The Drillers’ Club Arrives The Sunny Continent

Global body of drilling contractors gets its first African chapter
By  Foluso Ogunsan, in Lagos

Seventy two years after the International Association of Drilling Contractors(IADC) came to being in Houston, Texas, the capital of the global oil patch, an African chapter has finally been formed.

The Nigerian chapter of the IADC (or IADC Nigeria as it has chosen to be called), launched in October 2012, is the first IADC chapter on the continent. It’s the result of several past efforts which have been challenged by a variety of issues, “including the cyclic nature of the drilling business based on demand, among others”,  says Alex Illah, the genial, personable chair of the new club. “

IADC Nigeria was launched with membership of 10 drilling companies: Depthwize, Oando Energy Services, Saipem, TransOcean, Seadrill, Tasaniola, KCA Deutag, NigerBlossom, Lonestar and Caroil.

“The body is in the accreditation process for three new members”, Illah says. “IADC is primarily for ‘Drilling Rig Owners’ and we are part and parcel of an international body with processes and procedures and we all comply with them.

“Provided that a drilling contractor that is duly registered in this country has a drilling rig to operate with, such organization qualifies to be a member of IADC. Our focus is currently on how we can dialogue and partner with Rig owners and many have in this regime of local content, come on board. We are hoping that our ‘active membership’ grows. We also have “Associate Members” who are the operators of assets, our customers and clients, individuals who have rights over concessions whereby drilling activities can take place. We are also engaging with them to join as Associate Members. We are also talking with service companies who have relationship with drilling companies”.

In the course of drilling a well, there are other rig related activities such as Mud-logging, Hole Perforation Permeability.  “These categories also have opportunities for becoming Associate Members thus creating interacting activities for the benefit of IADC”.

My discussion with Mr Illah, who has done the rounds in the industry from seismic acquisition to drilling, turns out to be largely a training session for me. “For the primary members of IADC”, he tells me, “you have to be a drilling contractor that owns a rig. Second, you will register with the international body so you gain access to all the technical manuals and information, standards of training and performance on the rig. These resources put the drilling contractor in a good position to market itself to customers. The Associate Members need not own rigs, but they must have direct relationship with drilling activities, providing services that are relevant to the drilling sub-sector. Belonging in this category qualifies them to be members of IADC. The Third leg of our membership is the Operators: owners of licences, who own concessions, they also have opportunities to become Associate Members of IADC Nigeria Chapter. Within these three categories, we should be able to form a nucleus where the technical issues can be discussed; ideas that come through from all sources can be harmonized for the benefit of the industry in the country. We are looking to put all the eggs in one basket because on the rig with multiplicity of services being provided, you cannot be talking about standards of performance when they have some technical issues. Also being members basically means that the IADC will actively partake in the learning and training curve and subscribing to standards of the organization”.

Three key things have happened in the Nigerian oil industry that have shaped the context within which IADC will operate in Nigeria. The country is in the fourth year of the declaration of Amnesty for militants who ceaselessly attacked oil installations between 2006 and 2008 and heightened the sense of insecurity in the wilds of the Niger Delta, the country’s sole producing basin. The peace is tenuous and drilling rates can be, for this reason, unequal to what obtains in most parts of the world. The last three years have also seen an upsurge in localisation campaign. The mantra, everywhere you look, is “local content”. On top of this is the fractious national debate around the Petroleum Industry Bill, an omnibus piece of legislation that seeks to transform the industry.

I ask Mr Illah first about security issues concerning rig activity. First he explains, copiously, that the larger security issues are in the purview of the Government. He also restates the point that security breaches stem from a series of social problems that have to be holistically dealt with, but what I want to share are his specifics regarding what a drilling contractor can do on its own. “Depending on the rig type, to make sure they are properly secured, actions vary. In the case of a Jack-Up Rig for instance, being able to see what you can do on the Jack-Up Leg thus making it more difficult for people to climb on board and come up to the rig, having electronic surveillance support to monitor intruders, improving communications systems that can detect people long before they carry out any attack and so on, all go hand-in-hand with other pro-active measures. Drilling Contractors also collaborate with specialists in the Maritime sector. Information from such experts help you construct management systems that help protect the assets and lives of employees on your rigs. Engagement with the Armed Forces continue  on an ongoing basis, we network with the Navy in conjunction with the operators(those who own/operate the acreage in which the rig is deployed) and then share surveillance in one form or the other. The objective really is to be sure that we have looked at the issues from a holistic view, taking measures to promote the activity such that in future, we don’t have re-occurrence. We help youths to become better at what they want to do by making funds available to community element(s) so that they are part and parcel of a more peaceful environment for everybody to  operate”.

