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Nkpa: This is the Best Time to Drill for Oil in Nigeria
Bolpex.com is the first online global energy market place in Nigeria, which is making waves in the oil and gas industry. Its founder, Mr. Ukariwo Nkpa spoke to Nume Ekeghe on various issues in the industry. Excerpts:
What do you think about the current state of the oil and gas industry globally and in Nigeria?
The current trend vis as-vis very cheap oil will surely continue during the first second and third quarters of 2017. Late third quarter and fourth quarter 2017 will see a sharp increase in oil price, but not up to $90 to $140 per barrel for sure. The shale gas drilling and production will still keep the oil price low. It is believed that emerging higher oil price will spur investor confidence and will see increase in drilling activities around the world and will directly affect the amount capital inflow to this sector. Nigeria will definitely see quantum leap in drilling activity immediately oil price increases.
New exploration and new drills will start again and owners of oil blocks and major investors in the sector will feel very safe to invest in the oil and gas sector again. This trend will also help the bottom line of countries like Nigeria, Angola and Venezuela to creep out of recession. Services companies, the Weatherford, Schlumberger and Baker of this world are cutting cost and reducing overhead. Oil producing companies are getting bargain of a life time and contractors are bagging for contracts. In the past we had an ecosystem that services contractors market, now it is solidly an oil producing market. Oil producing companies are imposing ridiculous pricing regime on contractors with no possibility of rate escalation. Prices are fixed and firm over the contract duration and contractors are expected to hedge the princes.
What is Bolpex Energy doing differently in the energy marketplace?
Bolpex Energy Limited, the sole owner and operator of the very Innovative Oil and Gas e-commerce start-up, first in Nigeria. The oil and gas online ecosystem provides a unique platform where buyers and sellers in the oil and gas environment collide in real time and broker deals seamlessly. It helps oil and gas related companies but contractors and companies save and make money. Oil producing companies, the international oil companies (IOCs), marginal operators and independent operators can sell their surplus material via this platform. They can even borrow material from each other because they can easily see what the other company has in real time. This has a potential of reducing project slippage and downtime.
Oil and gas contractors with purchase orders will have a user friendly platform were they can meet suppliers of these goods in Nigeria. Contractor in Lagos can easily locate Oil Country Tubular Goods (OCTG) pipe from a supplier in Port Harcourt or Warri. The supplier would not have to travel to these states, he needs to just visit Bolpex.com, which is your 247 buying house, the platform reduces your sourcing time by 80 per cent and connects you to genuine oil and gas suppliers.
The founders of this specific oil and gas platform has worked for major oil companies like Shell, Total, Centrica Energy, Seplat, Eland Oil and Gas.
How has the decline in oil prices affected activities or transactions between buyers and sellers on your platform?
We believe that increase in oil price will also increase the activity in the platform. Nigeria is 95 per cent dependent on oil and when oil companies are not paying their contractors, the contracting/supply chain confidence will drop to zero even negative. This trend tends to affect e-commerce platform and the transaction volume. We have strategically reduced the effect this trend to on our bottom line by recently launching www.shop.bolpex.com. Thus independent Bolpex.com sub-platform is specifically designed to give Nigerian an Outlet Mall experience. Use it and experience the unique experience.
In Bolpex.com, we know that oil and gas workers, buyers, sourcing and procurement specialist working both offshore and onshore are people too. They buy laptops, art workers and phones among others, while doing their primary assignment, which is procuring for their respective companies.
Bolpex.com has created a platform where you can have fun and still work hard. Bolpex.com is also one of the first and only one per cent, one per cent, one per cent company in Nigeria. We operate in a sustainable way – The Bolpex way.
What is the state of rig count in the Nigerian oil industry?
Due to global low oil price and low investors’ confidence, the rig count is at the lowest in five years. The Niger Delta freedom to operate impasse is not helping the rig count for swamp and land rig. The low price is affecting deep offshore rig count. But Bolpex.com intelligence, our oil and gas market intelligence unit believes that is the best time to drill. The Rig day rate is very low and the services companies are cutting their day rate for personnel and equipment by 45 per cent percentage.
