Menergy International: Logistics and Oilfield Services Specialist in Ghana

Interview with Roy Aboku, Acting General Manager of Menergy International

You deal in a very interesting sector of the economy. You work in the famous oil and gas sector that everybody is talking about at the moment in Ghana. Could you give us your assessment of the sector?

To start with, I think that the oil and gas industry in Ghana, as far as the West African region and even the African region is concerned, is quite strategic. First of all because of our geographical location, and secondly because of our almost serene business environment. Additionally, before we discovered oil here in Ghana, we have had the opportunity to see other oil and gas economies in Africa make some mistakes and we have seen other economies do the right thing in other parts of the world.

I believe that we are in a very strategic position which presents a lot of opportunities for businesses, both local and international who want to take advantage of the resource. Even though we have been in this industry for over 2 decades, much before Ghana discovered oil, we find ourselves lucky to be in Ghana and to be Ghanaians at this particular time. Quite frankly, I think that this is the best part of the whole thing for us, in the sense that we are trying to position ourselves to be able to optimise the benefits of the resources in this country at the moment.

You have been in this industry for the past 20 years, it must have been a blessing when they discovered oil here! It must have been a real boost for you!

It is amazing. Actually, part of the crew that discovered oil in this country were human resources that we provided to the oil rigs. We started in Gabon and came to Ghana in 1992, where 15 years later oil was discovered. To think that that the crew that discovered it was provided by us is really exciting. In the same way it represents a challenge for us to make sure that we maintain our position as the front runners in oilfield service provision in this country. As a company this is how we look at it, and speaking as a Ghanaian, it is quite good that at a point when the country is prepping up for massive infrastructure development, aiming at middle income status, that oil resources have been discovered. It comes as an advantage to the government but also as a challenge to make sure that these resources are put to the best use so that we experience the oil ´blessing´ and not the ´curse´ as it is famously described in the industry.

How is the company structured? Is this a Ghanaian company?

Menergy started in Gabon in 1989. It was started with the vision and effort of a Ghanaian named Danny Mensah. Over the years, Menergy expanded into Cameroon, Equatorial Guinea and Côte D´Ivoire. Then in 1992 we came into Ghana as Human Resources International and later on changed the name to Menergy International. Over the years, we realised the importance of being an international company in this industry because of the nature of the activities that we undertake.

Therefore we have tried to expand into other countries, of course bearing in mind the constraints of local content and ensuring that the indigenous of those countries benefit from those resources, just as we are crying for here in Ghana. We have subsidiaries in Sierra Leone, Liberia, Côte D´Ivoire and Namibia and that is not the end of it. We are still looking into where else we can go, because oil activity is international in nature as the rigs move from one country to the other and likewise the oil companies acquire interests from one country to another. Therefore in aiming to best serve our clients we have tried to position ourselves as a company that is going as far as we can within Africa.

You have mentioned various countries and I have seen on your website that you are also present in the UAE, why is that?

Yes we are present in the UAE because we were looking at positioning a hub there that will more or less link the rest of the world and Africa. You will agree with me that the UAE is now becoming the location where you find the majority of the oilfield service providers´ headquarters for strategic business reasons including location and also the business climate there. That is essentially what caught our interest and what led us to the UAE. I must say that this is something new and it is developing. Our presence there is not as mature as you will find here in Ghana where we have full presence, but we are working on it.

What is your competition? What is your position here in Ghana and how do you compete with the large international players?

Most of the competition that we have had has been local competition. The nature of the services that we have provided over the years is such that the barriers are not that high for local companies to compete. Even though to work in this area requires a lot of experience, a lot of local companies have become interested in providing these services and they have come in and created competition for us.

What we have done over the years, to maintain our position as frontrunners is to try and go a step higher each time. Now our strategic interest lies in going into the more technical services. That is essentially why we are interested in your platform because we are opening up to international companies that are interested in partnering up with capable local companies to be able to optimise the benefits of the resources in this country. We are trying to provide slightly more technical services like subsea welding for example, we are looking to manufacture things like valves and being able establish things like top drives in this country. We are looking at services beyond the logistics, marine, human resources and travel support that we have provided for a very long time. So when it comes to competition we still manage to stand out because we have the experience and capacity that we have built over the past two decades.

