Double-digit growth in NigeriaJune 4, 2021
Guillaume Niarfeix, SPIE’s managing director for Nigeria and Ghana, talks to The Energy Year about the ease of doing business in Nigeria and lucrative opportunities across the value chain of the nation’s oil and gas industry. SPIE is a services provider that works in the E&P, maintenance and training sectors.
How would you assess the ease of doing business in Nigeria’s oil and gas industry?
Although the country is all about lifting barriers for investment, trade and doing business, it is almost impossible to get your money out of the country due to unavailability of forex.
To ensure foreign investors come in, one first must ensure stability. Laws and taxes should not change often. Additionally, there are many informalities in government systems such as Customs. For example, we are starting to install solar panels, which in theory are excluded from Customs duties. In practice, solar panels are often requalified as generators, which attracts taxation. Rules are often changing, which means companies cannot plan well. Nigeria has a long way to go to be a stable and certain market.
Bluntly speaking, it is difficult to enter the market today. It is a crowded market with complex ways of operating. Changes in the leadership of large companies is challenging as you need to replace managers with someone that has experience and the local specificities. Many qualified Nigerians have left the country and do not wish to come back. It is difficult to retain people because once they reach a senior position, they find opportunities abroad.
How has the Covid-19 pandemic affected your company’s operations?
We are one of the rare businesses that did not suffer much in 2020 although we were initially expecting to lose around 20-30% of our turnover. During this period, we commissioned our training centre in Port Harcourt, which was a great achievement. We were hit in terms of cashflow as clients began not paying their invoices. Consequently, we reorganised and implemented cost optimisations that put us in a good position for 2021. We are now resilient and ready to invest.
We take local content seriously and over 95% of our staff and most of our technical personnel are Nigerians. Our strategy in terms of local content was validated as we did not need to rely on expats to keep working.
Prospects are promising; the industry is picking up and new projects are moving forward. We have new contracts coming our way and volumes are increasing. The NLNG Train 7 project is expected to mobilise soon, which ties into the HI and HA fields, which are essential to feed gas into the new train. We are bidding for these kinds of projects as subcontractors with a focus on commissioning, operations and maintenance.
What upstream and downstream opportunities is SPIE open to?
The marginal fields area is an interesting space. In Nigeria’s first marginal fields bid round most participants who lost bids were lacking technical knowledge. For this round, we are a perfect match as we have experience and technical knowledge. Brownfield assets are also a consideration. The business of oil and gas is moving away from major fields.
There is a lot of investment to be made and the barrel price is high enough for people to invest. Moreover, there is a lot of revamping to be done and DPR [Department of Petroleum Resources] is insisting that facilities be upgraded. We can be of much help in this space as well.
The downstream sector requires O&M [operations and maintenance] services. The newbuild Dangote Refinery and an array of modular refineries are being built. These companies need to partner with an O&M company for the EPC stage to make sure they will be able to commission their activities. As a company with a longstanding presence in Nigeria, we can help these projects.
How is SPIE expanding its capacity via its new fabrication yard and workshop?
As we expanded and diversified our services, we saw the need for enlarging our yard. We have been growing at double digits for the last 10 years. Additionally, our new PPS [pipeline, process and services] service involves a lot of equipment, tools and space. We are also building a workshop to locally repair client equipment such as pumps and valves. It is currently almost impossible to get this equipment fixed locally. We saw this as an opportunity for us.
How has SPIE developed its training vertical?
We are strong in the training sector, even for people who are not from our company. We provide technical training that includes welding and bolting. We train in mechanical, electrical and instrument disciplines. In February, we commissioned a new training centre in Port Harcourt that will add to our in-country know-how pledge. This state-of-the-art facility has a calibration laboratory and three classrooms.
Previously training was expensive, and standards were low. We make sure our quality and standards are on point. We insist on competency. Training people is training engineers that we want to work with us. In a way, it is a long-term strategy.
How has the company adopted new digital technologies?
We have introduced digitalisation in our methodology, equipment management and inspection and control systems. For example, we use AI and augmented reality to make our maintenance efforts more efficient. These technologies avoid human mistakes and miscalculations. It is a way to receive a lot of data and improve our effectiveness. Automation and digitalisation are pivotal nowadays, being the main drivers of efficiency and effectiveness in the industry.
We began performing inspections with drones as an integrated service. It has added value because we no longer need to manually inspect a flare, the inside of a pressure vessel or a pipe. We also don’t always need to stop the production of an asset to carry out the inspection, which saves money. Drones are a very valuable service in these times.
How does SPIE differentiate itself from other players?
When it comes to deepwater development assets such as the Akpo and Erha fields – two of the country’s largest producing sites – 150 of the 200 people on board are our staff. We operate the facilities because we have the know-how. Although we don’t own assets, we produce about 20% of the oil coming out of Nigeria, equivalent to 400,000 bopd. We also produce the crude oil from the Amenam-Kpono field.
Over the last few years, we have seen more competition from local players. These companies bid at very low price, which means they have lower operating standards than ours. However, the crisis is bringing business back our way. Cutting costs on maintenance of FPSOs is not easy as safety and standards are fundamental.
How is SPIE changing its strategy to remain competitive in Nigeria’s oil and gas industry?
Over recent years, around 80% of our revenue came from operations and maintenance. However, cost cutting is rendering this service less profitable. Our strategy is to build our technical capabilities and added value.
Shutdowns are a large part of our strategy as they are sensitive and difficult. When you shut down a platform, you need to start it up as soon as possible. Everything needs to be changed within a few weeks. We were involved in the Akpo field and are currently involved in the Erha field. We secured a shutdown contract on one of ExxonMobil’s platforms where we mobilised around 400 workers. We want this to become a real service line for us.
Additionally, we invested in the PPS business, acquiring one-third of Baker Hughes’ activities. We bought all the cleaning, purging, nitrogen and water flushing from them and absorbed some of their personnel. PPS is a new service line for us, but it will be an important vertical in the years to come. These services include pipe cleaning and testing to make sure there are no leaks. We are the only company able to do an entire A-Z service in Nigeria.
What is SPIE’s growth strategy?
Today, 80% of our revenue comes from Total, ExxonMobil and Chevron. However, we are looking at diversification. SPIE intends to make PPS a crucial service in its portfolio and establish ourselves as leaders in the market. We also want to be recognised as the sole specialists for shutdowns. There will be a proliferation of shutdowns in the coming years as there are a lot of platforms that need to be revamped.
We aim to double our market share in the next three to four years and diversify, expanding our work by assisting the NOC and partnering in marginal fields. In addition, we want to work on the NLNG Train 7 project and some refining opportunities.
SPIE is now exploring the renewables space and is installing the first solar plant in our facility in Port Harcourt. We would be interested in working with clients such as Siemens as a subcontractor for Nigeria’s power sector. We have worked with Siemens in many parts of the world.