Consolidation as the way forward

Nigeria

Abiodun Oshodi, managing director of ILF Consulting Engineers, talks to The Energy Year about what the company did to prepare for situations such as the Covid-19 pandemic and the opportunities for re-evaluation that the crisis offers. ILF Consulting Engineers is an international engineering and consulting firm that provides technical expertise on industrial and infrastructure projects.

What factors have contributed to ILF’s preparedness to face the dual shock of Covid-19 and a collapse in oil prices?
Firstly, all the infrastructure is available for our employees to function and carry out their daily responsibilities. We are unable to move around freely and that has had an impact on our operations; however, the biggest concern remains the health and safety of our staff. Right now, Nigeria is in the middle of the community transmission stage, so it is not a matter of imported cases anymore, but a matter of the virus being transmitted within local communities in the country. We are now potentially more vulnerable to catching Covid-19 anytime we leave our homes.
We are still concerned about the way things will play out in the energy industry as a whole; however, I believe the right precautions have been taken within our field of activities. As a company, we are experiencing some delays, but we keep meeting our contractual obligations. Working from home has never been a common practice in Nigeria, and the current situation has been a huge exposure to what is possible.
In fact, the efficiency of our workforce has increased in the past two months. We have displayed flexibility and an ability to make quick decisions despite some of the challenges our people have faced in their remote work environment, such as access to power and the occurrence of blackouts.
Achieving broadband internet access is still a challenge in Africa, and we are trying to go around that bottleneck in certain parts of the country. But deadlines are being met and targets have been achieved. We are optimistic but cautious, hoping that the numbers of infected people will come down quickly and a vaccine will be found quickly.

How can Nigeria’s gas market ensure business continuity for all industry actors during this period?
I am very optimistic about the country’s gas market prospects, as gas still represents a new frontier in Nigeria. Currently, most of our projects are gas related. Regardless of what is happening in the global crude oil market, the impact has not been significant on natural gas prices.
For instance, the AKK [Ajaokuta–Kaduna–Kano] pipeline project has seen a lot of traction and has been moving full speed ahead. With our partners and the EPC contractors, we are progressing with the project. We are also providing consulting services for entities interested in the NGFCP [Nigerian Gas Flare Commercialization Programme]. We are supporting various gas supply projects. As long as the FID is completed and the funds are available, Train 7 will also bring a huge amount of work to the engineering sector in Nigeria..

How can digitalisation help companies overcome the challenges associated with the slowdown that has hit the oil industry?
Companies that started to embrace digitalisation after the 2014 oil price shock have managed to move forward in a lean and flexible way. What the current crisis has taught us so far is that you can actually work efficiently in a remote environment. Industry players must get together and establish the right infrastructure that will suit all the projects going forward. The overall capacity to store and analyse industry data is still very poor in Nigeria, and everybody is still struggling to have good internet access in their homes.
We have been embracing digitalisation and smart technologies in ILF. Clients want to see what additional value we can bring to them so that they can optimise their costs. We are emphasising the benefits of 3D modelling in reducing rework to enhance project performance levels and increase efficiency. Our teams are able to work on the same project models at the same time.
Companies have come to realise that these technologies can change the way we work permanently. Now, it is time to start putting more capex into industrial digitalisation and developing state-of-the-art techniques. It’s incredible that I do not need to fly six hours to London to have a meeting. Instead, I can do it on Zoom sitting in my room while also looking at a process plant through a 3D model. I am sure that we will see a boom in technologies following this pandemic as a result of necessity and the realisation that things can be done without physical presence.

What options are available for the government to stimulate growth while combatting the current crisis?
Unfortunately, the country does not have enough financial reserves to be able to support small and medium-sized businesses. Nigeria has gone from having tens of billions of dollars in reserves to just millions in the ECA. There are several different arguments as to what each administration has done in the past 10 to 20 years, but the question is this: What can we do now to boost our economy?
We have gone into this recession without having taken the necessary actions to properly recover from the previous oil price shock in 2014, and we are still suffering the consequences. But we are where we are today, and the government’s ability to help companies is limited. We are not able to offer similar support packages as the ones introduced by the governments in the US, Japan or the UK.
The Central Bank of Nigeria and the Bank of Industry have done quite a bit to support the economy in the past several months. The Bank of Industry has reduced interest rates by 2% for every loan. The new policy directions released by the central bank to stimulate economic growth were also encouraging. However, we will not know whether these actions were sufficient or not until we are out of this crisis.

How can the crisis change contractors’ receptiveness to entering into joint ventures and sharing profits?
We were always open to the idea of collaborating with our peers and other industry players. You can find a lot of consortiums that have come together to do work on large projects simply because we cannot match the millions of man-hours on our own that are required by the operators for such a large-scale development. Thankfully, Nigeria has a lot of large-scale developments and there will be work for everyone. Consolidation is the way forward. It may not have to be a merger, but rather a joint venture for a specific project.
It is obvious that coming together will be one of the few ways for industry actors to survive and navigate the crisis.

What do you make of the current downturn’s long-term implications on business practices in Nigeria?
For me, the pandemic presents an opportunity to rethink our model. We need to look at the size of our government, the long-term viability of our projects and the opportunities to streamline a lot of other areas. We need to think it through this time and not make the same mistakes we did after the 2014 recession.
Secondly, Nigeria offers a huge amount of opportunities for investors. We have to put in the right policies and establish the right market dynamics, as projects are there to be invested in. We need to think in the right direction; however, we have often suffered in the past when it comes to turning those thoughts into actions. I hope this pandemic sends a message to all of us that we need to do things differently.

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