The number of active
drilling rigs the world over, has nosedived since this price odyssey began.
What this means is that a lot of drilling rigs, land, swamp, jack-up, semi-subs
and drill ships are increasingly being stacked as a result of low patronage.
In economic parlance,
supply is greater than demand! The international association of drilling
contractors (IADC) is to the drilling companies what the organization of
petroleum exporting countries (OPEC) is to petroleum exporting countries and it
is doubtful if both organizations can do anything to arrest the situation. It
is therefore logical to conclude that several professionals involved in the
business have all had their income either halved or out rightly lost.
A typical example of
stacked oil drilling rigs are the two offshore jack-up rigs owned by Oando PLC
and stacked in the Marina in Lagos for over six months now. Those rigs, in good
times should be generating about $250,000.00 per day for Oando PLC. This simply
translates to, an incredible loss of money to the company, terrible loss of
jobs to Nigerians and a commensurate loss of revenue to Nigeria. It is not a
problem peculiar to Oando PLC but an industry-wide crisis. It is certain that
Oando PLC will gladly accept a rate less than normal if approached by
operators. This, at least, will save machine from wear and tear, create jobs
for men and generate revenue for company and country.
It is gratifying that the
Nigerian National Petroleum Corporation (NNPC) has secured $1.2B to further
drive its equity participation in the industry with promises to pay accumulated
cash calls of over $6B. It is cheaper to drill for oil onshore than offshore
for reasons of logistics, rig cost etc. Majority of drilling operations are
therefore, likely going to be conducted onshore.
If the operating companies
can agree with drilling contractors either, international or local to cut the
rates of their drilling rigs as they have earlier agreed with other service
providers, it means exploitation of Nigeria’s major revenue provider will not
be down to a crisis level but a manageable level. In other words, if there were
forty drilling rigs operational before the crude oil price crash, an agreement
can be reached by stakeholders to keep thirty operational rather than ten.
Furthermore, now that the international market price of crude oil is trading
for less than $50 per barrel from its glorious days of over a $100 per barrel,
the onus is on the NNPC through its subsidiary; the Nigerian Petroleum
Development Company (NPDC) to drive more projects along this line.
Since the oil price is down
south, it is time to take advantage the market has to offer by increasing
exploration/exploitation activities in oil mining leases at reduced rate or in
local business parlance, “promo price”. This will help in further increasing
the production capacity of the country, create more revenue base for the
country, create more jobs and further boost the country’s economy.
What is the point of
winning a keenly contested oil block after paying so much money to government
through the Directorate of Petroleum Resources (DPR) for ten years duration
without doing anything until the license expires? There are about 97 of such
undeveloped fields in this regard. It is agreed that borrowing money from
Nigerian banks to drive projects like these are tied into conditions designed
to make the banks healthier than the borrower. If this is enough setback, it is
time for local participators to look for foreign financial partners to
collaborate with to drive their visions rather than have it locked up in a
drawer. It is time for such “siddon-look” companies to synergize with others
either at conferences like the yearly Offshore Technology Conference, Offshore
Production Optimization Conference etc.
Nothing is bad for two or
more operators, to come together and drive a drilling program. Chevron drove
the Agbami project on behalf of Famfa Oil, ExxonMobil drove the first
successfully drilled high pressure, high temperature, HPHT exploratory well in
Nigeria on behalf of Total FinaElf and some other operators. Midwestern Oil and
Gas is driving drilling projects on behalf of its co-venturers.
This is not the time to be
passively redundant! This is the time, more than ever before, to be actively
involved in the interest of business returns, men, machine, industry and
country. Several companies in the industry are seeking to help operators cut
cost with technology-driven solutions. If operators decide to wait till the
market conditions improve before making a move, what is the guarantee that the
market indices will be favorable after such a move has been made? If we look
further, we will see further. Taking advantage of the challenge and
transforming it into opportunities for ingenious business development is the
way to go and going that way is the opportunity cost of drilling through a
price crash. The road is open! (guardian)
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