AberdeenEnergy reportOctober 2008
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 1
The discovery of significant oil depos-
its in the North Sea during the 1960s
and 1970s marked the beginning of
a new era and a definitive turning point in the
modern history of Aberdeen, Scotland’s third
largest city. Not only did the city (and, more
broadly, the Northeast of Scotland) become
the UK’s main base for oil and gas operations
in the North Sea, it also established itself over
the years as – arguably – Europe’s oil capital
and one of the industry’s most important global
hubs. “Although Aberdeen is a provincial city
of only 220,000 people, it is the base of one
of the UK’s only two truly global economic
sectors, oil and gas, the other being financial
services,” underlines Geoff Runcie, Chief
Executive of the Aberdeen and Grampian
Chamber of Commerce (AGCC).
Over the last four decades, Aberdeen
has experienced the ups and downs of the
oil and gas industry first-hand and matured
alongside the UK’s Continental Shelf (UKCS).
After the early years in which foreign play-
ers dominated almost entirely the services
market for the industry, a myriad of local
companies slowly emerged and joined the
international firms, consolidating a highly
diversified and integrated supply chain
concentrated in Aberdeen. Today, despite a
widely unexpected revival of the ageing oil
province thanks to the effects of sustained
high oil prices, everyone in Aberdeen and
the UK can’t help but wonder just how much
longer it can maintain its position as a global
centre of excellence for oil and gas, even as
the UKCS moves well into a period of long-
term decline.
»Part 1 – Life after forty: a second wind for the UKCS?
Aberdeen:a global center of excellence for oil and gas
Project coordination: Carolina Oddone Text and research: Robert Murillo
This supplement was produced by Focus Reports LLC. For more information and exclusive
interviews, log on to www.focusreports.net
2 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
Not that you would be likely to get any type of ‘decline’ sensation
while driving down the Bentley-filled streets of the Granite City, check-
ing out property prices or trying to get a table at one of the city’s many
high-end restaurants. Indeed, in just one generation the oil and gas
industry has catapulted a once economically stagnant region towards
having one of the highest GDP (Gross Domestic Product) per capita in
all of the UK, and an unemployment rate of less than 2%. If anything,
the number one challenge for companies – from the supermajors to the
small suppliers – is the lack of available skilled workforce in Aberdeen
to keep up with demand deriving not only from the North Sea, but also
from oil provinces around the world.
Still, numbers don’t lie and what is clear is that the main source
of Aberdeen’s wealth and prosperity, the UKCS, is dwindling. After
attaining a production peak of 4.5 million barrels of oil equivalent
per day (boepd) in 1999, daily production in 2008 has averaged
only about 2.7 million boepd, with most producing fields in their
decline phase. How these figures are likely to evolve and exactly
how much oil and gas can still be recovered from the UKCS is a
matter for debate and the estimations vary. Professor Alex Kemp
from Aberdeen University, one of the most prominent analysts on
the issue, has elaborated models which indicate that between 2008
and 2035 total oil and gas output from the UKCS will amount to
somewhere between 17 and 20 billion boe, depending on variables
like price fluctuations and exploration activity.
Kemp’s calculations are slightly more conservative than the figure
of 21 billion put forward by the government (with a potential upside
of up to 30 billion) and the estimates of 25 billion used by the trade
association Oil & Gas UK. However, unlike Kemp’s model, both the
government and industry numbers consider production will go on
beyond 2035. “We also consider that production is likely to continue
towards 2040, though at very small amounts,” says Kemp. Future
projections aside, all agree that ultimately the continuity of produc-
tion from the UKCS will depend on a combination of optimizing
existing production, bringing on stream undeveloped fields, and
continuing the exploration effort so as to add reserves.
Maturity has also meant that the average size of new discoveries
has decreased considerably in the UKCS. Adding this to the fact that
many of these discoveries tend to be geologically complex fields
and far from existing infrastructure, it is no wonder that the average
cost per barrel in the UKCS is notably higher than in other oil prov-
inces. The high oil price environment of recent years has managed
to encourage established players in the UKCS to continue invest-
ing in existing fields and rekindled the interest of new companies
to enter the region, but many of the challenges facing the industry
have yet to be tackled.
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4 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
Keeping the window of opportunity openIt was only in 2007 that the main trade bodies in the UK represent-
ing the operators (oil companies), on one side, and the contractors,
on the other, decided to come together and form Oil & Gas UK
(OGUK) to jointly address the issues affecting the whole industry.
Malcolm Webb, Oil & Gas UK’s Chief Executive, explains that “it
had become clear that it would be of great interest for all parts of
the value chain to have an association which could act as a single –
though not exclusive – voice for the industry, particularly in order to
raise our profile amongst the government and the general popula-
tion.”
As the main spokesbody for the industry, OGUK represents the
sector and interacts with policy-makers at different levels, from local
governments to Brussels. OGUK has been proactive in engaging the
British government, at a moment in which it is increasingly under
pressure due to concerns about the cost and security of energy
supplies. Webb maintains that there is a ‘window of opportunity’ to
seize in the North Sea while the existing infrastructure is still opera-
tional, but there are many obstacles to overcome in order to ensure
that the UKCS remains a dynamic producing region and continues
contributing to the country’s energy supply and wealth.
“There is no magic switch that can change the production profile
of the UKCS overnight. The only way to achieve this is through
sustained capital investment, meaning billions of pounds if we are to
recover the full 25 billion barrels of reserves estimated in the basin”, affirms Webb, adding that “to this end, the industry needs to have
the right business climate: on one hand fiscal stability and predict-
ability, which as not been the case in recent years. On the other
hand, we need specific stimulus to capital investments in order to
start seeing a more positive trend in a few years’ time.” For OGUK,
the special incentives should focus particularly on promoting invest-
ment in marginal field opportunities, unlocking the reservoirs West
of Shetlands, and encouraging enhanced oil recovery from existing
operations.
