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Interview

with Chris McCarty, Sales Director Sub-Sahara Africa, Baker Hughes Sub-Saharan Africa

23.02.2012 / Energyboardroom

You have been appointed the sales director for the Sub-Sahara region in May 2009, which coincided with Baker Hughes’ complete reorganization with a refocus on regions rather than product lines. How has this renewed structure enhanced the company’s position to do business in this part of the world?

The shift in the organization to a geographic focus has created greater alignment with our customers and opportunities within Sub-Sahara Africa. Formerly, a lot of the support and management decisions were coming out of Europe and Aberdeen, in particular. The reorganization shifted the decision-making, the control and the technical expertise into Africa. This did not happen overnight. We continue to move more and more people into the African countries. We also are hiring, recruiting and developing a lot of people within Africa. While more of the decision making now takes place here, the shift also brought our technology a lot closer to the field, whether it is here in South Africa or Angola, Uganda, Ghana, Equatorial Guinea, Congo, Gabon, etc.

You say it has been a progressive story. Are there still parts of this process that need to be completed?

The process is ongoing. We continue to attract more technical expertise in Africa, which is one of the key areas we need to work on. Technical expertise is an asset within the organization that is built over a long period and includes training courses, as well as hands-on experience and coaching.

We have recruited some very talented people in Africa, and also have brought into Southern Africa a lot of outside expertise. The build-up of technical skills is the part of the transition that will continue during the coming years.

You just took on the new role and had to guide the company into this new organizational structure in Africa. How did you set your own priorities back then?

The biggest challenge, at first, was to get a broader knowledge of the different product lines, as well as the informal links and contacts.
Once I understood the bigger picture, I focused on understanding the different African countries, their markets and their challenges.

Can you provide our readers with an idea of the significance of the Sub-Sahara operations compared to Baker Hughes’ other geographical regions?

The Sub-Sahara region of Baker Hughes is extremely important to the Africa Region and Baker Hughes as a whole. We are experiencing a high growth rate and see plenty of future growth opportunities.

While we now have operations in roughly 12 countries in the region, Sub-Sahara Africa comprises over 20 different countries. These numbers change every month, but approximately 18 of those countries have either exploration work going on at the moment or planned for the near future. From an exploration perspective, this is a very busy area.

When we speak about Sub-Sahara, we typically speak of a number of core nations, including Nigeria, Angola, Equatorial Guinea, Congo and Gabon. Today, we have a lot of up-and-coming countries, such as Ghana and Ivory Coast on the West Coast. Others that we see as countries on the rise are: Mozambique, Tanzania and Uganda on the East Coast. Additionally, South-African based PetroSA has a program planned for this year. In addition to that, there also is significant potential for shale gas, although such developments will require further political decision-making from the country at-large.

The rig count is a good indicator of the oilfield services (OFS) market. Within Africa, an increase of 5% was expected. The numbers from December 2011 compared to the year before remained unchanged however. How do you explain this disparity? Is the boom still expected to come?

I think the boom is already coming, but what you see in Sub-Sahara Africa is significant movement of rigs from country to country. Looking at the numbers of one particular month is only a snapshot, as rigs can easily move from Ivory Coast to Ghana, from Cameroon to Nigeria, and so on. These are figures I follow closely, as well. To run this business, you need to be aware where the different rigs are moving to and from.
Furthermore, there also are issues with rigs that have become idle due to political reasons. While quite a few projects had been planned for 2011 in Ivory Coast, they went quiet until Q4 and the real heavy work there is not starting until this year. Uganda was in a similar situation, where rigs went in that are now idle awaiting finalization of contractual discussions between the oil companies and the Government. It is, therefore, important to study whether the rig is actively drilling oil and gas, whether it is moving between countries, or whether it is idle because of other reasons.

Generally speaking, how would you identify the key challenges of setting up your sales strategy here compared to your previous position where you covered a region ranging from the UK to Kazakhstan?

One of the largest challenges is the logistics challenge. Getting equipment into Sub-Sahara Africa, getting it cleared through customs and -depending on where the drilling location is situated – physically getting it by truck on a road to remote drilling locations.

Together with that comes the challenge of equipment utilization. In the USA, your equipment goes out onto a rig, you drill a well and 24 hours later the equipment sits on another rig. Whether it is two miles or 200 miles away, the equipment will be there. If we talk about moving equipment across borders in Sub-Sahara Africa, you are often looking at two months.

The challenge of logistics and utilization of expensive assets in turn affects pricing and profitability.

You can obviously not improve the infrastructure on your own. Can you take particular measures to cope with this challenge?

The measures that we can take are largely strategic. You need to focus on the particular country and customer. From a country perspective, you can look for efficiencies to use particular equipment for other projects within that country or within closely-tied countries. This is something that also can be looked at from an operators’ perspective. A lot of the operators work in many different countries, which may create the possibility of using particular equipment on multiple locations.

As activity develops Baker Hughes can invest in expanded facilities to support that activity, which in turn can assist the development of local infrastructure and local suppliers.

