ERHC Energy Inc (ERHE)

[kingpindg]

New Ntephe interview; AEI had it wrong...

‘Our focus is to diversify assets in W/Africa’

Chief Executive Officer of ERHC Inc, Mr. Peter Ntephe in this interview with Samuel Ibiyemi during the Nigerian Oil and Gas Conference spoke on Local Content issues and commitment to acquisition of more assets in the upstream sub-sector in the Gulf of Guinea. ERHC Energy, Inc. is a publicly traded American company with valuable oil and gas assets in the Gulf of Guinea, off the coast of central West Africa...


By Samuel Ibiyemi Date Published 0000-00-00 00:00:00

Chief Executive Officer of ERHC Inc, Mr. Peter Ntephe in this interview with Samuel Ibiyemi during the Nigerian Oil and Gas Conference spoke on Local Content issues and commitment to acquisition of more assets in the upstream sub-sector in the Gulf of Guinea. ERHC Energy, Inc. is a publicly traded American company with valuable oil and gas assets in the Gulf of Guinea, off the coast of central West Africa.

NND: How is ERHC implementing local content in the execution of upstream projects?

The first thing is to understand our business model. It is very important to understand it. We are energy investment company, we run what we call the non operator model. When we say local content, there is a lot of it that doesn’t apply to us because we don’t operate fields directly. What we do is to take interest, non operated interest in existing blocks. It is either we bring in the operators or there are operators already handling the field.
It is the operator that engages in field activities. Our role always as far as our business model till today is to meet up with our cash calls. So, we are a good example of passive portfolio partner. For instance, if we hold 20 per cent and the cost of the well is $10 million then it means we have to release our own $2 million to execute the job. That is centrally our business model.
It is a model that a lot of people don’t know it exists but it is company like us with majority equity that determines the direction of the operation. In the oil industry, most of the operators hold minority interest.
When we talk of local content, if you check the staff strength of ERHC even though it is an American company you find out that at least half of them are Africans because the company’s focus is Africa unlike many companies operating in Africa.
We have the orientation that as an American company, we need to have Africans to operate in Africa. So, local content in terms of sourcing materials locally does not apply to ERHC because we are not operational. We can actually run what we do in the oil industry from our office any where in the world. We contribute technical expertise because we have a technical team that talk with operators. We attend all the meetings and make contribution.
It is really the operators that drive the operation, they come up with a plan and once there is agreement with the plan, the operator will interprete it. What our people do is to say well we look at it, why don’t you go and consider this other option and they give us advice, but the operators’ lead and we follow and pay our contribution.

NND: What are your strategies to boost upstream assets in the Gulf of Guinea?
Right now, we have a diversification strategy, for the life of this company since the mid 90s our concentration has been Sao Tome, the Nigeria- Sao Tome Joint Development Zone (JDZ) and the Sao Tome Exclusive Economic Zone. I will not be blowing our trumpet to say it was because ERHC that JDZ zone was set up.
We played prominent role in the setting up of the zone. The activities going on right now on JDZ block 2, 3 and 4 are directly traceable to ERHC activities. We brought in the operators that drill the wells in other blocks apart from block 1, which we don’t have interest. This block was awarded at the same time like ours in the licensing round and has commenced activities since 2005 when the licensing round was completed.
Only these three blocks in which ERHC have interest are witnessing activities. We drilled five wells at almost 4,000meters which cost almost $300million. A proportionate share of that even though we have carried it to $600million. This has been our concentration for the past ten years and that is how we got the JDZ to where it is.
Our focus now is to trying to diversify. What do we look for when you are diversifying our asset portfolio in West Africa? The focus of ERHC has always been West Africa. When I say West Africa I mean the western coast of Africa right down to Namibia.
What are the countries we look at when we are diversifying? We look at Nigeria, Gabon, Angola; these are the first country we look. We don’t just come to Nigerian Oil and Gas (NOG), we attended similar conference in Sao tome recently, we will be in South Africa at the end of the year.
We are working in Angola. Examining our reasons for attending this conference is the fact that Nigeria as the biggest producer in West Africa, there is no way we can’t appear here. Indeed a lot of ERHC staff have Nigerian root, either they work here or they are born here or they have an affiliate in Nigeria.

NND: When you talk about diversification, is it diversification in terms of going into other sectors in the oil and gas industry or diversification to other countries in West Africa?
The second one, we have plans but not a major focus to diversify into other sectors but our concentration so far has been upstream, so what we are trying to do is to diversify into other countries, move beyond the Sao Tome area and diversify our holdings so that we can have holdings in Gabon, Angola, Nigeria and Sierra Leone.

NND: What is the prospect of your assets in Sao Tome, how many wells have been drilled and what is the success rate of those drills?
We drilled five wells between September 2009 and January 2010. In three of our blocks; blocks 2, 3 and 4, we partnered with Addax and Sinopec in that drilling, they were the operators.
Like I said earlier, we join them, they took majority of the share and they actually conducted the drilling. In block 2, one well was drilled, block 3, one well was drilled, block 4, three wells were drilled. Out of these wells, we found gas. So far they haven’t declare commercialism those are the commitment for exploration phase one in these blocks, those commitment were completely met in time with budget and this is taking place in deep offshore.
Each of the well on water surface, total well depth was nearly 4000m for each one of them approximately 3,850 for each one of them.The raw cost of each of those well is $60m. The operators are analysing the results of gas discovered because we are supposed to commence phase 2 in march. This implies that we need more exploration work.
So, we haven’t had the kind of result we would have wanted this time around but what happened is not unusual in the industry at all, they were the first people to drill there.
We are the first people that drill but now because we have wells on ground, we have five near to each others. We can do all sort of analysis and all sort of geological correlation on the result that we have seen and use it to interpret our analysis much better for future exploratory work. So, work is still ongoing in the JDZ

NND: Can you tell us some of the benefits?
It is not just benefit but our own contribution; I want to make this clear. NOG is really about showcasing the Nigerian industry and our own participation is about contributing to showcasing an industry that we will want to participate.
As far has benefit is concerned, it is just the same we are doing here the more you show yourself, the more people know about you the more you develop business. A lot of the time when you do all these things, you can’t really measure it in terms of tangible quantity. It is goodwill that the company is developing.
We are not talking about how much that is being generated. We are talking about visibility, industry perception, credibility that’s the first thing we do, any other thing that comes directly as far as business development is concerned is a bonus.

NND: What are you looking at in the Nigeria upstream sector?
The case of a marginal field just like what Shell is selling now, the entire marginal field have discoveries in them, and you know what you are going into. It is not an exploration field where it is really a gamble.
The wells are there but they have been capped for some reasons or they were never developed. We are negotiating currently with at least three owners of marginal fields even though that is still being done in confidence.
We didn’t bid for Shell oil blocks because we think the time was not right for us for a lot of strategic reasons. May be in future asset sale, if opportunities present themselves from people who will get them. Yes we might get involved commercially and take non-operating interest. But for us to put things together as consortium, it came too soon for us with all other things we are doing.

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