OGP helo operators find profit and peril in Nigeria

 - November 30, 2010, 6:49 AM

Two years ago a speedboat opened fire on a Bell 412 as it departed an oil platform. A mechanic found a bullet hole in a main rotor blade after the helicopter returned to base. The passengers and crew had no idea they had been hit.
It was just another day in Nigeria.

Today, despite its vast oil riches, the West African nation continues to suffer from widespread poverty, lawlessness, official corruption and political violence. Even in the face of some government reform and better security, violence has intensified in the run-up to next year’s national elections and poses unique challenges for helicopter companies working the lucrative market for serving offshore oil and gas producers (OGP). Notwithstanding these problems, Nigeria remains an extremely attractive venue. “It has the highest profit margins, but it also has the highest risk,” said Mark Duncan, vice president of international OGP helicopter company Bristow Group, operator of the punctured Bell 412.   

Expats Targeted
The recent rash of attacks on oil platforms and supply ships, bombings, sabotage, transactional kidnappings and village massacres underscores the omnipresent dangers of doing business in Nigeria. On November 14, attackers in fast boats opened fire on, and then boarded, an ExxonMobil platform in the Oso project, an area with more than 500 million barrels of reserves, beating workers and shutting down production.

The week before another platform, operated by London-based Afren, was similarly hit and seven workers were kidnapped. A bombing attack in the capital, Abuja, during national independence day celebrations on October 1 killed 12. Oil pipelines and depots are frequently attacked. Most, but not all, of this is the handiwork of the Movement of the Emancipation of the Niger Delta (Mend), a self-styled band of Robin Hoods. Mend claims to be fighting for a more egalitarian distribution of oil revenues to the general population in this country where the average per-capita annual income, according to the United Nations, is $1,160. However, not all of this mayhem can be attributed to political differences. Much of the kidnapping is transactional, with hostages held for relatively short periods for quick six-figure payments to various criminals and gangs. Expatriates working in Nigeria, especially for the oil industry in the Niger Delta, are frequent and favorite targets.

Gwenole Jan, head of the economic mission at the French consulate in Nigeria’s largest city, Lagos, calls the Delta “very dangerous” and advises that expatriates working in Nigeria have their own drivers and bodyguards. Four French citizens have been kidnapped there since September, and expatriates working there typically live in heavily fortified and guarded compounds and travel in convoys with police escorts.

“This market is full of every kind of risk you can imagine,” said Bristow’s Duncan. Through Pan African Airways and Bristow Helicopters, Bristow operates 55 helicopters on behalf of a variety of oil companies in the country and commands an estimated 60 to 70 percent of the local market. It employs 890 people scattered over 10 bases near the coast and in the Niger Delta, traditionally home of the worst violence. Over the 50 years it has operated there, its employees have been wounded and kidnapped and its helicopters have been shot at on the ground and in the air.

“Anything you can dream of is there–on-the-ground risk, payment risk, government seizure risk, physical security risk and corruption. If you go there and try and run a helicopter company like you do in Louisiana, you will find yourself in all kinds of trouble. Everything there is at least twice as difficult–getting visas, commercial flights, crew buses, accommodations and good food,” Duncan said.

Maintenance logistics can also be vexing. “The biggest difficulty you have is the supply chain and getting parts in and out,” Duncan said. “Unless you stock well and have an efficient supply chain, your risk of down time is greater than in a lot of other places.”

Attempting to compensate for this, Eurocopter has established consignment stocks of spares in country for the approximately 25 aircraft it has servicing the OGP market. Models include the EC135, AS355, AS365N2/3, EC155 and Super Puma, operated by Bristow, Aero Contractors, DanCopter/Calverton Helicopters, Nigerian National Petroleum and Shell Nigeria.

Bristow does all its own maintenance, save for E-Checks on heavy helicopters, at its in-country bases and has implemented stringent measures to make sure assets don’t walk off and greasy palms are dissuaded. “We have strong procedures to make sure that our people and our assets are secure. We have equally strong procedures to make sure we don’t go about it the wrong way; we don’t pay people off,” said Duncan.

It wasn’t always so. In 2007 the U.S. Securities and Exchange Commission found that Bristow affiliate Pan African Airways had violated the Foreign Corrupt Practices Act by bribing Nigerian officials in exchange for lower employment taxes. Bristow cooperated with the investigation and today rejects all such entrepreneurial entreaties, according to Duncan.

