infrastructure <strong>investor</strong>interviewHome truthsMutiu Sunmonu, MD of the Shell Petroleum Development Company of Nigeria (SPDC),believes in the country’s value as a source and market for oil and gasQWhat is your investmentstrategy for the oil industry inNigeria?First, we want to focus on our heartlands, areaswhere we have invested in the past and where westill believe that there is value to be extracted. Wewant to sweat our existing assets and maximisevalue from them. On the other hand, while we areputting emphasis on the upstream sector, we arecontinuously looking at where we can haveprofitable economic returns downstream. That iswhy you see us investing aggressively in LNG,and looking at the domestic gas market so that ifit’s a profitable market we can be a big playerthere.QDo you practice a sustainableinvestment strategy?As the operator of the joint venture between TheNigerian National Petroleum Company, Shell, Elfand Agip, our strategy is about maximising ourhydrocarbon production and reserves towardssupporting the economic development of theNigerian nation.In terms of measurement, we start with afive-year plan, endorsed by all joint venturepartners, especially NNPC. Performance is soimportant because it influences how muchfunding is secured from government. Ifgovernment believes that joint venture funds arenot put to good use, they certainly have a reasonto cut back.External agencies help us appraise some ofour activities, especially on the social investmentside. We conduct opinion surveys to look at ourreputation, and for every project we do anEnvironmental Impact Assessment; for everyclean-up exercise, we invite third parties andgovernment to actually assess how well we havedone, to be certain that we are not operating todifferent standards in Nigeria from the Shellgroup worldwide.QWhat is your take on thecurrent escalation of world oilprices?Looking at the growing demand for energy; weshouldn’t be surprised at the prices. If we take aglobal view we see that wealth is increasing – aspeople get wealthier, the demand for energyincreases. We shouldn’t look at the hike in pricesas something negative, and for us as a companywe want to be a key player in that, making surewe can continue to meet those demands, but in acost-effective way.Economic alternative sources of fuel is stillfar away. We cannot get enough to actually startto depress the price of oil today, so I would sayit’s still a long shot. The technology would need along time to mature. Also new technology is nowreadily available to produce more oil than we everthought we had in the world. So oil will continueto be a major player.QWhat are your views on EITI(Extractive IndustriesTransparency Initiative)?It’s a noble initiative, which we identify with. Whenthe initiative was formulated, there was an auditdone, between 1999 and 2004, and wesubscribed to it. I feel proud that the auditshowed Shell as the largest taxpayer or royaltypayer in the country – US $8.5 billion. Wepublished how much revenue we payed to thegovernment, the first to have done that in theindustry. This concept should be extended tostates and local government so that at the end ofthe day our nation can actually get the benefit ofthe initiative. It is part of our strategy to have fulldisclosure of all our activities, both core andrelated.QIn what ways is Shell profferingsolutions to Nigeria’sconsiderable energy problem?I get calls nearly every week from the specialadviser to the president on power, so I can seethere’s a lot of focus on it. Government itself hascome to the realisation that we cannot have anymeaningful development if we are still in this eraof very low power output. I think that governmentwould need to probably take additional steps tomake sure the energy industry is deregulated. Italso needs to make sure that there are good andattractive incentives for private entrepreneurs towant to get into the power generation business.For example, we are building a brand newpower plant in Afam, which would add some 20%to our generating capacity. It will be managed bySPDC, and supplied to the Power HoldingCompany of Nigeria for distribution.QWith the unbundling of the stateenergy corporation, Nigeriansexpected better servicedelivery in this sector. Is thatrealistic?Those who are going to supply the gas to fuelthese power plants must be allowed to get acompetitive rate for the gas supplied. Gas pricingis also very important; we need to ensure thatpeople who invest in this strategic sector canhedge their investment against equitable returns.Gathering gas costs a lot of money – we havespent more than $3bn to gather gas over theyears in the areas of our operation – and themarket has got to offset this expense. Thereforethe theory of gas being freely available togenerate cheap electricity is fallacious.Mutiu Sunmonu talked to Ndiana UkpePrior to his current post, Sunmonu wasSPDC’s Executive Director Production, withoverall accountability for the company’s oiland gas production activities and delivery. Hehas also held the senior positions ofExecutive Director, Corporate Affairs, andGeneral Manager Production for SPDCEastern operations. He has worked for Shellsince 1978, with overseas stints at globalheadquarters in The Hague, and Scotland.70
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