We (Emerald) are not producing yet, but even the local companies contribute about 3 per cent production, which amounts to about 300,000 barrels per day, but it would grow. A company like Emerald has capacity to add 100,000 barrels of daily oil production in the shortest possible time.

As an international gas expert what do you think the Nigerian oil and gas industry represents to potential investors from the UK coming into the country?

The Nigerian oil and gas Industry does represent a very significant and very serious investment opportunity for investors from the UK. So far, Nigeria has not fared well because of bad reputation and bad name, which has been a direct hindrance to investment in the country. However, in the recent past, efforts are being made to discourage a lot of these nefarious activities and give a better image to Nigeria. As that happens, I would encourage British investors to make quick and direct investments into the Nigerian oil and gas sector. My view is that there is no oil and gas business in the world that can offer you greater dividends like in Nigeria.

As such, why should International Investors feel confident that Nigeria is no more a "risk market" than, say, Thailand or China?

There are many components to risk, and in the case of Nigeria, when you put all these things together against some other countries, you would see that Nigeria has tried very hard. Anybody who uses crude oil for anything in the world requires Nigeria's crude oil to blend it. Nigeria offers the premium crude in the world. The second is the North Sea Brent crude while the third is from Algeria. Nigeria's crude is the refiner's delight in the world because it hardly contains any sulphur. Sulphur makes refining very expensive. Two years ago I was able to be the first person to show to US delegates that what they call cheap oil from the Middle East turns out to be very expensive, because it contains a lot of sulphur. You can get the Nigerian oil without refining into your car and drive the car. That opened Dick Cheney (US Vice President)'s eyes. He found out that the Nigerian oil is not only the best but also the cheapest in the world. The risk is there but it is one that is worth taking because the rewards are higher than the risk. I think the risk would be much less as we work with the government.

As you know the focus of our report is on Nigeria at a time when the Development of Africa is taking centre-stage both internationally, through Blair's Commission for Africa, and internally through NEPAD. What are your ideas on NEPAD, Pan-African co-operation and the role of non-African countries in the development of Africa?

You know you cannot develop people who do not want to be developed. The effort must come from Africa to be able to develop its own land. I am quite opposed to some extent to the type of help that Africa needs. Sometimes I say it is the frequent aid that they get, that makes them not want to work for themselves. If somebody gets hungrier today and he knows nobody is coming to hand over to him a loaf of bread, he would think of how to survive.

NEPAD is something new which involves the participation of African leadership in determining the best programme for Africa. Also African Union and cooperation with the other world bodies is a very good initiative and we get some of the African leaders who are not at the centre of activities in terms of information, who are not well informed, rather they are leaving on dictatorial activities, if we get them to understand that shedding this attitude would only benefit their own people and themselves in the long run.

What is your vision for Emerald in this country?

My vision is for Emerald to be a company that would be professionally managed, a company that would play its role and take its position in the world energy sector such that they can produce, market and advance the course of petroleum and natural gas industry for the benefit of mankind. Also it is a part of the programme that we hope to foster better understanding between others and Nigeria and that Nigeria would continue to play significant and sustainable role in the energy system in the rest of the world. It is a great country where the energy resides. We want them to understand how rationally this can be shared.

Dr. Egbogah, thank you for your time.

Thank you.

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