An eye for opportunity in Nigeria

Nigeria

Kayode Thomas, CEO of Bell Oil & Gas, talks to The Energy Year about opportunities for local companies in the aftermath of the Covid-19 crisis and the pandemic’s impact on efforts to build and sustain local capacity. Bell Oil & Gas is an indigenous oil services company in Nigeria.

To what extent has your business been affected by the pandemic?
The last couple of months have been trying times; there is no doubt about that. It has been very, very difficult and unprecedented. We have been around for nearly two decades and we have gone through some tough periods, but the last couple of months have been rather unique in the sense that this is uncharted territory.
Nevertheless, the implications are very real in terms of the impact on our business and on the industry as a whole. Clients are coming back to renegotiate contracts they already have with us, putting them on hold or in some cases cancelling them. So, based on the last couple of months, it is tempting to forecast doom and gloom for the rest of 2020.
However, I see this as a temporary situation, and of course this is not the end of the oil and gas industry. Things will surely change; the question is who will be around when things change. Companies are taking action to weather the storm and to ensure that they are around when things change for the better.

Is there room for more entrants into Nigeria’s oil and gas industry?
There is always room in any industry. We entered at a time when the industry was already mature. It is even more mature today, but there is no reason why companies could not join, provided that they are clear on their value proposition, what they bring to the table and what competitive advantages they have.
However, for new entrants these days, it is certainly doable with all the focus on local content and capacity building. Even existing companies have to raise their game in that regard to ensure that there is a lot more to be seen on what has been done locally.

To what extent could local companies capitalise on opportunities after the crisis?
The biggest challenge for local companies is raising capital. We have been through this for many years, and last year we got some private equity investment in our company. That was on the back of many years of putting the building blocks in place and ensuring that we can demonstrate a lot on regulatory compliance issues, ethics and growth potential. This is what ultimately enabled us to raise some capital.
However, I am also mindful of the fact that it is very difficult for local companies to attract capital and build the capital base that is required to weather the storm when things get very tough. But it is still better than before, as the environment is more enabling nowadays for local companies.
It would not be far-fetched to say that one might still find some local companies that are not necessarily serious about building local capacity, but we are seeing a more forceful push from the Nigerian Content Development and Monitoring Board to ensure that local content goals are indeed achieved.
Using strategic alliances and partnerships to build the local capacity within the Nigerian oil and gas industry is also an important factor. Partnerships and alliances are at the heart of our company’s strategy. The question is whether a company can attract foreign and even local partners. The value proposition has to be there, and synergies must be achieved to get to a win-win situation in which partners are willing to combine their resources to achieve a common goal.

Can the current situation be an opportunity for local companies to build local capacity?
It can be an opportunity, but if care is not taken, we can see a downturn in that area as well. Following the 2015 crisis, we were slowly but surely coming out of that slowdown by the end of 2019. There were a lot of exciting projections and projects, and then Covid-19 had other ideas. We are definitely experiencing another slowdown. If you have to halve your revenue projections (or worse), halt certain ambitious initiatives or start aggressive cost-cutting measures, it is very difficult to see the growth path in the short term.
However, our strategy is very simple: apply the brakes in some areas to keep our head above water and dig deeper to make sure we are more innovative in the way we do business development, service our clients and keep them close. But at the same time, we are going to accelerate in other areas to put the company in a good position for projects that will inevitably emerge after the crisis.
This is one of the reasons it may appear surprising to some people that we are still forging ahead with some major projects in the company. We are building two plants: a valve assembly, testing and maintenance plant and an OCTG [oil country tubular goods] pipe threading plant. We acquired the land late last year at the Lekki Free Zone in Lagos and completed all architectural design and an environmental impact assessment.
After the Covid-19 pandemic broke out, we could not proceed, but this is a temporary delay and we are continuing negotiations with our contractors. We firmly expect that we should be commissioning this facility by this time next year.
On major projects like the NLNG Train 7, our first MOU was with Foster Wheeler back in 2007, which shows how long we have been tracking, and it took another 13 years for that project to begin to look like it was coming to fruition. The question we ask ourselves is what we can bring to the table. We know we can play a big part in piping, composites, flow control, valves and rotating equipment. This is a project that is going to happen; the government made that clear recently following the signing of the contract. It is going to run for four to five years.
What local companies should be doing is starting to position themselves for projects like that. It is tough to make those decisions in times when we have to try to keep body and soul together. Even our company had to review over and over again why we should continue with certain projects. But this is still a time for us to capitalise on the emerging opportunities.
Some of the new waves of this current situation are bound to stay. Even post-Covid-19 when everything gets back to normal, I am sure that the number of physical meetings will be very limited if one looks at how much more efficient we can be in utilising our time and how much more productive we can be. There are certainly opportunities and a light at the end of the tunnel, even in a dark period.

What is Nigeria’s level of attractiveness for foreign investors?
The level of collaboration is there, but there is massive room for improvement. Sometimes I feel we still operate in different silos, although we are trying to achieve a common goal. Gas is going to be huge for Nigeria. There is talk about the ups and downs of the oil price and how it will rebound, but gas does not have that volatility yet. Gas is going to be key for the country, and it has just been tapped.
When one looks at the industry as a whole, there are several gas projects that have been launched earlier but which have been slowed down for now. But I am sure they will come back to the table. The country is well positioned, and the potential has always been huge. Potential has never been an issue for Nigeria; instead, it is about implementation, utilisation, discipline and enabling the right environment.
I keep going on about making sure that we recognise what our strengths are, what our weaknesses are, and how we can fill those gaps and create an environment that attracts foreign players. There are many foreign entities that want to operate here, but if the environment is not conducive and if fiscal policies are not attractive, they will hesitate.
Companies are here to make profit. Yes, you must add value, but if you are not interested in making profit then you might as well set up a charity. If foreign companies are coming to the country, we have to make sure it is beneficial for everybody. As long as parties are able to work together, understand these things and fine-tune what needs to be fine-tuned, then we can begin to see some realisation over the coming years.

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