SAOGA: Growing a Sustainable Oil and Gas Industry in South Africa -Takolia

With a refining capacity of about 400,000 barrels per day of crude oil, additional 180,000 barrels from coal to liquids, and import of about 100,000 refined products, South Africa has become a relatively sizeable market for oil and gas in Africa. The market has experienced steady growth in the last few years with more companies taking advantages of the available opportunities, Ebrahim Takolia, an oil and gas expert, and the chief executive officer of South Africa oil and gas, SAOGA, believes strongly on the growth of the energy sector in Africa, in this interview with Orient Energy Review Editor, MARGARET NONGO-OKOJOKWU, Takolia reveals his experiences in the oil and gas sector, and the strong will to make the energy sector the driver of the South African economy and the latest developments with the oil industry in South Africa and within SAOGA. Excerpt:

Tell us about SAOGA, what is this association all about? 

Takolia: The South Africa oil and gas was formed in 2003, it initially started looking at services that Africa could provide to the oil and gas industry. It was heavenly focused on the rigs, the ships, repairs and maintenance of vessels. The facilities were set up first in Cape Town. Since then we have also promoted some other ports for oil and gas and we are in the process of working with an organisation called the Southerner Base IDZ to develop a service hub about 100 kilometer to Cape Town to service oil and gas industries. We are also lobbying legislature that will support the industry. We are also looking at working with countries in the Southern African region to review accesses to in a more collaborating way, because one of the challenges is that if a Ghanaian company wants to do oil and gas business in South Africa, it will be regarded as a foreign company, and also apply when a South African company goes to Ghana to operate. What we want is some agreement that will allow some African companies have more access to operate in Africa more than companies from outside Africa, we want a situation where these Africa companies will not be regarded as foreign companies because they step into another African country. So we understand that each country want to develop local content but what we want is that if there is work to be done, and there is a choice between a US company and a Ghanaian company, at least let’s get to see the Ghanaian company favourable if it can do the job, the same thing if a South African company goes to Ghana, that is the only way we are going to develop the industry in Africa. Individually the market is not big enough but if you take the sub-Sahara Africa as a region, use that as the area which you operate then you have a much bigger market and you can create a much more sustainable business.

What is your membership strength?

Takolia: We have more than 240 members. Our members consist of upstream companies like Total as an example and then we have field service companies which includes the likes of National Oil and many engineering firms, then some small and medium enterprises that operates individually. It is a diverse spread and it continues to grow.

So how will you describe the South African oil and gas industry?

Takolia: At the moment the South African oil and gas industry if you spread it into the 3 mainstream – up, main and down, the downstream is very well developed, it is a very matured market in South Africa. We import about 400,000 barrels per day of crude oil which we refine in four crude oil refineries and we also produce about 180,000 barrels from coal to liquids, we import about 100,000 of refined products, so South Africa is a sizeable market. We are 25^th in the world for the amount of oil we import. When it comes to gas, it is only three percent of primary energy we consume, so those are the two elements that make up the downstream sector. When it comes to upstream, South Africa have potentials in onshore and offshore, but onshore in commercial side with shale gas but because of legislative challenges and other issues, the industry is not moved to do wide scale exploration. There is a process of overcoming those challenges, the process is slow and we need to find a resolution so that we can have more exploration drilling offshore and some shale exploration onshore as well.

 So can you say you have a viable oil and gas industry? 

Takolia: Yes, the oil and gas industry is a very viable industry. South Africa does a lot of work in Africa, there are lots of field service engineering work. It can be a more vibrant industry if some of the legislatives issues in some of the African countries are resolved. 

What role is SAOGA playing in positioning these South African industries to face challenges in the industry?

Takolia: The role of SAOGA is to develop the industry and support the growth of the industry. We believe that we have done quite well because last year we have gained more than 100 members which includes some of the larger field service companies and other companies in oil and gas, companies that have acquired local companies or have invested in local companies. In terms of positioning the industry, we work with other organisation to lobby government in South Africa to look at oil and gas development in the region. We have started to make route into that. We also support networking events like African Oil Week and we also participate in other events where we talk on promoting Africa and regional local content, and how to develop local content. At the end of the day if the oil and gas industry is going to be used for transformation we are going to have some local industries that can create jobs. Is slower than we would like but it is moving in the right direction. 