Welcoming the new waveAs major oil companies tend to focus their resources and efforts
on the big plays in regions like West Africa and the Caspian, new
opportunities have been opening up for medium-sized operators in
UKCS. These dynamic players have been arriving en masse over the
last several years and setting up offices in Aberdeen, an encourag-
ing sign for the city and the mature UKCS. In Prof. Kemp’s view,
towards the future, “the UKCS is going to depend more and more
on these types of players, so the government has been proactive in
trying to attract them to continue coming and investing.”
One of the most notable entries to the UKCS was achieved by
Texas-based Apache in 2003, when it acquired BP’s Forties Field
– the largest field ever found in the UK North Sea, discovered in
1970 – and has since managed to not only increase production,
but also add new reserves to the ageing assets. Talisman Energy,
an international oil company from Canada, is another one of the
success stories regarding acquisitions and turnarounds of mature
fields in the UKCS. As one of the pioneers of this trend, Talisman
established a diversified UK portfolio, allowing it to become one of
the biggest operators in the UKCS. Aberdeen-based Dana Petro-
leum and Venture Petroleum have built on their North Sea success
to expand their E&P activities abroad.
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Malcolm Webb, Chief Executive, Oil & Gas UK
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 5
An interesting aspect of the UKCS’ E&P landscape in recent years
is the high number of Canadian companies investing and operat-
ing in the area. The Buzzard Field, the UKCS’ largest discovery in
over a decade with over 500 million boe, was brought on stream
by mid-tier Canadian operator Nexen in early 2007, following the
company’s major asset acquisitions in the area in 2004. Fellow Petro-
Canada also holds a significant non-operated interest in the Buzzard
project. North Sea-focused Oilexco entered in 2002 and has since
been one of the most prolific companies in terms of drilling in the
UKCS. Yet another Canadian and UKCS-focused company, Ithaca
Energy, entered in 2003 through participation in licensing rounds
and has made considerable discoveries.
“Canadian oil and gas corporations are entrepreneurial in their
outlook and willing to diversify overseas and internationally,” sug-
gests Iain McKendrick, Chief Operations Officer (COO) of Ithaca,
adding that in terms of the kind of reservoirs that they have been
dealing with, “the North Sea is well suited for Canadian companies’
technical capabilities and risk profile.”
In 2008, Ithaca has been busy raising funds in order to finance
its ambitious exploration, development and acquisition plans in the
UKCS. The company’s Jacky and Athena discoveries are expected
to come into production in late 2008 and 2009 respectively, while
the Stella assets bought from Shell and Esso are slated to come
on stream in 2010. Ithaca has also spent much of 2008 finalizing
the details regarding the acquisition of Talisman’s Beatrice and
Nigg facilities, in a transaction that will free Talisman of assets too
small for its now larger scale, while giving Ithaca the opportunity to
develop infrastructure for neighboring Jacky.
In McKendrick’s view, investors are putting their money into
Ithaca for two main reasons. “The first is the quality of our portfolio,
and the fact that we take high equity interest in all of our assets.
Ithaca has interests of 90% on Jackie, 70% on Athena, 66% on Stella
and 100% on Beatrice. The second is the quality of the people who
work on our developments, some of which are recognized experts in
their fields,” he says.
Ithaca does not rule out potentially making company acquisitions
of its own in the future, after having rejected a non-binding offer
made public by Endeavour. “The number of independent com-
panies we see in the UKCS is unsustainable,” states McKendrick,
adding that “within the current banking situation, many are going to
find themselves high on ambition but short on cash.”
Though Petro-Canada is a much larger and internationalized
(after the 2002 acquisition of Veba Oil & Gas’ upstream operations)
player, the UKCS also represents a large chunk of the company’s
overseas production, primarily through its interest in Buzzard,
with the remainder coming from the company’s operated assets
around Trinity and Scott. Petro-Canada inherited assets scattered
over a large swath of territory in the UKCS, which, according to the
company’s Northwest Europe Regional Manager, Jim Scrimgeour,
required developing a ‘concentric growth approach’, based on core
areas with infrastructure to which the other surrounding fields are
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6 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
“The key example
is the Triton core
area, which receives
the oil from the
Western Exten-
sion, Clapham and
Pict fields,” states
Scrimgeour. “Pict
illustrates how
Petro-Canada is
bringing to develop-
ment fallow fields
discovered almost
two decades ago.
These are all small
fields of between
10 to 20 million barrels of oil, but we are able to make them highly
profitable,” he adds, highlighting the company’s contract strategy
that has allowed it to sanction first oil in 15 months in some cases,
“which is exceptional.”
“The main challenge in the coming years will be to have access to
acreage, and we hope that the government keeps delivering. There
are licensing rounds coming up and fallow processes which could allow
us to invest in exploration ideas developed by smaller companies,”
states Scrimgeour, adding that “growth will probably be based more
on exploration than on acquisitions, but they are not completely ruled
out either.”
All these dynamic Canadian players have had to share the head-
lines in 2008 with TAQA (Abu Dhabi National Energy Company), a
fast-growing energy group based in Abu Dhabi, after acquiring six
mature fields in the UKCS in July. TAQA had already set its foot in
the UK initially when it acquired Talisman’s non-operating interests
in the Brae assets in 2007, afterwards finalizing its ‘Big Bird’ transac-
tion with Shell and ExxonMobil in 2008 for assets currently produc-
ing about 40,000 boepd and containing between 200 and 300
million boe in reserves, according to the company’s own numbers.