Which aspect(s) in your view has been mostly hit by the drop in oil prices?
Drilling operation rules the market, this vital operation makes up about 70 per cent of capital expenditure spend. The low price has reduced this sector by 90 per cent. Most companies have cut and/or cancelled their drilling budget. In Nigeria, a new norm has emerged, crude barging and trucking is no longer a seminar words but a key word in all operations meeting and morning broad cast. This is basically the new reality and it will continue unless the Niger Delta issues are resolved and it have to be resolved very fast to keep Nigeria oil and gas industry viable. Marginal field operators are not paying contractors, the IOCs are paying but they are asking contractors to discount already executed contract by 40 per cent, thereby destabilising all the economic pricing strategy adopted by oil and gas contractors. The contractors are owing their banks and laying off their workers. Workers are adopting different strategy to make end meet and patronizing Ponzi schemes. This cycle goes on without end.
The production department will always function even when oil is low. But because the total cost of ownership of an asset also involves operating expenditure, cost among other cost, drop in oil price has resulted in the reduction in Turn –Around-Maintenance programme (TAM). But oil facilities are scheduled to be TAM once every two to three years. Some go for years without structured TAM. We will not look far to see this trend around us. This trend has negative impact on the installed equipment and more often than not nullifies the warranty clause in the purchase contract. The lack of fund caused by low oil price has also effect ability of this company to recruit the best candidates. The information technology world is taking up the best brain and this is affecting the quality of workers in the oil and gas sector. It is worth noting that most of the asset handing over by the IOCs to local companies are in a bad shape and needs TAM. But the lack of funds is obviously not allowing the new owners to do mandatory TAM.
How has the increased focus on local content in Nigeria and some other African countries impacted on your business?
Many local companies are now giving bigger opportunities and contracts that would have gone to international companies. The normal scenario in the past was to give local companies contract less than $500. Now local companies are given multiple million dollars contracts. Oil Country Tubular Goods (OCTG) supply, a major drilling and completion spent was over the years reserved for few two international companies, now a lot of this local companies are now major players in the ecosystem.
These local companies normally source their products within Nigeria before sourcing or looking for it internationally. Bolpex.com has always been their first port of call, seamlessly contacting buyers and sellers together. The smart local companies leverage on our platform and use it as a means to support their client. Product lying in warehouses in Warri and Port Harcourt can easily be made visible in real time to a buyer or buying organisation. Bolpex.com has positioned itself as a genuine platform and the gateway procuring oil and gas material without hassle.
Companies from Ghana, Angola and around the world are also sourcing from www. Bolpex.com. Bolpex.com is continuously innovating and meeting customer’s expectations. We are transforming from a regional oil and gas platform to a truly international oil and gas online hub.
What new developments are you seeing in the energy marketplace?
Smart, innovative and tech savvy companies are coming into the oil and gas marketplace. These companies are headed by ex-bankers and oil workers that love and use of internet and e-commerce as a vital tool to supply chain management optimisation and to drive growth. At Bolpex.com, we believe that it can always get better and we envisage over 2000 per cent growth in this next two years. We are presently talking with MIN.ng in the bid to allowing local oil and gas equipment manufacturing in Port Harcourt, Aba, Ogun State and Warri to showcase and market their product in Bolpex.com. Listing and organic growth is our strategy for growth in year to come. Some Angel investors are also talking to Bolpex.com. Bolpex is open to both foreign and local direct investment opportunity.
Going forward, what are your expectations and plans for the energy market?
It will get better for sure and Bolpex.com, being a pioneer in this innovative ecosystem, will surely be a leader for years to come. We want more people/companies to come and join this unique marketplace. The opportunity is huge enough for all.
Our recruitment day is coming soon. We need young smart people to join our work force. Come and help Bolpex .com to create the next big thing, leveraging on the power and opportunity embedded in the Internet of Things. The Nigeria energy supply chain system needs Bolpex.com and Bolpex need contractors and oil producing companies to come on board because it is the right thing to do.