Startup success in AngolaMarch 21, 2018
Guido Brusco, the managing director at Eni Angola, talks to TOGY about the East Hub development and onshore operations, as well as the potential of the Lower Congo Basin and the business climate in the Angolan oil industry. Eni Angola operates Block 15/06, site of the East Hub and West Hub projects, and Block 35/11.
•On Cabinda North: “We believe a lot in the potential of this area. It is a largely unexplored area. It is onshore, cheap and very close to production facilities. If a discovery is made, the time to the production facilities and to market will be pretty quick.”
•On natural gas: “There is a willingness from the industry to open a gas era in Angola. We should not forget that gas has been explored very little in Angola. Oil was explored and gas was just a by product of the oil exploration.”
•On governance: “We ask two things from the government: efficiency and competitiveness. The response of the new leadership was absolutely in line with that the industry was looking for.”
•On low oil prices: “Looking at the industry as a whole, this oil downturn has been different from previous ones, it changed the paradigm of the industry. The one in 2008 was very short and it was limited. Thus, it didn’t oblige the industry to rethink the way it did business. This one was long and painful, and it implied a lot of restructuring in the industry and a lot more thought on how to sanction investment.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Guido Brusco below.
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Can you give us an overview of the highlights of 2017?
It was a fantastic year for Eni Angola. The startup of the East Hub is the first highlight. It was an incredible journey. Even the performance of the vessel in the first months was outstanding. You would not expect a new vessel to have such a high uptime, more than 99%, but that is a demonstration of the high quality. You may think there is a tradeoff between how fast it came to market and the quality, but East Hub showed the opposite. We did it fast, but the quality of the vessel was very high.
The second highlight was the MoU we signed in November in the presence of the Italian prime minister and the new Angolan president; this was a breakthrough for us. It opened up new areas of business, not just the upstream with exploration initiatives, but also the midstream, downstream, gas and renewables. This was really a very key event that will pave the road of the future for the next 10-15 years of our presence in Angola.
The Cabinda North operatorship and increase of share was another highlight. We believe a lot in the potential of this area. It is a largely unexplored area. It is onshore, cheap and very close to production facilities. If a discovery is made, the time to the production facilities and to market will be pretty quick. In the current context, we are very sensitive to the cashflow and the return, so this is a big plus.
We have evidence that oil is there somewhere, so we have taken a commitment to drill four wells. The probability to find oil may be high. The issue is not just to find the oil, but to make it commercially viable. This is a different issue. We will see pretty soon. We are thinking to drill the first well very soon, maybe this year. It largely depends on the weather in the rainy season. In Cabinda, they get very heavy rains so there is only a narrow window to drill a well. If it not this year, it will be early 2019.
Are you now at full production of the FPSO East Hub?
We are at full production. Actually, we have largely beaten expectations. The expectation was to produce 55,000 barrels per day, and we are currently producing 75,000 barrels per day. The project has been successful in every element – it was ahead of schedule, the uptime is fantastic, the reservoirs were better than expectations and the ramp-up was smooth. The last well was connected in the summer of 2017, and we achieved and are maintaining that level.
Actually, we have plans and we have already approved a project to tie in another satellite field that will be brought into production this year to help us maintain production. This field is called UM8 – Upper Miocene 8 – which is a layer of this reservoir.
The good thing about this satellite is that it is heavy oil with an API of 24-25 degrees. This is also opening potential to exploit some pockets of heavy oil that have already been discovered. Apart from the objective of maintaining production, it will be an interesting pilot test for the heavy oil offshore Angola.
Another important feature of this field is that having the facilities and infrastructure already there, the marginal unit development cost is very low. Probably it’s one of the lowest in our portfolio in Angola.
What is the scope of the contract you have signed with Saipem in the West Hub to bring two more fields on line?
