Minimizing Risk in S. Sudan
CEO of Nile Petroleum Services, Makaer Michael Dot, addresses the security concerns in South Sudan, as well as the importance of local content policies and the opportunities in the country.
How has competition in the sector evolved since Nile Petroleum Services entered the market? How does local content legislation impact companies’ work in South Sudan?
At the time we bid for our first contract, our competitors were Chinese. There were no local companies at that time. When we won the contract, the operator split the duties into two in order to spread the risk between a more experienced Chinese contractor and ourselves, as that was the first job that we had ever executed. But in the end we delivered and our counterpart failed to show up. The second half of contract was given to us and we executed the overall job. I believe that certain jobs should be executed by local companies, and we’ve proven that South Sudanese firms can deliver the goods even where internationals struggle.
The government has a vision and a plan to enhance and promote local companies through the Petroleum Act of 2012. The law states that local companies should be prioritized when selecting bidders in order to give them a chance to grow. In time, they will be able to compete with big international companies. This is the larger perspective. From a more close-up perspective, the law specifically mentions that local people should be provided with employment and training to get exposed, get competent and gain experience so they can participate in the entire business process. There is a specified minimum quota of local employees to be hired by each and every company coming from outside.
What are the key risks and opportunities in South Sudan?
South Sudan’s opportunities and potential as a new, emerging country are huge. We gained independence in 2011, but the independence came partly through conflict, so we need to develop infrastructure first to allow businesses to grow. We have a lot of different resources – oil being just one. Agriculture, for example, due to the diversity of ecological zones in this country, is a great opportunity.
The risk is mainly due to political unrest. That is obvious to anyone. But now the government is working hard to restore peace. Starting from December 2016 until now, security in Juba has been excellent, thanks to the government. If this can continue and the security push can be extended to the rest of the country, I believe the situation is going to improve and the risk will be significantly reduced. In business, no matter how much we plan and mitigate, we always encounter surprises. Risk is everywhere and we have to learn how to minimize it.
How did the most recent conflict (beginning 2013) impact field operations?
The conflict affected us. Everything now moves slowly, and there is no access to the River Nile, which means no access to floating transportation. Operational costs are high because the only way to access the field is via air freight. This creates some unique challenges for logistics.
As an example, the last project we executed needed 185 tonnes of steel to be moved to the field. Air freight is the most viable option, but this would mean we lose the contract value just in logistics. The government found a way, through the northern border, to give us special access to our material through Sudan. No goods are crossing to South Sudan from Sudan currently. But for the oil industry, the governments can grant special access. We were then able to bring our material through Port Sudan and over land. If the River Nile had been open and there were no conflict, we would have used river barges to access the oil fields from the south and delivered faster, with higher profits.
This interview excerpt is part of the Africa Energy Series: South Sudan 2017 book, which will be released at Africa Oil & Power in Cape Town from June 5-7. The full interview with CEO Makaer Michael Dot will be available in the Africa Energy Series publication.