with Raoul Jacquand, Sub-Saharan Africa Geomarket Director, CGGVeritas South Africa
When we met CGGVeritas Processing Center Manager in Moscow, Alexander Lyandres, in 2010 he stressed the importance of understanding the local market needs. When he took this assignment in 2008, he started to provide interpretation services, a service that had not been offered before for example. In your view, is there such thing as an Africa-specific strategy too?
Although CGGVeritas has been present in Africa for over 40 years, the nature of its activities has not always called for an in-country office: for example, we can be present by sending vessels, without necessarily opening branches. However, after 40 years of continuous presence in Sub-Saharan Africa, we now have permanent offices in four countries: Angola, Gabon, Nigeria and South Africa, and all of them are driven by oil and gas and mining-related activities. I believe strongly in a focus on local content, in being supportive of local capacity-building initiatives. I also believe it is a must for foreign companies operating in Africa today; the drive towards local content is a pan-African trend. Nigeria is a prime example. Last year the Nigerian Content Act was enacted, which created stronger obligations for foreign companies active in Nigeria. Nigerian Content credentials are checked strictly – either a company fits or it does not. Although CGGVeritas already had a processing center in Lagos, we also partnered with a local player, GOSL, a seabed surveying company that aims to grow into deeper offshore areas and has the technology and the motivation to go forward. We were adamant about choosing a partner which has true industrial capabilities, genuine assets, highly motivated people and real ambition. In turn we can help GOSL by injecting our technologies and by involving the company in larger surveys on the seismic side.
While in Nigeria the law is already there and enacted, in Angola local content regulation is not as obvious from a legal perspective. Nonetheless, the decision-makers look very firmly at the local content of foreign companies. In both Nigeria and Angola a clear trend is visible, and CGGVeritas fully subscribes to it. Working in partnership locally is part of the global culture of CGGVeritas.
In our third location, Gabon, we have a local presence through a branch office established to support both onshore and offshore activities. Although the need is not yet as stringent as it is in Nigeria and Angola now, it might very well be in the future. In our fourth location, South Africa, the regulations are in place and we are working hard to strengthen our local presence. Until now the nature of our activities has been rather specific and targeted; whereas in the other countries we have a presence oriented towards oil and gas, in South Africa our geophysical techniques have been mainly applied in the mining sector. It has been like this for the past 10-15 years, which is not so long compared to the track record we have in the oil and gas industry, where our techniques have been applied for several decades now. In South Africa the mining industry has embraced our techniques, whether for gold, diamond, or platinum exploration.
When we conduct our activities in South Africa we hire a substantial local workforce for our temporary programs during the dry season – from April to October, when we are able to carry out these surveys in the field. It is crucial that we have a good relationship with the local communities when we deploy our seismic surveying equipment on the ground.
Moving forward, we are serious about deploying a B-BBEE-compliant company to clearly demonstrate our commitment to South Africa’s Broad-Based Black Economic Empowerment initiative, and would welcome the opportunity to promote B-BBEE initiatives in the energy sector.
It has been a year now since Jean-Georges Malcor announced a reorganization to simplify CGGVeritas globally, in particular by focusing on five divisions (Equipment, Marine, Land, Processing, Imaging & Reservoir and Multi-Client), and setting up a global Sales, Marketing and Geomarket network. How did this strategy reflect on your operations in Sub-Saharan Africa?
In July 2010, the company was reorganized through a new matrix into five Divisions or business units, supported by a number of functional entities, one of them being Geomarkets & Global Marketing. We focused on 18 Geomarkets worldwide, of which sub-Saharan Africa is one. The idea of a Geomarket is to promote our various business units and ensure we are meeting the needs of our local clients. On the one hand, I am an ambassador for the Divisions, as my job is to promote CGGVeritas and ensure favorable conditions are in place for the Divisions to do business in sub-Saharan Africa. On the other hand, I am an ambassador for our clients, focusing on making sure our Divisions are aware of and are developing the best solutions for them. A Division has global assets – in the case of the Marine division, for instance, it’s a fleet of 19 vessels. My job is to seek out the offshore seismic opportunities in sub-Saharan waters where it makes business and operational sense for the Marine Division to mobilize its resources, in a safe and profitable context. I actively promote the different solutions that each Division can provide, and help coordinate their interaction with our clients so that we can best address their challenges and meet their needs.
