“There is a Matpatson Approach to Turnkey Drilling”

Matpatson Petroleum Services has been around the block longer than most of its peers, with drilling as its core operation. Founded in 2000, it has grown beyond the focus on well engineering to include procurement of drilling equipment, well workover services, downhole tool fishing, as well as training of drilling engineers and associated subsurface professionals. The buzz in the industry is now turnkey drilling but ‘there is turnkey drilling and there is turnkey drilling’, Matpatson argues.

In the ensuing piece, OLUBUKOLA OKULAJA and OLUMIDE ILESANMI, the company’s  Managing Director and General Manager Engineering & Projects respectively, conclude a two part conversation with Africa Oil+Gas Report’s Akpelu Paul Kelechi,  on the huge opportunity for the drilling service industry,  regardless of what happens to the industry as a whole… “Even if you don’t produce oil, you will produce gas and you can’t produce gas without drilling so drilling services will still have prominence…”

EXCERPTS:

You founded the company in 2000. What has changed since then?

We were founded in 2000 and we had a vision which was achieved in two years. Then we crafted this current one which we know will drive us for as long as we operate.

You achieved that first vision in just two years of your operation?

It was to put together a team which will do drilling project management and we achieved that in just two years. It was easy to achieve because we had some professionally honed, drilling engineers who had retired from Shell and we put them together as drilling supervisors and that’s all. We have since then enlarged the scope of the vision by stating that we want to be distinguished as a profitable, progressive, cost effective one-stop-shop for well delivery process in Nigeria and the West Africa sub region. That is what has taken us a little bit out of Nigeria; we are doing something in Ghana but it is not large enough to be announced.

Who are you working for in Ghana?

We worked for Tullow but it was just supply of technology items. Then we have stepped out to Congo Brazzaville working for SNPC (the state hydrocarbon company) which also operates some acreages. We are going to be involved in some serious drilling operations for them now with about four rigs. They have come here (to Nigeria) to load some things from our warehouse and we are loading about seven containers of tubular goods for them.

How has Matpatson evolved in its close to a quarter of a century existence? What is the story?

After we set up the vision, we then wrote a mission which reads: “To develop a reservoir of indigenous well engineering competencies that are readily available to provide services to the oil and gas sector in Nigeria and the West African sub region and to also develop sufficient equipment supply chain capable of supporting five well projects at all times”. We then asked ourselves how are we going to achieve all these? It means we will have to have the engineers, the equipment and so on and so forth. We have operated with that and we have built ourselves like a triangle.

When we were setting up that vision, we were thinking about turnkey but it never did come immediately. The company’s first main contract came in 2005 from Niger Delta Petroleum Resources (NDPR), which was awarded to (the founder) Mr. Ilesanmi as a drilling consultancy. Then we stated expanding the base of the triangle to project management where we now have people and we started driving this. However, in-between, we found out 

Olubukola Okulaja, Managing Director.

that Nigerian (E&P) Independents didn’t actually know that you don’t start planning a well when the rig is around. Most of the time they want to drill there are no equipment available. This spurred us to include procurement of drilling equipment to what we serve. In 2016 -2017, we did what we can call a pseudo turnkey. We supplied some of the equipment, we did the well planning and we successfully drilled four wells at a stretch for Waltersmith and we increased their production from 3,000BOPD to about 9,000BOPD from those fields that were not so prolific. That was a good test of our development towards turnkey. In 2019, when they said they wanted to drill more wells, we said fine, we drilled most of your wells anyway.

The Five Fingers Matpatson runs five companies. We have the training, the procurement, logistics, project management and the fishing department. We have all kinds of fishing tools there. When we are stuck, we just mobilize our fishing tools to the rig. The thinking behind this is: if there is no drilling, there is workover. If there is no workover, there is fishing. Somebody must carry something and that is why we have the logistics.

Part of what you do now is running a training school. You said that earlier…

We have a training school where we train our engineers and measure their competence development processes. By the time they would have done the International Well Control Forum IWCF (a certification process for well engineers) and we have finished training them, we can then give them a pass mark. We take IWCF  levels 2-4 now adding level 5. However we run a wide range of courses as stated on our training website: training@matpatson.com

Drilling engineers take the IWCF certification very seriously.

In Matpatson, we train the engineers vigorously and they stay with us. Most of them stay with us. We have a warehouse; we have a workshop, all in the same building. When you train people and you say this is a Charismas Tree, he has seen it there. All you then have to tell him is that, though these Christmas Trees look alike, this here is Class B, Class D and Class E and tell him the differences.

If we pretend to be your students right now, what will you say are the difference between Class A, B, D, and E Christmas Trees?

