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Interview

with on Woodwards, Director, UK-WAAG

11.06.2008 / Energyboardroom

Before getting specifically into UK WAAG, could you expand on your role as International Business Director of the Aberdeen & Grampian Chamber of Commerce (AGCC)?

AGCC essentially has two roles, the first of them being to represent the views of the business community to national and local government, trade associations and other external bodies. In this regard, we are influential in forming opinion and in modifying the strategic approach and tactics that are employed by other players so that they incorporate the needs of business.

The Chamber’s other key role is to provide services to businesses. We provide a wide array of practical services such as business training, export documentation, trade services and informational events to our members and the business community at large. Providing opportunities for our members and the business community to network is an important function as is extending the reach of business understanding amongst young people and in schools.

As a part of this offering, AGCC has an International Business Department in order to support companies’ efforts to expand business beyond the UK and encourage inward investment, and this is where I come in as the International Business Director. In addition, a specialist group called the UK West Africa Action Group (UK WAAG) was created 10 years ago within AGCC in response to a growing interest in that region’s oil and gas markets. An entirely new corporate membership organization was established, and today UK WAAG has around 80 corporate members representing a diverse group of companies focused on establishing themselves in Africa’s oil and gas markets.

How would you describe the breakdown of the companies which are a part of UK WAAG?

Many types of companies are members of UK WAAG, from one of our key members, BP, to many SMEs representing different parts of the industry’s value chain. There isn’t a particular characterization other than the fact that they are all trying to enter and sustain business in what are very difficult West African markets, and they feel that they could use the assistance that UK WAAG provides in order to succeed in doing so.

Which is UK WAAG’s main achievement after 10 years of assisting local companies enter the complex but prospective West African oil and gas markets?

I consider that the main achievement over the last decade has been to help and encourage a great many British companies enter West Africa who would never have ventured there by themselves. 10 years ago there were very few British companies in that region, and not many willing to take on such difficult and unknown markets. The risks and costs involved were perceived as simply too high for all but the very largest companies in the oil and gas industry. Nowadays, relatively small companies can confidently enter those foreign markets, so UK WAAG is very happy to have given companies the confidence that they needed to embark on what many would say is the last frontier in the global oil and gas market. West Africa has usually been the last place where companies decide to enter, due to well known issues like business transparency and security.

How has the overall situation in Western Africa’s oil producing regions evolved over the last decade, and how has this impacted UK companies operating there?

Over the last several years, the main trends in Africa have been dictated by external forces, notably the world’s thirst for natural resources. These markets have been developed largely at the hest of foreign countries and companies in their search for energy in particular. Some West African countries have been transformed by the discovery of important deepwater reserves, which has made it one of the most attractive oil provinces in the world. Such discoveries are irresistible to foreign operators who have logically flocked in.

There are particularities and variations among the different countries involved in West Africa’s oil and gas markets. On the one hand, there is Nigeria which was absolutely predominant 10 years ago, with production at about 2.5 million bpd at one stage, now in decline and facing serious security problems. On the other hand, Angola has emerged over the last several years and is now Africa’s most prolific producer with about 2 million bpd. Even more interesting is the case of Ghana, a country that today does not produce any oil and gas but is announcing massive discoveries which may launch it as one of the largest producers in the region and perhaps the world.

For these reasons, West Africa is an area generating a lot of excitement and it still holds substantial opportunities for companies but they have to remain nimble and be aware that circumstances can change rapidly in African countries. It’s also important not to view all countries in the region in the same light as each has its own business culture and individuality.

Which are the main activities and services that UK WAAG offers its members concretely in order to support their efforts to gain a foothold in the West African market?

A large part of what UK WAAG does is related to the provision of intelligence, meaning we gather information on the markets – political, societal, legislation, projects – whatever will be material to our members. The organization disseminates this information through channels such as reports, periodicals, articles, conferences, workshops and seminars. In addition, UK WAAG leads a large number of outward trade missions to West Africa, in which we actually take the companies into these markets and introduce them to the local business environment. We also host many inward delegations of foreign businessmen visiting the United Kingdom and introduce them to our companies so that they may invest and work together in projects in West Africa.

UK WAAG is unusual in that it takes an account-managed approach. We work with companies in a continuous manner using a defined market entry process rather than just providing intermittent events and occasional interraction. UK WAAG is interested in developing lasting and enduring relationships with its members, so in fact we become a part of their export effort, and as a result do a lot of consultancy-stile work. We hold ongoing discussions about their business and strategies at their own premises, in order to understand their needs and be able to assist them more effectively. Many trade associations similar to UK WAAG provide some periodic events, but they do not accompany the members throughout the whole market entry process and we believe this is fundamentally important.

From early on, UK WAAG realized that one of the biggest difficulties for companies was actually operating on the ground in remote, developing countries. For this reason, we have established partners in Africa, for example 3 legal companies which can provide information or general guidance to our members. UK WAAG has also partnered with logistics and security companies so that members will have concrete support in these areas as soon as they arrive. In sum, we can help them with many of the details which setting up business in a complex new market entails, such as sorting out the legal and fiscal framework, but also practical needs such as security and real estate.

Does UK WAAG limit itself to providing its services to its members?

