Angola’s Grupo Simples takes on operatorshipSeptember 5, 2022
Mario Gomes, co-president of Grupo Simples, talks to The Energy Year about the relationship between IOCs and local service providers in light of the local content regulatory framework and the group’s transition from service provider to operator. Grupo Simples engages in upstream operatorship and services such as rig supply, maintenance and operation.
What are the latest trends affecting the relationship between IOCs and local service providers?
As production in most blocks has been declining over the years, I believe that any new discovery in Angola – either onshore or offshore – is going to have a big impact. The future onshore E&P activities will probably help this sector grow. ExxonMobil is currently looking into new exploration activities, which will generate more work and jobs. It creates excitement for us as a service company because there are more opportunities.
Increased activity in the oil sector means more cashflow and more opportunities to drill new wells. It gives local companies the ability to invest more, as they’re backed by positive oil prices. IOCs that were really holding back on investing during recent years are now very bullish, which gives companies such as ours an opportunity to work with them. You have to take advantage of this momentum right now, and we’re going to take advantage of it. As service providers we can maintain our prices or even increase them compared to what we had to accept in the last few years.
How can the local content regulatory framework help the development of Angolan companies?
The government has recently understood that it is not possible for young local companies to deliver the same services at the same quality as those of international companies with 100 years’ experience. I think the government made a good decision to ensure that these Angolan companies can deliver and continue being profitable every day they work. This framework will give local companies a chance to further develop their capabilities and be more competitive. It’s a matter of long-term development and capacity building.
In terms of operatorship, now is the right time for new local E&P companies. Angolan companies can now deliver. If you had given us a chance to go on a block when we started in 2005, we couldn’t do it. We didn’t have the experience or the money.
What are the key takeaways from the group’s transition from service provider to operator?
In 2005, Grupo Simples started as a service company before becoming an operator. Services are the heart of this company. The group is divided into Simples Exploration and Simples Oil, which provides services.
We currently provide rigs, rig maintenance and labour services, and we operate the rigs as well. Blocks are operated in consortiums, which has helped us to obtain know-how and develop our own operator skills.
In 2016, we acquired the operatorship of a block in Texas. We came to fully understand how to drill and operate onshore. When the time was right, we divested from the US to invest in these onshore opportunities in Angola. We’ve been looking into this for a long time.
What is Grupo Simples’ onshore acreage position after the bid round held in 2021?
In the Kwanza Basin, we were awarded operatorship of KON 6, and we hold equity in KON 8, 9 and 5. Since these blocks are greenfields, they all present a challenge. However, based on our studies and those done by Sonangol in the past, we know the reservoir is an opportunity for us to find oil. We just have to minimise the risks to ensure we either strike oil or keep exploring.
Any brand-new block development can take from three to five years to enter the production phase, and the timeline depends on the service and the difficulties on the ground, such as the logistics.
What steps will you need to take to become an operator in other markets?
We are assessing the possibility of becoming operators in other African countries where we are already providing services, such as Mozambique, Togo, Equatorial Guinea, Ghana and Namibia. We are also targeting Egypt and Guyana.
The main challenge in new markets is logistics. However, we are mostly focusing on Africa because we know how to work here. The other challenge is partnering with the right local partner and navigating the legal requirements and registration issues. On that front, we already have a local Mozambique entity.
To go public and raise capital internationally, we aimed to have large projects under development. We’ve been waiting to have our Angolan onshore blocks ready to seek capital. We have a specialised in-house team working on this, which has been in place since 2016 when we were operating in the US. As we speak, we are finalising all the paperwork with the ANPG [National Oil, Gas and Biofuels Agency]. We are in the final stages of negotiations. The ANPG did an amazing job in supporting this.
How is the company planning to raise funds to develop the onshore blocks?
We’ve had an international financing strategy in place for six years. We are already registered in the Netherlands as a public limited company, but we have not yet floated our stock on
How does the company intend to be a part of the energy transition?
We decided to look a couple years ahead and try to understand that this is the future. The energy transition is an opportunity to create many new jobs and new developments in Angola and Africa.
Grupo Simples Oil knows that an energy transition will take place, and we are looking into the future. We have already started putting things together to invest in lithium, solid-state battery manufacturing and renewable energies. Oil will still be on the market for years, but times are changing. Cars and ships are already using batteries.
What are your priorities for involvement in renewable energy projects?
In an early stage, we want to build batteries. Working with large companies such as Tesla will give us the chance to obtain a market share and gain know-how. Then we want to develop solar panels and finally be a part of solar power generation projects. Africa has the much-needed minerals, such as lithium, and the sun is everywhere. Our advantage is our deep knowledge of the African continent.
We are also reducing the carbon footprint of all of our projects. We have put a timeline together to implement this in our ongoing contracts, which creates awareness within our organisation that we are changing.
What does your new operatorship role entail in terms of socioeconomic development for Angola?
Our ambition to succeed is fuelled by the opportunity to generate jobs and to make sure we’re a part of the development and economic growth of Angola. This is our ambition: bringing value to the table. That’s the reason we go in and work on onshore blocks. It is about building this country together and integrating it to keep it moving. We have a significant focus on how our operations will impact communities and how they impact shareholders and clients of the organisation.