Guy Maurice, Senior Vice-President for Africa, Total E&P: Interview

Interview: Guy Maurice

How has the drop in oil prices impacted upstream investment in Africa?

GUY MAURICE: Today’s low-oil-price  environment constitutes a sizeable headwind for much of the energy value chain, especially for exploration and production (E&P) companies. A natural countermeasure is the introduction of cost reduction initiatives. Fortunately at Total, we put these initiatives in place before the fall in oil prices. This needed to be done to remain competitive, as we want to the maintain the highest possible standards in health and safety. Generally, we expect oil and gas companies to continue with projects that have already been launched or that are under construction while at the same time taking steps to reduce their break-even point. This rationale would enable companies to maintain a long-term value creation strategy in Africa. With this in mind, Total’s plan is to maintain its organic E&P investments at reasonable levels for the medium-to-long term to allow production to grow in line with the market and preserve its competitiveness.

How can international oil companies encourage local content integration in Africa?

MAURICE: Over the years, local content has become a crucial component of the vision for oil and gas companies in Africa, in particular with regards to sustainability. However, local content should always be considered in the context of project economics. One must always bear in mind that a company’s focus will always differ from one country to another, and even from project to project. This may be explained by numerous factors, such as the availability or lack of qualified personnel and subcontractors, the suitability of local infrastructure, and the ability of local subcontractors to make competitive offers that are in line with the required quality and security standards.

There are different ways of integrating local content into the African production chain, such as local recruitment, training programmes, purchasing local goods and services, and supporting small and medium-sized enterprises. The real challenge is to be able to ascertain the local workforce’s needs in a host country, and to find out how best to meet those needs. For example, in some countries engineers or technicians would benefit from training that would allow their skills and knowledge to be transferred to other industries. In Gabon, for example, we are very much committed to “in-country value”, especially when it comes to education, which is why we support establishments such as the Centre for Vocational Specialisation in Port-Gentil, which trains over 40 young people every year.

What regulatory changes can improve the investment environment for African producers?

MAURICE: Improving the investment environment for African producers will essentially depend on new attitudes and on how regulatory policy is implemented. Globally, upstream capital expenditure will fall for the second consecutive year in 2016, due to the cancellation or delay of projects in what is the most challenging environment in recent memory. Companies need to be disciplined and pursue only the best opportunities. At the same time, government will play a key role in setting the levels of local content, as well as the terms of fiscal policy. For instance, in Angola, Total has recently agreed with the authorities to revise the terms on the Kaombo production sharing contract; and both in Angola and Congo, fiscal changes have been agreed and are awaiting approval.

African governments are responding to the crisis and are fully aware that in order to attract investment they need to provide an attractive investment environment. Investors need robust projects with attractive returns. Without the right set of fiscal terms to make projects commercially attractive, the industry cannot consider launching new projects.