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Interview

Smail Bouderba – CEO, GE Oil & Gas Algeria

21.07.2015 / Energyboardroom

The CEO of the oil and gas unit of GE Algeria shares the history of the company in Algeria, its partnerships, as well as the investment environment in the country and how the company has adapted to it.

Can you introduce yourself and present the activities of GE Oil & Gas in Algeria?

I have been working in the oil sector for some time now. Until recently, I was the regional manager in North Africa for Algesco, a maintenance center in turbo-machinery, located in Boufarik, which was born of a partnership between GE Oil & Gas, Sonatrach and Sonelgaz. The CEO position in Algeria then opened up, which shows the strategic commitment of GE Oil & Gas to this country.

GE Oil & Gas in Algeria operates in continuity with the group’s strategic choices of the last 40 years: development of local capacities to the best applicable standards. For this, we get in tune with all our customers, their development and investment targets, both in terms of equipment and service.

Originally, GE’s oil and gas branch was not part of its traditional portfolio. This division was created in the mid-90s, when the group acquired the Italian company Nuevo Pignone. Since then, growth has been very important, both organically and externally, which led our division to its current position as a global market leader in turbo-machinery. We used to be around 5,000 people in this division in the 2000s, and we are now 45,000 employees, including 7,000 engineers. Our portfolio spans the entire value chain, from upstream refining to transportation, petrochemicals and LNG liquefaction. Our business is growing constantly.

GE Oil & Gas shares the vision of the group as a whole: we introduce innovation in all our sectors, and particularly in the oil and gas. We use our experience and expertise to optimize our customers’ production tools, through internet technologies and industrial network for instance.

Our partnership strategy has been playing an increasingly important role over time: we are not only an industrial group in a place of leadership, but we also have a very strong ambition, inspired by our CEO Jeff Immelt, to maintain a particularly strong network of partners.

GE Oil & Gas’s portfolio has evolved dramatically over the last five or six years, in turbo-machinery but also regarding many other products: wellheads, christmas trees, electrical submersible pumps, and other equipment oriented on petrochemical and unconventional production for instance. This portfolio extension was much appreciated by our clients, including Sonatrach, and they follow this development with enthusiasm.

What is the importance of Algeria for GE Oil & Gas and GE as a whole? What kind of partnerships do you want to put in place in the country?

Historically, GE has been in Algeria for over 40 years, more precisely since the group equipped Hassi Messaoud and Hassi R’Mel facilities. When GE acquired Nuevo Pignone, the will to create a partnership in Algeria immediately emerged: thus, in 1993, a maintenance and service company was born, for the equipment already installed in the country, from a partnership between GE Oil & Gas, Sonatrach and Sonelgaz. There was a significant equipment fleet that needed support from this company.

In 2010, the workshop moved from Hassi R’Mel to Boufarik, into much larger facilities, from then on forming the new center of excellence: it is GE Oil & Gas’s largest such center in the world, specialized in maintenance and servicing of our equipment. The new center was inaugurated by Youcef Yousfi, Algeria’s minister of energy, in November 2010. The new workshop covers nearly 18,000m2 and represents about USD 36 million in investment. It was designed to provide maintenance and servicing on the equipment installed, but also to support and accompany the development of Sonatrach and Sonelgaz, among others.

Today, we are more than 230 employees in the Algerian subsidiary, up from 110 in 2006. Our center is not only dedicated to Algeria, but also to all of North Africa. This way, we support these countries, and Algeria in the first place, in their efforts to achieve their goals in terms of hydrocarbon production. The center’s capacity is designed to all operators in the sector, Sonatrach and its partners, to maintain all their equipment such as gas and steam turbines, compressors, turbo expanders. The center is equipped with the latest repair technologies used in GE centers worldwide.

The center also provides training within its dedicated training center. Several training sessions were organized to train our employees: over 6,000 hours of in-house training were thus provided, 500 days of on-site training, and more than 3,000 hours of skills training, which enabled us to improve our mastery of techniques and GE certification standards. Last, it is also a training center for our partners and clients: we train between 200 and 250 engineers per year, through structured training programs with trainee assessments.

In Algeria, we intend to sustain this momentum and develop additional activities within GE Oil & Gas, apart from turbo-machinery: this will allow our partners to benefit from the same service level which is characteristic of GE, but in different areas of our portfolio. Our action falls directly in the government’s objectives, including the minister of energy, to revitalize industries in Algeria through investment partnerships: as for GE Oil & Gas, this is a strong action that will of course focus on the energy and hydrocarbon sector.

We are looking into the feasibility, on the basis of the agreement signed with Sonatrach on January 29th, of a joint venture of mutual interest. We are in the process of identifying possible areas of cooperation to be able, together, to create jobs and develop everything related to manufacturing, associated services, and also innovative technology investment in the oil sector.

Minister Yousef Yousfi and the president of Sonatrach, Mr Sahnoun, both insist, during their interviews, on the need to improve operational productivity. Hassi Messaoud has a 27 percent recovery rate, as compared to 50 percent at certain Norwegian plays, for instance. What are the solutions offered by GE Oil & Gas regarding this issue?

EOR is a complex issue, for there is no applicable standard. It depends on reservoir features, on production profiles and also on production management implemented over several decades.

