An innovative operating modelAugust 25, 2021
Eke U. Eke, CEO of SpringRock Group, talks to The Energy Year about the group’s approach to cost reduction and optimising production and its plan to become a full-cycle oil and gas player. SpringRock is a Nigerian energy group with activities in E&P, power and oilfield management services in markets across Africa.
How is the sector recovering from the pandemic?
We have seen oil prices creep back up to around USD 70, but we haven’t yet seen an accelerated move towards starting operations. This is due to several factors. The major one is funding, which is very scarce. There is a lack of funding in the hydrocarbons arena, be that due to scarce capital or because it now seems risky to invest in oil and gas owing to some of the headline grabbing sentiments being driven by politicians who mistake oil and gas to be equals to gasoline. Hence, the recovery of the sector is much slower than anticipated and we hope that by Q4 of 2021 and starting in 2022 we will see a renaissance of oil and gas activities.
What method does SpringRock follow to enable enhanced production at optimal costs?
SpringRock’s mantra is excellence. To consistently achieve excellence, we follow an innovative operating model in making sure that our projects are well-planned, carefully thought through and properly executed. When we do that, we ultimately bring down costs. Many companies think that buying cheaper equipment and contracting services at a lower price will reduce the total cost of the project. Ironically, they actually end up spending 50-100% more.
The SpringRock methodology is all about adequate staffing of a project in terms of number of personnel and expertise. Rigorous planning and preparation in addition to careful management of the execution process is essential. Ultimately, we succeed in drilling oil and gas wells and set them up so they produce as effectively and efficiently as possible.
For example, we have been working on the development of a field offshore Nigeria since 2014. Before we commenced work in this field, it had 16 wells already. Hence, one would assume the field is already well known and engineering and design well settled technically. However, that was not the case and l can further state that is not the case in a vast majority of the cases we have encountered. Hence, we made six design changes in the engineering and design of the wells in the field. We also brought a different execution methodology and have so far constructed seven wells which are in production along with two other wells for appraisal and exploration in this field.
Presently, all wells constructed by SpringRock are producing better than any of the other wells previously drilled, of course comparing performance benchmarked at the same timeframe. These projects were done within budget, and secondly, these wells produce at a more optimal rate compared to previously drilled wells.
We believe that the concept of cost reduction should be seen as part of a holistic way of doing things right. We cannot always choose the product or service that costs less as this never necessarily reduces costs.
How do you maximise the production from the wells you drill?
We have different methods and techniques to optimise the production of our wells, focusing on the design of the well, the management of its construction, choices of hole sizing, completion design or even how that completion is delivered and anchored inside the well. Also, we use a lot of simulation and modelling to make our decision, also leveraging past learnings.
There is a fixed amount of oil and gas available in the ground. The amount that can be brought to the surface is also more or less fixed within a certain window. The question is: what share of the producible oil that can come to the surface can you achieve? This is driven by how the well was designed, how it’s constructed, the choice of technique and technology and the execution of the work.
Tell us about the project you’re presently carrying out with Amni International.
Currently, we’re working on the largest field operated by Amni International. This field has some challenges as its location is quite unique. The access for this offshore field is a river mouth with a shallow channel and it would ordinarily require special shallow draft rigs to get in and out.
We were able to design and implement a certain logistics methodology that allowed us to access the site using a standard rig. This saved a lot of money as it would have been time-consuming and costly to mobilise a special rig for that project. The project was delayed by Covid-19, but we expect that it will restart in late 2021.
In addition to this, we must understand that oil and gas are two separate monsters when it comes to development. At the moment, we are at the initial stage of the gas development planning in this field, with the expectation that by early to mid-2022 we will be in full gear, and the construction of the gas wells will kick off sometime in late 2022 to early 2023.
There are two other fields as part of this series of projects and we’re now assessing the development plans.
What projects are you engaged in in other African countries?
Outside of Nigeria, we have a deepwater project in Ghana in the Central Tano Block. There, we will be involved in the construction of two exploration wells. It will follow a one-plus-one scheme where if the first one is promising, we will have the green light to drill a second one. We are hoping to resume activities in Q4 of 2021, aiming to have those wells completed sometime next year. This project is extremely symbolic as it will make us the first African company to drill deepwater exploration wells.
We also have interests in Kenya, where we are exploring partnerships with Kenyan companies and will anchor our technical strength with the local participation to hopefully secure a development project that has however slowed down due to the pandemic. Before the pandemic hit, we had a bullish plan of development. However, the reality now is that Kenya will be quiet for a while in the oilfield operations domain. However, we are finalising a working collaboration with a major institute, providing know-how and training for the oil and gas industry and also for integrated project risk management. This collaboration in Kenya will take us beyond the oil and gas realm and into other business areas.
Lastly, we are looking at entering Uganda, and by the end of this year we hope to have a registered presence there.
To what extent are you looking into carrying out full-cycle projects and how important is innovation in this objective?
Our ultimate aim is to acquire full control over asset monetisation projects. Our goal has always been to be a full-cycle company in oil and gas. We started by building the capabilities that are required for the building blocks of an oilfield. We are leaders in well construction, and we have built up strength in the area of production management – even developing a new methodology – and we are about to commence field testing. We’re also investing in training and innovation. So, we have fully acquired or are in the process of strengthening all the capabilities you’d need to run an oil and gas asset.
The ultimate target is to be able to manage an asset from cradle to grave. This could be either in the form of managing the whole value chain and field management for a given company or even running an entire asset ourselves. Both options will enable us to add innovation, which we regard as pivotal.
We’re not trying to turn an oilfield into a laboratory, but we know that if we don’t try something new, nothing new will ever come. Hence, full-cycle management will enable us to introduce new ways of doing things. There are technologies and techniques that exist but they are held by a few IOCs and there is little access to them. We are innovating new capabilities that would be even superior to what the IOCs have and most importantly we will make this available worldwide.
To what extent is R&D central to your ethos as a group?
R&D is part of our bedrock and what we stand for. We have already completed a new production management workflow, which went through a year and a half of R&D. Now we are working on field testing, which is taking an idea from the laboratory and applying it to a real oilfield so that we can compare what we have with what we had anticipated. From here, we can diagnose issues or problems. After that, we move to commercialisation. At the same time, we want to work with universities for R&D within the countries that we’re already active in.
We know that there are very talented people in these institutions, from the professors and lecturers to the students. We want to harness that talent by teaming up with top universities. Along these lines, we’ve already signed a collaborative research agreement with the Federal University of Technology in Owerri, as well as an R&D agreement with the University of Lagos.
Our desire is to shift Africa from being a net consumer of new innovation in oil and gas to a net provider of this innovation. We believe we have the ability to contribute to innovation. In this mission, all of the projects will be 100% funded by us. Our future as a company and the future of the industry stand on the shoulders of innovation.