“Nigeria’s top Problem is Well Cost: We are Out to Solve it”

PARTNER CONTENT/Hd Drilling Services

Hope Okwa, Founder/Chief Executive Officer Hd Drilling Services, sees the high cost of well construction as major impediment to Nigeria’s meeting its goal of achieving 4Million Barrels of Oil Per Day of crude oil in the short term.

 “If we reduce well cost from $25Million to just $5Million hypothetically speaking, requiring only 20% of the previous investment demands”, he tells Africa Oil+Gas Report’s Ahmed Gafar, “even local banks may be able to fund field development campaigns”.

He also fields questions on a range of issues, from opportunities that newly awarded marginal fields throw up to demand for Nigerian hydrocarbon.

A bachelors and masters degree holder in engineering from the University of Benin (Nigeria) and Heriot Watt University in the UK respectively, Okwa has 29 years of post graduation industry experience, the first 14 of which he spent in AngloDutch Shell, mostly on well engineering and drilling supervision. He had a stint at BG (the defunct British Gas) as a senior well engineer in the company’s Nigerian deep-water operations. He had a five year stretch as senior drilling and workover well engineer on critical gas operations at Saudi Aramco, after which he had another 18-month stint at BP Angola as senior drilling engineer.

 Excerpts from the conversation.

Hd Okwa Drilling advertises itself as a company with a laser focus on oilfield drilling services. How did you come to this realisation?

 

  • The Nigerian Government targets Four Million barrels of oil per day (4MMBOPD), but the country is barely achieving 1.5MMBOPD due to high well cost. A 10,000 ft well producing only 3,000 BOPD costs up to $25Million to construct. To move from current 1.5MM to 4MM BOPD requires massive well construction activities, in the order of over 800 wells per year. The associated investment is $21Billion per annum. Where will this investment come from, especially in an era where top global financiers are moving their investment to renewables? The only way is to rethink well construction efficiency, with a view to drastically reducing well costs from current levels.
  • The sources of inefficiencies in well construction, is very much within our expertise, as a demonstrated through the several SPE papers we have authored.
  • It is very urgent to implement these solutions. In nine (9) years’ time, by 2030, the first world will pivot away from fossil fuel. What will then happen to Nigeria’s reserves of 37 Billion BOE?
  • We believe we have the solutions to reduce well costs in Nigeria by as much as 70%. I have a track record of this achievement from my employment with Shell, BG-Group, BP, Saudi Aramco, as well as many local operators. Hd Okwa Drilling is collaborating with operators and service companies to deliver wells that are only 30% of the standard cost. We hope to have an opportunity to talk about these alliances and collaborations in the course of this discussion.

Mele Kyari, Group Managing Director of NNOC, and Timpre Silva, Minister of State for Petroleum, at the launch of  the Nigerian Upstream Cost Optimisation Programme (NUCOP) in Abuja, last February

When you say: A 10,000 feet well producing only 3000 BOPD costs up to $25Million to construct, are you referring to an onshore well or a shallow offshore well?

The statement is true for land, swamp and shallow offshore. These use surface blowout preventers.

Ad if a 10,000feet well is considered too expensive at $25Million in Nigeria, what is the reference round the world? What are you benchmarking against?

My reference is Canada/USA, where the rig rate for land is $32,000/day comparable with $25,000/day for Nigeria. A 10,000 ft land well takes 8 days to drill while it takes 83 days in Nigeria. The Canada/USA cost is less than $2 million, while Nigeria is $25 million. The Canadians and Americans achieve the success by efficient well design (without gold plating as we do in Nigeria, efficient supply chain management, avoiding NPT and applying the science of drilling optimisation. We are experts in these areas. I should add that we are currently preparing to execute a $5 million horizontal well for a Nigerian marginal operator, applying our technigues.. 

Your website indicates that there’s an entire business proposition around well services that require some single mindedness. and how is the journey so far?

The establishment of Hd Okwa Drilling Services is a milestone in its own right. We have had opportunities to offer advice on Well Design, NPT avoidance, cost improvement, personnel recruitment, etc for various operators. In the years ahead, we plan to expand these offerings to technical consulting, staff development on cost-reducing well delivery processes and dealing with the complexity of supply chains in Nigeria.

Rig activity has taken a dive in Nigeria in the past year. What has been Hd Okwa Drilling’s Business Strategy in this prolonged period of silence?

We may ascribe the direct cause of rig activity collapse to the COVID-19 outbreak.  However, I suspect the underlying cause of this sharp decrease in drilling activity may not be far from the high cost of wells, as I highlighted earlier, and the challenge of obtaining investment cash in an environment where everyone is going to renewables.

We believe that if we reduce well costs drastically, through our activities, we will be able to stimulate activities. For example, if we reduce well cost from $25Million to just $5Million hypothetically speaking, requiring only 20% of the previous investment demands, even local banks may be able to fund field development campaigns.

