Malta-based company Medserv will be providing nearshore logistics support to Staatsolie Maatschappij Suriname, a fully-integrated oil company, with the Republic of Suriname as its single shareholder, in a shore-base contract valued at $30.6 million (€26.9 million), for the next 15 months.
It’s a golden opportunity for the company, allowing it to make its first foray into South America, and put feelers out for other oil producers in the area which may be interested in its services.
“We operate dedicated bases in Malta, Cyprus, Egypt, United Arab Emirates (UAE), Oman and Iraq, and have a representative office in Libya, but South America is a new geographical market for us,” Medserv CEO Karl Bartolo told this newspaper. “Suriname has a population of just over half a million people, and less than 7 per cent of its territory is developed – the rest is forest. It is not a major oil producer as yet. They lift between 16,000 and 17,000 barrels a day.”
Medserv, which provides shore-based logistics services and supply chain management for oil country tubular goods (OCTG) to various international and national oil companies (IOCs and NOCs), will be managing the project in Suriname, through a dedicated Medserv team. “The industry is still in its infancy there, and as a result experience and industry ‘know-how’ are still limited,” Mr Bartolo explained. “If this 10-well offshore drilling campaign results in a significant discovery, that would be a great leap, considering the economic size of the country.”
While Suriname already has all the infrastructure in place, Mr Bartolo said that the client engaged Medserv to provide the company with the experience and established proven quality systems that it is known for in the market. Not only does the company hope that oil companies which are already in Suriname, such as Tullow and Apache, will be paying attention to Medserv’s work with Staatsolie Maatschappij, but also that neighbouring countries which have made significant oil discoveries, such as Guyana, will sit up and take notice of the services that the firm has to offer.
“Suriname has given us a good head start to this year and will stabilise our earnings, but it’s not yet a long-term contract, so we’ll see what happens after that. In the meantime, the team will be using it as a showcase to attract other oil and gas projects in South America – particularly neighbouring countries. Meanwhile, Mexico liberalised its market last year, which is something that is also of interest to us.”
Mr Bartolo mentioned how the regional expansion already experienced in the East Mediterranean may be replicated in South America, citing Cyprus as an example. “We started out with one oil major. Nowadays, we have contracts with the majority of the IOCs which have offshore projects in Cyprus. Furthermore, it catapulted us into Egypt and presented other prospects in the region.”
Discussing how the company has managed to make inroads in so many different markets, Mr Bartolo said that a company that is trying to establish itself internationally will find it much more difficult to do so if the market it is trying to penetrate is already mature. “As I said, in markets like Suriname and Cyprus, the industry is young, and expertise and experience are still being cultivated. Egypt on the other hand is a mature market; however, we were brought in to support and help refine their quality management processes and service. We brought an improvement in health and safety, service delivery, and response time. There must be an opportunity of some kind – an opportunity to add value.”
Another key to ensuring the success of an international project is to not think short-term, Mr Bartolo added. “You can’t just plan to make a quick return. You have to make sure you provide in-country value. The fact that we’ll be using local staff will have a multiplier effect on the local economy, generate in-country value and help us gain long-term acceptance.”
Last year, Medserv’s Directors Anthony Diacono and Anthony Duncan, the company’s major shareholders, announced that they were looking to sell their 65.5 per cent shareholding, with investors signalling their interest in acquiring it. “The process is still ongoing,” Mr Bartolo stated. “Anthony and Tony are of a certain age now, and it would be a good progression for Medserv to find a strategic partner that can help further its growth, now that it has become a truly international company with lots of opportunities on the horizon. It’s been a tough two years – many companies like us have gone bust. But our stakeholders and shareholders continued to support the company, and our team was very robust and resilient to those forces.”
“What also helped, in our case, is that Medserv placed itself in easy oil countries and where oil and gas are of strategic importance for those countries’ economies. If our business was dependent on countries where cost of extraction is high, the projects would have possibly been abandoned and we would have had to shut down.
During the recent downturn we did slow down, but the volume we generated gave us enough breathing room to continue through this tough period. Now that the market is turning, and with the recent contracts that we’ve secured, we’re hoping to see more opportunities.”
Looking ahead, Medserv expects further expansion in Egypt and Lebanon, which Mr Bartolo said would be classified as ‘natural growth’. “The outlook for the Mediterranean and the Middle Eastern nations is positive as more projects become active,” he added. “We’ve continued securing new contracts, and extending existing ones, and we’ve worked on a restructuring plan to put into action this year in Iraq. This will be effective by March.” Other incoming projects for Medserv include work in Uganda, and the company also sees significant potential in supply chain management for mill-to-well projects.
Mr Bartolo said that both earnings and revenue had increased between 2017 and 2018, and the improvement was expected to continue in 2019. “There’s a very promising growth period ahead, not just for this period, but at least for another three years. I can’t imagine a much better outlook than we have for the current year.”
This interview originally appeared in The Malta Business Observer