Peter Barker-Homek, CEO of TAQA worldwide, was recruited in
2006 shortly after an IPO, with the mission to turn a company essen-
tially focused on the power generation business in the UAE into a
global energy group. “They basically asked me what I would do if
I had the opportunity to build a global energy company. I shared
my vision with them, and they said go do it. Needless to say, it was
a dream come true,” states Barker-Homek. In record time, he put
together a small team to assess different opportunities around the
world, and with $4.5 billion in their pockets went on to make acqui-
sitions in Canada, Africa, Northern Europe and the Middle East.
According to Barker-Homek, the UK acquisition “is a defining
moment for TAQA’s European business, creating an upstream player
of a considerable size. We have gained not only a significant amount
of reserves, but also the opportunity to grow them,” states Barker-
John Scrimgeour, Northwest Europe Regional Manager, Petro-Canada
Leo Koot, TAQA Managing Director UK (left); Peter Barker-Homek, TAQA CEO (center); Paul van Gelder, TAQA Managing Director Europe (right)
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8 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
Homek. “TAQA is dedicated to giving new life to mature assets,
which the majors tend to keep in harvest mode. We are playing a
key role in reinvigorating those assets in the North Sea, while at the
same time helping fuel the prosperity of Aberdeen.” A brand new
office building in the Westhill area will house TAQA’s growing staff,
which is expected to reach between 400 and 600 people.
TAQA’s Managing Director for the UK, Leo Koot, explains that
the company will continue to build around the existing assets as
hubs, seek opportunities to acquire other mature assets, and look
into the possibilities for corporate acquisitions in the area. “All
of this will take us to the next level in which we will be aiming to
double production,” states Koot.
Still a majors’ world after allMajor oil companies the likes of BP were the main architects of the
huge developments that quickly turned the North Sea into one
of the world’s main producing regions in the 1970s. Today, how-
ever, the big reservoirs and mega-projects which are material to a
supermajor are located in oil provinces in Africa, South America and
Asia, while most of the existing UKCS fields are in decline and the
possibilities of major discoveries in the region are very slim. So, does
this mean the end of the line of the supermajors in the UKCS?
Not so fast, says Roland Festor, Managing Director of Total E&P
UK. “There is still a lot of potential in the UKCS, even for the major
oil companies,” he affirms, adding that “it is not right to consider
that the only dynamic companies are the independents. I can say
that Total E&P UK, after 40 years, remains very dynamic; there is a
great atmosphere and a desire to stop the decline and get produc-
tion growing again.”
Although Total’s production in the UKCS is currently declining,
recent discoveries are leading the company to believe that it is not
only possible to stabilize production – 250,000 boepd, representing
10% of Total worldwide – but that it may actually rise again. “We
have had incredible success in exploration, with our last five wells
drilled turning into discoveries,” affirms Festor. Total’s achievements
are illustrated by its enduring Alwyn development, which came on
stream in 1987 with an initial production profile of 10 years yet is
still on stream today in 2008 and looking forward to 20 more years
of life.
Total is also set to play a key role in the development of the West
of Shetlands, where it is operator of the two largest gas discover-
ies in the area, Laggan and Tormore. According to Festor, “we are
looking to launch a new project there and hoping to move into the
development phase in the near term. Our two discoveries are very
close to each other and contain enough gas to build a stand-alone
project; however, they are not big enough to support the construc-
tion of a large regional infrastructure development.”
Indeed, in order to begin developing the considerable amount of
reserves sitting in the West of Shetlands to its full potential, brand
new infrastructure will have to be built in the area. In order to work
together to find infrastructure solutions for the West of Shetlands,
government and industry have established a ‘West of Shetland Task-
force.’ Along with Total, other companies with interests in the area
such as BP, Chevron, ExxonMobil, and Dong are part of the special
taskforce.
For Rick Cohagan, President and Managing Director of Chevron
Upstream Europe, the challenge of developing West of Shetlands
is a prime example of why the supermajors are still crucial for the
UKCS, as smaller players lack the financial strength to carry out
Total’s Alwyn North platform
North Cormorant platform, acquired by TAQA from Shell in summer 2008
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 9
large infrastructure projects. “Overall, the industry works very much
like an ecosystem,” says Cohagan. “Every company has its place
and role to play, each one making an important contribution to the
big picture. In the end it is about finding a way to make all of this
work for everybody’s benefit, and maximizing production from the
UKCS,” he adds.
Chevron has recently contracted a new drill ship with Stena
which is set to start drilling wells in the West of Shetlands in late
2008. Though Chevron’s involvement in this area is still in the early
stages, and there are major economic and technical challenges to
overcome, Cohagan is optimistic about the company’s strong lease
position there. “The early indicators we have for our prospects in
the West of Shetlands are promising, so we are excited to begin
drilling and hopefully have the kind of success that could take us to
further development in the coming years.”
In terms of existing production, Chevron Upstream Europe rep-
resents around 180,000 boepd, with the UK production accounting
for 120,000. “The profiles of the fields vary, with some fairly large oil
fields like Captain and Alba, which are in their mid-life phase, and
gas developments like Britannia, co-operated with ConocoPhillips.”
says Cohagan.
As for its presence in Aberdeen, not only has Chevron chosen the
region as its headquarters for all European E&P operations (includ-
ing the UK, Norway, Denmark, the Netherlands, the Faeroe Islands,
and Greenland), but it also established a new Technology Center
in 2006. The center, currently employing around 60 people, carries
Yardb_OGFJ_0810 1 9/19/08 3:29:48 PM
Roland Festor, Managing Director, Total E&P UK
10 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
out research, provides technology
services for European operations,
and supports global operations.
