Best Catering Services for the Oil Industry in Ghana and West Africa: Menergy International

Interview with Badari Narayana Srinath, COO of Menergy International

What is your overview of Menergy International today? What are the latest developments? Where are you operating outside of Ghana?

Menergy International is now in a restructuring mode. We have changed many things, including our teams and structures. We are currently operating very actively in the Ivory Coast. We are also operating in Ghana. We are registered in Dubai and looking to expand further there, as well. We are not currently conducting business activities in Dubai, but we have a complete set up, including an office space which is almost complete. As we are already in Q3 of 2017, we plan to pick up these international activities in Q1 or Q2 of 2018. Secondly, in terms of the company itself, we are planning to register the Menergy Group of companies. We have quite a few subsidiaries. We provide many different services to contractors, manpower and husbandry and catering services being the core which we began with and which we still continue. Because of our expertise and our dedication to our clients, they often come back to us asking for other auxiliary services. For example, in Côte d’Ivoire, we provided a large part of services to a repeat client.

What auxiliary services do you provide?

For example, we provided warehouse facilities management and container rentals. We worked with Dolphin Drilling in the Ivory Coast for their last campaign which has just ended. We also provide offshore containers which we own ourselves. These are not services, they are products that we provide for our clients. Procurement and accommodation services fall under husbandry itself. We are also involved in both offshore and onshore catering. Menergy Group is not going to focus only on oil and gas for 2017 and 2018. We plan to expand into other sectors, including construction and mining, because they also require similar services. For example, in Kumasi, we are currently serving a Brazilian construction company where we provide catering to more than 800 people. We do not want to restrict ourselves to only oil and gas due to the fact that the current oil and gas market is not at its best.

Menergy Group is not going to focus only on oil and gas for 2017 and 2018. We plan to expand into other sectors, including construction and mining.

When did you begin catering?

We formally began in 2009 as MEA Catering. However, we were serving clients much before that as well. Catering is part of the oil industry, in which we are quite involved. I am proud to say that we are one of the best. In husbandry services and manpower services, there are quite a few competitors who can do the job because it is not very complicated or technically complex. People can learn on the job and it is easy to pick up. Catering however, both offshore and onshore, involves technically complex operations. You need a very strong team for execution. Picking up the job is not a very difficult task. You can propose low rates and get the job, but executing it is the difficult part.  Especially in offshore catering, everything is related to food, and people without food and water cannot survive and cannot do their work. The food must also be of a certain quality, and there must be hygiene standards. There are many intricate details involved. Executing the job is extremely critical in catering. There are very few companies that can execute offshore and onshore catering at a high standard. I am very proud of our catering and our clients who vouch for us.

Who are your clients?

We work with Dolphin Drilling in Côte d’Ivoire and Seadrill in both the Ivory Coast and Ghana and Liberia. Currently, we are working with ENSCO for the new campaign which has already begun. We are providing catering services for them as well. They have close to about 200 people onboard the rig. We were the catering providers for Dolphin Drilling’s last campaign in 2014, the current campaign, and all the previous campaigns as well. We have been providing catering for Seadrill for a recent project in the Ivory Coast

How would you evaluate the situation in Ghana?

It is a very tough market here. From what I have studied and seen in the local market, Ghana has local joint venture rules. In the Ivory Coast, for example, Dolphin could subcontract. Here, it is not about subcontracting; rather, you must form a legal entity, which is much more detailed.

Is Ghana more structured?

It is definitely more structured, but it is also more time consuming in the sense that it is not easy to form a joint venture. You must stay with the company you choose for the entire project. If you pick the wrong one, you are in trouble. I was initially told by the industry players about a foreign company that picked a joint venture partner and now they are not very happy, but they cannot do anything about it because the contract is airtight. They probably do not have appropriate termination clauses. Joint ventures are good in that if you have the right partners it works beautifully. But if you do not have the right partner it can be quite a mess.

Has this happened to you as well?

