14 \ Business Life \ May 2013
www.GatewayToAfrica.com
BUSINESS life:
Alumni Oil’s Namibian Venture Gateway to Africa speaks to Stephen Larkin CFO of Alumni Oil, a British company that plans to drill for oil and gas in Namibia. GTA: How did the Namibian project come about? SL: We were called in by the Namibian government in 2011, to advise them on energy security. They were looking for creative ways to bring about more universal access to energy and to create enough energy themselves…they’re too dependent on neighbouring countries. We were also funded by the African Innovation Foundation in Zurich, to do a pre-feasibility study for a universal solar rollout. Solar on its own would not work, despite the fact that Namibia is the sunniest place on earth, because of the high capital
costs and associated interest payments. We needed to come up with an interim strategy. So we offered to assist them to find onshore natural gas with the lowcost exploration techniques that we’ve developed over the last eight years. Last year the Namibian government signed off on an area of about 5 million acres (bigger than Wales)[to Alumni Oil], where the remote sensing has indicated that there are substantial hydrocarbon resources. Hydrocarbon exploration it is very risky. Alumni is able to use an Enterprise Investment Scheme in the UK, as part of the Grant Thornton-UK Governmentbacked Growth Accelerator Program. The programme is targeting high growth innovation companies and we received a special dispensation from the taxman, which effectively enables us to combine the exploration with a very low-risk project, in biogas, which is guaranteed by the British government. Performance is guaranteed by an insurer, the feedstock supplied by a farmer. And the tax credits it attracts pay for the Namibia exploration costs.
GTA: So you say the two schemes offset each other? Image by Thomas Schoch
SL: Well if we fail on the exploration side, we give the investors a 40 per cent return with their money back after 4 years, from the biogas [which represents 70 per cent of the investment]; the other 30 per cent pays for the high risk/high return exploration..
GTA: And are the biogas returns guaranteed, or are those just projections based on the current market? SL: They are projections based on an
“Our long-term goal is to use the profit from natural gas, after we’ve given the investors their return, to create universal electricity access.” - Stephen Larkin, CFO Alumni Oil
index-linked government feed-in tariff, which is guaranteed [to rise] with inflation, and a performance guarantee, with an external insurance guarantee… in other words if it doesn’t deliver the electricity it is contracted to, an insurer will pay out.
GTA: How much money do you need to complete this oil exploration project in Namibia and how long is it going to take? SL: It’s going to take £5m [for just the oil exploration] and we estimate that it will take 4 years. Under the licence we’ve got 8 years, so there is a 4-year buffer, but we’re confident that we should be able to do it in half that time. If we invest on a 70-30 split - 70 per cent in UK biogas, 30 per cent in oil - the total project would need £17m, with £12m invested in the biogas.
GTA: What kind of investors are you looking for? You mentioned the PAYE. SL: We want to make this opportunity available to as many people as possible. Investors can put in as little as £2,000, where they will get £600 back from the PAYE that they paid last year. All the capital gains are completely tax-free. The investment is also well suited to contractors, we can help them get money out of their limited companies in an ethical, tax efficient way.