Operators: How Dearth of Projects’ Continuity, Lowest Bidder Factor Hamper Oilfield Services Sector

Peter Uzoho

Players in the Nigerian oilfield services sector, the critical area of the oil and gas industry providing support services, have raised concerns over some issues such as the lack of projects’ continuity and long gestation period, which have remained a major challenge to contractors in the sector.

Aside the issue bordering on project continuity deficit and long contracting cycle, THISDAY gathered that another discouragement to the local contractors that have built capacity and capability is the issue of lowest bidder, which some players condemned as adversely affecting competent firms and quality of job delivery.

Oilfield services operators provide services such as oil well maintenance, completion, production, supply, and logistical support services in both onshore and offshore. Companies in the sector manufacture, repair, and maintain equipment used in the extraction and transport of oil and gas. 

According to Meticulous Research, an Indian-based research and market intelligence gathering firm, the Oilfield Services Market is projected to reach $171.7 billion in 2025 from $138.9 billion in 2019, growing at 3.6 per cent.

Although the Nigerian government had taken some policy measures to encourage more indigenous companies to participate in the upstream segment of the sector, particularly through the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, but the players still believe there are still issues hampering their participation in the sector.

The Managing Director of Dorman Long Engineering Limited, Mr. Chris Ijeli, whose organisation had been around for the past seven decades, said opportunities abound in the Nigerian oil and gas industry while there are equally many challenges facing the industry, particularly the oilfield services players.

Ijeli told THISDAY that the issue of long turnaround time of contracts was impacting the sector negatively, pointing out that some projects drag for more than 10 years before actual kick off and completion.

He mentioned the case of Asaa North gas development project, which is being carried out by Seplat and Shell in the Ohaji area of Imo State; the Nigeria LNG’s Train 7, and other such projects that had dragged for years before finally coming to light or still being delayed.

Ijeli explained: “The first challenge in the oil industry is the turnaround time of contracts. You see a contract spend maybe more than 10 years to come to light. I will give an example. Asaa North that is just being about completed started in 2006.

“The FEED was completed in 2006, bid for, came up again, towards the end of former President Olusegun Obasanjo’s tenure, it was shut down, then it went into cooler. And then, 2011/2012, it came up again and it’s nearing completion.

“Also, the NLNG Train 7 made us to invest in galvanising pond between 2007 and 2009. When did it come up? The project started fully last year. So, that’s a very big challenge in the industry -the gestation period of projects takes too long. Before a project comes, some of the investments you have made would have run into problem.

“People took money to invest but the project will take long to start. So, we don’t have continuous project opportunities. So, one project comes, it dies, another one comes and the same thing happens”.

He said that a similar situation is being witnessed with the $13.5 billion Zababaza and Etan Integrated Development project, being carried out jointly by the Nigerian Agip Oil Company (NAOC) and Shell Nigeria Exploration and Production Company Limited (SNEPCO).

The fields were estimated to hold a combined total of 560 million barrels of oil-equivalent (Mboe) and were expected to produce about 120,000 barrels per day.

According to Ijeli, the Zabazaba and Etan projects had been stalled for years with no clue as to when it will finally take off and completed.

He also mentioned the ExxonMobil’s Owowo field, which is still being delayed, adding that Shell’s Bonga Southwest and TotalEnergies’ Preowei development projects were also following similar ugly trend of long project gestation period and adversely affecting contractors.

“We are still looking; Bonga Southwest came, dead, Preowei, we are still waiting. These are opportunities that you hear take more than six years and some go beyond 10 years. So, these are the major challenges in our industry. We equip ourselves, we prepare even before the project comes, the crop of engineers you have trained may have left you for other places, some of the equipment you have invested in are all there wasting. So, those are the challenges, “Ijeli noted.

On the issue of lowest bidder factor, a Director at Les Energy Services Limited, Mr. Richard Omole, told THISDAY that the Nigeria oil and gas industry has to find a way to address that worrying issue.

“We’ve discussed it even in our internal meetings. The lowest bidder, while it is good, it also has the potential to impact negatively on the quality of deliverables, project timelines, the cycle time for projects because for a company like us who has worked very hard over the years.

“When we tender, we consider so many things and because of the lowest bidder issue, a company that doesn’t have the capacity may come and win the contract. And you will see, when they win the contract, they are not able to deliver it. You will have variations, you have slippages here and there. So there should be a kind of way that the industry will be able to calibrate this lowest bidder arrangement,” Omole said.