Stuart Kent – Regional Director Sub-Saharan Africa, SNC-Lavalin, South Africa
Stuart Kent, regional director of SNC-Lavalin Sub-Saharan Africa, discusses the potential large CAPEX investments into the oil and gas sector as the oil price kicks off, as well as the importance of a policy that attracts investors. Furthermore, he highlights the regional opportunities for the company, especially in gas, and the factors that differentiate SNC-Lavalin from the competition.
The company in recent years has been through large acquisitions, first Kentz and then afterwards, Atkins. What has been the impact of this movement at a global level on your regional operations?
“Overall, there are great opportunities in Africa, and despite the fact that companies could easily go to markets like Europe and Australia, where stability and ethics are easier to come by, Africa offers the potential that not many places can match.”
We started out in the region as Kentz, which was purely a construction and large maintenance and shutdown service provider. We had a small EPC leg, though the acquisition by SNC-Lavalin broadened our spectrum and diversified our ability to perform large scale EPC projects. Furthermore, it introduced the idea of conceptual studies and true front-end engineering capabilities and allowed us to have the full end-to-end service approach.
The Atkins acquisition was quite recent, and they bring the expertise as an engineering consultancy business with a greater knowledge of the digitalization capacity of the EPC space. This digital drive is being slowly integrated into what we do, and the idea of engineering consultancy is now the company’s fifth pillar, joining the other four of oil and gas, mining and metals, power and infrastructure. This is really key for this one-stop shop EPC service as it brings all our global engineering knowledge into a formal platform that can be offered to potential and current clients.
All in all, these moves put SNC-Lavalin into the top-tier of EPC companies on the global and African market.
How have you got the message out to the market you are offering these new services?
We value our strong relationships with our clients and maintain open communication channels with them. This has made it possible for us to keep current clients in Sub-Saharan Africa informed of our enhanced offerings and share the benefits these bring to their projects with them. Our team engage with key stakeholders continuously to keep them up-to-date with how these new opportunities complement our original capabilities. When we engage with potential clients we take care to ensure that they fully understand our inclusive potential.
What is the strategic importance of the Sub-Saharan region for the company?
South Africa is where we started our footprint in the region over 30 years ago under the Kentz umbrella, and it continues to be the hub of our business where we grow our regional reach. Furthermore, it is the center for us to grow cross-border projects and facilitate knowledge and skills transfer to local markets, and this concept of upskilling locals is something we pride ourselves on.
From an operations perspective, we find that Africa has many pockets of opportunities and the more you explore, the more you find. For example, we see great potential in the mining and oil and gas sectors just across the border in Mozambique.
What percentage of your operations are in the oil and gas field?
The majority of our revenue is oil and gas, though this percentage shifts depending on the market conditions. Three years ago, mining had a larger role, with a downturn in the mining sector, less projects have been coming in, meaning oil and gas currently makes up around 85 percent of our revenue.
However, with the oil and coal price rising, we have seen a swing of late towards possibly large-scale CAPEX projects, especially coming for Mozambique. Fortunately, we are not dependent on these investments, as most of our work is in downstream oil and gas, such as the maintenance of refineries.
What needs to be done to unblock the market so there are more capital investments?
It is quite a complex process, and this is why many companies still refer to Africa as the final frontier. Investors are cautious about investing in Africa as they must manage corporate governance. Working in Africa has always had the overhanging situation of added risk due to compliance and corruption. Major companies stay clear of involvement in these issues and work in an ethical manner.
Overall, there are great opportunities in Africa, and despite the fact that companies could easily go to markets like Europe and Australia, where stability and ethics are easier to come by, Africa offers the potential that not many places can match.
Is uncertainty the new norm?
It is all about confidence. Companies need assurances that their clients – whether governments or private organizations– will respect their contractual obligations. And governments want- competent contractors who will deliver what they said they would. This dynamic is causing everyone to move forward very cautiously.
However, the shift in South African government already has international companies, including SNC-Lavalin, talking about potential future opportunities. Despite this being in the next five to ten years, we are eager for the chance to be part of the nation’s development.
Maintenance is a big part of what you do. How are you involved within this sphere in South Africa?
We are fortunate to be actively working in six out of the seven refineries under maintenance contracts, with Sasol being our largest contract and having a 30 years partnership with us. They are very active in maintaining their plant, which is contrary to many other players who are waiting for a continuous upshift in the oil price before investing into upgrades.
Another aspect that will develop in the near future are the upgrades required to move towards global requirements of cleaner fuels. We believe that in the future this could possibly attract the largest investments for a decade.
How ready is SNC-Lavalin to support the industry towards this environmental shift?
We are driven by our environmental prospects and are very involved in solar work being conducted in South Africa. We have constructed a number of solar parks and run their maintenance, and with the recent signing of the continuation of the renewable energy program by the minister of energy, it is an agreement with a potential of 55 billion ZAR (4.57 billion USD).
This final round of the program was put on ice for two years, with job losses from the energy sector a concern, but possibly there was a lack of vision of job creation in the construction of renewable energy sources. Additionally, this renewable energy program will create a surplus of energy, which South Africa can possible export to neighboring nations.
What is the relevance of gas for the region’s energy mix?
Gas is a cleaner fuel and we see that there will be a shift from fuel to this energy source, especially considering the gas reserves in Mozambique, some of the richest in the world. We see that many large blue-chip companies want to tap into this supply and in the next five years this will offer great opportunities. Mozambique is our second biggest market, and as we complete the construction of mines there, we are looking for the next big thing and see gas as this opening.
What differentiates SNC-Lavalin from other EPC competitors on the market?
We have a very strong construction business; meaning, normally we do not need to subcontract the construction phase. Moreover, with the integration of Atkins, we can tap into high value, low cost engineering capabilities that are highly accessible from around the world.
The true differentiating factor is we have vast EPC experience in a broad array of sectors, from oil and gas and mining to solar and power. This means we have the capability to work on vast cross-sector projects and access the abundance and depth of expertise and knowledge we have within our global organization.
Looking ahead, what are the opportunities you envision for SNC-Lavalin in the future within the region?
Atkins have offices in Kenya and Tanzania, and we have sites in Mozambique, Angola and Botswana. If you look at EPC projects in Sub-Saharan Africa they have been relatively quiet due to lower oil and commodity prices. However, there has been an upswing and we are ready to be part of it. That said, it has taken a little time for an upswing to translate into concrete contracts.
Our company is built around people, and our staff is at the core of everything that we do. We want to be seen as the employer of choice, with happy and engaged staff that are aligned with the company values of safety, integrity, collaboration and innovation. If we succeed in this everything will filter through and allow us to execute safe and successful projects, the key element for keeping us at the top of the EPC world.