I attended the launch of  IADC Nigeria and noted that Ernest Nwakpa, the Executive Director of the Nigerian Content Development Monitoring Board(NDCMB), who you could call the country’s “Localisation Czar”, mentioned his concerns about capacity issues in the Drilling Contracting space in the country. Nwakpa talked about lack of capacity to do drilling jobs in Nigeria especially by indigenous operators. He also talked about middlemen agents who deal with the operators as go-between, and thereby stifle technical competencies. I ask Mr Illah for his take on Mr Nwakpa’s views.

Illah acknowledges Mr. Nwakpa’s sentiments, saying that Nwakpa was “referring to the Human Capacity challenge, which does include technical knowledge, paucity of experienced and technically capable Nigerians to man the sub-sector”. He remarks: “Today we are looking for really technical competent hands to go into the sub-sector, we have limited resources. But what I inferred from Engineer Nwapa’s comments also refers to lack of capacity in assets and this is coming in from the back-drop that the rigs are very expensive. You will need about $60 million to be able to bring in a land rig today. It is pretty difficult to mobilize this quickly in Nigeria today. There are rigs today that cost $800-$900 million to construct them, depending on complexity. Therefore Mr Nwakpa is talking about how quickly we could begin to make huge improvement in these aspects”.

Illah thinks it’s going to take a bit of time for Nigeria to really rise up to these challenges, even though Nwakpa’s office is working hard on these kinds of issues. “IADC Nigeria is relatively new, we have both international and indigenous member-companies and we are beginning to come together and understand ourselves and to sensitise the Nigerian environment to take more interest, be aware and grab opportunities within the sub-sector. We should be sensitising businessmen to show them that this has long-term impact on our economy and will help develop the young population to work in the drilling sub-sector. Our government must be more alert to the realities of our times to put enabling processes in place for these opportunities and encourage investors to go into that sub-sector, by so doing the end result of these would be the development of more people.”

Now that we are on the issue of capacity, I want to find out how Nigeria’s infrastructural challenges are impacting the competencies of Drilling Contractors. For example, are there any in-country facilities available for servicing Oil Rigs?

“Very limited!”, Mr Illah exclaims. “There are steps being taken by entrepreneurs to set up more facilities. Again it has to do with the complexity of the drilling industry and the differences between simple drills and very complicated drills. Fairly simple rigs in terms of size, volume, equipment to be deployed and as you move from environment to environment becomes a little bit complex, to the extent that you will have drill kits operating in excess of 600-800 meters of water. The more complex the rig is, the more complicated it is to maintain it in-country because you need to be able to bring it into an estuary, for example the Lagos Ports, to carry out maintenance. One or two of our members have been engaging some of the Nigerian companies here in Lagos to carry out some rig maintenance. Because of our collaboration with the (industry regulator) Department of Petroleum Resources(DPR), Nigerian Ports Authority, NIMASA, Immigrations and Customs, we have been able to work hand-in-hand in Lagos to bring in bigger rigs. Last year(2012) , if you passed through the Marina in Lagos,  you would have seen the TransOcean Rig. TransOcean has brought in 4-5 rigs since we started this engagement. That particular one is one of the smaller Jack-Up Rigs named the ADRIATIC 8. There are efforts to bring in some other categories of rigs that will be able to access the harbour. There are ongoing engagements with Port Authorities to ensure that dredging is a major priority of the Federal Government of Nigeria. Also through the initiative of NCDMB, there is an ongoing study by NCDMB, in partnership with TransOcean and in conjunction with other stakeholders, to technically identify a suitable site where a facility can be built within the Nigerian Coastline; where bigger rigs can come in for servicing, upgrading and the like. There’s a huge opportunity there, the Ports Authority is aware of it, we have ongoing engagement with them. NCDMB has a working committee of which I am a member, so I know what is going on in that respect. Ultimately the desire is to create a facility where all the repair works can be carried out. This will definitely generate employment for the coming generation. There’s need for all stakeholders- the Operators, The Federal Government, State Governments to think outside the box and look for opportunities where certain things can be done in this country. By so doing, you employ Nigerians first and foremost, and once you employ Nigerians, buying from Nigerian vendors, you are making more funds available to the larger economy. That is a way which ensures future growth in this country.”