Over 200 companies are expected to form 57 Special Purpose Vehicles (SPVs) to develop 57 Marginal Fields in the next 36 Months. How is Hd Okwa working on taking advantage?

Here is where we hope to make the most impact. In the past, many marginal field winners have struggled to bring oil to market due to several challenges, related to investment funds availability.  Many of the marginal operators are going to need to drill 3-5 wells to realise their field potentials. Without support from our activities, each operator will try to raise $75 – $125Million for field development. With our expertise, this could just be only $15 – $25Million, which is within the capability of local banks. We have assembled a repertoire of options available to marginal operators e.g. from our bespoke consulting services, to full project management through our sister company H-PTP Energy services, or our supply chain improvement alliances The Well Engineering Platform, etc.  Through these outlets Hd Okwa Drilling services hopes to transform the well delivery landscape in the country and catalyse a speedy development of the marginal resources.

What is your outlook on Nigeria’s Upstream sector for 2021?

The environment is very challenging. There is demand for Nigerian oil with the ongoing commissioning of Dangote’s 650,000 BOPD refinery, and several modular refineries. These refineries will help reduce dependence on imported fuel, and not only satisfy local consumption, but fulfil demand across Africa and many of the developing world, who would still be dependent of oil consumption for the foreseeable future. As our contribution to the preparation, we are developing local manpower by running courses like the

  • Well Design Masterclass,
  • Re-Entry and Workover Engineering Masterclass,
  • Abandonment and Decommissioning Planning Masterclass.

We also extending our collaborations to experts overseas, who we are bringing to run specialist training in Nigeria for Nigerians, at very low price. We are also developing ourselves in readiness for the future challenges. For example, I am completing my Master of Science in Innovation and Entrepreneurship at the No.1 Business School in Europe, HEC Paris. Thus, we are ready to make our contribution to energise the Nigerian oil sector.

Nigeria exports oilfield service expertise outside the country. Are you one of such providers? Does Hd Okwa Drilling have Pan African ambitions?

Not at the moment. The focus of Hd Okwa Drilling Services is Nigeria. In North America, drilling planning has really advanced, and the gap with Africa is very wide. So, we focus on Nigeria first, then we can expand to the other African countries later.  Let charity begin at home.

Hd Okwa Drilling takes training a so seriously that it’s a full component of its spectrum of business. This is quite unusual in the Nigerian industry. Is training a highly monetised component of your business portfolio?

A direct answer is ‘NO’. However, we need a pipeline of skilled professionals to master the techniques and processes that we deploy.  One way of doing this is through training and mentorship. We have established several specialists’ courses relating to efficient well delivery. These courses are available to both individuals and operators, at a fraction of the cost. Training cannot pay back if we are to consider the efforts we put in, as these courses are at the cutting edge of the future of well engineering.  They cover Well Design Masterclass, Re-Entry and Workover Engineering Masterclass, Abandonment and Decommissioning Planning Masterclass, Efficient Cementing Technology, etc. We also organise team alignment workshops, well challenge sessions, drill-the-well-on-paper (DWOP) exercises, in addition to our normal specialist courses. Our resource persons are the leaders on the well engineering disciplines within Nigeria and the global industry.

The International Association of Drilling Contractors (IADC) Nigerian Chapter is always talking about training about quality and capacity of rig personnel, about safety on rigsite. Is your company looking at Collaboration with IADC?

We have it as part of our strategy to collaborate with the IADC Nigerian Chapter, on manpower development for the Nigerian industry.  We are in the process of founding a Well Engineering professional organisation. When completed, the organisation will also be part of our springboard for driving down well costs in Nigeria by accelerating competence development of professionals through mentoring by Nigerian professionals with extensive international experience.

I am curious about a company calling itself strictly a Drilling Service company; why can’t you simply describe yourself as a full subsurface solutions provider?

Of course, we are a subsurface consultancy group. However, expertise in the other areas of petroleum engineering abound. As drilling requires long training and mentorship to attain professional maturity, it appears to be the area in serious need of attention. If well costs are allowed to continue to grow, the current lull in well construction activities will linger too long. There is need for urgency, as we cannot predict what would happen to Nigeria’s oil after 2030, which is only nine years time!

I see that you count Shell, Amni, and First E&P as part of your clientele. For indigenous companies who are mushrooming in Nigeria, the logistics of integrated project management can be so challenging they’d do better to outsource it. Is this the space you are after?

Shell, Amni, First E&P, Monipulo, Elcrest, Addax, etc, are some of the beneficiaries of our expertise and we have worked in one form or the other with these organisations. However, we are a technical consulting organisation. We use our expertise to help operators, reduce well costs. We do this by facilitating well design improvement, helping them eliminating non-productive times, and training and mentorship of personnel. Our project management activities are carried out through another organisation that we contribute expertise to.

Out of the several specialisations in Hd Okwa Drilling services: Well Cost Improvement Catalysis, Strategic Expertise & Technical Consulting, Well Operations Risk Elimination, which of them does Hd Okwa Drilling find most forward looking? And which are you best at?

