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Interview

Juan Klimowitz Picola and Enrique Hernandez – Managing Partners, Gessal, Spain

02.06.2017 / Energyboardroom

Juan Klimowitz Picola and Enrique Hernandez, managing partners at Gessal, share the three-decade history of the company as well as the evolution in their service offerings. They also share their expert views on some of the biggest challenges and opportunities that the Spanish energy industry is facing, and how the expertise of Gessal will play a crucial role in the development of the sector.

As an introduction for our international readers, could you provide us with an overview of Gessal since the company’s founding in 1986 as well as the current footprint of your operations?

“There really are no other local Spanish companies that can offer the services that we provide, and we really are the go-to player for any new company looking to enter the market.”

Here at Gessal, our focus is on exploration and geological services, and our activities are primarily divided into three different areas. The first is exploration and everything related to seismic services, and this is not limited to the oil sector, but also to mining and other geological projects. Secondly, we have our drilling services, where we boast high levels of expertise in the supervision of drilling activities both onshore and offshore, and last but not least, we do offer some engineering services primarily through joint ventures with other companies on specific projects.

In which particular services and geographies are you seeing the most demand at the moment?

We work mainly in Spain; however, we have been active abroad as well, with projects in Algeria, Iran, Pakistan and other countries. For example, our drilling team has been working in Algeria for more than 13 years, and these services were a bit more complicated as we needed to form a joint venture with an Algerian company. Currently our drilling team is working on an offshore platform in Casablanca (Valencia Gulf).

Spain has one of the lowest levels of deep surface research in the European Union, why do you believe that is?

This is really due to the fact that the administration is not strictly following the regulations, which leads to a degree of uncertainty. In the last decade, it was easier to follow the laws and regulations, however, now the process takes too long in terms of publishing the applications of new permits for new activity. We have seen this process takes more than two years to have a final solution and receive all of the permits that your activity requires! Because of this, most of the companies in the last 10 years made the decision of not starting projects in Spain anymore.

What do you believe are the main factors contributing to the fact that this process takes so long?

Everything throughout the process is difficult as everything is now linked to the Ministry of Environment. In the past, the regulations were easier and the process was much simpler in terms of both applying and publishing. Nowadays, first you must request the Ministry to check if there have been new changes in the regulations and receive the final approval of the permits, and then you have to deal with the local administrations, which have their own regulations on some issues. Whereas 10 or 15 years ago, only the central administration was active in the application for new permits, now the local administrations also have to approve them. What this makes clear is that there is a lack of a streamlined process as you have to deal with many different actors in the administration. Many of the challenges stem from these situations. These problems, in my opinion, are not really a question of expertise, but rather the lack of having a clear vision from the Ministry on how to solve this problem.

Given this challenge, how are you adapting your business to still succeed, and how are you conveying the realities of the industry in Spain to your clients?

It is very hard to cope with these issues. When we begin working with new clients, we have to share with them all of the challenges, and in most cases, at the beginning, they do not think that is possible. It is remarkable to them that there might be so many roadblocks in a European country. With some customers, it has occurred that although they had started the application process, eventually they had to abandon it before they even got published because it had taken too long.

To address these issues, we have worked to diversify our service offerings and we have ramped up our activities in other areas, such as mining exploration. Additionally, we are using oil exploration information, in terms of seismic data, to improve some of our mining exploration projects.

In recent years Gessal contributed to a report stating that Spain has nearly 70-years’ worth of hydrocarbon reserves. Can you expand further on this, as well as what you see as being some of the key advantages that Spain has to offer?

Our evaluations that contributed to this study were based on our extensive experience working here in Spain. Spain has a very low rate of drilling per square meter. For example, we participated in one of the last discoveries in Spain and that was back in 2010. This discovery confirms that we need more wells in order to confirm the oil and gas estimates, as this area has not been well studied, particularly in terms of structure. There is a lot of work to do in Spain, and there are a lot of opportunities, especially for smaller companies to take advantage of the country.

Are there any areas that you believe are most prospective in the country, and how technically challenging will it be to pursue these opportunities?

There are many areas that are interesting, both onshore and offshore as well as conventional and unconventional, there are truly many areas that are unexplored. If you see a graph of the evolution of the discoveries in Spain, in the 1970s and 1980s, more than 40 wells were drilled per year, and the main discovery of oil was in the 1980s. However, over the last 30 years we have seen the rate of well drilling fall dramatically. For example, over the course of the last five years no more than one well was drilled per year. If we increase the drilling in the country, this will also increase the growing possibilities within the oil and gas sector in the country.

Drilling within Spain really does represent a high level of complexity, especially because it is effected by very many different stages of compression. This means the barriers to entry that we are seeing are not simply around regulations, but also relating to the technical difficulties that will be faced. In the offshore area, based on new seismic information, it may be less difficult as we have discovered very flat domain.

Given the extensive history of Gessal in Spain, as well as your impressive base of clients, how would you describe the competitive environment in Spain?

We do not have any competitors in Spain. All of our technical expertise has been developed since the beginnings of operation, and during that time we have also developed very close relationships with our extensive client base. There really are no other local Spanish companies that can offer the services that we provide, and we really are the go-to player for any new company looking to enter the market.

We have worked for more than 15 years with the government as well, and we have offered them help in their management of the hydrocarbon exploration industry.

What are the main qualities that Gessal brings to the table to attract these clients?

Our knowledge and expertise in geology in Spain is what makes us stand out and this is what brings customers to work with us. We have extensive knowledge, and are able to focus on the issues in many different areas, helping our customers to understand how to best operate.

We help them define the geological solutions to areas that are not very well known, and not well interpreted. Our strength and depth of knowledge is embedded within our professional team, processes and technologies.

Do you have any final message or piece of advice to our international audience who may be considering entering the Spanish market?

My message would be that you need to be patient, as we are still working to have a more efficient regulation stream, which will allow for things to move along more smoothly. The government needs to see the necessity in this, and I hope they will in the coming years!

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