Tony Elumelu Outlines How To Unlock Next Phase Development, Revitalize Upstream Sector

One of Africa’s leading investors, Tony Elumelu, has provided a roadmap to unlocking Nigeria’s next phase of development while revitalizing the entire upstream sector—creating added value.

The Chairman of Heirs Energies, an integrated and indigenous energy group playing a key role in facilitating energy sufficiency in Nigeria, made the revelation at the third anniversary of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Monday, October 21, 2024.

The master entrepreneur, who is also the chairman of Pan-African financial powerhouse United Bank for Africa (UBA), which provides substantial funding across the energy value chain, gave the solution while painting a stark reality of the challenges confronting the nation in the upstream sector.

“We are faced with the threat of declining production and investment. We must acknowledge the elephant in the room. Nigeria’s oil production has been on a downward trajectory, falling from peaks of over 2 million barrels per day to recent lows, below 1.5 million. This decline translates to lost revenues, reduced global market share, and missed opportunities for national development,” Elumelu pointed out while addressing the theme of the high-impact event, “Transformation, Innovation & Excellence.”

He elaborated with the summation that, “The root causes are multifaceted: aging infrastructure, security challenges in the Niger Delta, stalled investments, regulatory uncertainties, and a global shift towards renewable energy that has compounded the investment challenge. These factors, combined, threaten the very foundation of our economy, as we are heavily dependent on oil.”

While commending the NUPRC for targeting a production growth of 1 million barrels of oil per day (1MMBOPD) from current levels, the prominent champion of entrepreneurship in Africa declared, “This initiative should go beyond just increasing production; it should catalyze a comprehensive strategy to revitalize our entire upstream sector.”

Noting the need for collaboration among stakeholders for the project to be successful, the founder of the Tony Elumelu Foundation (TEF)—credited with disbursing over $100 million (USD) and providing funding, mentoring, and capacity-building support to more than 20,000 young entrepreneurs—outlined key elements it should encompass.

He listed them as: Infrastructure Modernization—upgrading aging facilities to improve efficiency and reduce downtime; Security Enhancement—implementing advanced technologies and community engagement strategies to secure assets; Regulatory Streamlining—NUPRC’s commitment to creating a more transparent and efficient regulatory environment; Investment Attraction—leveraging this improved landscape to attract both domestic and foreign investment; and Technology Adoption—embracing cutting-edge technologies to optimize production and reduce environmental impact.

“By addressing these areas comprehensively, we will not only aim to reach the 1MMBOPD target but also create a sustainable framework for future growth,” the proponent of Africapitalism, the economic philosophy that positions the private sector, and most importantly entrepreneurs, as the catalyst for social and economic development in Africa, expressed with strong conviction.

Touching on the prospective added gains of the pivotal project, the driving force behind the successes of one of Nigeria’s largest quoted companies, Transcorp Group, advocated that, “The path to 1MMBOPD must be constructed on strategies that maximize the value of our gas resources, reducing flaring and increasing utilization for domestic and export markets. This dual focus will help diversify our energy portfolio and mitigate the risks associated with over-reliance on oil. We know the criticality of gas in improving access to electricity in Nigeria. Access to electricity is the single most important factor in our quest for industrialization.”

Transcorp Power, a subsidiary of Transcorp Group with Elumelu as Chairman, contributes over 20% of Nigeria’s installed power capacity.

Elumelu, who applauded the NUPRC for laying the groundwork for the proposed solution with initiatives that include promoting sustainable practices, such as the Nigerian Gas Flare Commercialisation Programme, spotlighted possible gains of intentional collaboration between independents and regulators with a practical example.

“At Heirs Energies, we are actively contributing to this solution. In the first 100 days after we took over operational control of our OML-17 asset in 2021, we doubled our production from 28,000 to over 50,000 barrels per day. We suffered a setback with unabated crude theft, which caused us to shut-in and work collaboratively with the NNPC Limited to better secure the pipeline system.

“From a low of 5% terminal receipts in December 2021, year-to-date in 2024, we have recorded an average terminal receipt of 85%—a remarkable improvement and a good example of what a purposeful collaboration between NNPCL and operators, underpinned by rigorous execution, can deliver. With the improvement in the operating environment, we have restarted our investment and production growth journey and have now successfully reversed the fall in production that we suffered in 2022 and 2023 as a consequence of the evacuation challenges. A few days ago, OML-17 attained over 51,000 barrels per day, and we continue our production growth journey.

“Relatedly, we are also working to grow our gas production that feeds many power generation plants and gas-based industries. These achievements indicate what is possible where there is strong industry collaboration, and in particular, when regulatory support meets private sector drive and innovation,” he provided a graphic insight of the past and an idea of what is to come.

Explaining how Africapitalism—his economic philosophy advocating shared prosperity, ensuring environmental sustainability, and fostering community development—fits in the scheme of things, the champion of commerce across sectors, who pointed out that his belief is that, “The private sector has the power to transform the continent through long-term investments, but that it must work collaboratively with the public sector,” asserted that, “This philosophy aligns perfectly with NUPRC’s vision and the objectives of Project 1MMBOPD.”

Elumelu urged international oil companies to increase collaboration with indigenous firms to make the entire value chain better at effectively addressing the challenges affecting the upstream and related sectors.