Yet, recovery rates are a concern to all producers because they allow to assess the real value of the investment to make. In Algeria most reservoirs are eruptive ones, which produce “naturally”.

Sonatrach, from its beginnings in hydrocarbon production, used several means of production and recovery to improve final recovery. Nowadays, there exist very efficient recovery technologies, which of course have significant production and exportation costs. Given the features of Sonatrach’s Algerian reservoirs, these technologies should produce great results. However, Sonatrach has not felt necessary to implement them so far, for these reservoirs have excellent dynamic to date.

These technologies, whether submersible pumps, reinjection solutions – by means of a mixture of lift gas with water – or scanning, and so on, are solutions that Sonatrach has considered previously. At mature reservoirs, these techniques should be implemented very soon.

This domain of portfolio and services was not part of GE Oil and Gas’s offer until recent years. It is now the case, and we can now provide these solutions to our partners. This market is quite topical for us, and we already tender for contracts for this type of equipment.

In 2013, you entered into a partnership with Sonelgaz for the production of 29 gas turbines. Can you shed some light on this project and its developments?

GE Power & Water won this tender. Sonelgaz intends to increase the investment to develop its power generation capacities. In the vision of Mr Bouterfa, president of Sonelgaz, this tender, together with other fast track projects, aims to provide the country with over 10 GW of extra capacity in electric power generation.

Before these tenders, which date from 2012 and 2013, Algerian facilities would total 13 GW of production potential, which means that this effort will almost double the capacity.

The partnership also aims to provide Algeria with the capacity to manufacture and implement equipment in power plants, which Algeria shall then be able to build and operate by itself thanks to a fully integrated national expertise. It is in this perspective that our contract was signed in September 2013.

Then, in March 2014, another partnership between GE and Sonelgaz was signed for the creation of a joint-venture, GE Algeria-Turbine (GEAT), and which will allow to manufacture in Algeria gas turbines, steam turbines, generators and power control boxes. This investment in this plant will amount to approximately USD 200 million, and will create a thousand direct and indirect jobs in the region of its establishment, in Aïn Yaghout, in the Wilaya of Batna.

The project is underway and the first “Made in Algeria” production is expected for late 2017. Eventually, it will meet the needs in terms of production. The turbine thus produced will meet GE standards.

GE’s policy is to implement the same production standards in each of its factories, whichever the country. How do you manage to get the production in Algeria in line with these international requirements?

This is relatively easily accessible in Algeria, for there are excellent universities, with which we have signed a number of agreements, with Bab Ezzouar University or Polytechnic for instance. In recent years, we adopted this business culture that consists in relocating our European and American production centers, which is why we invested a lot, for example in Brazil, India, China or even Russia, in very strong production tools.

Furthermore, we noticed the emergence of countries such as Saudi Arabia, Algeria, Angola and Vietnam, where the human resources are very capable, where political will aims to create employment and facilitate truly win-win partnerships. This is the reason why for GE, establishing plants to international standards in all these countries and especially in Algeria does not present any real difficulty. Of course, it is still a challenge, but GE is experienced in Algeria and knows the country very well. As a consequence and thanks to our existing partnerships, we choose to keep investing and growing here.

While GE is heavily investing in the country, other companies are more timid, vis-à-vis the 51/49 for instance. What is your perception of the investment environment in Algeria?

Surely this is not the optimal configuration. A number of other countries actually have more favorable tax regimes, easier investment procedures and more suited banking systems. However, it does not imply at all that companies can find win-win partnerships as easily as they can happen here.

The configuration in Algeria also makes it that investments are predominantly sustained over time, as in the case of GE: we have been present for over 40 years, we have invested, and will continue to do so. We are confident that we will still be in Algeria in the future. With such a long-term vision, all the possible constraints, be they administrative, financial, and fiscal, eventually turn out to be easily manageable in the context of a win-win partnership.

The market exists and we are committed to this, so we always find a solution, even when administrative challenges occur, without problem.

The 51/49 provision is relatively recent, and not an obstacle in itself. It is possible to find an agreement which entrusts the most competent part with management, even if beneficial ownership goes to Algeria.

I believe that the 51/49 is not the biggest challenge, unlike the choice of a partner. Regarding General Electric, this is one key point: we know our partners of old, we have built success stories together. For new players on the contrary, this is indeed a major challenge.

The goal of GE Oil & Gas is genuinely to develop, as much as possible, the collaboration with our partners, including staying in tune with Sonatrach’s investment and growth strategy in their quest to maintain and increase hydrocarbon production.

We intend to diversify and invest in the areas where our partners, such as Sonatrach and the multinationals, want us to engage in.

Today, thanks to our efforts in R&D, our competitive advantage also lies in the crossing between our various advanced technologies: for example, the imaging technology used by GE Healthcare is also used in GE Oil & Gas products. This translates into faster growth with higher margins, allowing GE to be more competitive through this sharing between the various entities of the group, in advanced technologies, software, GE solutions and tools. GE’s strategy in Algeria develops in a long term partnership policy. We are committed to achieving development goals as set by the government, through our advanced technology, investment and partnerships.

Click here to read more articles and interviews from Algeria, and to download the latest free oil and gas report on the country.

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