Are there international companies that can come here and provide what you do or are they playing on a completely different field?

Companies like Schlumberger, Baker Hughes and Halliburton are companies that are doing what we are aiming to do in the future.

As it stands now, we still have some international competition in areas such as the marine services that we provide because there are a lot of international companies that compete with us in that area. In fact we have had a lot of concerns in the past about how some of these tenders are managed as they don’t necessarily really benefit the local businesses. Apart from that, there are a few foreign companies that have come in and sort of taken advantage of the natural resource development in this country and are participating in the industry. I believe that once the local content legal instruments are put in force, we will be able to control some of that competition.

Do you approach some of these companies to try and get some of these technical services? What are you looking for exactly?

We have had discussions with some companies in this area in the past and we are still in talks with some of them. You will agree with me that in forming strategic, long term business relationships, it is not the first guy that you talk to that you partner with. You always look for the one that offers the best deal, the best opportunity and who also has the best technical and financial capacity that you need to consolidate your interests in that particular business venture. Therefore we are still talking to some people and we are open to talk to many others.

What are the services that you are looking for?

In terms of what we are looking for, the most important things are what I just mentioned: technical and financial capacity. We all know that the oil industry is highly technical and highly capital intensive, which is why you find so many companies on one particular oil rig because each one provides some specialised service. That is what we are keen for: companies who have been doing this for a very long time and have been doing it very well. Not only that, but we are looking for companies that also have the financial muscle to be able to stand behind us while we take advantage of the local content opportunities.

Is this local content law going to be passed soon? What are the regulations going to be in terms of contracts awarded to local and international companies?

I would say that the regulatory environment in Ghana is progressing quite steadily. Although we have had concerns about the fact that it could move faster than it currently is. We all agree that issues relating to legislation and government regulatory frameworks can be quite time consuming.

At least for now we have the Petroleum Commission and legislation which has been passed which takes away the regulatory responsibility from the GNPC who used to be the referee and the player at the same time. I think this is a really good step so far. The Petroleum Commission is trying to regulate the industry in terms of who participates and what they do by providing permits and licenses. It sort of also shaves off, for lack of a better expression, the companies that come and create the impression that there are too many companies with too little capacity, whilst helping develop those that do have the capacity and know how to be able to participate.

Beyond that there is the local content policy framework which has been enforced since the beginning of the year. The law for the local content is actually yet to be passed by the parliament here in Ghana but I am told that it is well advanced. At this point there is a policy framework although in my opinion is not very enforceable until it is made law. We can only appeal and encourage and maybe the Petroleum Commission can compel some of these institutions to follow this framework as they have to get permits and licenses. When it becomes law, then it will be more compelling for companies to participate. An example of this framework is that now all companies in this industry are supposed to supply all their procurement plans to the Petroleum Commission, who in turn disseminates the information to companies that have been permitted by the Commission to participate in those particular areas. As a result, it is only when these companies do not have the capacity to respond to the tender that you can look outside. In the past, there has been the situation where before you know it, an outside company starts providing a particular service to a particular company even though you had the capacity to do it locally but you never even heard about the tender. I think we are progressing steadily but I agree with those who think we could move faster.

You have mentioned that you are looking for more financial capacity. Are you keen for investors and if so what kind of investors?

My answer is twofold: there is the financial aspect and the technical aspect. Recently there was a tender out that we were responding to. We needed to use an anchor handling supply tug boat to provide that service. It was a fixed term contract of 2 years plus one plus one, which means in the best case scenario you are looking at 4 years. Now this is a vessel that when we looked into it was costing between 20 million to 25 million dollars. Typically here in Ghana with our financial institutions you have to move mountains to raise that kind of capital from the local banks. Largely because firstly most of them are not comfortable with that level of risk, secondly because most of them don’t even have that much money to spare and lastly even if they do have the money, they would rather spread it out to 25 different clients than to give it all to one person. This is all due to the fact that there is not a very good understanding of the industry nor is there the ability to digest the risk involved in this industry. That is one challenge and in that sense we would be open to foreign investors who are willing to supply that kind of money. This is just for an anchor handling supply tug boat, you can imagine how much a FPS (floating production system) vessel is going to cost! Moreover, this is only in the marine aspect, there are several other areas that we are looking to develop. If you are looking at subsea welding equipment for example, you are talking about similar amounts of money. So if you want to participate in such very technical services it requires a lot of money.

