NESR leads the way in supply chain resilience
Sherif Foda,
NESR’s strong local presence as a national home-grown energy services provider has enabled it to weather the challenges posed by the current crisis in the Middle East, while others have floundered
Speaking to Oil Review Middle East at the Energy Intelligence Forum in London, where energy security and energy resilience were at the top of the agenda, NESR’s CEO Sherif Foda explained how right at the beginning of hostilities the company had put plans into action through its crisis management team to ensure business continuity and prepare for any possible disruption.
“What helped us a lot is that we have built a very strong and competent local workforce so we don’t need to rely on expatriates to come in to execute the jobs. The other aspect is to ensure you have the products you need to operate. We shipped everything we needed immediately, in some cases taking a conscious decision to air freight or incur more costs to be able to have ready equipment, people and products in country in case of conflict. So we actually grew during the conflict despite those challenges.
Foda cited the Jafurah unconventional gas project in Saudi Arabia as a case illustrating supply chain resilience.
“We worked with our technology partners and suppliers to ensure we can blend the surfactants in country, for example. We have sourced most of our needs locally, such as the pipes, infrastructure, and sand, with some of the products made in Saudi Arabia. As a result of that resilience, we continued with our frac performance in unconventional without disruption, and are marching ahead as we speak and into the coming months. No one would have believed 10 years ago that Saudi Arabia would have a competitive play that rivals the Permian or Delaware. Today it is second to none, a world-class unconventional play, developed with the latest technology and 100% local crew. So there has been no need to evacuate workers, giving us a competitive advantage.
“So we are growing our projects despite what’s happening in the region.” Indeed, NESR saw second quarter revenues grow 59% year on year, with a tripling of net income, as the company was able to execute all its contracts and maintain a presence in all operating units, with no interruption to any of its customer activities.
Logistics has been the biggest hurdle posed by the crisis by far, Foda said. “Logistics has been very, very complex. We planned the logistics at an early stage, deciding to truck goods from Jeddah to Dammam rather than going through the Strait, at considerable cost.”
Opportunities throughout the region
Discussing the company’s growth plans, Foda said he sees strong opportunities throughout the region.
“We see fantastic growth in the UAE and Kuwait, and we’ve been increasing our footprint and business in Saudi Arabia,” he says. In Kuwait, NESR in August announced multiple contracts totalling US$300mn over five years, including an agreement to establish a research centre that will focus on several challenge-specific innovations in multiple disciplines across upstream, sustainability, and unconventional resources. NESR will pioneer innovation and bring best-in-class technologies from around the world, tailoring them to the upstream ecosystem in Kuwait. While back in March the company announced it had secured US$300mn worth of cementing contracts in Kuwait and North Africa.
“North Africa has enormous potential because of its gas, offering the scope to replace Russian gas supplies to Europe,” Foda says. “Then you have what they call the new frontier – Syria has come back, Iraq post-conflict will offer a lot of opportunity.
“That is why the region offers so much, and it’s a very unique opportunity for a company like us, because you need to be very locally established. The current situation has shown that is cost prohibitive to employ expatriates, who come and go. You have to be locally made, homegrown, while conforming to or surpassing the top international standards.”
Others should be building local capacity, as NESR is, he said, while conceding that certain products will still need to be imported or locally assembled. “You’re not going to be able to build a high-pressure wellhead in every country. It won’t be cost competitive. But for the products that are used a lot, the main components of those items should be sourced locally. The local structure also has to be done extremely well.”
Decarbonisation technology potential
NESR has always had a strong ESG focus. Discussing decarbonisisation, Foda said this is not seen as the flavour of the day right now due not only to the conflict but also due to the stance of the US administration.
“But it will come back; it is a must. We cannot as an industry continue to produce oil and gas with the same level of emissions, especially as demand is increasing. We need to eliminate emissions as far as possible. ESG is a good business path. And as the CEO of Aramco has said, this region produces oil and gas at the lowest cost with the lowest emissions. That means projects will happen.” He added that now is a good time to invest counter-cyclically in ESG and decarbonisation technology, as NESR is doing, as there are companies with very good technologies that are currently available at a low cost due to lack of demand. “It is a very good opportunity to invest and make acquisitions to get ready with your portfolio of decarbonisation implementation technology.”
NESR is spearheading environmental innovation on multiple fronts, deploying technologies across water management, flare elimination, emissions detection, heat capture, and energy transition (CCUS & Hydrogen) and now pushing into minerals for the energy transition, recently signing an agreement with Aramco for the region’s first direct lithium extraction (DLE) project.
Foda sees the greatest potential for technology breakthrough in decarbonisation, in particular addressing the economics of decarbonisation. For example if recycling produced water were made economically viable, it would be much more widely practiced. “We need to break through the economics of materials, for example DLE technology to extract lithium,” he said.
At ADIPEC, NESR will be focusing on unconventional development and minerals, such as rare earth minerals. “We have a very cool technology we want to present at ADIPEC,” Foda said. Watch this space!
Concluding, Foda declared himself “super positive” about the future, seeing “the post-conflict box of opportunity”.
