An in-house strategy for services

What is your assessment of the state of the Angolan upstream sector?
The majors are here for the long run. Historically, majors have run economics a lot lower than the market really runs, so I am quite sure they were prepared for the recent challenges. A lot of projects were actually just about to get started when the pandemic began. Once the oil price dropped, some of these projects had to be put on hold.
In 2022, some of the projects on hold will definitely come back on line and when that happens, service companies will have to take a share of that business. Right now, everyone who has a contract running with an oil company is more or less fine because all they have to do is increase services.

How has the pandemic affected the overall competitiveness of service providers in the country?
Because of the pandemic, a lot of native companies went bankrupt and disappeared. This left a void in the market that now has to be filled. To do this, other companies are trying to consolidate a portfolio of services and adding services that they didn’t have in the past.
As many companies went bankrupt, there are a lot of contracts up for grabs, but that process takes a little longer because you have to bid for services and sign a contract. The opportunities are few, but they are there. Ups and downs in the oil industry are part of life.

How is the company navigating the aftermath of the pandemic?
We are a service company and we basically rely on drilling activity. We have been resilient. Our strategy was to maintain a very efficient operation. Lifting services are really the cornerstone of how people operate. The offshore cannot sustain anything you cannot lift.
We have seen an increase in investment and some drilling activity has also begun, which means an improvement for the clients we can provide our services to. We are seeing some drilling teams increase headcounts, which is a good sign.
With the increase in demand, we know that there are going to be delays in getting imported products into the country. These mainly come through the Port of Luanda and then go on to Soyo and Cabinda. There will be a slight delay as the demand increases but the market is dynamic and it adapts very quickly. This is always built into how we design our purchasing, our stoppage and even moving the items within the country.

How does Certex’s new facility in the Sonils Base play into the company’s diversification strategy?
Service companies in Angola are normally tied to a contract or an oil major for a certain amount of time. This is good because it protects the operation of the major and they have a preferred supplier with the ability to do a certain scope of work in need of execution. This is the case of Certex and our main client, for instance.
However, our new facility, combined with our financial ability, will allow us to tap into the rest of the market – like companies who don’t need a year-plus contract but will need add-on services for maybe three months. For example, we do inspections for one company twice a year for three months. We want to bring on board all the other clients who don’t necessarily need our services year-round.
So that is the reason behind this new facility. Sonils is close to our clients, and the facility will also allow us to provide new services that are not our core area, but that present a huge market for us.

What are the main characteristics of this Sonils facility?
Our workshop is a one-stop shop for things related to lifting equipment and equipment to support marine services. We are in the final stages of setting it up. It is a workshop, warehouse and support facility with offices. We plan for a total of 20 people to be working there. They will be inspectors and helpers in a variety of services.
The workshop is 800 square metres and it is designed to do equipment maintenance and for storage. The outside area is 10,000 square metres and will allow us to perform all the other marine-related services. For example, we will be able to repair marine fenders and much more.

What key variables are affecting local companies as they diversify their business portfolios?
Many activities in the Angolan oil industry depend on imported products. You have to mitigate the risk of sending forex out to buy these products, but you also have to make revenue from local currency. Services are key. For training services, you mostly use and get paid in local currency.
At this time, Certex’s new market is what we already do in marine services and training. But we have a lot of other things in the pipeline and we are going to expand the portfolio. It’s a jungle out there and we need to make sure that we can capture opportunities.
We have talked to other companies about partnership agreements to subcontract if needed in order to be the number-one preference. This is all in the pipeline. It’s going to be a good 12-18 months. We have learned to live with the pandemic, and now everything is on the way up. Any business that is good will always look to grow and expand the regional operation. We need to grow in Angola before we can think about expanding.

How have training activities been impacted by the slowdown of activity in the last few years?
Training is very important when you have a decrease in activity. People lose their jobs and when they are rehired, they need a lot of training. The industry is very specific about people having the right certification to do a certain job. We offer training services, especially for lifting equipment certification, but we’re also looking at providing training services for port operations.

Is the energy transition affecting businesses’ ability to attract capital investments?
The energy transition is a knife that cuts both ways. Most financial institutions are looking at the energy matrix of the company when financing oil and gas. Companies that have more renewables within their portfolio have a better chance of getting financing more quickly.
We are a service company and there is not much that we can do in terms of diversifying our own energy matrix. We have plans for our workshop to use solar energy to supply part of the energy that we need, but it’s on such a small scale that no financial institution will look at it. The energy matrix issue affects the big companies who are able to source financing from the international market. We are not at that level yet.
For their part, Angolan financial institutions don’t seem to have enough capital to finance the capital-intensive oil industry. Here, it has nothing to do with the energy matrix or the energy transition. Angolan banks simply don’t understand the oil and gas business – the times, risks and contracting dynamics involved.

How has the crisis impacted local companies’ determination to develop more in-house capacities?
Unfortunately, because of the crisis, we have not been able to find partners that have a long experience of doing business in Africa. Many companies are wary of doing business in Africa if they don’t already have experience here. If they don’t have a lot of money, they aren’t looking to risk money on a business venture with someone who is new to them. Regarding financing, it is very difficult right now.
As a result, our strategy is to try to do everything in-house. We would prefer not to, but we do have the capabilities within our company. Our people have certifications in lifting equipment and port operations, so they have very diverse skills.