Lekoil at ADIPEC: Indigenous Companies Can Attract Capital from the Middle East -Akinyanmi
Olalekan (“Lekan”) Akinyanmi is the Chief Executive Officer of AIM –listed Lekoil (LON:LEK). He has over 20 years’ experience in the oil and gas industry, most recently with AllianceBernstein L.P. in New York where he spent six years as a research analyst and portfolio manager covering Energy and Materials worldwide.
Lekan has held senior positions at UBS Investment Research, 3Fold Ventures and Encabler Inc, a Californian headquartered Technology Company specialising in interactive television software, which he founded in June 2000, as well as successfully negotiating and raising the first round of equity capital for the Company’s operations.
Prior to founding Encabler Inc, Lekan worked as lead engineer for Schlumberger Limited, where he advanced High Pressure High Temperature wireline operations for Texaco’s North Sea oil prospects. Lekan’s work at Schlumberger took him to a number of different petroleum jurisdictions including Scotland, Oman, Pakistan, Egypt and Nigeria
Lekan graduated from the Obafemi Awolowo University in Nigeria with a Bachelor of Science Degree in Electronic and Electrical Engineering and also holds an MBA from Massachusetts Institute of Technology (MIT) Sloan School of Management. He is also a Member of the Society of Petroleum Engineers
Lekoil has raised $50 million on the London Stock Exchange and is now the fourth oil and Gas Company with significant operations in Nigeria and listed on the LSE.
Orient Energy Review caught up with him at the Just concluded Abu Dhabi International Petroleum Exhibition and Conference, ADIPEC, where he sat at the African-focused panel, discussing his company’s input in the development of the continent’s oil industry. In this interview, he throws more light on this topic and his company’s progress so far. Excerpts.
Lekoil is one of those indigenous companies that are blazing the trail in Crude Oil production in Nigeria. What would you say is the secret behind this success?
I would say that Success is a function of the objective that you set out in the first place, to an extent I think we haven’t quite achieved what we set out to achieve, but I think we are on the right track but I wouldn’t say we are there yet .The things that has helped us, first of all, we have been able to put a strong technical team together, our strategy is very clear in terms of balancing exploration and production assets, a lot of people focus on one thing or the other but we think a balanced portfolio is better because of industry situations, sometimes oil price is low, sometimes it is high, we have to be ready for all situations so that’s one side of it. Another thing that has helped us is access to capital, partly because I have been able to spend a lot of time on the other side of the table, I think I have been able to have an investor mindset that helps to actually know how to structure things properly to raise capital, so these are the two key areas and the third area which we are still developing is just leveraging indigenous identity, whether it’s in working with the communities or whether it’s in working with government entities and we are building that rapidly and so far we are being very well received because we are going to the communities with a different mindset , with a partnership mindset ,We are not going there to exploit and run away, it actually makes a difference to me personally to see the place transformed ,if I look at otakikpo field for example, and the communities where we are working, I find out that the most interesting things to me personally is just to see the place transformed just because of the work we are doing there, fixing the bridges and the roads and all that just in the communities changing for the better, and that is huge.
How do you manage to strike a balance in doing your work and building a community relationship because just like you said, you don’t want to go in and just do the work and leave without impacting the lives of the people in your host community? How did you go about it?
I think we’ve been quite fortunate in terms of having people that actually understand this, so we came in with a lot of experience and during the work we spent a lot of time trying to understand the communities, so the first thing we did was that we actually went in and did medical outreaches even before we started to do the work at all, and it’s sad in a way that you go into a community that is so blessed with these natural resources and the medical care there is lacking. So when our guys went there the first time it was just to check blood pressures ,do some basics and by the time we went the second time we brought in make -shift operating rooms and our guys were performing operations there and there were people who we have been told that if our doctors were not there their daughters would have died ,so that generated a lot of goodwill but that’s not enough, you now have to use that to put a proper framework in place to show the communities that you are there to work with them and to keep an alignment so that they know that as long as you prosper they prosper tool and I think that’s the balance you need and a lot of people do underestimate how intelligent and how educated leaders of these communities are , this is not some 50 years ago or kings in some corners of the world that do not know what is going on , they are actually quite smart and intelligent people. So we had a proper negotiation before we put our unit together and its been very good.
We know that recently Lekoil went into a joint venture with Green Energy as financiers and technical partner. What’s the update on the field and the progress so far?
Green Energy was awarded this field and they brought us on as technical and financial partners, we as technical partners are responsible for day to day workings of operations in the field and it’s been good. At the beginning of the year we commenced operations, the first thing we had to do is to do land reclamation so we have actually turned the swamp into dry ground now and these were massive, large hectares that was reclaimed and after we did this we had to move the rig to the location, we had to fix the road, fix the bridge; which adds benefit to the community and then we re-entered one of the wells, the lower zone in that well, the production when we did flow test came in at 5,700 barrels per day and we are expecting 1500 barrels and so it came in much better. But now we have suspended that because we are doing what is called a dual completion so we are now looking to flow- test the upper zone, so you can’t do two at a time, you’ll have to suspend one before the other .The fact that we flow- tested at 5,700 doesn’t mean that we are going to produce it at that level, what we have to do when the flow is relatively new, is to choke it back, you don’t produce what you can produce, you start it gently so that until you understand the characteristics in the field better do that you don’t damage the reservoir. So our expectation is that by the time we put everything together we would have a very robust production profile for next year.
At ADIPEC you were one of the panelist when they were focusing on Africa, how can you assess the performance of indigenous African companies in the upstream generally?
Generally, it’s hard for me to give a comprehensive answer but if I start from the Nigerian perspective, I feel like we are creating like a new cartel of companies, the indigenous companies and some of these companies are well run and from my perspective again, we have access to capital, technology and frankly we understand the environment, so that is very important and has a lot of role to play. Then outside Nigeria am sure there are but I haven’t seen some of the higher profile indigenous companies, there are other companies that are Africa- focused but am not sure if they are run by Africans. So if they are Africa -focused, developing the continent, then that’s a good thing because the more capital we can attract to our continent, the better it is; because when you bring in capital to a project, it’s not just the money that goes into the project, it’s all the multiplier effect, the services, the people that is working there, their families benefiting from it all. That capital is very important for the development of the continent.
Would you say that going to a place like Abu Dhabi is beneficial for a Nigerian indigenous company like your company? You know, to come out in a place like that to showcase what they are doing?
It’s always good for me to go to different parts of the world; I think one of the take away from Abu Dhabi is that they have been made aware of what is going on and this is a region that has been in the oil business for a long time and a lot of their monies is getting invested in other parts of the world, so I think to an extent if we can attract some of that capital to Africa, it would be helpful.
How is your company taking below $50 per barrel price?
We have been quite fortunate because the key element of our strategy is that we have been low cost producing, well different people have different strategies though, but with a breakeven price of about $25, so $50 per barrel is not bad. Again when the bids were made especially the IOCs asset, we have always wanted low bidders because we are always looking to have a low breakeven price so we didn’t win those assets
How has the Nigerian content Act been helpful to Lekoil?
It’s been good, I think it’s more targeted towards the service companies actually and it’s been good. For me it’s good to see capability development in Nigeria. What we need to do is to make sure that our indigenous service companies apply a high level of professionalism and rigor so that they can deliver services at the same level or even at a better level using local knowledge than the international companies, which makes it sustainable. If our local companies are not doing well, then the people will start pushing back, but so far so good.