Class A is a simple Christmas tree that you use for either water injection or production of some kind. A simple production without any kind of chemistry as such. Then Class B is for oil and also for gas that are not corrosive. No H₂S (Hydrogen Sulphide), no CO_2. (Carbon Dioxide). Class D has a certain percentage of CO₂ it can accommodate; the point is that there is a threshold it can allow even if it doesn’t have H₂S. Class E can accommodate a reasonable level of H₂S and CO₂. If you don’t select the right type of Christmas tree, then you will have corrosion and before you know it, you are having some leakages somewhere in the wellhead and that is the worst area you could have a problem because you have no control anymore. Just like in the casing too, we have K-55, N-80, L-80, P-110. They are all for different things; some are for tension; some are for chemistry.

The Middle is where the Problem Is

 In the battle to bring down well cost there are things that will not come down; the cost of materials is one, human elements are another. In every management, the top is not the problem neither is the bottom. The middle is where the problem is. The figures, the equations are worked out in the middle. If you are the MD of a company and you send out ten tenders, the people at the middle would have done the tenders and they give you the analysis, even if it doesn’t look too good to you, you will not start evaluating the tender

If you have a classroom to train your staff, you have the materials to drill the well and you have the engineers to drill the well, you are fully competent to do the turnkey contract and that is where we are. We have progressively developed ourselves. Our approach to turnkey is new: a drilling model reengineered for greater efficiency and increased economic value to the operator, the Matpatson approach. People might consider that to be expensive but if you lose 2 days, you would have actually lost all the money you would have used to pay the Subject Matter Experts because they come in at the planning phase and they come in when their part of the operation is going on. The open hole wireline expert comes here at the planning phase. He is able to say: if you have this angle already and this dog leg severity, there is no way you can run this log on wireline. Then he jumps on his computer and does the simulation and proves to everybody that you can’t run it on wireline. So straight away from day one, you are planning to log on drill pipe. You have taken care of that risk straight away. The cementing expert comes in and says, if you need this height of cementing behind your casing, you are going to break down the shoe.

When you say you are ‘logging on drill pipe’ does it mean you are ‘logging while drilling’?

No, we call it Tough Logging Condition, TLC. You know, if you are drilling an exploration well, some people might want to take a risk of putting neutron tool in the hole. If you are stuck with it, you are in big trouble. You can drill with your gamma ray resistivity and then come back and log your neutron density on wireline if the hole is good; otherwise, just put the TLC straight away and by that, you can be sure of going in and coming out. These are the things. We had no issues at all with any of these operations and everything went smoothly on the Ebendo wells (which the company drilled for Energia Petroleum). We had a few tool failures particularly on the wireline but the rig had no Non-Productive Time at all; it worked fine. Did we have any major problems? Yes; somewhere we had differential staking when we were coming out of hole. I think the driller was actually messing around and it was static at a point. The over balance was actually higher across the formation and we got stuck. That was majorly all we had.

You said: “the driller was..” But in a turnkey project, that driller was Matpatson?

Yes it was us actually because we brought the rig. It was a Chinese rig that we used and they did well other than that incident.

You are not going to use that rig again?

You can throw the oil away into the gutter but we will produce gas. Our worry about the industry is that competencies are going down.

Oh we would. The driller made a mistake and that point. The truth is that, if somebody makes a mistake, you don’t sack him immediately. Let’s take an example of a career drilling engineer with Shell, just an archetype.  When he was six months old on the rig, still a trainee, he was on a job and he lost this finger. He went to his manager even though he was still a trainee and said he wanted to change to petroleum engineering (meaning reservoir engineering) department or production technology, but the manager said “no”. he said “you will stay in this department or you will leave the company” and the trainee asked why? The manager responded: “because this has happened to you, you will never allow it to happen to anybody” Our archetype drilling engineer experienced series of that situation that resulted in the loss of his finger during the course of his career but he always remembered that this was why he lost his finger. So, if somebody makes a mistake, you don’t sack them immediately because someone else will come and still make the same mistake. Back to the driller on Ebendo. He was warned and he had a warning letter and he apologized. Yes it cost us some money because we lost some drill pipes and drill collars along the way.

So far, how many students have gone through your drilling classroom?

Oh a lot; we actually do some training for Shell

Do you want to put a number to it?

Sometimes, they come in like 15 or 16 at a time particularly for the drilling courses. The highest number you are allowed to carry at a time is 12. We have well intervention courses and then we have some drilling companies that bring their staff for rig training at different levels. The rough neck, the driller, the tool pusher and the drilling manager. Right now we are actually training some engineers for Nigerian Content Development Monitoring Board NCDMB.

Do they work for NCDMB?

We don’t think so; they just took some people and gave them to us to train and if we like them, we can take them. We have identified two of them that we will take through our own critical training programme. So that is it about training.

Do you have a live rig or a simulator?

We have a simulator particularly for the certification. We just actually finished installing the Shell DS-500 simulator last November. It is as big as the rig floor and we are going to Angola to install one in March 2023.