Beyond money you also require some technical expertise and in my example of subsea welding you have to look for companies with that kind of experience so that you can have a knowledge transfer over a period of time in order to develop that capacity locally.

Therefore we are looking for two kinds of investment but not necessarily one individual partner offering both aspects.

Now we know that you are present in other countries but are you looking to expand further?

Like I said earlier, it is important for us to see Ghana more or less as a hub for the oil and gas services industry in this region, specifically in West Africa due to our geographical location, our stable corporate environment and also our stable political and economic situation. If you look at Liberia, Sierra Leone, Mali, Côte D´Ivoire, Nigeria, Togo and Benin who are also becoming very interesting for companies interested in the oil industry, you will see that we are very well positioned geographically.

When you then also look at our stable political and economic situation you will see how we can serve as a hub to provide these services. In this industry obviously there are a closed group of clients doing very huge projects. For example we could be servicing Tullow Oil who will be working in Ghana, Côte D´Ivoire and in Liberia etc. so if we can provide services to Tullow Oil in all of these countries why would they want to hire different companies in each country? Consistency is very important and is what drives our growth agenda. For example you could have a rig here in Ghana and before you know it they would have to move to Liberia and go and drill three wells, and then perhaps one or two in Sierra Leone or Côte D´Ivoire before coming back to Ghana. This is a rig that obviously has crew working on board and so if you can use the same crew for all these operations the consistency and the continuous flow of activities is a great advantage as downtime in this industry costs millions of dollars.

We want to be able to serve our clients better and to be able to distinguish ourselves from our competitors. That is what has pushed us to follow our clients everywhere that they go.

What are your major challenges? What keeps you awake at night?

The major challenges are firstly: financial capacity when it comes to some of the major projects that we have to undertake, which is why we are beginning to look for outside partners. We are not just sitting around waiting for God to come to our rescue, we are taking our own steps and we also use various platforms like opening up to the general public or the global business environment for potential partners.

We are also looking for technical capacity for the higher levels of participation that we want to attain. We are happy where we are but we want to go a step further and so we are looking for technical capacity as well.

We are also looking at legislative support, which as I explained earlier I think is moving in the right direction but at a slower pace than is desirable. We believe that over the next few months a lot of things will be much clearer. When local content is enforced it will give us a lot of power and will add value to us as far as building partnerships with foreign companies who are interested in this region is concerned.

As the industry is so young here there is a significant lack of knowledge of the industry that cuts across the various stakeholders in the industry right down from the everyday employees up to the people who have to make strategic decisions and this obviously poses a challenge.

Where do you want the company to be in the next 5 years? What would you like to achieve?

As I hinted at earlier, we are looking to become a very technical service provider in the oil industry in Africa. In so doing, we are trying to position ourselves so that we have the basic knowledge, ground information and the required capacity for the levels in which we are participating. We are concentrating on not losing focus on what we do. However, at the same time we are looking to go a step higher in terms of providing the very technical services. I used the examples of Schlumberger, Baker Hughes and the likes as examples of what we are aiming to achieve over the next half a decade. All things being well, we should be able to position ourselves as a very strong force that is African owned to compete with the Baker Hughes, the Schlumberger and the Halliburton out there.

Our competitive strategy over the years has been to make ourselves a one stop shop where if a drilling contract for an oil company comes into a particular area we would close the loop as far as the required services are concerned, from human resources to logistics to travel support in order to help make their operations seamless so that they can concentrate on the drilling and we can deal with the rest. That has been our competitive strategy over the years and has been what we have always aimed for. It is how we want to consolidate what we are doing now whilst we also aim at providing the more technical services.