NABA Summit Summary: Session IV – Oil and gas
West African activity in oil and gas has taken off in the last decade, driven particularly by advances in offshore technology. Angola became the newest member of OPEC in January 2007, and has become one of Africa’s leading producers, threatening to overtake the long-time leading producer, Nigeria. Anadarko/Tullow success in Ghana’s Jubilee field will transform the country’s oil and gas industry. In this session, hosted by INTSOK, companies working on the ground shared their experiences and their outlook on the future developments.Mr. Erik Holm Reiso, representing Rystad Energy, started off this session by giving a macroeconomic outlook on the opportunities in oil in West Africa. Since the financial crisis in 2007 oil prices have dropped radically, but slowly recovered again after 2008. However so the Euro region is not yet on the way out of recession. The results of global demand in oil in Q2-Q3 of 2014 has shown a very weak grow. This trend relates to the growth of consumption in the USA and China.Mr. Holm reported on OPEC findings which show that the production level of oil over 2013-2014 has decreased. The lowest point was reached in Q2 of 2014. The oil market outcast for 2015 show over-supply. Saudi Arabia is trying to cut down production, but they have problems persuading other OPEC countries to take their share in the production cut too. The forecast towards 2020 shows that offshore is still going to be of importance, as well as shale operations.
It is good to go to West Africa for Norwegian suppliers
– Mr. Erik Holm Reiso, Partner at Rystad EnergyIn West Africa he indicated opportunities in oil. These can be found mainly in deep water development for which Angola, Nigeria and Ghana are emerging. The INTSOK webpage provides more info on these new projects (which companies are active and in which areas) Norway is still doing well, the revenue growth in Norway in 2014 is 318 billion, compared to 206 billion worldwide. 
Following on the analysis of international oil and gas prices by Mr. Holm, Mr. Phillip Ihenacho, CEO of Seven Energy, introduced his company with a strong statement, saying that Seven Energy does not need care too much about international oil prices, because they mainly are an gas company. Secondly, they do not really to care about international gas prices, because they sell most of their gas on the national Nigerian market.He continues by telling that the market in Nigeria is quite small in access to electricity (only 48% of population has access to electricity). The main energy supply is by diesel generators, so there is a large import of diesel. If consumers can make a switch from diesel to gas there would be an enormous comparative advantage to the country. Mr. Ihenacho shows that Nigeria has very high gas reserves compared to other countries (Egypt, India, Netherlands and UK). Production however is quite low and consumption in Nigeria is even lower. This means there is a huge potential.
Safely operating in the niger delta is only possible by having long-term partners
– Mr. Phillip Ihenacho, CEO, Seven EnergySeven Energy has assets situated in the north west Niger Delta, south east Niger Delta and the Anambra Basin. Their onshore operations consists of two types of business. Firstly, upstream oil and gas exploration, appraisal, development and production, and secondly midstream gas processing, distribution, sales and marketing. Having good contacts and cooperation with local communities is embedded in their business. Therefore they work with a highly experienced board and senior management team that combine local experience with international oil and gas industry expertise in addition to the companies’ Corporate Social Responsibility policies. 
The Siem Offshore Group is working in the marine field They operate in Nigeria, Ghana, Angola and more. Besides that they are setting up operations in Equatorial Guinea, Mozambique, Tanzania and Congo Brazzaville and Ivory Coast. Worldwide they have a great presence of vessels. Mr. Kristian Siem explains that they built 10 AHTS vessels in Africa, worth 100.000 million dollar investment each. At the same time they are conscious about their role in society, having an obligation towards the local community. Whilst exploring the nation’s’ natural resources they aim to sustainably development a nation via the utilisation of local human and technical resources.
We aim to sustainable development a nation via the utilisation of local human and technical resources, whilst exploring the nation’s natural resources
– Mr. Kristian Siem, Director and Chairman, The Siem Offshore GroupHistory between Ghana and Norway goes back several decades. The early trade in vessels between both countries resulted in Aker Solutions. The Siem Offshore Group started in Ghana in 2009 with iTech awarded for Tullow. The strategy for Ghana is long-term investment based on local content. Currently they have proposed a partnership with GNPC to develop and review a training program and employ the people trained. 
Mr. Åsmund J. Mandal of FMC Technologies Nigeria spoke about the opportunities challenges and risks in project execution in Nigeria. FMC Technologies Nigeria has been around in Nigeria for many years. Being active in African business for a long time you think you can repeat things, said Mr. Mandal, but that is not the case. Even working with local teams business remains a challenge. The core values of integrity, innovation and respect are important when operating in a country like Nigeria. FMC Technologies Nigeria has its largest base in Angola and second largest in Nigeria with a total of 573 Xmas tree installation in Africa altogether. Recently they also got two major contracts assigned by Ghana.