Did this reorganization provide a significant boost in the potential of the company? What other external factors suggest a growth potential for CGGVeritas in the region?
Yes. Some of our clients discovered that we could do more for them than they were accustomed to seeing from us, while CGGVeritas discovered local business opportunities which would have gone unnoticed otherwise.
The offshore map of the South Africa Petroleum Agency that we have in our office here gets updated quickly. This means that, while South Africa is not yet a big oil and gas-producing country, the government realizes that action is needed due to the depletion of current fields. The list of applicants is growing, and permits for feasibility studies are being converted into exploration rights licenses. Last year PetroSA organized tenders for its seismic offshore activities. Although we did not win the tender, CGGVeritas took it as a good sign because it showed that this flagship player is ready to explore again; as we all know, finding is impossible without exploration!
Apart from PetroSA, plenty of smaller bold players are developing as well. In Mozambique we saw successful gas finds, while an exceptional number of new players entered Namibia last year, even though a real discovery has yet to be made. If Namibia achieves similar levels of successes to Mozambique, I am sure the focus will shift to South Africa. The fact that Shell has come in and applied for a large offshore block is telling: the big players do their homework before they move. I think 2012 will be the year when exploration work starts showing results.
Nevertheless, we have to be cautious as the geology in South Africa is not the same as the countries on the sides of the continent. It could be that the industry does not find anything, but that is the risk and beauty of exploration.
We are happy to see companies like PetroSA take the lead in exploration activity in South Africa. A number of small and agile players are also active in the area, and create a healthy challenge and competition for PetroSA. From all these companies, the flow of tenders for exploration work is promising.
In parallel, the Petroleum Agency of SA is doing a great job in promoting the acreage and raising the profile of the country’s oil and gas potential, both onshore and offshore. CGGVeritas would be interested in seeking ways to share its technology with the Agency to help it achieve its goals.
What is your assessment of the competitive landscape in Africa and to what extent do you see this changing?
It is very crowded. In both East and West Africa exploration companies are making big investments, and in its wake, the service sector is moving in, including a number of agile smaller players. CGGVeritas has many assets that can make it a preferred supplier, but as a big player it can be a challenge to move as quickly as the smaller competitors. As in other places, there is an element of risk in Africa. We are therefore always cautious to weigh up the risks, whether financial, human, operational or environmental, and select our opportunities carefully, even if this means taking a less strong position in some markets.
Not only in SA’s Karoo, but across the continent there is quite some excitement surrounding onshore shale gas. In your view, are we seeing a paradigm shift between onshore and offshore in Sub-Sahara?
Onshore exploration has its own constraints compared with offshore, but looking at the numbers, the potential of onshore shale gas theoretically outweighs what we can hope to find offshore. The South African shale gas moratorium will be discussed again in February this year, a moment we are awaiting eagerly. CGGVeritas is not involved in fracking but has an interest in the safe exploration and production of these areas. We discuss and advise E&P players on the right technologies to use regarding shale gas. We have the necessary non-intrusive techniques that address the environmental concerns. The last thing a company wants to do is frack or drill in the wrong way, and our geophysical techniques are precisely meant to de-risk those decisions. Our technology has already been successfully applied in North America and Europe, and the next natural step is to offer it to South African players. That is also why, in order to be a credible and acceptable player committed to the long term, CGGVeritas wants to be fully associated with a local player. We are willing to put a future-proof structure in place in order to be involved in the exploration and production of the Karoo.
Our experience in the South African mining sector has taught us a great deal and this boosts the value proposition we have for the shale gas sector in South Africa. Firstly, we know that we can mobilize at a lower cost and, secondly, we know that our non-intrusive geophysical techniques offer a feasible way to lower the risks. This means we can help the industry take educated decisions, while helping to reduce the impact of this activity on the environment.