No, it has not happened to us. We have not formed a joint venture entity with any foreign company. Having said that, the joint venture system gives great opportunity for local development compared to other countries, depending on how the joint venture is structured. I believe the minimum required by law is ten percent, but people who are willing to take more risk should always push for more because that is when you have the real development. You are putting your real skin in the game. Ten percent is what an agency charges, not a joint venture partner. Ghana is a tough market because there are too many competitors competing for the same job. The expertise is already here, there are enough foreign companies, and they know about Ghana. Ghana is one of the more stable economies in the West African region compared to other countries. People prefer to work in Ghana and they feel secure here. The language here is also English, which I have encountered as a challenge quite a lot when we work in the Ivory Coast because you must always translate. People are more comfortable working here, but it is very hard to get contracts, for any company, not just us. For one job, you may have three or four competitors, so you must cut your rates very low. The oil companies also now have a reason to push harder because they say the oil market and oil prices are low. It is one negotiation point they always introduce. However, if you look at catering and food prices as an example, there is not a proper balance. The oil prices are low, but the prices associated with procurement have not gone down. For example, with the cooks’ salaries, they are not going to ask for a lower salary than what they earned last year. If they were earning 1000 USD per month last year, they are not going to ask for 500 USD per month this year because of the oil prices. You still have to pay that same amount, if not more. There is a slight imbalance in that also which hits the profit margins for companies like us a bit hard. The market is very slow here. That is also one of reasons why we want to diversify into other segments.

Your diversification strategy will take you well into 2018.

Yes, easily, because all these things take time.

By early 2019, where would you like Menergy to be? What is your vision?

We are also looking at east Africa for our vision. We were told by many clients that we work with in West Africa to look into East Africa. In 2019, we would definitely want to do this, but we will not focus solely on Africa.

Is that why you are setting up in Dubai?

Exactly. Towards Q3 and Q4 of 2018, we would like to have some business revenue and cash flow there.

Are you focusing on a specific segment in Dubai?

Currently, we are pushing for manpower and husbandry and catering. Dubai is the hub where all the major drilling companies’ management supply chains are set. Even if you are getting contracts in Africa, they still go through Dubai. We would want to see that as the focal point for both the African business and towards the east. We are also expanding, now. We are recruiting in manpower, in the Filipino crew, which we have done before but on a smaller basis. Now, we are setting up proper partnerships instead of an ad hoc practice of going to the marketplace looking for crew. We have already set up one partnership in the Philippines, and we are looking at Malaysia and India, as well. We want Dubai to be that hub so that we can provide the crew requirements from any of our drilling contractors. They do not give enough notice, sometimes only one week. So, you need to evaluate and then see who is the best crew to bring in at those rates. The crew are not all going to demand the same rates. By 2019, we definitely want to see Dubai as the focal point for Menergy Group, looking at business segments for both the west and the east. We do not plan to focus too much on the east because the east is very well developed locally. There are enough local people doing the job. There is not much value we can add to the area. We would not be opposed to establishing something in the east, but we will not actively pitch a plan for it. We would still be focusing on Dubai, Africa, as well as Europe. For example, we have been exploring Tenerife because most of the rigs are parked there, and therefore are in need of the same services. We do not currently have a legal entity so they are not able to carry us along with the rig. We would also explore Germany. We have already started the paperwork for us to establish a legal entity there. From Europe, we can serve the North Sea region as well if that is required. The advantage we have is that we can sometimes bring in more economical labor. For example, the Filipinos the Indians are comparatively the same level of quality, but their labor costs are much lower. In the current market, it makes a huge difference. We never compromise on quality. We have even taken losses to make sure that the client is happy. Quality is of top importance, especially in catering. In husbandry or in manpower, you can say you are willing to do 95 percent well, but in catering there is no 95 percent. If the food is spoiled, the food is spoiled. The margin for error in catering is much smaller. This is why catering requires rigorous operations and also causes it to be very capital intensive. It requires a good, strong company with a strong background to execute the jobs. We are happy that we are able to execute these jobs quite well. Not to say that we are 100 percent perfect, nobody is. Every operation has its problems. But these are problems that we solve amicably, and thankfully, nothing has happened so majorly to date that we have had to get the contract cancelled.

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