Wale Tinubu, Group CEO, Oando
Send this article to a friend
Print this page

» Prices will come down as pumping starts – Wale Tinubu, Oando.
» We're looking for profile to JV with international entities - Wale Tinubu, Oando
» Nigerian energy firm seeking diversity

» JSE:OANDO PLC:
950c 0%

Oando seeks $1bn by 2008
Allan Seccombe
Posted: Fri, 07 Apr 2006

[miningmx.com] -- NIGERIAN oil and fuels company, Oando, wants to raise $1bn by early 2008 to fund an aggressive growth strategy to take advantage of high crude oil prices and to meet local demand for refined products, CEO Wale Tinubu said.

Oando is planning a $1.5bn greenfields refinery in Lagos, for which it will raise funds separately, but work has been paused for two months pending a government decision on which of four bidders will acquire a controlling stake in Port Harcourt, an existing refinery Oando is bidding to run.

“The first $500m should be done by the fourth quarter of this year, which we’ll fund with a combination of debt and equity,” Tinubu told Miningmx in an interview.

A second round of fund raising will be held in early 2008 for another $500m, he said.

Oando will expand its energy services strategy, which involves servicing rigs and wells on the oil fields of Africa’s leading crude producer. Cash is needed for exploration and putting the two blocks it has into production and acquiring another two.
The first $500m should be done by the fourth quarter of this year
He declined to say how much the Port Harcourt refinery would cost.

Nigeria wants to raise crude production to four million barrels per day (bpd) from 2.5 million bpd by 2010.

“Oando has set itself a target of getting to 50,000 bpd of crude production by this time next year and increasing production by 50,000 bpd every year for next five years, as well as improving our probable reserves to a million barrels of proven reserves in five years,” Tinubu said.

Oando has spoken to US and European funders about the first $500m.

“We are processing term sheets with different financiers on the debt side. We are looking at different gearing ratios because some of our divisions can take on 100% debt funding,” he said.

Half of the $500m could potentially be raised by issuing more Oando shares on the JSE, addressing the lack of liquidity in the stock. Oando is listed on the Nigerian bourse.

“The JSE is a natural place for us to be and we’ll exploit that fully before we consider another listing,” he said.

Oando and its technical partner Shell will submit their Port Harcourt bid in the next three weeks and a decision is expected in the following two weeks.

The other bidders are India’s Essar Oil, a conglomerate of a number of top Nigerian companies called Transnational Corporation, and the Refinee Petroplus consortium.

Port Harcourt is running at about 80,000 bpd, below its nameplate capacity of 215,000 bpd. Oando will refurbish the newer section of the refinery to realise its 150,000 bpd capacity and then de-mothball the 40-year old, 65,000 bpd part of the plant.

“There is a business case for not only acquisition of Port Harcourt but an immediate plan to double capacity,” Tinubu said, adding Oando wanted to export petroleum to Africa and the US.
Free news alerts: click here to subscribe
Oando will build the 360,000 bpd Lagos refinery whether it wins the Port Harcourt bid or not, he said. The Lagos project would be started once Port Harcourt reaches nameplate capacity.

“We can build the Lagos refinery as a second refinery to satisfy local demand and design it – 25% to 40% -- for the export market,” he said. It would take five years to build the new refinery.

Raising $1.5bn should be straight forward, he said. “One of the key things is that the financial circles in Africa truly understand Nigeria’s dire need for refining capacity. It would not be a hard sell.”