The number 1 criteria for success in Nigeria is mobilizing personnel and adapting early activity plans
- Mr. Åsmund Mandal, Commercial Director for Africa, FMC Technologies Nigeria, Ltd.Key factor to success is careful planning, according to Mr. Mandal. Time is needed to plan, because things move slow. He defined a number of success criteria, such as a.o. the mobilization of personnel, facilities and services, contract review and system and early detailed engineering. He also indicated a number of challenges and risk factors in Nigeria, such as corruption, a new petroleum structure, security, infrastructure, the Nigerian content development bill and the petroleum industry bill. Therefore is risk management a major activity of FMC. Without it there would be many more problems than they currently have.Last but not least, FMC has a strong focus on local content development. Before the Local Content Act of 2010, there was a slow build up of local content due to intermittent projects and a lack of commitment. Today is is an import part of the contract. FMC works on transferring knowledge from expats to local people and has all local PM, System engineering, procurement staff, customer support and assembling of Xmas trees. All the locally employed engineers are locals and are trained in Norway for 6 months.Ms. Koosum Kalyan, board member at Aker Solutions, presented the Aker Solutions strategy for West Africa. Aker Solutions is operating in 18 countries, a.o. Lagos, Ghana, Angola, Tanzania and expanding to Mozambique. The company focuses a lot on local content and improving quality performance of service operations. In Angola they are involved in deep water projects, and they recently got awarded the largest deep water project. This is a stepping stone to win other projects in other parts of Africa, and for each project, build their capacity and experience. On the topic of local content Aker Solutions makes sure that the majority of people working are local people. Aker Solutions tries to reduce the number of expats as much as possible. They train local teachers, provide technical internships, and sponsor egligable Angolans to study in other parts of the world, anticipating large discoveries.While working in West Africa, Ms. Kalyan also indicated some of the challenges Aker Solutions faces, or better said, things which they can do to limit these challenges. Among these are company training, creating easy access to government support, local recruitment and training. It is not only about taking people at the high level but training people within the company.
If you wanna do business in Africa, it is there!
– Ms. Koosum Kalyan, board member, Aker SolutionsAker Solutions assists the government in how to develop customs regulation for the oil and gas sector. The oil sector for that matter takes a lead in exploring this for other sectors. Next to local content they need to make sure that operations are contributing to local communities. That is why they work in Congo Brazzaville and focus on sustainable development in Ghana.Ms. Koosum Kalyan recommended Mozambique as a golden opportunity for everyone. In some of the countries they have a confirmed long-term commitment. To secure this long-term commitment, early positioning is of main importance. Therefore her advice is to meet local partners: as many as you can!Mr. Hans-Petter Hybbestad enlarged upon Statoil’s operations in Angola. Statoil started working in Angola in 2001, and produce up to 225.000 barrels per day of equity production, material deep water position today. The oil sector is of great importance to Angola. Looking at Angola’s GDP oil makes up for 45%, looking at Angola’s exports oil makes of for 95%, and seeing Angola’s government revenue oil makes up for 80%. Angola is today the second largest oil producer in sub-Saharan Africa and have the ambition to pass by the number 1, Nigeria. At the same time 40% of population has no access to electricity. It is a challenge doing business in Angola, the World Bank Group statistics show that Angola ranks 181th out of 189 countries for the ease of doing business. When looking at the statistics for corruption, the country ranks 153rd out of 177.
Believe me: local talent can be found!
– Hans-Petter Hybbestad, Head of Finance and Control, Sub-Saharan Africa, StatoilBecause of these numbers local content and capacity building matters. When the oil industry came to Angola, nothing was there. Statoil has brought techniques to the country and has been able to ground these technologies. Ethics also rank high in Statoil’s business and they apply the same standard to their own company as they do to their partners. They promote integrity and due diligence everywhere they operate. Mr. Hans-Petter Hybbestad explained that for the contracts they entered into in the ‘80s and ‘90 there have been conflicts. Nevertheless they honour these contracts, and have solved the major disputes which arose from this.Mr. Sverre Skogen, Chairman of AGR Energy shared AGM’s experience on their work in Ghana They have build well-management and drilling services and this proved to be a huge success. As an example he told that in 2011 there was a big discovery in Israel, we they were trusted to do the work. Today AGM holds 10 licences in Israel and after we were asked to do the same work in Ghana. We wanted to develop from being a licence partner to be a global operational service provider in operational expertise, drilling, subsurface and training. So far 20.000 people have been trained in GNG.
Our strength is to see challenges as opportunities
– Mr. Sverre Skogen, Chairman of AGR EnergyThey established the AGM Ghana Block, located in the Tano Basin. this is a Joint Licence Ownership. The Petroleum Agreement is effective since Jan 2014. The key to get this contract was to create a joint operating company with GNPC. AGM is the main contributor in the initial phase, then they will transfer Norwegian experience. AGM sees the Petroleum Agreement model as basis for value creation for all stakeholders, working with NOC/local companies by utilizing capabilities, forming joint teams and systems with local content participation, commitment to social community and welfare and creating value for all stakeholders. AGM Petroleum aims at maturing their block in Ghana with ExploreCo/GNPC and the AGM ModelAt the end of the session, Mr. Gulbrand Wangen concluded with the lesson learned today with the following statement “If you decide not to start and fund your company locally in Africa, you better stay home”.The audience came up with a point for discussion after the presentations:
Would lower oil prices per barrel have an effect on the Statoil local content strategy?
Mr. Hans-Petter Hybbestad: the main threat is that there would not be a continuous flow of work. Mr. Åsmund Mandal: there is no doubt that to invest in local workforce is definitely a benefit. An expat in Africa costs about $200-300 per hour. A local trained worker $70 per hour (i.e. Nigeria). If there is no continuous flow of projects, we can not maintain the local workforce, invest and train them. We try to keep project long-term and stable, maybe even on lower level, but continues. Tor Smestad (Aker Solutions): It is a national responsibility to develop oil business, not up to Statoil or AGR.
Summary by Lieke van Nierop