ConocoPhillips’ UK managing
director Archie Kennedy shares his
peers’ view that there are still good
opportunities for the supermajors in
the UKCS and that they have a key
role to play in the future of the basin.
“ConocoPhillips has been one of
the most active investors in recent
years in the UKCS,” he says, adding
that “we have reinvented ourselves
several times over the many years of
operations in the country. Our portfolio has evolved; we have changed
our competencies, developed new technologies and a huge skills base
to reflect our current scope of business in the area."
The UK is currently one of ConocoPhillip’s largest business
units outside its core area, North America. “The general focus is
to attempt to hold the UK’s production roughly flat, which is quite
a challenging thing to do in a mature basin. In order to achieve
this, we have to grow the base business every year just to keep our
production at the same level. This requires considerable investment
plus the need for continued success in drilling. We have to ensure
that the UK is an attractive place to do business and that our proj-
ects remain competitive,” Kennedy says.
Ithaca_OGFJ_0810 1 9/19/08 3:12:28 PM
Rick Cohagan, President & Managing Director, Chevron Upstream Europe
Archie Kennedy, UK Managing Director, ConocoPhillips
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 11
The ever-changing Aberdonian entrepreneur When Sir Ian Wood took over his family’s Aberdeen-based fishing
business in 1964, after obtaining a university degree in psychol-
ogy, few could have imagined that it was the beginning of a career
that would lead to the creation of one of the UK’s largest and most
successful engineering companies, Wood Group, employing over
26,000 people in 46 countries.
The arrival of the first oil people in Aberdeen in the late 1960s,
clad in cowboy boots and hats, was quite a culture shock for the
locals, and Wood was no exception. But the young Ian Wood soon
perceived the huge potential that this new industry in the North Sea
could bring for Aberdeen. “I can’t really say I had a long term vision
at that point, but I did have a kind of stubbornness and was able to
recognize the opportunities that this new industry could bring,” says
Wood.
Much of Wood’s motivation at that point in his life came as a
reaction to what he perceived as the newcomers’ patronizing atti-
tude towards Aberdonians. That filled him with “a real hunger and
ambition to prove that a Scottish company could do just as well as
the Americans or anyone else,” admits Wood, quickly noting that
he is much less parochial nowadays and simply considers himself
and the Wood Group as global citizens. That initial drive, however,
and his strong focus on getting the right people cemented Wood
Group’s early success and served as the guiding lines throughout
the company’s evolution.
The oil price crash in
1986 and Wood’s own
long-term vision drove
him to make diversifica-
tion and international expansion a
cornerstone of the company’s strat-
egy, aspects in which Wood Group
was also a pioneer among the other
Aberdeen-based service providers.
The company has since gone public
in 2002, and Sir Ian Wood has taken
a step back by handing over his posi-
tion as Chief Executive to Allister Langlands (Wood remains involved
as an active Chairman), but Wood Group’s reputation as an icon of
Aberdeen and the North Sea is all but secured. Many in the Granite
City express regret that more companies did not take Wood Group’s
lead early on in order to become major international players in their
own right. Nonetheless, examples of Aberdonian entrepreneurship
and business-savvy abound since the beginning of the UK’s offshore
industry.
One such is Craig Group, a privately-owned company which got
started in the North Sea’s shipping business 75 years ago. Doug-
las Craig, the third generation in the family-run business, led the
company’s transformation since the 1970s towards offshore support
services for the oil and gas industry. Today it is a company with
turnover in excess of $180 million, leader in the supply of stand-by
Sir Ian Wood, Chairman, Wood Group
TAQARev_OGFJ_0810 1 9/24/08 4:02:28 PM
12 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
vessels in the North Sea, and growing internationally through its
oilfield procurement services division. In a whole different business
area there is the telecommunications solution provider Nessco,
which was founded by Aberdonian Tom Smith in 1979 to service the
offshore industry’s specific needs. Today, on top of Nessco’s estab-
lished position in the UKCS’ oil and gas market, the company has
branched out towards new sectors and expanded abroad.
Another of Aberdeen’s emblematic entrepreneurs is Jim Milne,
founder of the diversified Balmoral Group. Through the subsidiary
Balmoral Offshore Engineering (BOE), Milne started providing buoy-
ancy and elastomer products and services to the oil and gas industry
over two decades ago. However, the industry’s latest downturn
in the late 1990s seriously affected the business, to the point that
BOE eventually shut down, after an unsuccessful attempt in 2003 to
weather the storm through a joint-venture with its main competitor,
CRP Group.
Milne was not to remain out for long though, and in 2006 he
decided to start Balmoral’s offshore business afresh. Milne and his
team moved quickly to design, build, install, and commission a
state-of-the-art plant with broad manufacturing facilities. To Milne’s
own surprise Balmoral soon secured deepwater contracts for multi-
billion dollar projects in places like Brazil, India, the Gulf of Mexico
and the China Sea. “Initially we assumed that we would have to
start with small jobs and gradually work our way up again. I was
humbled by the high opinion that the industry kept of Balmoral and
its people through the tough years,” he says.
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Jim Milne, Chairman and Managing Direc-tor, Balmoral Group
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 13
Another man locally lauded for ‘taking big business back into
Scottish hands’ is Bob Keiller. He was responsible for one of the
most talked about transactions in recent years: the management
buy-out (MBO) of Halliburton’s production services division. Only
a few months after joining as
managing director in 2004, he
realized that the business would
be better off alone and soon
managed to get Halliburton’s
approval to go ahead with the
deal. After the long and ardu-
ous process of splitting a global
business, Production Services
Network (PSN) emerged in
2007 as a major contractor with
revenues of over $1 billion and
strong growth. Though he is
reluctant to see himself as an
entrepreneur, his actions have
won him several prestigious
business awards.
