Positioned for the upturn

Angola

TOGY talks to Domingos Freitas, country director of Angola for Weatherford, about Weatherford's Angolan operations, the challenges in the market and the prospects for the oil and gas industry in 2017. Weatherford is an oilfield services and equipment supply company headquartered in Switzerland and active in more than 100 countries. In Angola the company employs 297 people, with administrative and operational bases in Luanda and a stocking base in Cabinda.

How has Weatherford adapted to Angola’s difficult macroeconomic reality and a less dynamic oil and gas industry in 2016?
In 2016, Weatherford had to adjust in three different, but complementary, dimensions. First, to the tough market conditions that affected the entire oil and gas industry. Second, we had to readjust our internal structure, mainly in terms of personnel. And third, the company had to become more efficient to reduce costs and understand where to deploy its resources during periods of low activity.
As for the difficult market conditions, low oil prices forced several companies to suspend their activities because operating costs became too high, making their activity no longer financially viable. For example, we had two large contracts that were cut short with those two decisions impacting our internal structure and personnel significantly. However, we were able to transform a difficult situation into an opportunity to improve the company’s efficiency levels and to negotiate agreements with the local unions that benefited the local workforce.
With the number of operations going down, we have readjusted the dimension of our staff by mainly transferring expatriates to other locations where we have managed to get new contracts and where we were in need of qualified workers. At the same time, we decided to increase our efficiency levels by investing in our own local employees through training programmes designed to strengthen their skills. We are currently employing 297 workers and around 83-85% are from Angola, with the remaining 15% being expatriates.

Which projects helped Weatherford steer through this period of reduced activity?
We are highly involved in Chevron’s block 0 and block 14 activities, ensuring that the operator maximises the output of their assets. The operator was the first operator we worked with. Likewise, we are highly involved in the Total Kaombo project where we provide tubular running services, as well as completions and lower completions with expandable screens. This is one of the biggest projects that Total has in its portfolio for the years ahead.
Completing those wells is crucial for their operations in Angola and it is a high-profile project as far as Kaombo is concerned. We have teams of about 20 people per rig, which is the average amount of staff we deploy on our offshore operations out of about 297 total people in Angola. The contract with Total has a duration of three years, with the option of another two. It started in 2015 and will last until at least 2018 with the possibility, depending on the obtained results, of an extension for two more years. For Weatherford, it was very important to have Total’s vote of confidence in our technology and know-how.
We also have a project with ENI, but that contract depends on drilling activity and at the moment ENI is not carrying out any drilling. Another service that we provide to these operators is called fishing, which is more like a type of contingency work. Weatherford is a leader in that kind of service.

What opportunities do you see for Weatherford in Angola’s upcoming onshore projects for 2017 and beyond?
Those onshore blocks were awarded in December 2015, but the contracts with Sonangol still have to be finalised. Once this process is concluded, Weatherford can become a valuable partner for all those companies with our petroleum consulting division that will help them redo the exploration of their land-blocks. Moreover, working on these onshore wells will also be a good opportunity to establish partnerships with the local content companies that will be operating those blocks for the first time.
We can partner with these Angolan companies by transferring our technology and assisting them through the learning curve that they will have to go through, since in the oil industry there is very little room of manoeuvre for errors. At a moment when cooperation between companies is becoming increasingly important, Weatherford can use its international experience brought from onshore operation in North America and the Middle East to support Angolan companies while benefiting from a better integration in the local market and community.

What is the importance of Angola to Weatherford’s global operations?
Weatherford strongly believes in Angola and one of the country’s key strengths is its blessed geography. Angola stands out as one of sub-Sahara’s richest countries in terms of natural resources, particularly oil. The current economic situation might not be the best, but the country’s oil potential is too big to be neglected. That is why we struck a deal with local trade unions to make sure that our personnel remained happy within the company. That is also why we have invested in their training and believe that this is the right time to bring in more technology.
The market will eventually pick up, and when that happens companies that are already well-established in the country will also be the first ones reaping the benefits of growing production and will claim higher market shares than those companies that decided to leave Angola.

How satisfied are you with the communication between the Angolan Central Bank (BNA) and the public and private sectors?
What we have seen with the new management of the Central Bank is they have approached AECIPA to try to understand the needs of the oil industry. This is something we have not seen before and, since giving that input to Central Bank management, some companies have already seen progress in terms of their dealings with the banks and in terms of access to foreign currencies for repatriation.
The other thing we have seen is the operators and Sonangol, and even the Central Bank, are more open to these consortium contracts wherein the scope of work is split and some of the amounts are paid in foreign currency while the rest are paid in Angolan kwanza. This is because the new BNA management see that it is something that needs to happen in this industry in order to keep it alive, and if you keep the industry alive, you keep the country alive as well. It is much better than before, but of course, there is always room for improvement.

How important is Sonangol’s restructuring for the future of Angola’s oil industry and what do you expect from it?
The government and the Central Bank have understood that Sonangol is crucial for the vitality of Angola’s economy. This is why the company’s restructuring has become so important. To begin with, the company has been developing more communication channels with the other market operators in order to improve the transparency of the entire industry. Moreover, alongside reducing its operational costs, Sonangol has to become the true engine of the market, making it attractive to potential companies that are willing to invest in the country, as well as for those who are already established in the market.
The restructuring proving successful, more opportunities will flourish, more contracts will be awarded and more companies will enter the market – large international enterprises, as well as local content companies. However, for all that to happen it will be essential for market players and services companies to have more access to foreign currency so that they can both import the equipment they require and pay their personnel overseas.

Could you tell us about your partnership with universities here?
We have a partnership with Jean Piaget University. We look at year four students to engage them for work experience and training inside the company. When it comes to hiring new engineers, they are the prime pool of engineers we look at. We will have about 60 students coming in from Jean Piaget and other universities as well. The programme will select the best candidates for future Weatherford employees, and those that are selected will be offered opportunities for training within the company.
The training is going to be not only in Angola, but we also plan to send a number to work overseas, in North America or in the Middle East, so they will go for a year or two, work from there, get some experience and then come back. This way, when they return, they will have international experience.

Given the current market conditions, how are you forging your strategy for the next years and what would be your message for the market in 2017?
Crises are cyclical. This current one started in 2014 and it should gradually start to revert its course in 2017, particularly during the second half of the year. The market will start sending more positive signs to investors and hopefully Sonangol’s new administration will simultaneously release the right incentives for new companies to join and for the ones already here to invest more.
2017 will be much better than 2016 and Weatherford is looking to be well-positioned to capitalise on the opportunities. To accomplish that, our strategy will be designed in line with the needs of our clients and to offer the products and services that they want to buy. A number of our services are designed to both increase the efficiency levels of operators and reduce production costs. That is why one of the areas we are focusing on is in regular solution and production enhancement. We are investing heavily in that in Angola because we know that it will become a service that most operators in the country will want to have. Investment in technologies will therefore be essential to address the challenges that 2017 will bring.

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