Ronke Onadeko is one of the pioneer indigenous personalities that veered into the business of oil and gas early in her career. In this interview with Olusola Bello, She thoroughly examined the industry almost after 25 years and concluded in her opinion that it needs to be accountable and transparent for the nation as a whole to benefit from the sector.
Background
She attended the Federal Government Girls College Sagamu, thereafter went to the United Kingdom to complete her secondary education with A Levels in Chemistry, Biology, Mathematics and Home Economics. She obtained her first degree in Resource Development (Food Science and Technology) in the United States at the University of Rhode Island, Rhode Island.
After working in the United States of America for two beverage companies, she then returned to Nigeria. She started off her working life in Nigeria and served the Nation during her National Youth Service duties at Unilever (Lever Brothers) at Apapa, Lagos. Immediately after her NYSC year was over she found herself in the Oil and Gas sector in a start-up entrepreneurial venture that needed an administrative assistant. That was where she learned the trade and grew the company under the tutelage of her mentor into the first indigenous oil and gas company that Nigeria had at that time, the company was called First Fuel Limited.
On the job, she had the privilege of taking several courses over a four year period at Oxford University’s College of Energy and Petroleum Studies. She has been practicing in the oil and gas industry since 1990.
Q&A
What is your assessment of the oil and gas industry in the country?
OIL AND GAS INDUSTRY EVOLUTION
The oil and gas business in Nigeria has evolved from its International Oil Company and government dominated beginnings. In the early 1990’s very few Nigerian entrepreneurs knew about the opportunities in the industry.
Nigerians in the sector were comprised of staff of government largely in Nigeria National Petroleum Corporation (NNPC) and its subsidiaries, Pipelines and Product Marketing Corporation (PPMC); Marine and Transportation Division (MTD); NAPIMS; and the four refineries, International oil companies, International service company, indigenous oil companies, and contractor firms. The oil and gas business kept within and stayed within close circles.
International trading companies and international entrepreneurial merchants formed the next layer with their Nigerian agents. The entry barrier into the sector was perceived too high, however, this quickly changed as the business became better understood and in various capacities Nigerian business men and women took interests and positions.
There are many notable pioneers in the sector, many from pure chance encounters, others upon retirement from the sector or children or those somehow related to the industry. Some names that come to mind from that era are Keem Belo-Osagie, Mr Kofi Agbaje, Rahaman Abdulrazaq. My entry to the sector was through an entrepreneurial outfit that was a trail blazer for many successful indigenous entrants into the sector- First Fuels Limited owned and managed by Abdul Rahaman Abdulrazaq.
In an entrepreneurial business you are exposed to every part of the business. From exportation of crude oil blends to importation of petroleum products; you understand how they are allocated, how to position yourself for active integration into the processes and how to remain relevant as the business develops.
At that time, the Pipeline and Product Marketing Company (PPMC) would determine what product needs there were quarterly, what was needed to bridge what was produced in our refineries, and then the tender would be made public. At first we worked with the international companies to bid and later we started bidding independently and were successful at it.
There were disadvantages when we started, because large amounts of money were required to play in the oil sector then. There was need to align with an international partner that was already in the business to leverage their expertise and balance sheet. The authorities were happy to see the effort of the indigenous individuals and desired to see more of their own and so we were encouraged.
The modus operandi was to partner with an international company that would open a letter of Credit (LC) in favor of your local company and you would be required to issue a back to back letter of credit in favor of PPMC, over a period of time, this was done successfully, local players started engaging international financial institutions to consider their company’s for direct LC opening. This was how most people who are pioneers got to finance the oil business and build capital and credibility in the early days.
The industry at that time was accountable and there was some measure of transparency. Everybody knew what was going on. I am not saying there were not issues at the beginning but not in the magnitude that we are seeing today. It seems there are opportunities these days to become a millionaire from a first deal.
Don’t you think something is wrong somewhere?
As with all sectors and in all nations there are always ways for improvement, across industries. Nigerians are responsible for where we are and where we are not today. Governance, institutions and leadership are the pillars that uphold development and progress. Political will, long term planning as opposed to short term, quick fix plans are some of the ingredients missing in the oil sector today. The common denominator among the failed and failing institutions is the Nigerian in the industry. My opinion is that it is an accountability, transparency or corruption problem or a combination of all three.
Should government have companions or alliances?