Many Englishmen have also arrived in Aberdeen with the oil and
gas industry, and ended up making the Northeast of Scotland their
home, such as Newcastle-born Kevin Mahoney. After moving up the
ranks in Santa Fe to subsea superintendent, he left the company in
1992 and founded Yardbury, a business originally focused on the
recertification of drilling equipment. “Over the years I built Yardbury
up from very small beginnings, steadily developing a diverse range
of services,” says Mahoney.
One of Mahoney’s preferred means of growing the business
was through acquisitions, the
first being a long established
hydraulics company specialized
in the repair and manufacture
of power units, Glenmac, in
1999. In 2002 Yardbury further
expanded its capabilities by
acquiring Dee Bridge Electri-
cal Engineers. As a result,
“today Yardbury is ready to
provide hydraulic, electrical and
mechanical services to the oil
and gas industry, all in-house
and controlled under the same
roof,” he states.
Internationally, Yardbury
took its first major steps in 2003
when it entered into a co-operation agreement with a Libyan drilling
contractor to re-certify equipment in that market. Mahoney admits
that it was a challenge, “but today Yardbury has its own state of
the art workshop in Libya similar to the one in Aberdeen, smaller in
scale but with Yardbury management systems."
ConPhi_OGFJ_0810 1 9/23/08 2:03:47 PM
Bob Keiller, CEO, PSN
14 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
Cutting-edge technology for rough seasWith more than 400 fields located
around the British Isles, over 40
years the UK’s oil and gas indus-
try has recovered a total of 36
billion boe from beneath the sea-
bed, in one of the world’s most
hostile offshore environments.
Thanks to its own rough nature,
Scotland has become a global
centre of excellence in offshore
engineering, subsea technology
and in the export of offshore
goods and services.
In developing its Elgin/Franklin
assets, Total has had to overcome
serious technological challenges due to extreme high pressure /
high temperature (hp/ht) reservoir conditions. For Total’s Roland
Festor, Total’s implementation of cutting-edge technology in the
UKCS is one of the main elements helping the company attract
new talent, at a moment of skill shortages and high turnover in
the industry. “Total E&P UK offers both young graduates and
experienced people the chance to work on some of the world’s
most challenging fields in terms of technology like Elgin/Frank-
lin,” he says. Another heavyweight, Chevron, is looking into
opportunities to apply enhanced oil recovery technologies in
order to optimize and prolong the production life of its older
fields, despite the particularly expensive and technically chal-
lenging environment in the North Sea.
For Prof. Kemp, mid-sized and independent oil companies are
being successful in “extending the lives of the fields and enhanc-
ing recovery through increased drilling and the application of
new techniques.” Scrimgeour, points out that Petro-Canada
is not just about taking over old fields: “We are more about
applying new high-end technologies in order to develop fields of
different sizes, which allows us to deliver projects on time and on
budget that make commercial returns,” he says.
Balmoral’s Milne also highlights the great technical chal-
lenges the company deals with from Aberdeen, as it works in
uncharted territory for projects operating at depths exceeding
3,000 meters. “We can be the last link on jobs that are worth
many billions of dollars, so it is a big responsibility,” he admits.
But Milne seems to crave the challenge and adrenaline of major
undertakings, as illustrated by Balmoral’s current development of
the world’s largest bend restrictor. “It is often said that Balmoral
will not hesitate to go places where others fear; those who say
this are right. I’m at my happiest when involved with innovative
and revolutionary materials, processes and products,” he says.
Aberdeen has also proved to be a fertile breeding ground for
new engineering companies focused on niches within industry.
Project Design & Management Services (PD&MS) was created
in 2002 by a group of four friends with different backgrounds
within the oil and gas sector. Providing primarily engineering
and project management support to brownfield developments
and rig upgrades, the company went from having just eight
employees initially to over 100 in 2008, reaching a turnover in
excess of $27 million. Managing director Dave MacKay states www.petro-canada.com
Petro-Canada is one of Canada’s largest oil and gascompanies, operating in both the upstream anddownstream sectors of the industry. Our goal is tocreate value through the safe and responsibledevelopment of oil and gas resources.
Our International & Offshore business operates in theNorth Sea, East Coast Canada, Libya, Syria, andTrinidad and Tobago, and delivers more than half ofthe company’s oil and gas production.
With offices in Aberdeen, The Hague, Stavanger andLondon, we are successfully growing our business inthe U.K. and the Netherlands sectors of the North Sea,with associated exploration activities extending intoNorway. Last year we doubled our North Sea production.
Our strategy is based on “concentric growth”; phaseddevelopment around core production areas. This approachhas enabled us to build up a world-class executioncapability in sub-sea developments, delivering them ontime, on budget and, above all, safely.
Companies like Petro-Canada are the future for the oiland gas industry in the North Sea. With a focused strategy,high quality assets and great people, it’s a good time tobe part of our team.
To find out more about Petro-Canada, please visit our website: www.petro-canada.com
PETRO-CANADA IS GROWING INTHE NORTH SEA
PetCan_OGFJ_0810 1 9/23/08 11:37:13 AM
Dave MacKay, Managing Director, PD&MS
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 15
and the buyer was Wilton, a Teesside-based company mainly
focused on providing fabrication and offshore mobilization ser-
vices.
According to
MacKay, PD&MS
and Wilton’s
combined capacity
allows them to tar-
get EPIC type proj-
ects which may have
previously been out
of their individual
reaches. “Our initial
philosophy of 'no
job is considered
too small' can now
be expanded to
include 'and no job
is considered too
large' and we can
provide clients with
a direct one-stop
shop solution which
will include design
engineering, procurement and materials management, fabrica-
tion and FAT, construction and commissioning elements.”
that they “saw a niche in the market for smaller types of projects,
with quick and cost efficient turnarounds.” After six years of
steady growth, he feels that PD&MS is nearing the upper end of
its niche and is now
looking at “taking
things to the next
level.”
