Nigeria will be one of the best investment destinations in the post-Covid-19 era.

Mauro BARTEZZATI Managing Director ELPER OILFIELD ENGINEERING

Confidence in Nigeria’s future

May 14, 2020

Mauro Bartezzati, managing director of Elper Oilfield Engineering, talks to The Energy Year about how changes in IOCs’ needs during the Covid-19 crisis are impacting business and operations for the service sector. Elper Oilfield Engineering is a Nigerian-owned company that specialises in engineering and technical services for the oil and gas industry.

How has your business been affected by Covid-19?
The immediate reaction from the industry was a request for cost reductions, as companies have started looking into 30-40% savings in terms of both new investments and ongoing production. We had the first such reaction from ExxonMobil, for which we had to reduce the number of personnel for our ongoing contracts. Additionally, Chevron has informed us that it is looking into a 50% reduction in terms of value, not personnel.
As a general rule, we are expecting reductions either in the number of personnel or value-wise. As far as personnel, it is really a matter of qualifications: The more qualified the personnel are, the more the client is looking to reduce the numbers because of the higher cost factor. As we speak, we have almost 500 people working, a percentage of which will probably be temporarily reduced to some extent. Probably the expatriate workforce will be more affected than the Nigerian workforce.
Apart from ExxonMobil and Chevron, no other client has reacted as yet. Let’s wait and see what Shell or Total will do, then we can make better assumptions on how our service market will need to be reshaped. This will happen fast, and even if we hope that the market will recover somewhat, the price downsizing aspect will stay longer.
As far as day-to-day operations are concerned, we immediately applied remote-working schemes for our core personnel and enhanced communications with personnel working in the field. We are very persuasive with all of our employees to follow clients’ prescriptions. Until now, we did not have any employees that encountered any health issues. The general rule to be followed within our company is to apply social distancing and remote working and to make sure that all of our staff members obey clients’ prescriptions regarding safety.

To what extent can the service sector allow more rate reductions?
It has its limits, of course, and as has happened in the past, we can go as low as we can as long as we do not have to compromise quality. We also have to see if this downsizing is just an emergency response or if it will stay there longer. If it is an emergency response, we will do our duty like everybody else and hope that things go back to acceptable levels soon. If it is for the long term, we will have to review our programs and internal organisation.
However, past experiences show that crisis always accommodates lower fees but never comes with a compromise in quality. I think this is where the line will be drawn.

 

Do you expect an uptick in asset management services as was the case during the 2015 crisis?
In Nigeria, I think this area has been kept at a very high level as far as deep offshore is concerned. Requests for maintaining older facilities will probably come, although in Nigeria this is more in the hands of non-international organisations. Total, Shell and Agip mainly have some facilities in onshore, swamp or mid-sea areas, and these will still require quality maintenance services
Since this crisis is a relatively new occurrence, we will have to see if the resources are there. In the case of IOCs, resources are mostly there for maintenance, but for the independent operators, it is an open question. In Nigeria, they were not exposed to a major crisis in the past. The 2009 crisis was mostly in the hands of IOCs, which was followed by an asset sell-off to smaller companies from 2010 onwards. We have to see how strong they will be faring financially to keep up with the requirements.
As far as Elper is concerned, we have more experiences with IOCs, and there we expect the usual curve of things going down and then picking back up.

What are some of the initiatives from companies to fight Covid-19?
I know of some companies that are redirecting their production to masks and disinfectants, and some are doing it quite effectively. Social responsibility has been applied by IOCs, NNPC and the large Nigerian companies in a very generous way. I have also personally participated through an association for the procurement of medical kits for testing, etc. Other industries such as telecommunications responded with attention and generosity too.
Of course, needs are huge in a country with a population of almost 200 million, but everybody has done their best up to now according to their own capabilities.

How confident are you about Nigeria’s future in the light of this crisis?
I am quite confident, and I can tell that Nigeria and Africa will be one of the best investment destinations in the post-Covid-19 era. The big conglomerates will find opportunities here that will be hard to find in the Western world. If you are looking for real opportunities with relatively fast returns and good interest rates, I believe Nigeria has potential because of its size and the internal market.
Other African countries will require a lot of investment in the areas of infrastructure and logistics, so they are prime destinations for funds but should be carefully analysed. On the other hand, we are more fragile when such a crisis happens, but we are also more flexible and not too structured, so we are prone to react in a much faster and diversified way. Funds will probably still be available after the crisis, and if there are solid projects that can be showcased to the financial community, those can be very rewarding.

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