Crisis management and remote solutionsOctober 14, 2020
Iwan Chandra, president-director of Baker Hughes Indonesia, talks to The Energy Year about expectations for the market and project work in light of the Covid-19 pandemic and how the company has reorganised its operations. Baker Hughes Indonesia provides energy technology services to the country’s energy industry.
What was the biggest challenge in the early days of the pandemic for Baker Hughes?
For us, like everyone in the oil and gas business, there are two categories. In the US, it directly impacted the work on shale oil, and demand dropped a lot. While the supply is abundant, shutting down production is not that simple, so as soon as the storage facilities were full, the real problem occurred.
In Indonesia, those things have not happened because we still import half of the oil demand, and produce only about 50% in the country. Our activity in Indonesia has not dropped like we saw in the US, Europe and the Middle East. From an operational demand point of view, we are running at around 80%.
We are not directly involved in the demand because we work primarily on exploration and production, so the effect we are seeing on the downstream demand is not directly felt by us. The wells still need servicing and clients continue to drill wells, even if not as many. A lot of onshore activity is still ongoing. From a cost perspective, it is obviously lower than offshore and deepwater.
Do you expect a radical change in late 2020 in terms of deferral of projects?
It is not a secret that E&P companies operating in deep water have already delayed activities because the rigs have stopped, they don’t have any more workers and as of today they still cannot clearly see when they can restart. Operationally, the rigs need 100-150 people on board plus all of the backup because of crew changes. A lot of the expertise also comes from abroad and today these personnel cannot even come into Indonesia. It is risky to start the operation, even if the rigs are here, and support them internally when they go back up because they need to import some experienced engineers and expertise as well as technical equipment.
The supply chains are still broken and we don’t know whether they will come back in the near future. If you do talk to them, six- and nine-month delays are pushing them into the next year. It is not us who decide to delay: We are already here. If you talk to the national oil companies or people who operate in the country and do not rely on expatriates, they are continuing.
Only one or two companies are delaying. The others, especially the national oil company, will say that in the more general picture, exploration may be delayed, meaning in new frontiers with chances of discovery at only 15-20%. But it does not mean that they are delaying plans that were already in the development stage; these are not drastic changes. Regarding Q3 and Q4, I think activity will still be there, but how much it will be impacted I cannot guess.
From an operational point of view, how did you reorganise the work of your teams?
We are a global company and we have experienced downturns before. We have crisis management teams (CMTs) activated in 16 countries in Apac [Asia-Pacific]. We activated our CMT on March 15, when the country declared self-distancing measures and school holidays.
Working from home is not a big problem because we have been living digitally for a long time. The main impact is on how we are operating in the workshops and how we serve the rig operations as operators demand 14 days of quarantine and self-isolation before anyone can go on a rig.
This means that when we normally spend 10 days on a client’s rig, we need 24 days for the crew to actually be able to deliver that one job. Where we used to take one week, we now take three weeks and we need almost three times the crew.
In a sense, we cannot charge more either because the oil price is low and we are sharing that burden. That is one challenge we have to face, but so far we are delivering the job. Our office is almost empty, and we have half the usual number of people in the workshop serving the tools and equipment and making them ready for remobilisation to the rig sites.
It all sounds like major cost increases for service players like you. Do you feel stuck between a rock and a hard place?
We have experience of this. The truth is, oil companies are correct: Their revenues are lower because the oil price is lower. So they want us to serve what they require and they want us to follow the Covid protocols, and are also asking for a discount. That is the balance we are taking.
This crisis may represent an opportunity for gas to take the front seat in a place like Indonesia. Do you foresee more work for Baker Hughes in that segment in the years ahead?
Gas will have a bigger role to play in Indonesia and that was already the case before the pandemic. But, in the near future with the oil price situation and Covid, I don’t know whether that has made gas more relevant because oil is cheap and the factories and vehicles still need oil; the power generation sector works mostly with oil or diesel… So if it is more affordable, why would you need to switch to gas, which is harder to transport, where the piping isn’t reaching everywhere and where there are many requirements?
In the longer term, gas in Indonesia will definitely play a much bigger role, with the majority of gas discoveries and a couple of LNG project developments underway. It is a strong sign for us, since Baker Hughes has industry-leading systems and proven in-field experience in gas technology: gas turbines, compression, power generation, processing and control for LNG and power plants. Gas is a cleaner energy source as well compared to oil and coal sources.