2006 was a year of
particularly meteoric
growth for PD&MS,
raising its profile and
reputation among
the UK’s oil and gas
industry and making
it a prized target for
an acquisition. “As it
has never been our
intention to grow
to the size of major
companies in our
field such as typically
Wood Group and
PSN, our growth
strategy contem-
plated the possibility of being purchased by another player when
the moment was right.” Indeed, that moment came in April 2008
PDMS_OGFJ_0810 1 9/19/08 3:18:08 PM
Chevron’s Captain FPSO (foreground) and wellhead protector platform (background)
Imagine if scientific research and natural resources came together for a better future
mplementary, naturally
Our energy is your energy
No-one wants today’s innovations to compromise our development in the future. This is why Total has defined its Research & Development around four major areas: better knowledge of both fossil and renewable energy foroptimum usage; reliability and efficiency of our operations; competitiveness of products and how they adapt to market needs; and controlling the impact of our activities on the environment. In 2008, Total is investing onebillion dollars in R&D, with more than 4,000 researchers working in 22 research centres worldwide. In addition,we have more than 600 active partnerships with other large industrial groups, universities and specific researchorganisations. www.total.com
TotEP_OGFJ_0810 1 9/23/08 11:35:18 AM
16 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
A special place for subseaOf the many areas of expertise which have been developed in and
around Aberdeen in support of the UKCS offshore industry for over 30
years, the subsea sector stands out as one of the most cutting-edge
and innovative. In fact, the Westhill district just outside of the city
center is known as ‘SURF city,’ in reference to the high concentration of
subsea-focused and related companies in the area. Major subsea con-
tractors such as Subsea 7, Technip, and Acergy all have large headquar-
ters there, supporting operations well beyond the North Sea.
Many smaller emerging players specialised in the subsea sector
have roots in Aberdeen, and are experiencing phenomenal growth
as the global demand for subsea services continues strong. A prime
example is TSMarine, established in 2004 in response to the growing
needs in the field of subsea decommissioning and rigless intervention
solutions. According to Alasdair Cowie, CEO of TSMarine, “The vision
from the start has been to engage in these specific subsea activities,
not to become an EPIC type company or drilling contractor ourselves.
The idea was to open up new opportunities, going beyond the tradi-
tional thinking in the subsea market.”
After observing several false starts over the last 20 years, Cowie is
confident that the subsea well intervention business has finally started
to take off, as a more cost effective alternative to drilling rigs. “Opera-
tors are now starting to establish long-term subsea field support con-
tracts which include a high level of well intervention, IRM, component
installation and indeed decommissioning services. There are only three
operators doing subsea well intervention for the moment, but there
is no doubt that they are going to
be joined by a large number of the
other major oil companies over the
next five years,” says Cowie.
According to him, as some of the
major subsea contractors move on
with the majors to massive projects in
areas like West Africa and Brazil, “a
huge gap opens up which companies
like TSMarine are in a prime position
to fill.” In 2008 about 70% of TSMa-
rine’s revenues came from overseas,
but Cowie believes that the UKCS
should pick up in 2009, allowing the company to establish a 50/50 split
between domestic and international business. TSMarine’s turnover has
skyrocketed from $18 million in 2005 to an expected $140 million in
2008, driven by major contracts such as the one awarded by Woodside
for rigless intervention in offshore Australia. Fresh new resources from
both debt and equity are allowing TSMarine to build its own custom-
ized vessels and to accelerate growth.
William Edgar, chairman of industry body Subsea UK, highlights
that about 40,000 people are employed in the country’s subsea sector,
which was worth about $9 billion in 2007 and growing at double digits.
That is a very significant part of the global subsea market, which is
estimated at about $25 billion. Well aware of the sector’s potential and
growing needs, the founders of DES Operations set out to develop
www.tsmarine.net
SpecialistsRigless and Subsea Intervention
Well InterventionConstruction SupportSubsea Well Installation and CommissioningWell abandonmentDecommissioning
Scotland HQ Office Australia Office Lagos OfficeSingapore Officecotlandnd H HQ OfOffificece Australia Office
TSMarRev_OGFJ_0810 1 9/24/08 4:09:00 PM
Alasdair Cowie, CEO, TSMarine
Imagine if scientific research and natural resources came together for a better future
mplementary, naturally
Our energy is your energy
No-one wants today’s innovations to compromise our development in the future. This is why Total has defined its Research & Development around four major areas: better knowledge of both fossil and renewable energy foroptimum usage; reliability and efficiency of our operations; competitiveness of products and how they adapt to market needs; and controlling the impact of our activities on the environment. In 2008, Total is investing onebillion dollars in R&D, with more than 4,000 researchers working in 22 research centres worldwide. In addition,we have more than 600 active partnerships with other large industrial groups, universities and specific researchorganisations. www.total.com
TotEP_OGFJ_0810 1 9/23/08 11:35:18 AM
18 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
innovative solutions to facilitate companies’ access to subsea wells in
terms of processing and production optimization. They eventually came
up with several patents for a ‘USB-type port’ which could be retrofitted
to the underwater christmas tree, most notably the Multiple Applica-
tion Reinjection System (MARS) which was filed in 1999.
“The business was set up with the aim of lifting reserves for subsea
wells to the same level that can be attained through platform wells,”
says Ian Donald, co-founder and current Vice President of DES Opera-
tions. “We found that the potential upside recovery that could be
achieved through the application of MARS in subsea processing was,
in certain cases, up to 20%. MARS also gives companies the ability to
carry out well intervention without the need for a new drilling opera-
tion, a long term benefit throughout the life of any field,” he adds.