For what company?

We are going to install that on behalf of the manufacturer actually because we are now partners with them. The Drilling Systems in London and we are also partners with Aberdeen Drilling School.

There is a growing number of drilling companies who now do turnkey projects. What is Matpatson’s opinion about the state of turnkey drilling in Nigeria today. Would you say it has really taken off?

Do you see a general uptick in the drilling industry now relative to, say, Ten years ago-before the massive price crash and then pandemic? What do you see as the prospect to the drilling industry?

We are talking about green energy and the rest but in this country, even if you don’t produce oil, you will produce gas and you can’t produce gas without drilling so drilling will have to continue. You can throw the oil away into the gutter but we will produce gas. Our worry about the industry is that competencies are going down. That’s a huge worry and you can see it; Last year, one Nigerian owned firm had two blowouts. That’s the cost you pay for declining competencies. Another cost is downtime. The fact that you have finally finished the well doesn’t mean that you have done well. If you plan a well for 50 days and you are drilling it for 150 days, the cost is proportionate to the number of days in a way and some constants. This is the way we see the industry going. In those good old days, when we generally had the good people, you take the drilling report, there is only one line – drill from 5,000 to 6,000 feet. Then the mud SG (Specific Gravity) and viscosity, finish. There was no geological report, nothing. Although there were companies like Geo-services and Baroid was doing some mud logging and so on and so forth.  But today, there are more information in this report. It’s almost per hour, per hour.

So that means that people should be able to take better decisions

Exactly, but it is not so. Three decades ago, in one Shell operated well in Belema (an oilfield in the eastern onshore Niger Delta basin); they were already setting the nine-inch casing when the (drilling) programme was signed. They were drilling the well with the draft programme and it was so fast. But today, the wells are complicated and there are no cheap wells anymore, that’s for sure. The depths are getting deeper and the formations are getting more aggressive. Again, the morale of people is dampened by security issues and so on. So where is the oil industry going? We will remain with it no doubt about that but then, if you take how the IOCs train their drilling engineers, we do not think there is any Nigerian indigenous independent that will train its staff that way. The industry keeps ending up with less and less skilled people. Some of them will actually grow but it won’t be like the kind of people that we had before that had real hands-on experience. The IOCs encouraged people to go for trainings. It was like going to earn more when you had a course in San Ramon, Holland, Milan; of course you would go back there to do some exams and if you failed, you were in trouble.

It is not there anymore and as you can see; the Nigerian independents are taking all the people from the IOCs and when the old ones are no more there because they are finally retired, what do you then do with the younger ones that are not properly trained? You end up with competencies that are already depleting.

Do you think there is an obsession among operators to bring down the cost of drilling projects? You did say that wells are becoming expensive.

Again, let’s go back to some archetypal operations in an IOC three decades ago. There was a workshop and a team was put together on well cost reduction. The team was to compare the company’s cost per barrel with a competitor’s cost per barrel. This archetypal IOC’s cost per barrel was double that of its closest competitor at that time. One key reason for additional cost, the team found, was community issues. The competitor’s was an offshore operation and there were no community issues. But there were other things, and this is where we are going: how that sort of lesson helped the Matpatson’s design of its work. It helped Matpatson -when it was formed-to set itself apart. WhenMatpatson started consulting for Niger Delta Petroleum Resources, it came up with the idea of drilling four wells in one cellar. That reduces your line take and it reduces your rig move time. The pipeline is also part of your well cost and you have to acquire right of way for the four wells because they are scattered here and there. Finally, what cost does the real operation itself add? In the battle to bring down well cost there are things that will not come down; the cost of materials is one, human elements are another. In every management, the top is not the problem neither is the bottom. The middle is where the problem is. The figures, the equations are worked out in the middle. If you are the MD of a company and you send out ten tenders, the people at the middle would have done the tenders and they give you the analysis, even if it doesn’t look too good to you, you will not start evaluating the tender. You might be wondering why certain things are not there but you won’t push it.  We don’t want to say it absolutely but that is the case.

Again, technically, what we did with these Energia wells was that we actually got somebody to do some geo-mechanical study for us. We gathered some data like pore pressure regime from the wells that they had drilled and so, we already knew the mud that we would need and so on. We didn’t have to struggle with top holes and so on. This is what we are saying, we have all these people here and what you will lose will be more than if you had them. That is why we call it the Matpatson approach to turnkey drilling in addition to the fact that we have all the equipment.

You said because of material cost and human issues the average cost of $25Million per well will never go to like say $10Million?

Well it might if the oil price goes to like $8 per barrel, the whole price will crash. But if it remains the same, I think a 12-13,000 feet well, dual completion, will still be about $20-25Million depending on what you put in it for completion.

Does Matpatson have any plan to own a rig?

