How has your business changed with the changing economic positioning of the oil and gas industry? Has it impacted on how and where you invest time and resources?
That is a very interesting question.
To give you a bit of background about Mazarine – the company started in late 2013 and was very much opportunity driven. The opportunity was in Tunisia and at the time the oil price was around $100-$120 per barrel. People couldn’t imagine the oil price dropping to less than $80-$90 a barrel, yet at the same time people were talking about it hitting as high as $200 a barrel.
What made the Tunisian project so attractive was that it was onshore, it was short cycle, and I could easily oversee the project. Of course, as you know, the oil price then started to drop and then the idea of having a business on shore, short cycle and that utilised existing infrastructure in easily accessible areas at a fairly low cost was particularly appealing
The oil industry had changed a lot by the time we made our first discovery. But we were a small company with low-cost and we had set up our infrastructure to function well in a low oil price environment. For us to operate in an environment with the oil prices of today is entirely possible. Let's hope that they increase a little; and that the prices will at some stage reach approximately $60 a barrel; but we are very capable of building a business at the current price range.
Do you think that the current business environment is going to affect people's decisions around where to invest? For instance, will countries with low operating costs and well-established infrastructure be preferable to those with a higher risk/reward opportunity?
I think the attraction of areas that are low cost are not just about trying to find opportunities with huge volumes, but are more about “at what cost can you develop opportunities?” I also think that the outlook of the industry has become more short term – the world is changing and the portfolio of energy is in transition. Certainly, there is a role for oil and gas to play for quite some time but at the same time, we are aware that we need to position any activities in terms of decades. Now when you decide to invest it's no longer a 40-year time horizon that you are looking at. Now you start something and you want to see the timeframe within which it is developed and start seeing a return on your investment.
There are definitely opportunities on the market and there are MAs going on but parties are more careful about investing in areas where the opportunities are harder to develop or where costs or the risks of delays are too high. In that respect, I think Tunisia presents a good opportunity: the costs are low, you can use existing infrastructure and that makes it an attractive opportunity.
What is it about your current exploration in Tunisia that presents such an attractive proposition?
The key attraction of Tunisia is that there is a pro-business environment. There is a state oil company, ETAP [L’Entreprise Tunisienne d’Activités Pétrolières], that is effectively your partner when you embark on various opportunities and they are very supportive and easily accessible. If you go to Tunisia you find an open door, a lot of expertise in-country both within ETAP and within the workforce.
So, what you find is that Tunisia, while a small oil and gas country in relation to its immediate neighbours, has an active oil and gas industry and I think that there is still a lot of potential. Tunisia is still the place where, if you make the effort, and you do the necessary technical work there are opportunities to develop.
What is important for an investor is that you have an environment that is predictable and consistent and supportive. From that point of view, Tunisia offers all of these things.
Given the current economic status do you believe that Africa is now more or less of an attractive investment opportunity or is it still perceived as high risk?
Personally, I don't believe that Africa is particularly high risk. Nigeria has been a dominant player for a long time and I have had businesses there twice. People from outside of Africa are very quick to tell you why you should not go there; but I've been there multiple times with various companies and I had a good experience.
At the end of the day what I see is that there is a lot of expertise – obviously not everywhere – but in countries like Nigeria that is the case. At the end of the day what you need to consider is the opportunity – is the environment stable and are there reliable parties that you can make agreements with?
We are looking further into opportunities in other parts of Africa. Our focus at the moment is very much on North Africa but we are definitely interested in opportunities further south and into East Africa.
Given the work you have done in this sector – what is the most unexpected challenge you have come across?
To be perfectly honest, and this is perhaps an indication of my approach to business, we went into Tunisia on the basis of a handshake.
The agreement was signed in October 2013; in December of that year, we started the seismic campaign and in February 2014 we finalised the seismic campaign, planning, tenders etc. We started drilling in early 2015 and had our first discovery in April 2016.
What really took me by surprise is that even though we are a small company and we worked very hard, it still took a significant length of time to bring a field into production. So, although the parties are supportive, the time it takes to get all of the approvals and tenders in place highlights that theindustry has some work to do. The challenge will be to shorten the time between exploration and first production.
This is the one area that took longer than expected and I think there is room there for improvement.
If you had the opportunity to work completely unconstrained in theory you could put a field into production in a couple of months, however, in reality it takes a couple of years.
A two-year delay could be the constraints of the country that you are in; it's certainly not because people are unwilling but local circumstances, legislation and bureaucracy is where things have to improve. This is where countries can become more attractive – if they can create an environment where you can fast track the time between discovery and a productive business.
What is the most important take away for this industry?
Our industry is still got a great future. But given the changes that are happening to the energy portfolio I think is very important that governments, regulators, state and private oil companies work very, very closely with one another, because time is running out. In order to maximise the value of the resources that these countries have, there is no time to be wasted.
At the end of the day it's all about working together – it's not the oil companies alone; not the state oil companies, or the government alone – we are all in this industry for the same thing – to create value – but time is running out and we need to do this now.
About Edward van Kersbergen
Edward van Kersbergen is founder, majority shareholder and Chairman of Mazarine Energy. He also serves on the Investment Committee of Simmons Private Equity II L.P., the private equity division of Simmons & Company International.
Edward has founded, invested in and managed a number of companies active in the oil and gas and alternative energy segments. He recently served as Executive Chairman of Xodus Group, the global upstream oil and gas consultancy, where he helped triple the company’s business in two years’ time. In July 2013 he sold his majority shares in Xodus to the Japanese engineering company Chiyoda.
Edward began his career in 1988 with Shell working on offshore drilling rigs, as a well-site operations engineer. Following various technical and commercial roles for Shell companies in 1998 Edward joined Premier Oil in Singapore. After a spell with RDS – Resource in Aberdeen as Business Development and Petroleum Engineering Director, he was co-founder and CEO of subsurface consultancy Horizon Energy Partners in 2001, which was sold to SGS in 2008 . In 2006, he founded Oyster Energy, a co-investment company for gas assets in the Dutch sector of the North Sea. This venture was sold to Elko Energy in 2009.
Edward is a graduate in Physics from Delft University of Technology in Netherlands.