Donald explains that, “BP and Shell were the first to move forward
with our technology. While BP decided to use MARS for multiphase
pumping in the Gulf of Mexico, Shell focused it on well stimulation in
the North Sea.” With the benefits of DES Operations’ solutions proven,
the company doubled in size for several years and in 2007 accepted an
offer to become a part of the Cameron Group.
In Donald’s view, this move has allowed DES Operations to truly
globalize its offer to the industry. “Now we are able to support clients
in all of their international markets, all while retaining a distinct identity
within the Cameron Group. Their global footprint gives us the opportu-
nity to move from the pilot projects phase to full scale implementation
capability,” he says. DES Operations is already supplying operations in
the North Sea, West Africa, the Gulf of Mexico, and soon in Brazil.
In with the new…in with the old While the UK’s North Sea may not be seeing the type of mega-projects
taking place in other oil and gas provinces, there is plenty of work to
go around for Aberdeen’s offshore contractors as operators seek to
get the most out of decades old assets and push back decommission-
ing as far as possible. As Archie Kennedy points out, “the bulk of new
developments in the UKCS will be relatively smaller fields that will be
reliant on existing infrastructure for off-take, as opposed to greenfield
projects. Much of that infrastructure is quite mature and maintaining
asset integrity is a crucial aspect.” Local major engineering groups such
DES_OGFJ_0810 1 9/19/08 3:20:00 PM
Petrofac’s new head-quarters in Aberdeen’s city center
FocRep_OGFJ_0810 1 9/22/08 11:36:49 AM
October 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 19
as Wood Group and PSN
have developed particu-
lar brownfield expertise
in their North Sea
operations, on the back
of which they are now
supporting production in
mature fields around the
world.
International oil &
gas facilities service
provider Petrofac also
has Aberdeen as its main
hub for its Operations
Services division, after the acquisition of Atlantic Power & Gas and PGS
Production Services in 2002. Through a combination of organic growth
and acquisitions, Petrofac is now pulling together a central capabil-
ity based in Aberdeen offering a full range of services, from opera-
tions, maintenance, brownfield modification, well services, production
engineering, specialist consulting and training. The company is in the
process of bringing everyone together in its new offices in the city
centre, where it already has over 700 people working.
According to Gordon East, Managing Director of Petrofac Facilities
Management, “Petrofac has deep roots and heritage in Aberdeen, and
our base in the city is symbolic of our long-term commitment to the
region and the North Sea. I believe that the oil & gas industry has many
more decades of life here”.
In East’s view, one of the keys to Petrofac’s
success has long been its ability to generate
commercial innovation. The most significant
example of this has been the duty-holder
model, which Petrofac pioneered over 10 years
ago in the North Sea. “Whilst others have
followed, Petrofac remains the leading player
in this market, and has successfully taken the
concept overseas”, he states. One of the com-
pany’s main milestones in this regard has been
the major contract awarded by Dubai’s govern-
ment to manage the entirety of its offshore oil
and gas assets, which East hopes will open new
opportunities in the Middle East and with other
National Oil Companies around the world.
Besides the Operations Services and its tra-
ditional Engineering & Construction business,
Petrofac has introduced another innovative
approach to the oil and gas industry with its
Energy Development division. Indeed, through
this division “Petrofac has provided its own
capital for upstream and infrastructure projects
and is investing alongside its customers and
the services it provides, thereby producing
another new concept in the industry”, says
East. In the UKCS, Petrofac is keen on investing
in the development of stranded, marginalized
or non-core assets. The company has recently
announced achieving field development
approval for the Don area, which Petrofac is
particularly proud of as many other companies beforehand had been
unable to come up with a development solution for that area.
Further along the value chain, companies specialized on the mainte-
nance side are also keeping busy and focusing on renewing multi-year
contracts with key clients. One of the main players is Aberdeen-based
BIS Salamis, whose CEO Ian Nickerson explains that there is an increas-
ingly strong demand for its services in the region since “assets that
are already nearing the end of their estimated lifespan are being both
upgraded and more rigorously inspected and maintained with the aim
of remaining operational for another 10 or even 20 years”.
Much like BIS Salamis, Cape
Industrial Services has been diversifying
from its traditional fabric maintenance
and deck operations support offerings
towards higher added-value services
such as inspection. John Welsh is
regional director of Cape’s UK Offshore
division running from Aberdeen, which
has doubled in turnover in the last five
years and now represents 20% of the
company’s total revenues. He states
that “standing still isn’t an option for
Cape and we are constantly looking to
further enhance our skills portfolio and
capabilities through training and shared
knowledge.”
Cape Industrial Services’ engineers on-site
John Welsh, Regional Director – UK Offshore, Cape Industrial Services
20 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal October 2008
For the North Sea and beyondDominion Gas brought George Yule on board in 2006 to prepare
the company for sale, culminating in an MBO in May 2007 and with
his becoming chief executive subsequently. After climbing up the
ranks of the industry, from the workshop floor through several levels
of management, he is now ‘living the dream’ as leader of Dominion
Gas’ new and ambitious team.
Dominion Gas is a provider of diving and industrial gases and
equipment for the offshore sector, and as a complement, also
offers engineering solutions. “We are not what some would call a
‘catalogue’ gas company; we are in fact an oilfield services com-
pany, focusing on providing total solutions rather than (just) selling
gas,” says Yule. Dominion Gas is currently broadening its range
of products, services and capabilities; some are being developed
organically and others through mergers and acquisitions. Only seven
weeks after finalizing the MBO, Dominion Gas bough its closest
independent competitor called Global Gas Supplies, making it mar-
ket leader in UKCS in terms of offshore cylinder gases and giving it
new overseas presence in Azerbaijan and Singapore.
