An African Diamond

Dr. ‘Layi Fatona, Managing Director of Niger Delta E&P, talks to AOP about why his independent oil company based in Nigeria is interested in exploring for oil in South Sudan. Niger Delta E&P entered South Sudan in 2015 through a joint venture with national oil company Nilepet. The local entity, Nile Delta E&P, is focused on development of brownfield sites and gas utlization, bringing techniques and experience from its integrated operations in the Niger Delta region to South Sudan’s oil patch.

Why did Niger Delta E&P, an indigenous Nigerian operator, enter the oil and gas sector in South Sudan?

We have extensive experience in gas monetization and we are very interested in the many gas opportunities in South Sudan. So we came here and told our story, and a delegation from the state oil company Nilepet visited us in Nigeria. They met with our employees and visited our facilities, and saw that we were not only producing oil, but also processing gas and processing and refining oil after having just commissioned a 1,000 barrels-per-day modular refinery. The refinery has been in production now for five years. We built a company from scratch into a fully integrated oil company. I think that was what the South Sudanese saw in us.

As a result, Niger Delta E&P and Nilepet formed the first joint venture in Africa between a national oil company and an independent African oil company. It is a very new and very unusual kind of relationship that we forged. Nilepet has a 51 percent stake in the joint venture and Niger Delta has a 49 percent stake. We marked two years of operations in April.

What role will the Nile Delta E&P joint venture play in monetizing South Sudan’s gas resources?

When we founded the joint venture, we had two mandates. The first mandate was that this new joint venture company would monetize and commercialize the gas resources of South Sudan. As a geologist originally, I was driven by a gut feeling. No one knows how large or small the gas resources in South Sudan are. For me, that was a thrill. In Nigeria, we were the first indigenous independent company that fully monetized our gas resources. We built a gas processing plant and we are the only local company that delivers gas to the Nigeria LNG plant. Since inception we have been able to do the first comprehensive sampling and analysis of gas in South Sudan. Because of that, we came up with a feasibility study and plans to utilize and monetize the gas.

The Petroleum Act of 2012 stipulates that companies are not to flare gas, but there are no penalties in place, which is why they still flare the gas. One of the things we plan to do is capture the flared gas and provide power from it. The feasibility study is done and we are going to the implementation phase now. At the pilot project converting flared gas to power will be the first priority. Further down the line we will be using solutions such as LPG to power. Right now gas is being flared and nothing is being done with it. The pilot power project will operate out of the same power plant that already exists at the Dar Petroleum Operating Company production facility. The plan is to produce just 1 MW to show that it can be done using the same infrastructure that already exists. It is the first and only gas to power project in this country so far.

What is your assessment of the gas resource here?

We’ve been here for two years and we’ve only done what are called superficial strategies. Honestly speaking, I am led by my explorer’s instincts rather than hard data. The rule of thumb as a geologist, as I was taught, is that your first hunch is always right. My first hunch is that there are a lot of gas resources here and no one knows it because no one has really looked at it. I may be hard-headed about this but I’ve always been right before. I don’t think I’m going to be wrong this time. Geologically speaking, God never made oil and gas separately.

How is your company involved in enhancing recovery factors on working oilfields?

The second mandate is to enhance production working with Nilepet at the Dar Petroleum fields – which we started doing in 2015. Nilepet owns 8 percent of Dar Petroleum, and we don’t have much of a say in how they operate, but part of our mandate was to try to find a way to have a positive impact on how they operate. Right now, Dar Petroleum produces almost all of South Sudan’s output, around 130,000 barrels per day. Out of that, around 40,000 barrels is water, so they have a lot of issues with high water content. Our job in the long term is to resolve that issue. Is it a technical problem with how the wells were completed? Is it their age? Is it how the
wells were drilled? This is the kind of information we hope to find out over time. Related to this, and because we have no operational role at the Dar Petroleum fields, we are trying to get our own field that we can study and prove our capacity on. That is what we are doing right now.

Has the state of conflict in some parts of the country affected your ability to do business?

Conflict is a state of perception. I talk to people all the time who think we’re crazy for being in Juba; they think people are killing each other in the street. I tell them that’s rubbish. You’re safer here than some places in Lagos. It’s all in how you see it. We don’t believe this place is any more difficult than being in the Niger Delta.

Geographically Juba is about the same latitude as Lagos. If I can survive in Lagos, I know I can survive in Juba. The attraction of Juba is that this is new. South Sudan is an African diamond. You will not find an African country that is six years old anywhere but here.

This interview is part of the Africa Energy Series: South Sudan 2017 book, which was released at Africa Oil & Power in Cape Town. Read the full report here.