Strategic partnerships have tremendous value in growth, development and skills and technology transfer. Alliances with non-governmental bodies will encourage stronger corporate governance and instil best practices. Transparency will be forced if we practice international best practices, take India as an example, all the importation of petroleum products and crude have been done by open tender as far back as I remember and this makes for competitive pricing, cutting out of middle men and the increased costs of brokering they represent without adding value and speed and reducing corruption. NNPC should have an operational trading division here in Nigeria and in their London office dealing directly with producers, refiners and reputable traders and managing a similar or improved process.
What do you suggest NNPC should do?
In my opinion NNPC needs an overhaul. It needs to be privatized and commercial in its outlook. It needs to be run with a merit appointed CEO that will be rewarded according to productivity. NNPC should be a cash centre not a cost centre as it has been for years. A leaner more efficient organisation with focused goals and strategy could accomplish more than we are currently witnessing. A nimble National Oil Company will be effective and proactive, not merely reactive and responsive.
The entire set up if handled by a private person that owns the business, will be done from a smaller base with less number of people. The overheads are perhaps too high. If I had to buy 22 cargoes of products quarterly all I need to do is get a laptop and telephone and check Reuters to access the details and then I place an order for the number of cargoes I need, with a small highly skilled team handling the trading, shipping and other operations, perhaps this is a simplistic scenario but I’m sure you can see the picture I am trying to paint here.
Does the issue of importation come up because the refineries are down?
That will be a logical deduction. First to note is that the downstream sector has unfortunately become a cost centre and not a profit centre as it should being that the hydrocarbon assets of Nigeria stand to date at 1.8m barrels production daily.
The state of the four refineries is dismal; the refineries are under performing at about 30% if not less of the installed 445,000 bpd refining capacity causing heavy dependence on importation of refined petroleum product and loss of revenue and development in the sector.
In my opinion creating an enabling environment that will foster private investment confidence in sector should be a primary goal of the government as a whole.
Some opine that there is an urgent need to fix the existing refineries to meet the 35-46 million litre demand for PMS this has been tried in every administration and has failed to achieve any desirable out come so I would suggest the sale of the refineries even at a loss if that is all that can be arranged because the net gain will be worth it in the future development of the refineries when fresh private capital is injected into it. A sale will stop the hemorrhaging of the funds allocated yearly to turn around maintenance, staff salaries, pensions, thefts and all manner of wasteful refining of high grade crude to low value not needed products.
Mitigating this challenge will revive and pave the way for Nigeria to become the petroleum hub of the African market
How to revive the refineries
Unfortunately, government has not been known to have successfully run any sector or business. It is almost impossible to be productive in a system where the bureaucracy is political and complex. An example that buttresses this point is the process of repairs in a refinery in Nigeria. If a part is broken and needs a replacement it goes through a process and several committees. From one committee and even beyond the refinery management and if the project is above in price it has to go to the Federal Executive Council. No private business is run in such a hierarchical, cumbersome manner. A private business will manage the problem differently and in an efficient, timely and inexpensive manner without going to the board level to approve purchasing spare parts etc.
The government therefore needs to keep their hands off the refineries because they have not operated them successfully in the past nor is this likely in the future. The solution may be to bring in private people to buy or concession it out keeping marginal ownership. Indorama is a good example for us to follow. If we use Eleme Petrochemical plant as a blue print, I think the government should divest from the refineries. If any private investor goes to banks to borrow money to invest in the refineries, he or she will make sure it works effectively and profitably.
Do you think that if NNPC is privatized it can compete with other sectors?
NNPC has a lot of unexpressed value; the human resource capital is skilled but perhaps performing below expectation because of the stifling environment. NNPC may be deficient in technology and behind on efficiency because of government interference and nepotism.
A case in point is the former Eleme Petrochemical that was purchased by Indorama. With the same staff and better management terms and conditions it went from a loss making venture to a super-efficient profit generating organisation, even to the point of needing to expand almost immediately.
If some of the NNPC assets are sold and are in private hands the government will be revenue positive, this will attract capable leadership and matching management for the assets. Skills and technology will improve and NNPC may well realize increased revenue generation from these redundant assets. Some of the assets I think should be sold down if not completely are the pipelines, depots, refineries, marginal fields, oil blocks etc.
It is advisable that the divestments start sooner than later, if they take too long to sell down on these assets they may lose value, entrepreneurs will set up competition and the interest in them may diminish. Take NITEL as an example it is almost impossible for NITEL to compete against its contemporaries that are purely commercial, and selling NITEL now is not as rewarding as it would have been had it been sold at the dawn of the gsm era. Worse still is the scenario where investments move to other oil and gas locations such as Ghana, Angola or even East Africa.
In conclusion, it would be in the best interest of the nation to review our strategic direction and act swiftly to make up for lost ground.