Oil and Gas News

Oando to use London listing to fund upstream plans

Nigeria’s top fuel retailer and gas distributor Oando Plc plans to list on the London Stock Exchange in early 2010 and use the proceeds to fund its upstream ventures, the company’s head has said. Chief Executive Wale Tinubu said exploration successes in the region had fed unabated interest to invest in West African oil and gas which made a listing attractive despite the global economic slowdown. “With the petroleum industry bill coming along there will be a radical change in the way and manner the acreage is being handled and we look forward to raising a substantial amount of capital well in advance to benefit from the distribution of assets,” Tinubu told Reuters in an interview on the sidelines of an African oil conference in Cape Town. Nigeria wants to drastically change its oil sector with legislation to restructure state-run Nigerian National Petroleum Corporation (NNPC) into a profit-driven firm along the lines fo those in Brazil, Malaysia and Saudi Arabia.

In its current draft, the Petroleum Industry Bill could allow the government to renegotiate old contracts and retake acreage foreign oil firms have yet to explore. It also aims to promote the involvement of indigenous companies in the industry. Oando has been investing in oil exploration and production for a few years to try and diversify its low-margin fuel retail business and benefit from plans to deregulate the sector. The Petroleum Industry Bill is currently before parliament and the government hopes the legislation will be passed before year end. “We have a particular interest in land, swamp and shallow water assets where we have core competence,” Tinubu said. He said the company expected to spend 75 percent of its future investments on the upstream sector, with only two downstream projects eyed in the next three years. One is a 210,000 tonnes import terminal, to be commissioned in 2012, and the other a pipeline system in the Lagos harbour. In the long term, the company is mulling a 360,000 barrels per day refinery to ease the country’s dependence on fuel imports, now making up 85 percent of Nigeria’s fuel needs.

As part of its strategy to become an integrated energy group, Oando is planning to build gas-to-power plants to boost urgently needed electricity supply, with a 12.15 MW plant to be commissioned within four weeks. Deals for other, bigger plants, will be signed next year, he said. He said he welcomed the government’s plan to abolish fuel subsidies, which cost Nigeria 640 billion naira ($4.3 billion) last year, almost a quarter of the country’s original 2008 budget. “It’s absolutely critical for us to stop subsidising … not only is the nation starved of capital for infrastructure development, it also (discourages) any downstream investment in the country,” he said. He dismissed fears that most Nigerians, who live on less than $2 a day, would not be able to afford petrol and that the abolishment could pose a risk to inflation. “The public don’t go around in cars, they go in buses which are run on diesel … it’s a middle class subsidy, but unfortunately it’s been regarded as a subsidy which touches the poor,” he said, suggesting that the government should opt for subsidising public transport instead. 

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