The recently concluded Nigeria Oil & Gas Conference, 2019 themed ‘Driving Nigeria’s Oil & Gas Industry Towards Sustained Economic Development and Growth’, can only be described as nothing short of insightful, challenging and eye-opening.
In a presentation at the event, Oando Plc’s Group Chief Executive, Wale Tinubu’s thought leadership speech where he spoke about Oando’s evolution from a downstream company, to an integrated energy solutions provider.
He highlighted the challenges the company faced in this journey and how through determination, focus and tenacity they were always able to realize their goals and finally he used this as an opportunity to advise indigenous players in attendance on how best to consistently add value and remain relevant in the industry.
Tinubu’s speech was titled: “The Evolution of Oando: Survival and Growth Strategies.”
He said: “We had a lot of support from the NNPC when we started out as a trading company in 1994. We had the opportunity of working with NNPC in the 90s in what was typically the golden age in the industry when the refineries worked to full capacity. “The refinery was doing so well in Kaduna that we had excess petroleum products and we secured a very innovative solution for the NNPC to manage the excess products.”
Speaking further on the NNPC’s support he said: “We branched out towards infrastructural opportunities, once again with the NNPC. We built the first gas distribution network in Lagos. It was called Gaslink Lagos, NNPC gave out the gas in the project and today there are about 130 industries taking gas from us and we have been able to drop, by at least 40 per cent the cost of power to those industries and in the process stimulate economic growth.”
Tinubu challenged stakeholders, government, indigenous oil companies and the like to look into the downstream sector. He explained that one of the reasons for the company’s divestment from its naira earning downstream business to the upstream sector was because of low gross margin in the downstream of about 10 per cent as far back as year 2000 and as low as three to four per cent today. Another reason he mentioned was the inherent fuel subsidy which took up $5 billion of the country’s budget last year, monies that could have been channeled into infrastructure and education.
He explained: “At a population growth rate of 3%, the question is what is the best to invest in, infrastructure or consumption? “There is a big debate that has to be made around this and I think the oil industry, absolutely need to champion that debate with the federal government.
“We need to ensure that these subsidies are altered and the downstream sector needs to be commercialised, the refineries and pipelines need to function to maximum capacity.
“There is no logic in transporting our products by road at an extremely expensive rate without the chance to build a multiplier effect of having a vibrant downstream.”
Another challenge he explained was on Oando’s acquisition of ConocoPhillips Nigeria. He explained that the transaction was extremely challenging in the sense that the company had to pay a non-refundable deposit of $450 million and had to worry about how the rest of the capital would be raised in a short time frame.