What are the latest developments that you’re most excited about in the South African Oil & Gas Industry? 

Takolia: The Oil & Gas sector continues to face many challenges due to lower energy prices. However, work on the larger projects in Africa continues. Due to Africa’s growing need for energy, electrical and liquid fuels, many energy projects continue to be developed. It is an interesting time for the upstream and mainstream sectors of oil and gas in Africa. The sector is a continuously revolving industry with significant opportunities and challenges. One of the biggest opportunities relates to the fact that Africa needs energy and we have discovered energy in Africa. What we need to do is to find the way to get the energy to export market and domestic use in Africa.

Tell us about your recently launched Marine Oil and Gas Academy, MOGA, what difference will it make in the South African oil and gas industry?

Takolia: We set up the Marine Oil and Gas Academy in order to understand what the different elements are doing in terms of training and also to put it online and make it accessible. What it does is to perform the platform to say what is available, training that you could get in oil and gas in the universities, colleges, technical schools, etc. You can also get certificate training, and also the type of jobs that are available in the oil and gas industry. The difference it will make is that before we set the academy there was no platform for which students if they want a career in oil and gas could get one, but now they have a platform. If you need to specialise in Petroleum Engineering, what do you do? The platform can help in that aspect and so many others. It is also helpful for people looking for jobs in the oil and gas industry. It is for every stakeholder in the oil and gas industry – government can use the platform to see activities happening in marine, oil and gas. We basically put the information concerning every stakeholder in one place, so that it can be accessed by everyone. Before now it is difficult to mention all the course in oil and gas industry available for prospecting students, but now if you go there you can access different courses that are available in the oil and gas sector, you can see what jobs are available, what different trainings are provided, and we would want other companies to put their initiatives online so that we can have a better view on that. 

Apart from the MOGA, do you have any other institute where training is done? 

Takolia: In South Africa yes, we are involved in capacity building. We provide funding and training for 210 students in what they call work placement. They get placed to be trained in a work place but we pay them so their employer received them to train them but doesn’t have to pay them. We do direct intervention as well. We don’t do direct training ourselves, all of that are done through member companies.

What is the government doing to fund oil and gas, if there is a fund available how is it disbursed and who are the people entitled to it? 

Takolia: We get some government funding for our projects but there is also industry funding. All of the big companies realised that they have social commitment to society and on that basis they actually engage in programmes from where they provide fund for training, skill development, and industry researches. So I it is government and private sector doing the funding. Previously it was driven by government, now increasingly the private sector is realising the benefits from this type of relationship.

Is there a special government fund set aside for initiatives of SAOGA? 

Takolia: We get some government funding but it is not a specific fund. We are non-profit organisation and we get fund from different sources. We also charge member fees which we used to fund our activities.

Local Content is a major issue in oil and gas, what is SAOGA doing in this regard? 

Takolia: We are working with government to understand how best we can handle local content. We also believe that local content should be seen in terms of regional content. If you understand that any local content initiative is to make profit, and you want to make a local content company that looks at local content in specific product in oil and gas, and you also have that the market is only Nigeria, or Ghana or South Africa, or Mozambique then is not going to work. But if you enlarge the market to sub Saharan Africa then you have a larger market then it will work.

We are promoting local content in South Africa but we are looking at it at regional level. If you have a South African company it should be able to operate in Nigeria, and Nigerian company operate in South Africa and be seen as local content otherwise the industry will not bring enough to sustain local companies. So we need to start aligning ourselves to start thinking like the European Union, like the way Canada, the US and Mexico operates. We need to start thinking like that in terms of local content. So we are identifying areas where we could possibly look at local content like substituting imports for domestic products. In South Africa we also have Broad Base Black African Initiatives which is mainly to ownership, like the management and skill acquisition in a company.

