Weathering the storm

Gabon

Lotus Services Group general manager Arnaud Ebe Ongone talks to TOGY about the global economic crisis and how it is affecting consultancy companies in Gabon, as well as variables and impediments to obtain financing in the Gabonese hydrocarbons market. Lotus Services Group Gabon is a tool rental company operating throughout the associated services, supplies and logistics sectors of the energy industry.

How is the current economic crisis affecting Gabon?
The current economic reality is that we have to focus on what is essential. With the crisis in Gabon, we can’t make any predictions past 2017. The crisis has been declared across four sectors: political, economic, financial and social. Until we have clear visibility, we can’t engage in any long-term projects.
We are trying to diversify in 2016. Everyone is trying to manage their contracts in the oil and gas industry until 2017. We can’t look at Gabon only in terms of the economic crisis. Companies were forecasting the price of the barrel at USD 80 or USD 75. Now they’re forecasting USD 40, so they have to change their method of operations and readjust, but they will start up again. The oil crisis is a provisional crisis and we have to maintain costs.
In Gabon, the approaching presidential elections are creating both social and political instability. The combination of these variables is making it so that Gabon won’t be stable again until 2017. I know that deepwater is coming, and while Gabon is not a Gas country, it will become one because it doesn’t have a choice. It’s not a political strategy, but an economic necessity.

What innovative services can Lotus Services Group provide to the development of Gabon’s deepwater plays?
Lotus Services Group is able to provide a system that allows us to communicate between vessels in dynamic positions on the seabed. This could bring in some work for subcontractors in terms of certifications and metering systems. In Houston, they are already using containers with a metering system, but these cost around XAF 100 million (USD 170 000) per unit.

How difficult is it for Gabonese SMEs to finance these types of projects?
Financial organisations are overcautious. No one wants to provide you with USD 2 million or USD 3 millions to start a project. That’s why I have a different strategy. We have to make contracts with the major operators here in Gabon and explain to them the advantage of developing Gabonese SMEs. We have to create a win-win partnership.
Today, if you want to talk about gas production, you’re talking about 50 or 60 years from discovery to commercialisation. When you look at the background costs, if you’re able to create a Gabonese SME within three to four years that is able to supply services, or economise 50% of your costs over 10 years, you’re in a winning situation.

How would you rate Gabon’s culture of entrepreneurship?
It’s important to separate companies into categories if you want to have an objective analysis of the situation, which will allow you to have the essential points of development. The majority of the companies here are sponsored by big people in this country, in a direct or indirect manner. When someone is sponsored, they don’t go out to find financing, either because they are privileged with operators or because the person backing them has sufficient funds to support them completely.
companies that have no support behind them and that really want to be competitive need to find accurate information regarding the way of doing business in Gabon. That’s why Gabonese SME’s need different platforms to be able to exchange information and to be strong together.
It’s true that the entrepreneurial spirit of Gabonese people should be improved, but maybe it is because there aren’t enough platforms of discussion between the banks and the Gabonese SME’s, or maybe there isn’t a real political motivation to promote the SME’s. We need to raise the level of consciousness of the Gabonese population.

Where does Lotus Services Group source its equipment from?
If you go to the port right now in Port-Gentil, you’ll see tonnes of parked equipment. They aren’t being used because the quantity of material wasn’t aligned with the business demand. It doesn’t make sense to buy equipment when there is a slump in oil-related activities and there are no long-term contracts being signed. We must analyze the economy and the actual situation. We get our equipment straight from the subcontractors for our own clients at an agreed price.

What are your long-term and short-term strategies for weathering the global economic crisis?
In the short-term, the strategy is diversification. Gabon imports about 95% of the products it consumes. I think that the food and agriculture industries are important markets to be developed in Gabon.
Globally, I think we have to find key financing methods. There are Gabonese companies that would be able to discuss at an international level and acquire international contracts. However, the biggest problem remains financing, even if you have the abilities. In the long term, I’m trying to find key financing, which passes through financial guarantees.

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