The evolution of Nigeria’s marine services sector

Nigeria

Olumayowa Ogunnusi, CEO of Caracal Group, talks to The Energy Year about the group’s diversified approach to providing services, its strategy for expansion and the value it brings to the market. Caracal Group provides marine and offshore logistics, infrastructure and manpower services.

How has Caracal adapted its business operations over the last few years?
Caracal Group is split across four companies providing a range of services, such as marine and offshore logistics, offshore infrastructure and manpower services. Back in 2019, when working on the Egina project for TotalEnergies, we stopped referring to ourselves as a vessel provider and started branding ourselves as a technical and logistics solutions provider.
We have a fleet of ships comprising accommodation vessels, jackup barges, platform supply vessels, anchor handlers and fast crew boats. The Caracal oil and gas branch, which provides the marine and offshore logistics services, has emerged as the flagship of the group at this time, providing end-to-end turnkey solutions to our clients and being part of the planning stages instead of simply supplying our vessels.
At Caracal Group, the focus has always been operational excellence over commercial determinants, especially throughout the Covid period, when we managed to keep assets at 100% utilisation while doubling down on the safety of our personnel and operations.

What are the group’s ongoing projects and contracts?
We are proud to say that we have assets deployed with all the major IOCs in Nigeria today – Chevron, ExxonMobil, TotalEnergies and Shell, as well as with the bigger NOCs such as Oriental Energy Resources and Tenoil. Some of our contracts have been ongoing since 2019, while others resumed only in recent months. We have been consistent as we focus on delivering excellent service to the operators and becoming a strategic partner to them.
We have also spread across Africa, as we decided to go beyond only working with Nigeria’s top four companies and had the momentum for global expansion.

What has been your strategy for the expansion of your activities?
We had to be creative with the way we finance our growth and acquire new assets by focusing on equity-related financing rather than debt. Over time, we sought to understand how IOCs finance their projects and saw that they would never borrow money but would rather create SPVs in which they keep their asset portfolio and set the returns directly down into investment-grade papers around each asset, which is the model we began to explore. We entered the London market in order to raise capital for these deals and were successful.
More recently, we have directed our attention towards debt, opening ourselves to the local opportunities available through NCDMB [Nigerian Content Development and Monitoring Board] funds as we seek to build up the balance sheet of the company. We are working on both our contract and asset book in order to achieve our target of a USD 100-million valuation over the next three years, which will enable us to raise further capital for future expansion.
Regarding expansion into new markets, we always favour organic growth by first chartering a third-party vessel, providing a crew and understanding management practices before sending in our technical management unit from Germany. Once we become comfortable operating the asset in this market, we start acquiring.

How would you define the company’s value proposition?
We have a partnership with Hellespont Ship Management, which is a German-based technical management company, and this has been the backbone of Caracal Group from day one. In terms of operational excellence and preventive maintenance, we have that same ideology that can be seen in the German way of thinking. These measures and mentality have enabled us to maintain our ships at close to 100% utilisation on a yearly basis and avoid breakdown maintenance over the years.
An aspect we are proud of is the audit we went through with ExxonMobil for which we scored the best results a platform supply vessel had scored in Nigeria, among both local and international operators. That is one of the reasons we say we focus on operational excellence before anything else.
We know the challenges operators face. We understand the high costs of replacing an asset or going through maintenance and bearing non-productive opportunity costs. We have around 650 people within the group who all work on different aspects of the business to make sure the best services are delivered to these operators.

What opportunities lay ahead for Caracal Group?
We see the market for fossil fuels becoming more strategic and structured over time, which will encourage fiscal discipline and create better opportunities for the most commercially astute operators. As these players are looking for quality and price-competitive services, we will be first in line to welcome the opportunities.
The long-term goal we seek is to reinforce our role throughout the value chain, go beyond what the competition offers and become an integral part of our clients’ planning strategies and logistics solutions instead of remaining an asset provider. In the next three to five years, we see Caracal Group being a top technical logistics solutions provider.

What challenges do you anticipate in light of these growth ambitions?
One major challenge we may face is transitioning our management practices. Having people unlearn and relearn perceptions and habits in order to embrace innovation and change the way we operate our business will not be an easy task.
On another note, we have built a team of international partners that we learn from and co-operate with. We have strong foundations and the only difficulty I see arising will boil down to finding further financing opportunities. We look at creative ways to overcome that challenge and actively welcome financial partners or arrangers that are willing to think outside of the box to deploy capital.

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