Crude oil price crash: Matters arising

By Kayode Adeoye   |   16 September 2015   |   5:45 am  
Oil workers, member sof PENGASSAN. Photo: naij

Oil workers, member sof PENGASSAN. Photo: naij

There was a time in Nigeria when Oil companies like Mobil Nigeria, Elf Nigeria were drilling on high water depths and Chevron was on low water depth creeks as they are today. The medium for moving men and machines from shore to their facilities was through Boats called the “Crew Boat” for men and “Supply Boat” for machines and consumables.

Those were days when premium was placed more on machines than on men!
Those were days when men were kept in Boats between 3 and thirty30 hours because a Boat was offloading or being loaded!

Those were days when men suffer sea sickness atop waves that are up to a meter high!
Those were days when men were lifted from Boats in a carrier hooked to a crane called the “Basket” or climb through a stair almost at the water level in very hostile waters!

Those were days when personnel were lucky to be flown from shore to offshore and back by Helicopter!

Those were days when the international market price of crude Oil was above $75 per barrel!
This continued unabated until Exxon Corporation bought over Mobil to become ExxonMobil and proceeded to cancel all such personnel movement from shore to their offshore locations and back except in extremely challenging situations of weather, operations, drilling costs and inability of their facilities to accommodate more than required.

Elf and Chevron, to some extent, followed suit after management changes effected by mergers and acquisition changed their name and thinking to Total FinaElf and ChevronTexaco respectively.
Crude Oil price is crashing at an alarming rate and multinational Oil companies, marginal field operators, indigenous Oil companies, multinational drilling companies and local drilling companies like Oando, multinational service companies, indigenous service companies and a host of other service providers to the industry are united by one reality which is, to CUT COST.

This column is aware that series of meetings have been held between the marginal field operators in the industry and the various service providers on the need to reduce contract costs by the service providers thereby reducing the cost of drilling for crude oil by the companies. To this end, both the marginal field operators and the service providers are involved in the reduction of their overheads by downsizing their staff strength or reducing the salaries of their members of staff or both. While this is a practical corporate survival strategy, it shouldn’t be applied at the detriment of the crew welfare as earlier enumerated.

It is a fact that the international Oil companies are to Nigeria’s Oil industry what First Bank is to Nigeria’s banking industry and at such, have a thick skin to accommodate the ripple effect of the crude Oil price crash than the marginal field operators and will not therefore immediately seek to cut their overheads through downsizing and reduction in staff salaries as much as marginal field operators but will be involved in the reduction of overheads through other means. This column however wishes to submit that going back, in the name of cost cutting, to using strictly Boats to convey personnel from shore to their offshore facilities in highly troubled and unfriendly waters should not even be considered as an option.

The marginal field operators have their Oil Mining leases ashore and at such are not bothered with movement of men and machine by either a Boat or Helicopter but are focused on other options. Options like cutting costs through the choice of wells to drill. Development wells over exploratory wells, which is sure to give them a return on investment than a well they know little or nothing about. Standby rates for equipment service providers which used to be at a fraction of the operating rates are also on the verge of being cancelled. Furthermore, mobilization/demobilization costs are looking likely to be cancelled meaning third party personnel will be responsible for bearing the cost of their transportation to and from the facilities of the marginal field operators. Insurance in the event of permanent injury, disability or death is provided for third party personnel on paper but hardly seen to be carried out in reality!

In conclusion, it is hoped that the relevant regulating agencies will be atop their game by making themselves available to micro-manage all the cost saving innovations that will be introduced by these companies in the days ahead such that it will not be at the detriment of human capital development arising from unfair and inhuman operating and safety conditions. These are trying times for the industry but global best practices shouldn’t be on trial!



  • amador kester

    Rather than the national oil windfall nostalgia psychology or rather psychopathology its better to promply think economic diversification from multiple perspectives as the new way of life

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