A positive outlook in AngolaSeptember 28, 2021
Alberto Mendes, co-president of Grupo Simples, talks to The Energy Year about the future of Angola’s oil and gas industry and why Grupo Simples is transitioning to become an energy company. Grupo Simples provides multi-disciplinary oilfield services such as lifting, inspection, integrity management, rig supply and management, and oil bunkering.
How do you assess the future of Angola’s oil and gas industry?
We have a positive outlook on the oil and gas market – both in Angola and globally. The regulatory framework is improving and we think that as the industry recovers, we are in a position to take advantage of this recovery.
There have been new laws, such as the local content law, and decrees that speed up contracting and address other issues that have hampered the industry. A new agency [the National Oil, Gas and Biofuels Agency] is exerting this power and trying to prevent the decline in production. We are very hopeful because we can follow the majors and do some business.
I see the government making a great effort to liberalise the energy and power market. We want to work with the government on this.
Can you describe Grupo Simples’ journey?
We started as a local content company. Today we have grown outside of that definition. We are operating in the United States and we have delegations in Mozambique. We have teams doing work in Ghana and Togo. We go wherever our services are needed. However, we are no longer a service company. We are producing oil in the United States, so we are an operator. That was our aim from the beginning.
With the regulatory framework, present market conditions and recovery of the industry, we are ready to make some strategic decisions that will propel us into the future. These strategic decisions include divesting from the United States and focusing on the E&P regions in Angola, Mozambique and Equatorial Guinea. We are looking into these regions first to expand as service providers whilst exploring E&P opportunities. GSO wants to produce oil in Angola on the land blocks offered in the ANPG 2021 bidding round. This bidding round makes land blocks available to Angolan companies. We want to partner with local companies such as Sonangol and Somoil to bid for this opportunity.
This is our strategic vision in terms of our focus and the region where we will operate.
[Editor’s update: Grupo Simples was awarded a 50% stake and operatorship of the KON6 block in the Kwanza Basin, while taking 20% in KON8, 20% in KON9 and 10% in KON5.]
How is Grupo Simples following global trends in the energy transition?
Today, we are a full-fledged oil company that will soon be producing in Angola. However, we want to expand beyond being an oil company. We are starting a new migration into being an energy company that in the future will be providing power storage. We are strategically looking into renewable energies, doing research and development projects on solid-state battery production in Angola. Expanding on our current vision, GSO aims to develop as an energy company with the world as our market. We want to be part of solar, wind and other renewable energy developments. We see ourselves complementing these projects with innovative battery technology to drive down the price and increase longevity and performance.
Following the European and US standards for developing new battery technologies, we signed an agreement with an Indian institute to research new materials for batteries. We want to be ahead of the curve in 2027. We hope to have a working product by then and compete in the local and international market. This is a five-year programme that was initiated in 2020.
What kind of potential do you see in Angola for renewables?
The regulation process has started. Solar-powered plants are being connected to the grid. What we really want is not to be restricted to the Angolan market, but to make batteries that will support industries and businesses outside of Angola.
The potential is unlimited. We plan to get involved in the grid here, offering storage and providing batteries for solar projects. Batteries will need to be replaced from time to time. Stored power is needed for the times when you’re not producing, and that is where we want to be. We can grow with the industry with storage for any type of renewable power that connects to the grid.
Does Angola have the raw materials available to manufacture batteries?
We are also investing in mining, including mining of rare-earth minerals here in Angola and the DRC, such as coltan, lithium and other elements needed for batteries. We have a producing coltan mine in the DRC that has an annual output worth USD 1 million.
If we can mine coltan and refine it, we can actually make the basic parts of the batteries here. These can be used for cars, medical equipment, or any object that needs power. We will be part of these industries.
We plan to build outside Luanda, where we will refine rare-earth minerals. We will start to do basic components and transform them into batteries to supply different manufacturers. Maybe we could even work with Tesla in the future – who knows?
What is behind your decision to divest from operations in Texas?
We will exit the US because our investments were not bringing in enough returns. These were old fields. We knew when we got in that they were old and needed even more capital. We are already in a capital-intensive industry. If you have 50-plus-year-old assets, you have to do a lot of work on them.
Where will the group invest this newly available capital?
I think we can bring that back here and focus on exploring for oil in Angola. At the same time, we will keep our dollars to invest in future technologies since oil demand will see a significant decrease in the rest of the world. I don’t know how Africa will behave. For example, a massive refinery [Dangote] is being built in Nigeria, but California will no longer have internal combustion engines in 2030.
It is time to prepare. We know that the oil industry will remain active for some time, but we are looking ahead and turning into an energy company.
How was the company able to cope with the difficult business environment of 2020?
We are recovering from a great crisis. The oil prices are going back up. Many local content companies have disappeared or are limping. We also took a big hit. However, we have taken precautions and we are deeply rooted with the right partners, savings and investment.
We are able to withstand, to plan and to invest for the future. We had to reduce some of our staff numbers. However, we are nimble, small and productive.
What is the group’s long-term vision?
We are ready to move forward and strengthen our E&P activities. The shrinkage in demand for oil services has signalled to us that we need to remain sensitive to the market and re-evaluate the structure of our services division. GSO will continue to provide high-quality oil services to the market, whilst looking at ways to expand with the addition of complementary niche services for the market.
We plan to pool greater resources into our E&P and R&D activities. This includes oil exploration (Angolan land blocks) and gold, diamond and rare earth mineral exploration in Angola and the DRC. Additionally, we are investing in the future by continuing to expand and develop in battery parts production and renewable energy. This is to survive the crisis and build a vibrant , dynamic energy company, capable of delivering good returns.