Bristow shields itself the best it can from corruption and violent attacks by employing local lobbyists, lawyers and private security firms. The latter provide not only security but also intelligence and analysis. Bristow added extra layers of security after a joint convoy with ExxonMobil from one of its camps to an airfield was attacked and several of its employees received gunshot wounds.

Despite this challenging environment, Bristow not only survives in Nigeria; it thrives. According to CEO Bill Chiles, Nigeria is the company’s most profitable market. During the last quarter it accounted for revenues of $58 million and an operating margin of 29.5 percent. However, these high margins are accompanied by high costs.

That translates down to the pilots, who get the equivalent of hazard pay. Approximately one-third of Bristow’s Nigeria pilots are expatriates who work rotating shifts of four to six weeks on followed by an equivalent amount of time off. They fly shifts that can last up to 12 hours per day, six days per week, in a mixed fleet that includes mostly medium twins and light singles that average 120 hours of flying time per aircraft per month.

Hazardous Working Conditions
Neil Collins has been flying Bell 206s and 407s for Bristow in Nigeria for two-and-a-half years from the isolated base at Escravos, 20 miles from the nearest paved road. Virtually all personnel and supplies are delivered via the base’s 5,800-foot runway. When in country he lives there with 1,600 other Chevron personnel, contractors and the camp’s protective military contingent.

Nigerian regulations limit duty days to 12 hours, with no more than 21 hours of flight time in three days, 30 hours over seven days, or 100 hours per month. Night-time single-engine operations are prohibited and twin-engine night flights are permitted only for medevac. Collins works 28 days on and 28 days off. He previously flew in the Gulf of Mexico and said Nigerian airspace can take some adjustment due to sporadic and sometimes unreliable ATC infrastructure.

The helicopters Collins flies are equipped with pop-out floats, traffic alerting, portable ELTs and emergency satellite radios, and the Blue Sky Network tracking system. Flights are generally less than 90 miles and within 20 miles of shore. VFR flights are at 2,500 feet and below, while IFR traffic is given 3,000 feet and above.

Nigerian ATC, oil company operations centers, Bristow base operations control and Bristow’s international headquarters in Houston track the flights. “There are always several sets of eyes on you,” Collins said. While a cooperatively funded Sikorsky S-92A based in Lagos can be used for search-and-rescue, Collins said the volume of helicopter and boat traffic in the shallow waters off most of the drilling areas generally guarantees expeditious rescue.

While pilots do use steep platform approaches and departures in high-risk areas, Collins said the platforms themselves and local weather present more omnipresent considerations. Natural gas flaring from the platforms can send flames “a couple of hundred feet high,” and the positions of jack-up barges and communication towers can also dictate approaches and departures. Weather dangers come in two main forms: enormous thunderstorms and Saharan sand storms called the Harmattan.

Weather Dangers
Nigeria is extremely humid with temperatures averaging between 85 and 93 degrees F. Maintenance personnel sometimes place dryers inside helicopters at night to “dry out” the avionics and minor parts that can suffer rapid corrosion. Collins said the heat doesn’t have much effect on load given the low elevation and cruising altitudes.  

The pop-up thunderstorms can extend 300 miles across with tops to 65,000 feet, and company policy prohibits flight within 10 miles. “The intensity can take your breath away,” Collins said, and the storms often trigger precautionary landings. While Collins does not have live weather on his aircraft, he can generally get updated reports from IFR helicopters in the area, operations control and ATC.

The Harmattan rages between November and March, and some storms can last three to four days and be bad enough to shut down the international airport at Lagos.

From the air, Collins said, the Harmattan “looks exactly like fog or mist. You can’t tell the difference.” He said that inlet barrier filters and blade tape are generally ineffective at protecting helicopters from the associated micro sands and that water is the best remedy. “The engines get a rinse at the end of the day with purified water and the aircraft are washed to get rid of any dust on the [rotor] blades or other parts of the aircraft exterior.”

As for the manmade dangers, Collins said, overall security has improved in recent years thanks to a system of early-warning buoys in the delta and an increased military presence.  

Long-term, more OGP helicopter companies are expected to be drawn to Nigeria by the high rates of return. “We have a strong market position there,” Bristow’s Chiles told stock analysts last month, but “we do not expect that market position to continue forever.”

Thierry Dubois contributed to this article.