They are bringing two more fields on line and we are planning startup for one of them, Ochigufu, at the end of Q1 2018 [output began March 16] and the second, Vandumbu, in Q1 2019. Those will contribute about 45,000 barrels. This production will go to the West Hub and tied into N’Goma FPSO; it will contribute to maintaining the plateau. Those are the three fields that will be connected to the two facilities between Q1 2018 and Q1 2019.
Plus we have another project that will be delivered this year, SBMS, or subsea boosting multi-pump system, which is basically a big submersible pump that will reduce the back pressure to the subsea network. This will enhance not only the production, but also the volumes of reserves that we can recover, giving more stability to the subsea network, which has become pretty sizeable now at 120 kilometres.
Can you outline the scope of work that you plan to undertake with Sonangol through your MoU?
The commitment we have is to support the country to mitigate the shortage of some refined products, especially petrol. We are collaborating in Luanda to increase the reliability of the refinery and increase the production of petrol through technical support. We have very ambitious objectives to increase the refinery production of Luanda and of course we are helping and supporting Sonangol in their decision to trigger investment for a new refinery.
We have a team of very senior technicians and professionals here who are working shoulder to shoulder with Sonangol staff and in the refineries. We are doing some assessments on some facilities to find the bottlenecks and we hope for the current level of production to increase by several times.
I anticipate that there is a potential for renewables here. Renewables are the future, even for an oil and gas rich country. This energy transition journey needs to be planned. We would like to be part of this plan in Angola. It will happen. We hope it will happen soon, but it is inevitable; it’s just a matter of time.
Are you confident in further gas exploration and production in 2018?
I am not sure that exploration for gas will be made in 2018, but I am confident that it will be made in the following years. There is a willingness from the industry to open a gas era in Angola. We should not forget that gas has been explored very little in Angola. Oil was explored and gas was just a by product of the oil exploration.
The second consideration is that there is a strong commitment from the government to boost gas production. Gas is a cleaner and cheaper hydrocarbon and it will help the country in its energy transition journey from oil to renewables. Gas is the bridge of this journey. Eni has great expertise; we are well known as being one of the largest gas producer in Africa.
We also supply gas for the domestic markets and of course, we are interested to export our gas vision to Angola, as we did in Egypt, Libya, Nigeria and [Republic of] Congo. Before the end of this year, we will have gas delivered to the local grid through one of our projects in Ghana. We want Angola to be on this list, too.
Is Eni interested in Block 1?
We are very much interested in all the Lower Congo Basin, and I wouldn’t single out any block. Eni was one the first operators of Block 1 in the 1980s. Currently, we are de-commissioning and permanently abandoning the last well that was producing in that block. We have a pretty good knowledge of Block 1.
Is Eni more optimistic about the oil prices?
I think this last oil downturn was very helpful for our company to strengthen the discipline on cost. I don’t think that the increase of the oil price will change this; the way we do business now has become about cost discipline. Cost reduction is strategic for Eni. Enough has been said about that. Eni has demonstrated that it can develop fields with a very competitive time to market. Last year we had a number of startups as a company, not only in Angola, that were very successful and always on schedule or ahead of schedule, and our cost structure is very competitive.
Looking at the industry as a whole, this oil downturn has been different from previous ones, it changed the paradigm of the industry. The one in 2008 was very short and it was limited. Thus, it didn’t oblige the industry to rethink the way it did business. This one was long and painful, and it implied a lot of restructuring in the industry and a lot more thought on how to sanction investment. We became more selective. We are no longer driven simply by volume and schedule, but we are very much driven by value. We look very carefully at the break-even cost of our barrels. Things changed and I am sure we will not go back to bad habits.
Eni met with the new president to discuss the future of the industry in Angola. What are your opinions on how to move the industry forward?
We ask two things from the government: efficiency and competitiveness. The response of the new leadership was absolutely in line with that the industry was looking for. The president established, in a matter of days, a committee to address these two issues. Soon this effort will bring competitiveness and efficiency into the system and will make Angola an attractive oil and gas opportunity for investors.
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