A cost-efficient offer from Angola’s local companiesMarch 16, 2021
Noa Paulo, general manager of TECSEP, talks to The Energy Year about the key issues facing Angola’s local services providers as they compete with internationals and the company’s strategy for growth. TECSEP is a 100% Angolan-owned provider of oil services and supplies.
What is the central issue Angola’s coming local content law needs to address?
As a local company, the main challenge we face is the lack of opportunities to create more jobs. A related issue is that we need the acceptance of the operators. We need them to understand that local companies are capable of providing services so that they deal directly with us rather than going through the big service providers.
If you look at the spectrum of local companies today, most of their people came from IOCs. So we know these IOCs from the inside, which is another strength we offer. We only need them to accept that we can provide the services.
Most of the time the emphasis is on quality, but how can they know we have this quality if they don’t test us? If they give us the opportunity, then we can show them who we are and what we can provide.
Through ASSEA [the Association of Native Companies for the Oil Industry of Angola], which we are part of, we are discussing with the ANPG [National Oil, Gas and Biofuels Agency] how to make sure local companies are protected and promoted within the industry.
Which type of regulation could help local companies compete with international services providers?
A local content law – this is the tool that national companies need. Everything in this country is provided based on a contract. An international company will win a bundle contract for around USD 300 million including drilling fluids, filtration, tank cleaning and many other services. A bundle can decrease the cost for the end user. But for local companies, a bundled contract doesn’t work well. National companies don’t have the financial muscle to compete if all services are tendered in a bundled contract. So a middle way has to be found to satisfy all parties involved.
In response, we have been asking the government to dismantle such contracts. How can a company like TECSEP compete in a situation like that? It is impossible. With individual contracts for services like filtration and WBCO [wellbore cleanout], local companies can compete, as well as avoid subcontracting.
For example, today, TECSEP provides the services subcontracted by the service company, but with our equipment and with our people so we are responsible for everything we do on the rig. However, the payment goes through that service company and they pay us. We don’t have a direct relationship with the client. That needs to be changed. That’s one reason why we have been pushing for this local content law.
Currency of payment being “hard currency” and terms of payment being 15-30 days are fundamentals as the financing system for local companies practically does not exist.
Can local services providers be more cost efficient than international companies?
Yes, we can. For international companies in Angola, the cost is always higher because bringing an expat to this country is not easy. Also, in terms of overall costs, Angola is one of the most expensive in the world. But as local companies, we can be more cost efficient for the operators. That’s why they need to give us opportunities to allow us to show them what we can really do.
In TECSEP, regarding our workforce providing filtration and inspection services, we have today more Angolans than expats. We used to have more expats than today and due to the pandemic and in order to become cost efficient we reduced that number to the minimum possible. The rate for those services is around 80% Angolans now.
Can you give us an overview of TECSEP’s business strategy?
TECSEP provides services such as inspection and NDT [non-destructive testing] of tubulars and lifting, filtration, wellbore cleanout and tank cleaning. We also provide drilling tool rental and procurement for companies who are looking for materials either locally or internationally.
These services are not something that only IOCs can provide in Angola. We have well-established Angolan companies, like TECSEP, that can provide them. Using the example of filtration, TECSEP is providing this service to one of the big five international operators in Angola through one the big service companies. The strategy is simple. Business volume increases through new opportunities.
Is the goal to be a one-stop shop to provide multiple services?
Of course, that shall be the aim for national companies to conquer their deserved position within the industry. This is what we are trying to prove today. We are trying to make sure that the operators understand that we have local companies capable of providing various services. Once they accept this, we can serve more as a one-stop shop within the frame of our expertise. We do understand that this is a process but we need to start today and now.
How does TECSEP go about training the local workforce?
That is a challenge as well for Angola. We need training centres. They are very important if you want to have sustainable local content. People are your best asset. At TECSEP, we have a project called the Angola Oilfield Training Centre, which is aimed at providing training and certifications for the whole region, making Angola a reference in human resources. The plan includes classrooms with drilling and perforation simulators. It could be expanded to other industries such as the mineral industry. We are looking for investors to implement the same.
What is your outlook on Angola’s upstream sector for 2021 and how are you preparing for it?
For 2021, we expect the ANPG to come up with more projects. Most of the production in Angola is from deep and ultra-deep offshore projects. There is little happening onshore, and we expect the agency to promote this kind of production. The technology needed for onshore services is more flexible than what is needed for ultra-deep offshore. And it represents less of a cost as well.
We expect the government or the ANPG to give the local companies exclusivity on providing onshore services. That is the best strategy to create opportunities for national companies. Of course, we also care about international companies. We need each other, and we want to keep working side by side.
What is your message to international investors about the future of the Angolan oil and gas market?
The future is promising and I believe it’s up to the country to create better conditions. If investors see that they can make money, they will come by themselves. We do have more homework to do. Investors are like sniffing dogs.
Currently, I cannot see how Angola can attract more investors with actual economic conditions. Our inflation is high, costs are high, our Doing Business ranking is not favourable and so on. We have been trying as service companies but we have difficulties in attracting people to come and invest in the country. Most of the time, investors prefer to work with the government because they have the guarantees. Our financial system doesn’t support us in this. You can have a contract worth USD 2 million but it will not guarantee that the bank will provide financing.
What do you expect for the future of TECSEP?
The future for TECSEP is brilliant. We are preparing ourselves to be present in the market and for all of the challenges we will face. We will expand our company, but we need opportunities. The typical profit rate for companies is 3-7%. That’s money you need in order to invest and grow the company and it is not enough. That’s why we are eager to take on more opportunities – in order that we can grow.