Alternatives in tough times

What is the current status of the domestic oil and gas industry?
In 2017, Bolland is still experiencing the throes of the crisis that resulted from the global fall in oil prices. The level of investment and activity have fallen, and the market for oilfield services has shrunk.
The market downfall has not been the same in the different basins, and also depends on the type of E&P plays – conventional or unconventional. This has affected the turnover ratios and profit margins of all the companies. Despite this troublesome scenario, Bolland has continued to work with all its clients, thus showing that there has been a decline in the market, but not in the number of business contracts the company holds.

Why has upstream interest recently shifted away from conventional plays in Argentina?
In my opinion, the main reason is the level of operational costs that are not aligned with oil prices. Consequently, a large number of the mature oilfield operations are not profitable with such costs and prices.
Companies have mainly focused on unconventional E&P plays and, as the capex of the oil operators is lower than it was a year ago, nearly 45% of the total amount is now allocated to unconventional projects, around USD 3 billion out of USD 6.5 billion per year. I believe that whenever a match between costs and current oil prices is achieved, the conventional share of the business shall regain its value.

How can the government put more focus on these mature areas?
The main issue is the need to increase operational productivity. The federal government has promoted agreements between unions and companies to enhance productivity, and several of those agreements are already in place and starting to be enforced.
From my point of view, it is also necessary to attract new and specialised oil companies to operate those mature fields at a lower cost. The government should make these areas available to smaller operators. In Argentina, that has not happened yet. Taking into consideration how much of the acreage assigned or leased to certain operators has actually been developed, it is clear that something needs to be done.
The subject of mature fields concerns the whole oil and gas sector and there is a need to see how some of the exploration and production areas can be reassigned in such a way that they are economically viable at a smaller scale and with lower operational costs.

How have Bolland’s domestic operations evolved during 2017?
In terms of total revenues, there will be a fall in relation to 2016. However, as far as each of the business lines is concerned, the results are different and some of Bolland’s traditional activities are achieving even better results than those of 2016.
In Argentina, Bolland has transformed some of the company’s business units, for example the one that used to deal exclusively with sucker rod pumps has now become the artificial lift unit. The company is very actively making inroads in the PCP [progressing cavity pumps] market. It is also expanding other business lines, such as engineering and construction, operations and maintenance, mostly in Chubut and Neuquén.
The company has recently finished building a plant for Total in Rincón de la Ceniza and it is currently operating it. It operates Shell’s plant in Sierras Blancas as well.
It is also participating in tenders for operation and maintenance work for YPF in Chubut. It has participated in many of the tenders for well-testing equipment and services for unconventional wells and field developments.
Bolland is also carrying out improvements at its machining plant for sucker rod pump manufacturing with a lean system that allows for the minimisation of inefficiency and waste. It is working with an American consultancy firms to identify possible areas of improvement at the plant.

Is Bolland working on projects in other countries?
Bolland is very active in Bolivia and is still operating in Brazil. Its international expansion will be regional for the time being, with the exception of the sucker rod pumps business, for which it is developing a project to export pumps to the United States.
In Colombia, Bolland has completed an association with Cediquim, a Colombian service company which supplies chemical products to the oil and gas and other industries. Today, it is a small company with a low market share that Bolland is hoping to rapidly increase. Cediquim started as Bolland’s chemical products representative in Colombia, and it has recently decided to acquire a majority stake in the company.
Bolland has also exported sucker rod pumps to Colombia, but always through representatives; it had no company of its own. Bolland considers Colombia a good prospect because it believes it could be an example of what may or should happen in the oil and gas industry in Argentina in the foreseeable future. The country has many operators and a very deregulated oil and gas market. Bolland wanted to assess how the company could work in that environment.
It is also studying the US market to see if its sucker rod pumps can be exported there.

What are Bolland’s short-term objectives?
The goals for the next three years are to continue with a growth rate that is higher than that of the Argentine economy; focus on regional expansion; make an effort to compete in more aggressive markets and set in place a new organisation model that is more suitable for meeting current and future needs, following its corporate strategy review.
During the last quarter of 2016, Bolland reviewed its corporate strategy and decided which markets and business lines it is willing to develop.
The company also established a priority focus on innovation, entailing not just new business lines, but also the implementation of new technologies, equipment and software.
In two or three years, Bolland aims to be a very consolidated company that is less dependent on individual clients and more open in all business lines. Bolland will also pay a lot of attention to its new clients in unconventional plays, such as Shell, Total and ExxonMobil. The company sees those as an opportunity to learn and gain experience in operating at highly stringent levels, which Bolland thinks it is able to meet.
In terms of the company’s structure, Bolland will aim to incorporate middle management and strengthen the organisation with a spectrum that brings together the experience and tenure of its staff, including those who have been working with Bolland for many years and have given great continuity to its work, along with new people with the necessary expertise.

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