Do you feel a specific responsibility towards the community?
Maybe not as big as the operators and the oil companies as we only have 800 people spread across Indonesia across six big workshops, but when we talk about the community, we contribute to the locality where we are based. We work towards the direct next-door environment.
How have you been organising work and operations in light of the pandemic?
We have our CMT in place. At the beginning, we had a twice weekly conference call with everybody and were providing necessities like masks, gloves, IR thermometers and sanitiser in the workplace. Workers without a critical presence requirement would work from home. We do practice these safety measures; personnel have to wear masks, wash their hands more often and keep themselves at a safe distance.
The communication and access to our system are critical, so that the work they do from home is effective, and they don’t have to be in the office. We have a clear decision-making channel, with HR, HSE, security and myself as the country lead and CMT leader and we have regular meetings and all have the same protocols and policies on how to work in these environments.
If anything forces us to push the boundaries, then we have to regroup and really assess the safety and security of our own people, other people and the installation we will go to. If we have strong standards but need to go to the installation of a company that is not practicing the same strict measures as us, this is not much use. We are communicating constantly with our employees, our customers and other contractors. We would like to know who will be on the same site for two weeks or a month, and whether they are practicing the same strict measures as we are.
It is not easy and we have many questions – for example, whether it is safe to travel on public buses, which became more difficult. Domestic flights were stopped for about two weeks. Now they have restarted for certain destinations, but they applied strict measures and rapid tests are easier to get. So for everybody to be able to be on board a plane, we need to show them the rapid test/PCR results and evidence of self quarantine for the last 14 days, and then health records from the hospital.
It is strict and it is getting more difficult, but it is for everybody’s safety. We try to convey that to all of our employees. We provide masks to every employee, and when they go to a rig site or a work site, we give them enough masks and sanitiser. It sounds small, but when you have 800 people daily those things are another cost that we have to bear.
Do you see these new ways of working, like working from home, reducing the costs of running the business beyond the crisis?
To be honest, we are not looking at it that way at the moment. Out of our 800 people, most of them are working onsite, but of course, like elsewhere, technology allows us to do some of the drilling and logging remotely, especially in the North Sea.
In Indonesia, we haven’t fully gone the remote way because the operations on the sites are not 100% ours, so even if we can perform some of it remotely, what about the other 80% of the workers? That is the reason why it will not change significantly at the moment, but the capabilities are there. We are developing many digital remote technologies such as remote testing, remote checking and remote logging, which will happen more, but they need to happen in parallel with other stakeholders as we cannot do it alone.
From a back-office perspective, that is quite normal. We are already in a lean situation, and being forced to work from home makes us see what is efficiently done remotely and what can be done remotely all the time.
In the past, you would need the signatures and initials of many departments at the industry and customer level before it went to the end guy, but nowadays they are accepting e-signatures, using DocuSign, etc. Typically everyone needed wet signatures for legal documents, but now they are accepting e-signatures. It would take a week to 10 days for a document to circulate to all of the departments, but now it can be done within hours. That is one thing that will stay.
But again, we need all the other sides to accept that. The issue is more about whether a practice is acceptable in the country. It is the industry, the banking sector, the law firms, the customers and us that are creating new ecosystems that will make us all more efficient.
Do you think the world will be significantly different when we emerge from this crisis?
The answer is yes. A lot more people will be more careful and hygienic and will not take things for granted. People will be more vocal about identifying problems and hopefully things will happen a lot quicker. Before, the bureaucracy was so slow that you would assume things can take one month to get through an office for approvals, but now it will take maybe a few days or even a couple of hours. That time expectation is the big change.
If we didn’t have Covid-19, correcting things one by one wouldn’t be possible organically. Now we can be confident that something that would have taken one month can be completed within one week and people will learn together and look at things more critically and optimistically, knowing that they can happen more efficiently.
I am an optimistic kind of guy from the business and operations side, but if you speak to a lot of people from the US and Europe, they might be more pessimistic because they do not know how quickly that demand will be coming back. In Indonesia, we know that oil/energy is still needed regardless. We are here and need to operate and fulfil all of the requirements in this country.