Our expertise covers all areas, and we need all of them as arsenal to attack the monster of well costs escalation. We operate through several avenues:

  • In Non-Productive-Time elimination for example, our research showed that all NPT’s in the Nigerian drilling operations are caused by four main events namely Well control, wellbore instability, equipment failures and human errors. These events constitute 30% of the total time spent at the well site on a well. We have developed expertise that we use to support operators to eliminate these events.
  • Invisible lost time constitutes the least beneficial activity to the drilling operation, but are being carried because they can’t be detected. This time constitutes up to 50% of wellsite times.  We collaborate with international experts to develop well operations analytics software. We currently support two – SMARD and CI Drill.  Both software are creating disruption in the well analytics space. These two-software combined can eliminate up to 30% of all invisible lost times.
  • Drilling project management requires high level of expertise. The country has relied on Shell to develop drilling expertise for the industry in Nigeria. However, as the company has shrunk over the years, so have the number of professionals they develop.  We contribute technically to H-PTP Energy Services which is full services well projects management organisation founded by like-mind professionals with strong international expertise.
  • We have developing collaborations and alliances with service suppliers to the drilling business to help them improve their services to international standards.
  • I act as Technical expert in well engineering such as expert witness, standards development, expert opinions, etc.
  • We have supported a financial service organisation to advise them on energy project funding.
  • We act as well examiner, in line with international standards, where we look at drilling project plans, and offer recommendations for improvement.
  • We conduct workshops to drive the ideas through the clients’ teams.
  • And, of course, training services. We are very good in this area.

The last annual report by Shell sounded so despondent about their experience out on the Nigerian oilfield environment. What is your message to international investors about the future of the Nigeria’s oil and gas market?

We need investors to help us develop the 4MMBOPD we need to develop the economy and enjoy the benefits of oil and gas. I think investors can help to improve the technical space in the local industry by patronising local expertise. For example, our organisation consists of high-level professionals with experience of global oil and gas industry, as well as internal consultancies such as McKinsey & co, as well as PWC, among others.  These professionals understand international standards and procedures, and are able to offer advice to international level.

On the whole, the development of local refineries will help insulate the industry from the vagaries of international oil market cycles. With a population of 200Million citizens, Nigeria is the country to invest in. And the oil and gas leads the way.


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4 comments

  1. GJ Kreeft says:

    If the company can achieve their goal of helping to produce 4 million bpd in Nigeria this would be nothing short of a miracle…but I wish them luck…because time is ticking

  2. Kola Ernest says:

    I’d say this is a stretch. Yes, some valid points in there and a lot fo room for improvement but i do not see some important points that are hard truths about drilling in Nigeria.
    LLI (long Lead Items) costs range between 40 – 60% of a well total cost. So if you do not drill the well but order all the materials, your well will cost at least 5million USD. Without influencing import costs and middleman markup, your room for improvement is already capped. The 5million horizontal well they are about to drill must exclude these LLIs.
    Using Canada/US as benchmarks are not apples for apples comparisons and I can give you 2 reasons.
    1. their production rates are very low and so are their wellhead pressures. most of the wells in conventional Canada/US need SAGD or sucker rod pumps to bring out the crude. You must respect our bonny light type of crude and high permeabilities that can easily give you 3,000BOPD in Bayelsa – this means you cannot call our designs goldplating. And remember vandalisation and fail safes which come with their own cost.
    2. Canada and US have all the LLIs they need locally. So the cost of a pipes, wellheads, pumps, completions accessories, etc is the barest minimum.
    Generally, yes the expertise can be improved, but that is not the only problem.

    • Hope Okwa MSc P.Eng ACIArb says:

      Dear Kola,
      Thanks for your contribution.
      First, buying tangibles for $5million is shocking unless you refer to a subsea well. In Nigerian onshore context, a big bore well equipment is less than $1million. However your daily spread rate will be $180,000 – $250,000 per day. So if you just did drilling optimisation and reduced the well time from 60 days to 40 days, you save $5million! Still on this big bore well, I suggest you take a percentage of your actual drilling time as a percentage of the total wellsite days, you will be shocked to find that flat time is higher than 85%. What activities constitute this flat time? Kindly find out.
      Furthermore, the well equipment in the Canada/USA wells drilled in 10 days, are not different from Nigeria’s that is delivered in 80 days. The difference is front-end planning covering fit-for-purpose well designs, supply chain optimisation and competent wellsite execution.
      Our aim is to introduce these into the Nigerian oil and gas industry. We have reference SPE reports where we have achieved 60% or more, improvement in well times. We consistently drilled horizontal wells in 9 – 15 days or much less. I am happy to be contacted to provide more examples of what we have done in Nigeria.

  3. Taka Tono says:

    Very many thanks. I do fully understand and agree with 80% of the well written report. Nigerian, like All African economic development, from Natural Resources including Oil and Gas MUST learn how to smartly Dodge the OIL CURSE and DUTCH DISEASE. The rest is A Luta Continua.

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