Naturally, UK WAAG is primarily focused on supporting its members, but after years of activity and experience it has developed as a centre of excellence in its field and there is a growing interest in our services. The organization gets many inquiries from business at large and we are willing to assist companies whether they are our members or not. We tend to think of ourselves as representing UK companies in general rather than just our members, and in any case it is impossible to work in a ‘membership bubble’ because that would simply be unworkable.

Would you say that there is still significant room for growth in terms of internationalization for Aberdeen’s indigenous oil and gas companies?

One of the key functions of not only UK WAAG and AGCC, but of the wider business community, is to highlight to local companies the fact that the North Sea’s oil and gas resources are finite; and that although there may still be opportunities in certain niches and some fiscal incentives exist, the bottom line is that production is inevitably in decline and this will mean less work for existing players and little room for new ones. We are therefore encouraging companies to diversify and this includes looking beyond the UK’s borders as a matter of survival. Our message is that they absolutely have to export, there are many opportunities overseas and this holds true even for relatively small and new companies.

This can be a difficult message as Aberdeen’s oil and gas contractors are currently fully occupied, often working at 100% capacity to satisfy existing demands. In this context it is difficult to persuade them to take on a whole new market region – they often don’t have the time or resources to handle that. But for the long-term this is a fundamental message and we will continue to work on convincing them of the necessity to internationalise.

Has the record high oil price and booming demand for oil services around the world meant a greater interest for UK WAAG’s expertise?

Our membership is definitely growing, although it is worth pointing out that UK WAAG’s footprint is much larger than only its group of members and our events can attract hundreds of companies interested in West Africa. Demand for our services and general enquiries are very strong now because West Africa has really taken off, largely spurred by deepwater developments. There are many opportunities there for our companies as the local supply chains are not yet fully developed as is the case in most other oil producing regions. Whereas the world’s other major basins are well-serviced already, in West Africa companies will find that competition is still very thin or even non-existent in some segments.

In a sense, your organization represents the entire UK business image in the oil and gas markets in West Africa. What strength does the ‘UK’ brand have in the international arena?

The UK can rightfully claim to be a leader in certain areas such as subsea technology, deepwater developments, training and project management, but we have to be careful not to delude ourselves because global competition is very stiff. The UK has a reputation for good design, dependability, innovation and flexibility. We are seen as being straightforward and easy to deal with and of course we often have the advantage of strong colonial links and corresponding similarities in areas such as language, culture and legislation.

British businesses have to remain technologically strong but also do a better job of selling themselves. The UK is often not very good at collectivizing its brand, image, services and capabilities, so as to represent itself in a holistic way. There are many initiatives from the government, trade organizations, individual companies, etc. but not much in terms of coordination. This is in stark contrast to the Norwegians, for instance, who are very good at public-private projects and who communicate a simple and uniform image.
UK WAAG strives to work closely with stakeholders in order to work jointly and give a better common front on the world stage. In this regard, we could use a lot more assistance from government. The segmentation of the myriad bodies and agencies involved makes it difficult to act collectively in global markets.

Besides West Africa, what are the other regions in the world in which Aberdeen-based companies are expanding?

Aberdeen companies are certainly gregarious, they travel well and no part of the world’s oil and gas industry is untouched by a familiar local company name or a distinctive Scottish accent.

We see expansion in the Americas, especially Brazil, and also in the Central Asian region. It’s important to realise that the buyers for projects in developing countries are often based in corporate headquarters based in other countries, perhaps on a different continent. Business developers often have to prospect several locations around the world to close a single deal. For instance, our members are increasingly developing their business relations in China in order to win contracts for operations with Chinese companies that are active in deepwater exploration around the world, so we can say that the sales effort in the oil and gas industry has to be truly globalized.

From your perspective, where do the main opportunities and challenges lie over the coming years for Aberdeen’s O&G companies?

Aberdeen’s oil and gas service providers are trading largely on a knowledge-based, technological edge and this is clearly seen in areas such as the subsea sector. This lead, however, is of no more than 5 years in any discipline, so we have to continuously stimulate technological superiority through investment in research and development, skills development, etc if we are to sustain the health of our industry and region.

The goal should be to maintain that 5 year lead and for Aberdeen to enhance its position as a technological and best practice test-bed and hub for the global industry. The city needs to convince international players to establish their main headquarters in Aberdeen, and for that we need to offer the best in terms of fiscal incentives, infrastructure, universities and research facilities. But it is also about offering a good quality of life, making the city an attractive place to live and work. Towards the future, Aberdeen will also have to further diversify and take advantage of its leverage in oil in gas to develop renewable energies and other knowledge-based industries.

What is your final message to the readers of OGFJ on UK WAAG and Aberdeen?

Aberdeen has clear plans to remain at the forefront of the energy industry and the instruments of this; the Energetica corridor, the creation of a subsea hub at Westhill, a revitalised ACSEF and the growth of the renewables sector are all positive signs that this will be achieved. As a leading centre of education and research, a world leader in life sciences, having a highly-skilled workforce and a quality of life that’s hard to beat, the region has the components needed for success as a global energy hub.

The world’s thirst for energy guarantees long-term opportunity for Aberdeen and its companies but they have to be prepared to internationalise their businesses and work on the global stage. The risks can be high but the rewards can be great, but in any case it is an essential activity for them, not an option. Whilst the prospect of entering difficult foreign markets may be daunting, companies have much help to hand and they should avail themselves of it. Trade associations like UK WAAG are experienced and ready to assist them.

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