In a 2009 interview with Focus Reports, Baker Hughes’ country manager for Norway Zvonimir Djerfi opinionated that logistically extreme and challenging projects are in fact a great way to showcase the capabilities of the company. In that sense, do you envision particular projects in Sub-Sahara Africa that could demonstrate such capabilities?

We have mobilized a fair bit of equipment into Uganda and Senegal in preparation of a number of projects. In most of these cases, it is a partnership between us as a service provider and the operator. It is very important for the parties to work together, prepare the documents, contracts, and so on.

While we have already taken on a number of challenging jobs, it is worth noting that this has been a matter of Baker Hughes recognizing the challenges and then working together with the operator and their logistics teams to overcome these challenges. It is always a partnership that works best.

At an international level, the national oil companies are considerably important for Baker Hughes. In Brazil, for example, the company nurtures strong relations with Petrobras. How important are such NOCs for you in Sub-Sahara Africa?

The NOCs are very important. What is interesting about Africa is that they can have different roles depending on the country. In Angola, Sonangol is heavily involved and a big decision maker. It is important to have good communication and technical dialog with them. In Congo or Gabon, the NOCs act more as Ministries, looking at the regulations and laws and examining what we need to comply with. GNPC in Ghana is a very interesting case with whom our local country staff has regular contact. This is a new frontier, where the oil industry is relatively young. They are looking at the regulations to study what needs to change for the benefit of the Ghanaian people and what is needed to accelerate the oil and gas development in the country. They want to learn from other African countries experience and do the best they can to promote their country.

Baker Hughes is renowned for bringing in the latest technologies to the market. We can question whether some of the younger markets are ready for some of these latest developments. How do you take this into account during the preparation phase?

There is a tremendous need for new technologies in Sub-Sahara Africa, especially when you look at the expected boom in deepwater activity. It really comes down to the client or the operator and what their particular need is in the field that will drive these technologies. Undoubtedly, taking formation evaluation equipment, as an example, we consider this as one of the leading innovations in the past five years. It is going to continue to be important with the current deepwater finds in Africa. Fluid sampling and pressure testing, sonic logs, etc. are some of the technologies that are important in African deepwater projects.

To better service its clients, Baker Hughes has put in place a Critical Operations Team. Can you inform our readers on the role and methodology of this team?

This is something that is quite different from operating in Africa compared to anywhere else in the world. Quite frequently, there are multiple points of contact. For example, an operator that is drilling in Angola may have a development support team that is sitting in Europe or Houston. At the same time, we have our own local operations staff and technical people in Angola, but we also have our technical experts looking at the data who sit in Europe or the USA. Internally, we have systems where we can share conversations that occur between a Baker Hughes person in Angola with clients in Cape Town, Stavanger and London. There is a lot of information available in real time that allows the opportunity to have multiple experts discussing and advising the local operations team. From our perspective, it is an interesting challenge to keep all these communication flows going, while keeping all the interested parties involved. The system has even led to the emergence of real-time business communities, for example of geoscientists.

In several African countries, local content continues to play an important role. This requires many companies to develop people at a local level. Is this a challenge?

It is about knowing where to recruit and knowing how to develop and train human capital. There are a number of particular challenges within Africa when it comes to training. Obtaining visas to access international training is one example. Yet, we have worked through these challenges and are now looking at significant opportunities. As a result, we are actively recruiting new graduates in Sub-Sahara Africa every year. In the first three years, we ensure that they receive intense training to enhance their personal development.

Since 2008, an education center has also been set up in Dubai. How has this initiative taken off?

The Dubai education center is great for Africa, due to its proximity. It is generally easier and faster to get our people into Dubai compared to Houston. Dubai has been a tremendous location for us and the center has provided us a lot more means to develop and train our people.
In addition to having all the equipment and training materials, we also have real test wells where we can practice actual well site operations.

When speaking to Warwick Blyth of the South African Oil and Gas Alliance (SAOGA), he also pointed to the potential of South Africa to becoming a training hub for the region. Do you agree with this potential, and if so, is this something Baker Hughes will be able to tap into?

It certainly is and we are already in discussion on such initiative. We already host a number of pilot programs around the so-called soft skills, such as language training, advanced computer systems skills training, geosciences training, etc. We are already tapping into this potential to some extent.

To wrap up, you already mentioned how you had to learn about the different African markets when you first arrived in this position. What ambitions do you now have for Baker Hughes’ Sub-Sahara operations?

We have come a long way in a relatively short time since we reorganized in 2009.

There is significant potential for growth in Sub Sahara Africa for the Oil and Gas business. In the past two years, we have significantly invested in infrastructure in Angola, Congo, Ghana, Equatorial Guinea, Uganda, Nigeria, as well as Gabon. We are consistently improving the skills of our people and capturing more market share while providing broader services to our customers.

On a more personal note, you have already moved around a fair bit. What motivates you to run the Sub-Sahara operations?

This is an exciting place to be because of the opportunities the region presents. There exists a mixture of mature developed markets and new frontiers. The huge variety of projects keeps your mind fresh and always challenged.

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