Production downtimes crippling oil service companies – OilServe

The dearth of new projects and constant production downtimes due to sabotage of oil facilities is taking a toll on the operations of oil servicing companies, Emeka Okwuosa, chairman /GCEO of Oilserve Group, an energy group, said.

Okwuosa, who was recently awarded a national honour as Commander of the Order of the Niger (CON), said that vandalism and other events that force players to shut-in production are impacting Nigeria as a country very seriously.

“It is impacting oil and gas companies extremely badly. Some of them have shut down operations for once. Imagine the cost you carry in the course of your operations, and are going to sustain that business with that level of cost when you have shut in your production.

Nigeria has slipped from the ranking of Africa’s top oil producer and now struggles to keep production above 1 million barrels per day. Key terminals including the Bonny Terminal have been shuttered for months and critical pipeline infrastructure like the NCTL was shut for a year.

Oil companies operating in the onshore, shallow water assets have been forced to shut their operations as they are finding it difficult to recover half the volume of crude sent through pipelines. Some have resorted to expensive barges adding to their production costs while many simply shut the fields.

But oil service companies have been badly affected by these closures.

“Because when you shut your operations, you can no longer retain the services of service companies. And these service companies are Nigerian companies, so that can have a multiplier effect” said Okwuosa

He said a lot of the service companies are struggling for over a year because there is nothing to do.

“Imagine when you have the NCTL that has the capacity to flow hundreds of thousands of barrels per day shut down for a year. You have the Trans-Forcados shut down, and you have other export pipelines shut down. What that means is that companies that feed these pipelines are shut down. And if the operating companies shut down, then they won’t need the services companies.”

Since the service companies are mostly doing nothing, they are unable to generate revenue, and pay staff and many are closing their businesses.

“Of course, laying off staff has been going on for quite a while but the numbers will be visible when companies do their numbers as of today I can tell you it is hurting. It is hurting the service companies and it is hurting the producing companies. The producing companies are hurting because most of them have no production,” he said.

Okwuosa said this is why it is important to find a solution quickly because the multiplier effect on the economy is very bad.

New projects like the Trans-Saharan Gas Pipeline and the AKK Pipeline may yet offer hope for some service companies.

“We know that the Trans-Saharan Gas Pipeline project might require more than one contractor to execute, but we want to be part of it because we have the capacity to deliver our scopes.

Okwuosa said Oilserve has achieved a lot in the country over the past 25 years of its operations and has been tasked to deliver projects in some of the most difficult terrains.