Can you give us some insights into what the SAOGA Supplier Development Project entails?

Takolia: We are running a pilot project with a university in South Africa, what next they are going to do is to mark the value chain in one region in South Africa. What we aim to do is to take that model and use it in South Africa, and maybe if we get some funding we can do it regionally in Sub-Saharan Africa. What they do is to show the different capability in the different areas of the oil and gas as a value chain, show the local content potentials, what the companies are and what the people are doing. At the moment it is very difficult to locate supplier of a particular product when you need one.

The SAOGA supplier development project aimed at mapping and profiling companies that deliver goods and services into Upstream & Midstream Oil & Gas Markets. The exercise revealed that South Africa has an emerging Oil & Gas cluster of companies from engineering, field services, technical, financial, legal, etc that deliver into this growing industry.

In what ways will the falling oil prices affect the oil and gas industry in South Africa?

Takolia: I think the biggest impact of falling oil prices is the reduce funding for exploration. You already seen that there is less of exploration happening in Africa, that is because the companies cannot raise money for exploration. But I do think that it will be short time because Africa is still the last frontier oil and gas exploration. 

What should the industry do to sustain itself at this period? 

Takolia:I think Africa already know that we have a lot of oil and gas. All we need to do is to monitor them, we got to bring it out of the ground and market them. We can continue to explore, we have already find almost 100 tcf of gas in Mozambique, we know that Nigeria has two million barrels but the problem is that Nigeria is importing refined products, the problem is that Mozambique has 100 tcf of gas but there is still no meaningful amount being exported for development so we need to say we have to really focus on how we now convert this energy for development, ands use the energy to diminish all the bottlenecks in growth and development of energy in Africa, that is the next focus of development in oil and gas.

What is the major challenge to your association? 

Takolia: One of the biggest challenges is that it takes a very long time for governments in Africa to make decision on policies – that slows down the industry. If we don’t make the right policy we can slow it down and we can also create a long run problem because African economies are growing and they need energy. You can’t have a robust growing middle class and they don’t have access to energy. We have energy in Africa and we still import it from other areas of the world. There are some decisions that the leaders of the continent needs to make, decision like – let’s use our own energy to meet out energy needs and you will continue to have a growing middle class. Since the industrial revolution in 1800, you can’t have economic growth without energy, and you can’t have development without energy. If you look at countries like China, Japan, and the emerging markets in Asia, it is part of their growth and development strategies, they always look at how they can get sufficient, consistent, efficient and cost effective supply of energy to the population and in Africa that is a big challenge. It seems that our government are not thinking from the policy perspective on how they can do that because given the amount of energy we have in Africa we shouldn’t be having queues in petrol stations in Africa, we shouldn’t be having shortages of diesel in Africa, but all of those things are there. We have shortage of gas in Cape Town as we speak today. All of these are the biggest challenge to the industry. We really need to get the government move on policy and start to see holistically all of the regional bottlenecks that are rising.

What about challenges in your operations?

Takolia: The challenges of what we do are the challenges of the industry, government policies, getting the appropriate level of skills, training people, and also developing local sustainable system, so they are basically industry challenges.

So what are your future prospects?

Takolia: I think for the future prospects we see that there is huge potential going forward for the oil and gas industry but it will require some policies and some good decisions from government. Also, it is an opportunity that local businesses in Africa can take advantage of. I think the prospects are good given that Africa is now a big market for oil and gas business. Before now the question used to be – if I find oil and gas who is going to buy it from me? Now there are actually places in Africa that I can sell my oil and gas to. 

How far do you see SAOGA going in the next 5 to 10 years? 

Takolia: I see SAOGA in the upstream industry, its infrastructure, production and distribution of oil and gas. In the next 10 years we will focus on development in the region.

SAOGA successfully launched the virtual Marine, Oil & Gas Academy on 13 August 2014. The Academy will nurture an enabling environment for human capital development in the industry in South Africa and beyond, and will also provide improved access to globally benchmarked Oil & Gas training programmes in the region. At the function, learners and work placement employers were also recognized for their contribution to the development of skills for the sector.