TOGY talks to
Step by stepFebruary 1, 2018
Alberto Mendes, president of Grupo Simples, talks to TOGY about the need for infrastructure development, the importance of a government gas policy and the Angolan market. In December 2015, Simples Oil & Gas was awarded a 30% stake in block KON 6. However, in May 2017, Sonangol announced the cancellation of the onshore bid round, citing the change in market conditions since the round was launched in 2014.
On development: “The issue of infrastructure is not built or solved on a big-bang basis, it is gradual. You attack a basin, promote the local companies and the success will overflow into other basins. Before we open another front in the Namibe Basin, both the Congo and Kwanza basins need to be brought on line.”
On gas monetisation: “For small operations, the difference between making it or not depends on exploiting whatever you find in the land. As a small company, we do not have the luxury to not do anything if oil is not found.”
On the business climate: “We are still in a bubble. Prices have come down, but until we have correction mechanisms that will correct and strengthen the fundamentals, growth will be limited, or it will take a long time to get that correction.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Alberto Mendes below.
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Would a bid round in the Namibe Basin interest Simples Oil & Gas?
We always agree on the initiatives to develop the oil industry in the country. We agree with those that put Angolan companies in a good position to participate, but we are gradualists. We do not have infrastructure. The issue of infrastructure is not built or solved on a big-bang basis, it is gradual. You attack a basin, promote the local companies and the success will overflow into other basins. Before we open another front in the Namibe Basin, both the Congo and Kwanza basins need to be brought on line. We think that this needs to be done and put into perspective, but if it is not gradual, we are setting ourselves up for failure.
Does the law need to change to allow gas monetisation?
We would like that to be reviewed. For small operations, the difference between making it or not depends on exploiting whatever you find in the land. As a small company, we do not have the luxury to not do anything if oil is not found. Whatever happens, we need investment to be capitalised. Smaller explorers could own the gas even if they are looking for oil. It would help to create infrastructure for more integrated energy solutions for Angola. It would spur more integrated solutions and multi-source solutions for energy consumption in the country.
Has Angola been living in a bubble fuelled by the oil industry that burst?
It was and it will live in that for some time. Correction mechanisms are very scarce. Companies do not go bankrupt in Angola, they appear and disappear if there is work. Our legislation is still ancient regarding correction mechanisms. There have to be free-market principles, which are often not embedded in our laws. Some adjustments need to be made for cyclical correction mechanisms to work in order to bring both a stronger recovery and growth after the present downturn. We are still in a bubble. Prices have come down, but until we have correction mechanisms that will correct and strengthen the fundamentals, growth will be limited, or it will take a long time to get that correction.
What is your outlook for Grupo Simples in the coming years?
We expanded for some years during the great growth period. We had a big growth period, and we have been consolidating as we shrank over the past two years. We are looking forward for another growth cycle beyond the oil industry. Our consolidation of expertise and technologies will reach out and focus on technological partners, which will allow us to go to explore the same technologies outside of the oil industry for instance, inspection, scaffolding, cranes, operations etc. We will work with certified companies as technological partners, so our refocusing will allow us to have broader growth and a presence throughout the market, in oil and gas and elsewhere. This will allow us to start growing again because we do not know how the economic activity will behave. It also depends on the stimuli that the government will give. We are positive, but it takes more than that to allow companies to grow.
What have been your activities and highlights in 2017?
When we went to the States, it was partially to allocate resources that we had already compiled in the Angola campaign which has been cancelled. We started going into the US, in the east Texas region, while preparing for the campaign here. We paid attention to Angola. We hired people to work in the blocks we were awarded, such as geologists and petroleum engineers, not just to prepare the bid but to develop the awarded field.
We did not have assets in the US while the bid was prepared. We were participating as investors on other companies’ assets. Our position changed when things were cancelled. We changed the paradigm and decided to buy our own assets and operate. Personnel was hired in Angola to perform US operations. Two rigs were bought in from Colombia to perform the workovers.
What activities is Grupo Simples currently engaged in?
We have changed our focus so that the company survives. We trimmed down the segments of the company and redefined them into 12 segments, and we do not work outside of that. We had 14-16 segments before the climb down, and we are doing the bare minimum with the synergies we have in-house. We have cut most excesses we had to cut and resources that did not complement each other.
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