CGGVeritas organized three technology seminars last year – in Luanda, Lagos, and Cape Town. Why did you organize these initiatives and how successful have these been?
We put in a lot of effort for one simple reason: the crowded competitive landscape. There are two ways in which CGGVeritas can differentiate itself: through technology and through service. Although we are active in a very technical business, at the end of the day delivering our service is about people talking to people: when a reservoir engineer at an oil company puts his trust in what a geophysicist of our company has told him, the two need to speak the same language.
We need to stay technically innovative and combine that with a strong service. Our seminars are about showing and explaining the CGGVeritas techniques to our customers.
Those three countries are places where CGGVeritas technology and our highly innovative products have value. These products demand major R&D investments and need to be brought to places where they benefit the client. Nigeria and Angola are mature oil and gas spots, and hence our customers face technical challenges that can be solved with these techniques.
Our seminar in Cape Town was a first, to show our presence and to test the appetite of companies for our technology. Cape Town was a logical destination for the event, but we also invited a number of guests from Johannesburg and neighboring countries to widen their horizons and show them which synergies and lessons can be shared, as well as which techniques are applicable in their field and vice versa. The response from companies was so good that the seminar will return this year.
Also in the plans was to advance with BroadSeis to get a competitive technological edge. This has been recently used with Shell in deep water offshore Gabon. Was this also a pioneering project in that sense?
CGGVeritas made a significant investment in BroadSeis and it is becoming an industry standard for high-resolution seismic. The project with Shell in Gabon was yet another good example of strong co-operation leading to a better adoption of the technology by the client. We are also completing a project in Guinea, which was even larger than Gabon. This shows that momentum is building and that BroadSeis is applicable globally.
In general, the industry is cautious in adopting new techniques. Therefore we are happy to see that larger players like Shell value this solution. The bigger companies have been able to try this technique elsewhere, but the small players take a risk when going with a new technology because they have no other acreage to try it out on, which makes it a bold step. Some choose to do it because it is a way to differentiate from the competition and to optimize the potential of an asset.
BroadSeis is the flagship in our offering on the offshore side, and we are also promoting an equivalent onshore solution which we call UltraSeis. We have been working with the mining industry recently as UltraSeis is a technology that has been proven onshore mainly in the Middle East and could be applicable here.
Some companies adopt technology quickly, others more slowly, how do you do you work the national flagship companies? For instance you also work with the National Petroleum Corporation of Namibia (NAMCOR) in Namibia?
In general, as with the rest of our client base, some national oil companies are followers of new technologies and will only adopt them once their benefits have been proven in a similar environment while others move early taking advantage of the technology’s benefits. Namibia’s NAMCOR for instance is keen to use state-of-the-art technology. Namibia is also eager to keep the interest of the key players by maintaining a stable environment and highlighting its hydrocarbon potential. The country does not yet have a very large oil and gas infrastructure, so there are benefits to working with the large oil and gas companies as well as the service companies, and that is the support they are looking to secure.
You have been in South Africa for almost two years. If we come back in 5 years, what will have been achieved by CGGVeritas here?
A possible definition of success would be a safe and sustainable increase in oil and gas production as well as mining success throughout sub-Saharan Africa. This could be supported through an expansion of our footprint in the region along the lines of what CGGVeritas has achieved already with the creation of technology centers in Lagos and Luanda, which serve as hubs with critical mass and expertise able to fully service our clients. We are mindful of the various steps we need to overcome, so it will take perseverance and patience, typical African values, to move forward.
Do you perhaps have a final message for the readers?
The international community needs to overcome its reticence about South Africa and the continent as a whole. Hopes that an iconic country like South Africa will blossom and grow are strong. For CGGVeritas I would like to reiterate our commitment to the country and the continent. We will expand our presence without taking unnecessary risks and hope to bring real value wherever we can.