A momentous step in the E&P arenaJune 10, 2021
Wole Ogunsanya, managing director and CEO of Geoplex, talks to The Energy Year about the company’s measures to deal with the Covid-19 crisis, the importance of owning one’s assets and Geoplex’s expansion into oil exploration and FPSO operation. Geoplex is an indigenous Nigerian company offering a wide range of oilfield services.
What measures have you introduced to mitigate the Covid-19 shocks and enhance efficiencies?
Looking back, we started 2020 very well but, all of a sudden, most oil and gas companies, such as ExxonMobil, Chevron and Shell, shut down their operations. Most activities went to almost zero. The industry is cyclical and ups and downs are normal, depending on the volatility of the price of a barrel of oil, which meant that, to an extent, we were prepared for it. We had already been through three or four recessions.
One of our advantages was that all our assets and equipment are owned by us. We were not in any kind of debt, so that also helped us navigate the crisis. Since the start, we have defined assets as: people, equipment/facilities and cash assets. The reason is that when you have these ups and downs, your people and equipment need cash assets to cover the gaps. Thus, we have done well in making sure the company has good cash assets.
The first thing we did was to start looking at cutting costs. Accordingly, we proceeded by releasing some of our employees, mostly based on performance. Secondly, we were more aggressive in looking at new market and client opportunities. We were able to pick up some extra work from smaller indigenous companies, starting in April 2020, and this approach has even generated profits for the company.
Furthermore, efficiency helps you reduce costs, which is crucial in times of crisis. Here, we implemented a series of measures to control costs. We hired auxiliary equipment and we cut down on our inventory of spares. Any equipment left unused, any materials sitting in a warehouse, mean that money is being lost. In the case of some materials, not only were we not using them, but they were expiring and going to waste. So, cost control – in terms of cost of operations and spare parts – was used to improve the efficiency of our work in 2020.
What expansionist moves has Geoplex made to consolidate its position in the E&P space?
We are making a lot of efforts to position ourselves for the years beyond 2021, taking a “contrarian” approach. We are looking at the 2021 period as a time for us to expand into new service areas. The investment required will be lower and, by making these business moves, we will achieve an even stronger position than we occupied before.
If you look at the history of the industry, everything began with companies which owned the equipment needed to drill wells and extract oil. Over time, however, oilfield services began to be outsourced. Our strategy is to go back to the old days: one can look for oil, employ one’s own capacity to extract it and start producing – do the whole job from A to Z.
Accordingly, we have taken a momentous step in the E&P arena by acquiring part-ownership of one of the marginal fields which was recently put out for bidding by the Department of Petroleum Resources (DPR).
This is very strategic for us. You see, the work it takes to bring oil out of the ground is what we do. By participating in the marginal field, we will produce oil at a cheaper rate, we will do the work ourselves with our own assets and, in doing that, we will reduce the cost of getting the field into production. Why work solely on another company’s assets if we can work on our own assets? Our reward is to share in the profit from the oil, which is a lot larger than the profit from services. Enabling that oil, with our capacity, is a lifetime reward for us.
We are just waiting for the licence and, as soon as we get it, we will embark on a field development plan and get the funding, which we have already secured. The whole rationale behind it is to use our assets to enable production. The best way to make a marginal field profitable is to have some control of the services involved in extracting the oil. The amount of oil is limited and the cost is high if you outsource everything. We want to use our capacity to obtain oil. Despite this, we will still work for other clients.
How important is the FPSO service business line for the company at present?
Yinson Holdings Berhad is our main partner in our FPSO service business line. We jointly own a company called Yopwal that is in charge of the operations and maintenance (O&M) of FPSOs. We own a 60% stake while they have 40%. Through Yopwal, we provide services to, for example, First E&P’s Abigail-Joseph FPSO. This asset was launched in October 2020, and built with a capacity of 155,000 bopd. First E&P aims to be producing around 40,000 bopd from the Anyala field within 2021.
The FPSO business – and specifically the Abigail-Joseph – is very strategic for us, being one of our most profitable businesses this year. The contract we have is for seven years.
We are also investigating some other FPSO opportunities. We are set up to participate in any FPSO tender that takes place as we want to be more active in this area. Likewise, Yinson is one of the most efficient small to medium-sized FPSO companies in the world. In Nigeria, they run almost 99.99% of the time. We complement them, as we are known for our efficiency and for our service quality, which is as good as that of any international company out there.
What is the company’s involvement in Nigeria’s E&P sector?
We have worked with Chevron in the past and that work will continue. We are now working for SPDC [Shell Petroleum Development Company] on the ANOH project, and that contract runs until 2022. In actual fact, our contract is to work on any field Shell has. We do plenty of rigless work at present, since drilling activities have dwindled. Also, we have a fleet of rigs ranging from 200 hp to 3,000 hp and, as we do not have any rigs working now, we are actively tendering for both onshore and offshore projects.
As for general services, we are providing them to West Africa E&P, Niger Delta Petroleum Resources and SEPLAT. We have also done slickline work with ExxonMobil and are now waiting to resume activities with them. In addition, we recently won a tender for two deepwater contracts with SNEPCO involving electric wireline operations, becoming the first indigenous company to win a contract of this sort. Lastly, we are doing a lot of prospecting with Total.
What is Geoplex’s presence and strategy for expansion in the sub-Saharan region?
The oil industry is like a global village. What it takes to find oil here is the same as anywhere else, and we actually have the know-how. The sub-Saharan region is close to us and most of the work has been done by the multinationals. We thought we could break into that area easily because we are an African company. This is why we have established offices in Republic of Congo, Ghana and Ivory Coast.
We have no work in progress in Ghana at this moment, but we have some projects coming our way in Ivory Coast, where we are waiting to mobilise, and we are actively working in Congo. The major challenge in these countries is the lack of oil production volumes and the fierce competition.
We did work in Cameroon and Kenya, but once those projects ended, we packed our equipment and left. Currently, we are preparing to bid, jointly with Baker Hughes, in a tender for a five-year project in Angola. If that bid is successful, we expect to send multiple sets of equipment and establish ourselves there for the coming years – even after that contract has ended.