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Omole: Delay in FIDs Impacting Negatively on Oil Service Firms
Mr. Ranti Omole is the Publicity Secretary of the Petroleum Technology Association of Nigeria and Managing Director/Chief Executive Officer of Radial Circle Nigeria Limited, a 25- year old oil service company. In this interview with journalists on the sidelines of the association’s 2019 Clients’ Appreciation and Industry Achievement Awards in Lagos, he spoke about developments in the oil and gas sector. Peter Uzoho presents the excerpts:
The international oil companies (IOCs) are complaining about the amendments of the PSC Act, how do you think this will affect the service industry?
I think it is an amendment that they will need to sit back, reset and rework and look at how they can maximise the opportunities still available despite the changes in the PSC Act.
Are you saying it won’t affect the oil service industry at all?
Well, if you bring in new changes whereby you were not paying before, but now you have to pay, basically, that means, your returns will be lower. In a way, it is also an opportunity for you to re-evaluate and re-examine how you do business. Some are looking at it as if we have to pay more royalties, let’s look at ways to cut down production cost. Some are looking reducing two to three dollars per barrel. It is also a kind of strength to reshape the whole system but typically, people also need to benchmark.
When you bring in a new Act to amend an existing policy, you have to look at it via-a-vis the other competing countries in Africa that are competing for same resources in oil and gas sector. So, for us to know whether that amendments are disadvantageous or just in line with the existing framework that you have in other African countries, we need to do a chart, benchmark, compare how we stand with other countries and if you find yourself more on the negative side, we need to address it.
What informed this year’s theme at the PETAN annual dinner, which is “The Oilfield of the Future: Operational Excellence”?
Basically, what informed it is that the whole world is changing. Technology is changing how things are done all over the world. We are having smart fields, Artificial Intelligence (AI), robotics, data mining and analysis. In a way, we said we need to go with the future which is intelligent and smart fields and remotely monitored fields. The topic is apt and it is also to remind us all that we cannot continue those things (we do) the traditional way.
Not only that, if we really want to cut down cost, technology is the way whereby you have less people, less maintenance, less field visits, smarter ways of monitoring your systems and improving the efficiency of your operations, which invariably, will reduce the cost of actually running your operations. So, the topic is apt. Everybody is talking about the technology as the future. This started early this year at WAIPEC where we talked about data mining and artificial intelligence and the impact on the sectors. So it is for real and the whole industry will just have to do that.
Are you saying PETAN members are ready for the future?
We are fully aware and we are re-orientating our strategies and some of us are already getting involved in some pilot tests. We talked so much about it but the industries around the world are not fully ready. But in some areas, we are having unmanned vessels, ships, platforms using drones for inspections. Gradually it is catching up and our members too are getting involved realizing that if we don’t get involved fast, we will be left behind.
Considering the fact that most of us are oil service companies, that means we do lots of maintenance work. So, if robotics are going to replace us, then we better be in charge of the robotics and be able to control and programme and use the various sensors to be able to improve our service delivery.
Today, people are talking about condition monitoring system using vibrations to monitor the condition of various assets. We are getting ready because that’s the only way we can still be in business for the next 15 to 20 years.
Recently, the issue of collaboration among PETAN members to attract big contracts was raised, what is PETAN doing to address this and what has Radial Circle done in this regard?
Quite a number of us on different occasions have come together to collaborate in other to get bigger projects or try to see how we can leverage our various strengths so that we can get more. Also, we keep on engaging ourselves to talk about collaboration frameworks and various platforms for us to be able to come together and harness our resources so that it will also help us in certain areas where we don’t have the capability, we can actually collaborate to build on those capacities. It is the most cost effective way and we understand that and we have few relationships that we are able to consume and we expect that there will be more as the year goes by.
What major projects are you handling at the moment?
Generally, in the country, the last big project just finished which is Egina (FPSO). The next one we are looking now is Total’s Ikike and the other ones are Bonga Southwest and NLNG Train 7. All these projects are in the pipeline, and hopefully FID on Train 7 will be taken as stated by the NNPC. If they do that, it will be a game changer in the economy. It is not just a project that will impact the high class service providers, but it will impact a lot of community people even those beyond the vicinity like 50,000 tons of concrete (that may be needed). That means you need to get granite from Edo and Kogi States, you need trucks to haul things to the jetties, you need to offload them. You need badges to carry them from those jetties to Bonny Island.
It is a project that really, will be a game changer, a catalyst multiplier to the economy and we need more of that. The more we have favorable policies the more we ensure that we able to take FID in projects. The more we have external funds, which we called FID, invested long term and most times you can’t revoke it from the contract because you are going to build a refinery, FPSO.
So it is such long term fund that we need. Apart from their impact, they are there for the next 25 to 50 years unlike the typical FDI, if anything happens, you can pull out your equity and take out your money. We also need to balance the short-term or close to liquid investment to the hard investment. When we put them in the economy apart from the continue impact on the society, the value addition, these are investments that will be there for a very long time and also generate income for the country. The NLNG gas, oil for refinery which we can sell and generate more revenue for the country.
What do you think are the challenges the oil service industry is currently facing and what is the way forward?
The first of the challenges is that we don’t have more projects. The delay in projects has led to our members keep paying their staff waiting for the next project. Then overhead keeps running, so really, they have increasing overhead because they don’t have projects right now. Secondly, since it is their various initiatives to cut down the cost of production, it means their own margins on the activities start getting thinner. But because people have different services and mix of portfolios and collaborations, they are still struggling (to survive).
We need catalysts, we need projects to be able to stimulate the industry and considering the fact that the service providers employ quite a number of people. We are a very big chain not only PETAN members, but we have thousands of service providers across the country supporting the oil industry. We need to get projects and that is the only way the industry can sustain itself.
Are you worried that some IOCs like Chevron, ExxonMobil are selling their assets?
Some organisations periodically reassess their strategies, they look at their mode of operations and look at where they increasingly have strength or becoming increasingly difficult and harder to operate. Most assets that they are being disposed are either on land or swamps and not the deep water where they have the strength and at times they look at the returns on the fields and people keep on re-engineering their portfolios for them to invest in deep water or other projects.
When you look at this globally, it is not really something out of tune. In a matured market like Nigeria, there will be assets that they have explored for the past 25 years and the returns are getting low and they feel it doesn’t meet their threshold of their investment returns, rather than keep on with it, they can spin it off, take the money and invest in maybe new frontier, new field or new gas that they want to put in their money.
Tell us about Radial Circle?
Radial Circle is a member of PETAN, it is 25 years old and it is a company that key into all the programmes of Nigerian Content laws in growing capacities, employing Nigerians and ensuring we can domesticate more services in Nigeria in line with what the Association stands for and also in line with what we need to actually grow the industry in Nigeria.