New growth in Angolan logistics

February 18, 2021

Manuel Graças de Deus, general manager of Kwanda – Suporte Logístico, talks to The Energy Year about how activity at the Kwanda Base is poised to grow with the 2021 bid round and the New Gas Consortium, the company’s plans for reducing its carbon footprint and how Angola can be made more attractive for investment. Kwanda – Suporte Logístico operates the Kwanda Base, a logistics hub in Soyo.

For exclusive interviews and articles read: The Energy Year Angola 2021.

Will the planned 2021 onshore bid round affect Kwanda’s strategy ahead?
This is a very positive development for the Kwanda Base. Some of the blocks that have been announced for this bid round are in the onshore Soyo area, so that will certainly have a big impact on us. We operate the Port of Soyo. We have the infrastructure that supports a lot of the oil activity both offshore and onshore. So we’re looking forward to the bid round. It’s going to be a game changer for smaller, local companies as they get into the business of producing oil.

How will the local content legal framework impact these domestic companies?
The new framework is going to have a positive impact on Angolan companies. The three contracting strategies on exclusivity, preference and competition are going to have implications for smaller local companies. With the support of the international oil and service companies, there will be a much more competitive market in the future because that’s going to provide the opportunity for smaller companies to grow.

What is your own position related to local content?
We are a local content-driven company. Sometimes we’re not considered local because of the nature of our makeup: 49% is owned by Saipem, but all three of the other partners – Sonangol, Sangemental and Casoy – are Angolan companies. Sonangol is planning to privatise its 30% share. That will be part of the next wave of privatisation taking place in 2021. Because of that, I don’t know what our future composition is going to be – whether another local company is going to come in. I’m sure there is going to be a big impact on us. But regardless, we are committed to local content and we’ll do our best to continue to evolve and provide opportunities and overall support to other local content companies.

What do you think will be the impact of the New Gas Consortium on the Kwanda Base?
As general manager of Kwanda, it made my day to hear this would be going forward in 2021. We were expecting it to start in 2020, but of course the pandemic delayed it. This development is just a few kilometres from us. The big impact on us will be on the logistics side because, as I mentioned, we operate the oil-related and the commercial terminals of the Port of Soyo.
We have the infrastructure needed to support the New Gas Consortium project. At our base we have the accommodation and yards that may be needed. We’re preparing ourselves to take advantage of some of the business opportunities related to that project. I’ve heard that there will be more than 2,200 people working at the peak of the construction phase of the project and having this number of people just next door to us and all the related business ramifications will add to our business.

What is the relationship between Kwanda and the Angola LNG project?
We are joined at the hip. We are next door to each other and we have a lot of business ties. All of the people that work on rotation for ALNG live in the Kwanda Base. So we provide them with a lot of services and we of course enjoy the benefits of this.

How is Kwanda planning to reduce its carbon footprint?
Right now we are self-contained; we produce our own power. However, our objective for 2021 is to develop a major project with ENDE [National Electricity Distribution Company] to build an electrical link from the Soyo combined-cycle gas power plant, which is about 5 kilometres from the base, to provide electricity to the Kwanda base.
Having this power generation from gas means that we can stop using over 5 million litres of diesel per year (about 14,000 litres per day or 5.11 million litres per year) on our base to produce energy. As you can imagine, this will translate to a major cost impact as well as a major benefit to the environment.

What is the outlook for commercial and industrial port activities?
The Kwanda Base had its best operating years back in 2014-2015. Today, we have the capability to support a lot more traffic than we currently have, and we’re looking forward to the upcoming growth opportunity. In 2021, we expect a lot of traffic because of the development of the New Gas Consortium and the growing offshore activities. We’re also looking forward to the Soyo refinery project, which might be awarded this year and will hopefully start construction soon.
Currently we have the commercial port and the so-called oil terminals – three quays dedicated to the oil business – and those are going to be busy. The commercial port will also be busy as business increases in Soyo, with the new gas developments and the refinery. All of this will have a multiplying effect on us as Kwanda and on the economy in Soyo.
Thinking back to the construction of Angola LNG, that’s when Soyo really grew to become what it is today. Now, we’re going to see additional growth, and we’re looking forward to this.

What is the Kwanda Base’s main competitive advantage?
Our biggest competitive advantage right now is our location. We have all of those oil blocks right in front of us. We are the nearest port to them and of course a lot of the business and traffic goes through us. From a logistical standpoint, that is the greatest advantage that we have.

What are your targets for 2021?
We target growth in revenues and hopefully we’ll manage our costs to the point where we’re making some money for our shareholders. In our business, we are very dependent on others. When there is growth offshore in the E&P business and growth in the service companies, then there’s growth for us because we provide logistics services to all of these companies. Our port operations, our accommodation and our base services are all intertwined with these companies. So we hope to see continuing growth going forward.

What lessons can be learned from the Covid-19 pandemic?
There are plenty of lessons. Of course, it has been tough. We are used to a business and rotation model that is different from what we are doing today. Now we have a lot of people working in rotation and staying in, confined to the base, which was not the case previously. And with so many people at home, we’re working with fewer people than we normally do. As of January 2021, we’re working with about only 65% of our normal population.
Regarding costs, on one side our costs have increased due to medical supplies and quarantine and isolation requirements but on the other side we’ve learned to do a lot more with less. I think we’ll be much more conscientious from a cost standpoint going forward because we’ve learned to do things without the same structure that we were used to.
The personnel side is more complicated because there is a lot we need to consider when it comes to staff reductions and people’s efficiency. It is something that is very dependent on our positive or negative operational growth, but we can never forget that we’ve learned to operate with less.

What is the attractiveness of the Angolan energy industry for international investors?
The political environment in Angola is becoming a lot more transparent and that is making it very attractive to international investors. I think the recent changes in the legislation have helped. We need to become more welcoming from a regulatory standpoint. We have to provide opportunities that are attractive to international oil companies. Areas such as the rule of law and the sanctity of contracts need to become more visible and more attractive.
Of course, the cost structure in Angola is high. However, if our economy becomes more diversified and less dependent on oil to the point where prices of other commodities drop, that will have positive implications for this cost structure.
But right now there is still work to do for Angola to become one of the most attractive areas for production. We face challenges such as lowering the cost of logistics and the cost of living. If those costs dropped considerably, it would give a big boost to the market’s attractiveness.