Alain Loppinet – Director & Executive Vice President, Kappa Oil Services – France
The director and executive VP of Kappa Oil Services, a global service provider to the oil and gas industry, describes his company’s focus on EOR and manpower supply and leading position in Angola.
Kappa Oil Services (KOS) is a service provider in the oil and gas industry operating in various business segments: procurement, maintenance, QHSSE, Skilled Manpower Supply, Training and Enhanced Oil Recovery (EOR). In which context did you join KOS?
I had been working for Total E&P for several years when I was introduced to SICA, a company that used to belong to the group Kappa. SICA and then Kappa Oil Services have requested my services to help them obtain the ISO 9001 certification and improve their commercial promotion.
How did KOS perform in recent years?
In 2014, Kappa achieved a turnover of USD 38 million, which was up slightly from 2013 when we had reached USD 36 million. In the last 5 years, our growth levels have increased tremendously, particularly after winning a very large contract in Angola on behalf of Angola Liquified Natural Gas (Angola LNG). We were tasked to supply them the spare parts for their plants. We created a subsidiary called CKT to meet their demands. We have also signed a contract to supply Angola LNG with ethylene and one for chemical products specific to LNG.
How would you define KOS’ core business?
Our core business depends on the expertise we hold at a given moment. Our teams comprise specialists in procurement and EOR. We have also introduced three subsidiaries, one in Angola, one in Russia, and one in Singapore to purchase equipment from China. Our connection with other companies has enabled us to introduce a new business line called skilled-manpower supply. Last year, we signed a manpower supply contract with ANLG covering their plant. Although procurement constitutes our historical core business, we have also recently been involved with enhanced oil Recovery (EOR).
What is the role of KOS in re-examining its customers’ supply chain methods and improve their processes?
On behalf of ALNG for instance, we actively seek suppliers, negotiate contracts and place order requests from manufacturers. We are responsible for all the equipment from the plant to the site and in charge of inspection, packaging, shipping and customs. We are currently examining opportunities in Russia and looking into ventures in Mozambique. Our objective is to act as a procurement office, which supplies equipment directly to our customers. We ensure our customers’ “peace of mind” by handling every aspect of procurement. We have for instance developed a sound knowledge of Chinese suppliers thanks to our staff based in Singapore.
One of the major trends in the oil and gas industry at the moment is cost reduction. How do your skilled manpower supply services respond to the majors’ short term needs and help them introduce more flexibility in an industry, which is sometimes rather conservative?
Regarding skilled manpower supply, western engineers are sometimes very expensive, which has compelled us to become worldwide providers. We therefore always evaluate candidates coming from countries such as India, where they are usually as competent but cheaper. In the field of LNG for example, we find many competent engineers in Indonesia. By supplying talented and qualified professionals from emerging markets, we are more competitive. At the moment we source 20 different positions. For instance, we have sourced corrosion engineers, contract and procurement managers, refinery’s project staff and QAQC managers. Skilled manpower supply could become our most valuable business line in the future. Our activity, although limited at the moment, leaves plenty of room for growth.
At KOS, we are devoted to our customers. If our customers seek cost-reduction, we strive to find suppliers at the lowest price and same quality of course. We are aware of current market dynamics and have therefore decided to decrease our margins to deliver cheaper services and sustain our order intakes. Prior to signing a contract, we always discuss the scope of the project and allow the customer to examine our quotations.
KOS also comprises an oil recovery enhancement service. Could you please outline a few projects where you were capable of optimizing and maximizing hydrocarbon extractions?
As discussed earlier, EOR is a growing business segment within Kappa Oil Services. Our first activity consists in examining oil fields to determine the best way to proceed with EOR. We then perform EOR by injecting polymers and other chemicals. Kappa is mainly responsible for the operational side and partners up with different companies to benefit from their expertise in reservoir engineering. We also apply mathematical models instead of reservoir ones.
Is your historical presence in China what distinguishes you as a partner of choice?
In procurement our experience in Asia does set us apart from our competitors. We have built deep ties in Asia via our subsidiary in Singapore and partnership with SICA Asia. We have a thorough understanding of the Chinese market. I have been working on equipment standardizing for a very long time and immediately recognized the potential that China could develop in this industry. Asia is home to affordable and talented engineers. Our greatest challenge today is however to find quality and reliable manufacturers. We have also faced delivery issues on some occasions, but all in all, China is a key country for KOS.
Angola is without a doubt a major O&G producing country, but what exactly sparked such an undivided interest on your behalf?
We originally worked for customers who enjoyed privileged relationships with Sonangol. They had the kindness to introduce us and that is how our Angola adventure started. We then completed one project after another, until our success encouraged us to establish a subsidiary. The only issue we have today in Angola, like other companies, is that due to local content legislation, we are paid in Kwanza, the currency in Angola. We are successfully working on this front.
Overall, I would say that as a small French player, our strategy is rather simple; it consists in following Total and capitalizing on the presence of this supermajor to win a few projects. We also enjoy a very good relationship with Maurel & Prom and could assist them in Mozambique in the near future.
Safety was Total’s CEO Patrick Pouyané’s priority for the future and Thierry Pilenko, CEO of Technip, only fear. Yet you claim that you can still reduce maintenance costs without compromising safety. How is that feasible, and what is your role in optimizing the maintenance cyle?
With regards to skilled manpower supply, safety concerns fall under the responsibility of our clients. However, when we conduct inspections, our customers may ask us to take care of HSE. When we make an offer to our client, we don’t only address purchasing costs but also maintenance costs. For ALNG, our contract also requires us to provide spare parts, in which case safety becomes a concern. QHSE is a business line of its own within Kappa Oil Services. Although we aren’t conducting any HSSE projects at the moment, we have been contracted in the past by companies to oversee HSE aspects, particularly for equipment storage projects.