Necessary exploration in GabonAugust 22, 2019
Henri-Max Ndong Nzue, director and CEO of Total Gabon, talks to TOGY about the company’s reorganisation and ongoing drilling campaign, how regulators are attempting to attract more foreign investment and the importance of local content development. Total is a stakeholder in 16 E&P developments in Gabon, which together produced more than 36,000 bopd in 2018.
What changes has Total made to maintain its presence in Gabon at a time of low oil prices?
2014 was very particular because of the sudden fall in oil prices. We often tend to forget, but we went from nearly USD 110 per barrel to less than USD 50, which means we were losing more than 50% of our income. It was essential for Total Gabon to persist and reorganise itself. We led this reorganisation around two axes.
Firstly, it was mainly to think about our asset portfolio to keep only the ones in which we provide real added value. This is why we have decided to divest our mature fields onshore to actors that were able to take them back and prolong their economic life in a way that both the local communities and the Gabonese authorities find profitable.
We concentrated on our offshore assets, for which we saw real opportunities for development. We are about to finalise a drilling campaign in the sea, which shows the coherence of the strategy we put in place.
The second part of this strategy was about our organisation, which needed to be a little bit more light. Consequently, we put in place two plans for voluntary departures that went well.
We also reviewed our internal organisation with the creation of two entities, one of which is the division of production performance, focussed in the hunt of the barrel to allow us to maximise our production. A second entity is the division of business and development management. It is more oriented towards the long term to ensure the durability of our operations in Gabon.
Last but not least, we went through a major change of culture with a good enough approach in all our expenses and by challenging our contractors.
What are your current objectives for 2019/2020 in terms of oil production?
Total Gabon’s strategy is focused on three axes, the first one being security, our core value. This is to ensure that all of our employees go back home safe after a day of work.
Our second objective is to support our production. This means we need to be capable of producing efficiently and cheaply. We did an important job with all our suppliers of goods and services to ensure that every USD 1 is spent in a useful way.
Moreover, we also improved the availability of our facilities. We had a utilisation rate of 80-83% in 2013. It has increased progressively and today we have reached 90%, so we gained almost 10 percentage points, which is significant in terms of additional production.
The third element to support our production is obviously launching productive investments, such as the drilling campaign in the Torpille field. Regarding exploration, we were the first to drill deep offshore at a depth of more than 1,700 metres with the exploration well in Diaba. We discovered natural gas condensate, but the quantities discovered are not sufficient at this stage to justify further development.
What are the details of the Torpille drilling programme?
For the drilling campaign at Torpille, we will use two infill wells, which allows us to support production and improve the recovery rate from this deposit. We will also have a water injection well to support the pressure of the deposit. The campaign also required an adaptation of our surface installations to be able to manage the new wells we are currently drilling. The well depth is 2,500 metres and the platform is at a water depth of about 40-50 metres.
What is Gabon’s gas potential?
In Diaba, unfortunately, the volumes discovered were not sufficient to claim an economic development today. Apart from this, we have mainly associated gas with oil production. Today, we are using this gas essentially to generate electricity for our operations or enhance the recovery of oil.
Some actors are producing gas from non-associated gasfields used for power generation at Libreville or Port-Gentil. Aside from these dry gasfields, we clearly see that the gas resources of Gabon are modest.
So far, we don’t see significant gas resources to justify either the construction of a pipeline network to bring that gas to consumers, or the liquefaction of this gas. This is why deep offshore exploration is important, as it might enable us to discover new gas resources that could be used to produce LNG or feed the national market.
What kind of services providers does Total Gabon work with?
A number of companies decided to leave Gabon following the 2014 crisis. Obviously, it is something we regret because some companies that were previously located at Port-Gentil are now handling their operations from abroad.
Related to the providers we work with, there are now two types of companies, one being the international actors we all know. Apart from that, we work with local actors that we have helped emerge through our local content policy and that accompany us in our oil activities. Those include companies such as IEG [Impact Environment Gabon], which deals with the incineration of industrial waste for Total Gabon; Sigma, which deals with scuba diving; or Dietsmann, in maintenance.
How does the company support local content development?
When we analyse the offers made to us, we tend to privilege the local company if its has good HSE standards and provides more or less the same quality of service. Beyond that, we have put in place a system to accompany and stimulate the development of local actors. Twice every year, we present local companies our activity programme so they can identify some business opportunities.
Moreover, we conduct training programmes, particularly in regards to HSE, to enable local companies to reach the required standards. We even pre-finance the operations of some companies so they can have the financial security to invest in their development.
We also asked international companies during calls for tender to set up either Gabonisation programmes for their teams, or to accompany us in the training of young Gabonese. As an example, we have put in place with Ponticelli a welding department at the professional training centre of Port-Gentil. About 90-95% of the students that left this institution found a job. It is a good success.
How critical is the 12th bidding round to supporting Gabon’s oil production?
It is necessary to relaunch exploration to find production relays for the country’s production. The previous call for tenders in 2014 did not meet expectations because of the global oil price crisis and the new hydrocarbons code, which ultimately was not attractive enough for oil companies. This code was already tough in an environment of USD 120 per barrel, so obviously, at USD 50-60 per barrel, it could not work anymore.
This tender is absolutely essential to revitalising the industry in Gabon. When we look at our sedimentary basin in Gabon, we can see that over the past 10 years there have not been new developments of more than 50 million barrels of reserves. That shows the issues and challenges we face in terms of exploration in Gabon.
What measures are being taken by the government to drive foreign interest in the bidding round?
Based on various discussions with the oil and gas administration, the new hydrocarbons code should be more attractive and go towards more flexibility, so competition between the actors can fully play while giving some space for negotiation for the blocks that may be less attractive. Moreover, the government has taken a big step by removing the tax on the part of the profit that went to the contractor.
However, we are wondering about the repressive nature of the code. There are a number of articles on the management of operations that we believe need to be improved. We have explained ourselves to our supervisory administration and we hope there will be a consideration of our observations in the field.
Moreover, besides the code, the repatriation of export earnings is another issue that is important to solve to attract bidders. It is important to remember that we are in an industry that works in US dollars. It is important for companies to obtain international financing from shareholders and banks in dollars. These actors want to be certain that the companies will be able to freely manage its revenues to reimburse their loans.
What are Total Gabon’s objectives through 2020?
We are finalising our drilling campaign on Torpille. As for 2020, we will really work to consolidate our operations. We will continue on the maintenance works of our facilities. We will also work on the reliability of our compression network to increase our production potential. This will be one of our main priorities.