No and this is the question that everybody is asking. First, there’s the risk of not having a job and operations go down. What do you then do with the rig? The rig is more like your car, if you park it and you don’t drive it, but you cover it up and you think it is still new, you are just wasting your time. It is getting older faster. To properly stack a rig will probably cost you nothing less than $2Milion. Cold stacking means that everything is shut down. You can imagine what happens to the bearings. You have to change all the oil in the engine to cold stacking oil and all your bearing will have special grease. Your drill pipe pin and box will have a totally different dove.

When you now need that rig to work, you then find out that the legs might not be able to work. You will then have to start looking for injecting pumps and all sorts of things to get it running again. Finally, the draw works are not working, the NCI Unit is not working and so on. You might need to spend like $5Million before you get it to work. If you don’t have that kind of money, what do you do? Then it becomes a junk. Since you can always find a rig to rent for your operations, just go and rent a rig. Today, the Chinese are taking over everywhere because you can’t beat them. True or false I don’t know but people say their government give them money and say they should just go away because they are too many and they do not have to pay back. So how do you beat those people? I look at what ACME energy did and I know how much it cost. We built that rig and I actually went to America to select it. That is still the strongest land rig in Nigeria today and we can vouch for that. But now, it is stacked after the Waltersmith turnkey operations that they did.

Now that Matpatson has multiple arms: drilling, training, even logistics; which of them would you say is the highest revenue earner for you?

It is actually the procurement company, in the last two years.

Which one brings up the rear in earnings, then, the training school?

Matpatson runs five companies. We have the training, the procurement, logistics, project management and the fishing department. We have all kinds of fishing tools there. When we are stuck, we just mobilize our fishing tools to the rig. The thinking behind this is: if there is no drilling, there is workover. If there is no workover, there is fishing. Somebody must carry something and that is why we have the logistics. Finally, when there are no serious operations that is when people come for training. It is well covered and when you go to our warehouse, you will see the way it is lined up.

Is it the training school that is dealing with the Angolan operations?

Yes.

And is this for Azule Energy?

They haven’t told us who the company is yet. We just know that we have a contract with them.

So now that the Petroleum Industry Act (PIA) has been made law, how would you evaluate the upstream industry year-on-year?

We don’t know because we tried to get one of the marginal fields and we were bounced.

You tried as Matpatson?

Yes with a joint venture. We were bounced.

Did the authorities give you a reason why they bounced you from the bid round?

Would you ever know? With all the stupid things that happened then, we weren’t even interested at some point anymore because even the DPR director was asking for all kinds of stupid things and those things don’t go well with us.

Congratulations on delivering two wells back-to-back on Ebendo field. There was so much excitement…

We drilled one exploration and one appraisal/development well back-to-back; all on turnkey, for Energia Petroleum in Oil Mining Lease (OML 56).

The idea for contracting well drilling on a turnkey basis is not totally new in the industry, but if you remember, the operator provided everything apart from the actual making of the hole. However, we have gone beyond that, we drill the well and we provide everything. We also provide other services like open-hole logging, for which we make arrangement with other contractors. Basically, the client gives us the coordinates, we design the well and they agree with the design, we also write the programme and they agree with the programme and then we go to execute.

You are their drilling department in a sense.

Nigerian (E&P) Independents didn’t actually know that you don’t start planning a well when the rig is around. Most of the time they want to drill there are no equipment available. This spurred us to include procurement of drilling equipment to what we serve.

Yes and they only have somebody that oversees what we are doing to ensure that it is in line with what we have agreed on. The job opportunity came when we say an Energia tender for a rig in 2022 and we approached them and said why don’t you just give us this job to do and we’d provide all the services. We did all the negotiations and they asked if we had everything and we said yes, they could come visit our warehouse here in Lagos. If they wanted to see some of the completion accessories, then they could come to our warehouse in Port 

Harcourt. Although we did two wells in this project, we have the capacity to do five wells back-to-back.  if we get a contract today, we don’t need to order anything. We have tubing, we have casing accessories, we have well heads and we have completion accessories all in our warehouse in Port Harcourt. We also have a pipe yard here in Lagos because at a point, it was actually easy to move stuff from here to the Warri zone rather than go from Port Harcourt because of the bad road. We still have pipes for about four wells here and five in Port Harcourt, tubing and casing…

You carried out e-logging on the wells too…and did the completion job?

Yes, we bring in top service companies, supervised by ranking Subject Matter Experts, for the e-logging and we pay them for the service. We actually have a contract with them for such services. But we complete the wells …

It is full oil field service that you do then.

Totally correct. Everything is on you; the risk is on you and the benefit is on you as the turnkey contractor. So that is like transferring the entire risk to you and you accept that. If you do your job very well and you have competent people, you are probably not taking too much risk and that is the difference between us and others.