Ihenacho: My Passion for Investing in Modular Refinery

Chairman of Integrated Oil and Gas Limited, Capt. Emmanuel Ihenacho, in an interview with journalists, said his decision to invest in a scalable refinery was largely to prove a point that Nigeria has the resources to add value to her crude oil. Ejiofor Alike presents the excerpts:

The concept of modular refinery has been a subject of strategy debates over some time now with some players in the upstream sector looking at it as suboptimal processing model. What ideas propelled your modular refinery project?
The modular refinery is an idea whose time has not just come but whose time has nearly passed. We cannot continue as a country that produces oil without capacity to refine it. If you produce oil and export all as it is the case currently, it is creating value in somebody’s economy in terms of the money you pay for the freight in carrying that oil there. And if try to add value to it by processing it at a refinery that is located elsewhere, then you create additional value there.

And if you take the products and put it in a ship that doesn’t belong to you, and bring to your home, you also create additional value elsewhere. So we want to capture the chain of value that we have lost historically by saying ‘our oil is going nowhere.’
We take oil; we refine it and sell it. So we want to make the country a hub for oil processing in the continent.
People frequently call me all the time and say, ‘I want to buy some Automotive Gas Oil (AGO),’ and I am very embarrassed to reply, ‘I’m sorry we don’t produce AGO.’ This happens because we export our oil raw to Europe and they refine it and produce AGO and we import it. So we want to change that.
My motivation to invest in scalable refinery is not necessarily to make money. It would be nice to make money but I have a point to prove: that we can do it; that Nigeria can and it has the necessary human resources to add value to its crude.

I want to pay tribute to the new DPR. They have been absolutely very professional, fully supportive of what we are doing. I had a recent meeting with them and I was very surprised how they turned up right on time, young people bristling with ideas, listening to what we had to say and making commitment towards ensuring that we work together to develop this idea of modular refinery.

At where you are now do you intend to develop into an optimised refinery operator?

I absolutely agree with you, and we are already looking forward to possibilities of optimising the economies of the process by taking the benefits of scale. But we really wanted to start in a phased process. Modular refinery allows you to put a module, and once that one is successful you could add another module. You can gradually build it up to 50,000 barrels per day unit by which time it will no longer be a modular refinery. It will be a full scale refinery.
So our modular model is a very good way to learn rather than learn with a huge refinery that will cost you $9.0 billion and at the end of the day you may not be successful. So it is better to dip the toe with smaller risk than to take a dive and risk all. We learn the ropes at every phase until we absolutely know everything about the refineries. We are confident that we are going to do a good job.

How much do you think you have invested in the domestic economy since you stepped out of public service?
I cannot tell you now. It is really enormous. But money is really a marker. The thing is really that if you rise intellectually to a point where you really don’t worship money but look beyond money to focus on things money can provide: good life for the people, you have arrived.

How have you been able to combine politics and managing a fast growing business? Are there points of friction in driving conflicting programmes simultaneously?
I really appreciate how you have summarised what we have been doing in the Genesis Group for quite a number of years. I have been in politics because I wanted to participate in policy making process so that we would have a country that is very successful, that creates superior living conditions for its people. That is why I ventured into politics.
Well for obvious reasons some the ambitions din not come to pass. My aspirations in politics didn’t really materialise. But that didn’t stop us. We have a fall-back position which is to go back into business. The purpose of going back to business for me is not become richer. It is to create value that would impact on the wellbeing of common people around us. That is what we are doing.
We articulate novel ideas, pull the necessary resources together and deliver superior values to the society in the process.
You started and gained popularity as a shipper, then you ventured into petroleum, and now the group has continued to diversify. May we know your current scope of business?

Well, let me tell you that when people describe me as a marine based businessman they forget that I am actually a broad based businessman. Apart from being a Master Mariner, I hold a Masters Degree in International Transport. I also hold MBA in General Management from Bradford University. So the sum total of this practical experiences in managing businesses in maritime, in acquiring further exposure academically has really led to the fact that I am very versatile in a lot of things that I do.
So, in the maritime sector, my company, Genesis Worldwide used to be the largest private sector ship owner in the country. And at a time Genesis was in fact a national carrier. I ventured into petroleum because of the ancillary relationship between oil transportation and shipping.
So when we started trading oil and gas I owned tank farms.
I ventured into aviation also but that is not generally known by a lot of people that I own an aviation company. In fact we have gotten our air operating license as an aviation company.
I also have interest in port development ventures. So, I have a lot of interest in the maritime and also in things that are not particularly maritime. I am thankful to God about the progress we have seen and the successes we have achieved with regards to all that we have put our hands in.

With all the businesses ideas and ventures that fill up your hands, how do you capture all of them in one integrated business model?
It is really a difficult call but it is not an impossible one. It really interferes with how you live your life. You will like to do business all the time but you would also love to have a family life. When you have a lot of ideas cutting through your veins at all times, sometimes something gives. Your wife would sometimes say ‘snap out of this and let us go have a meal just like ordinary people’.
The thing for me is not to be idle. We need to be productive all the time. We have to be fully engaged, and that is what I have done for so many years.

How have you been able to drive through all these with the level of funding constraints that we see across the economy?
It is very simple. When you ask somebody who is not a businessman why he is not investing he would say there is no capital. You have to realise if you are a businessman that yours is to conceive ideas. It is not your business to put your hands in the pocket and find the money. There are people who are institutionally prepared to finance any business if they can be properly articulated.
So what you have to do is to have very fertile business imagination, intellectual capacity to conceive how certain things can be done that can impact in a positive sense in the area you live. So if you are able to articulate those ideas and have been able to convince the people who own capital that this would happen, they will provide the funds.
So that is the way I have built my businesses. I conceive of ideas, and I understand the distinction between the businessman and providers of capital. So I conceive these things and I sit lenders down and convince them that they will work. And if they believe me they will provide the money; and that is the way it has worked all this time.

Some of the business concepts and ventures are of deep pocket dimension. May we look at their commerciality profile in the context of the prevailing economic situations?
It is the bottom line that forms the dream. Actually in every business idea that we conceive of we have to show you what the commercial outlook is, we also have to show you what the cost implication of that business idea is, we have to show you what the revenue stream is, and every bank of provider of capital has a mechanism for carrying out due diligence to see if your assumptions are valid or if they are just pies in the sky.
We don’t invest in pies in the sky! We invest in things that are verifiable. You can reference those things against what has been done before. I need to say it here that absolutely all the things we have conceived are top of the line businesses.

The group business structure is so rapidly expanding that it compels attention to the sustainability profile?
The structure is very sustainable because we depend on the availability of very clever human resources; not just ourselves. We scout around all the time for clever people and we invest in them. We also try to act as motivators to very young people with the hope that we retire they will follow the models we have established.