The UK currently represents about 70% of Dominion Gas’ busi-
ness, while the remaining 30% is done overseas, but Yule sees this
balance shifting in favor of international operations in the coming
years. “Aberdeen is a mature market, but it is important that we
retain a critical mass of presence here, because it does represent a
‘supermarket’ for many oil and gas and diving companies for their
global activities,” states Yule. “Dominion trades from Aberdeen into
22 different countries, but certain
regions require having a physical
presence in-country. Our plans are
to expand to other areas such as
Latin America, Gulf of Mexico, West
Africa, and the Middle East but
we remain open-minded to other
project-led opportunities in other
locations too,” he adds.
Though emboldened by the
company’s growth, from $9 million
turnover in 2006 to about $40
million in 2008, Yule acknowledges
that it is important to find the right
balance and avoid over-stretching. “In terms of our existing business
locations, we believe that Norway is interesting because it offers a
sustainable market going forward, with longer-term perspectives
than the UK North Sea.” He also sees Norway as a strategic step-
ping stone towards the countries of the former Soviet Union.
Aberdeen-based environmental services company TWMA, focused
on handling and treating waste generated by drilling operations, has
also established itself in Norway and is rapidly expanding its interna-
tional presence well beyond. A significant injection of capital in early
2007, provided by investment partner Lime Rock, has enabled TWMA
to make acquisitions, build equipment, and develop new technolo-
gies. One of the company’s recently launched innovations, the TCC-
RotoTruck, is a compact, mobile, and versatile process equipment
which helps overcome the logistic and environmental issues that arise
when having to move waste material over long distances.
“TWMA is positioning itself as a provider of total environmental
services for the oil and gas industry, both onshore and offshore. We
can offer operators in any location to look at the waste generated
by their activity, and thereafter provide advice and environmental
solutions to safely recycle or dispose of them,” says Ronnie Garrick,
TWMA’s managing director. Besides Aberdeen, the company has
bases in Norway, Egypt, and Nigeria, plus newly opened sales offices
in Houston and Kuala Lumpur. “As a result, TWMA has been experi-
encing a high level of
enquiries and global
interest in the services
that we provide,” he
adds.
The company’s
turnover, projected
to reach about $48
million in 2008, has
doubled over just
two years. In Garrick’s
view, the environ-
mental services
market can only keep
growing in the future,
and in preparation for
the even busier times
TWMA is moving to a
new and larger loca-
tion in Aberdeen.
TWMA Total Environmental Services offers a wide range of specialist solutions to the on & offshore oil and gas industry.
One Company...
...One SolutionTWMA, Greenbank Road, East Tullos, Aberdeen, AB12 3BQ, UK
Tel: +44 (0) 1224 875560 F: +44 (0) 1224 875548E: [email protected]
TWMA_OGFJ_0810 1 9/19/08 3:16:43 PM
George Yule, Chief Executive, Dominion Gas
Ronnie Garrick, Managing Director, TWMA
February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 57
In the midst of global economic tur-
moil, Aberdeen’s oil and gas industry
seems to have at least partially
insulated it from the rest of the UK, if
not the world. Even in an oil province of
declining production and reserves, the
city has remained a fertile hub for inter-
national expansion, M&A activities, and
posted record cargo traffic at the airport
and harbour. As though to emphasize this
imperviousness, in the thick of the finan-
cial crisis, an unlikely vote of confidence
was cast with the approval of Donald
Trump’s plans to build a £1 billion golf
resort just north of Aberdeen.
However, there is growing senti-
ment that it’s a matter of when, not
if, Aberdeen will feel the pinch, and
alongside declining oil prices, other
circumstances aren’t lending much of
a hand. Dramatic cost inflation, ageing
infrastructure, and the looming prospect
of decommissioning have only amplified
calls for a renewed focus on innovation.
Continued trends toward asset transfers
from larger to independent players,
and their reliance on easy finance, seem
doubtful in light of a credit crunch. And
even if these difficulties are overcome,
there is still the matter of who, exactly –
with painful shortages of skilled labour
– will do the overcoming.
»Part 2 – Life after forty: a second wind for the UKCS?
Aberdeen:a global center of excellence for oil and gas
Project coordination: Carolina Oddone Text and research: Arthur Thuot
This supplement was produced by Focus Reports LLC. For more information and exclusive
interviews, log on to www.focusreports.net
LloReg_OGFJ_0902 1 1/16/09 11:44:30 AM
58 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal February 2009
If cause for concern should be felt from the top down, it’s
understandable Aberdeen has not yet felt the same impact as
elsewhere. As Scotland’s First Minister Alex Salmond puts it, his
“biggest concerns are not in the energy sector at all – they lie
elsewhere in the economy.” Where exactly is uncertain, although
the recent takeover of centuries-old Scottish stalwart HBOS by
Lloyd’s TSB would certainly rank among the more prominent. To
assuage worries around wildly swinging oil prices, the former
Oil Economist with the Royal Bank of Scotland responsible for
the 1980s development of the Royal Bank / BBC Oil Index draws
a historical analogy. “To people who wonder about volatile oil
prices, I remind them that when Colonel Drake discovered deep
oil in Pennsylvania, the price went from $30 per barrel to about
$0.20,” says Salmond, arguing that “the price of oil is volatile,
and has always been volatile. People involved in hydrocarbons
are accustomed to volatility, but the volatility experienced as
of late is nothing compared to when deep oil was discovered.”
Perhaps true, but then again, 150 years after Drake’s discovery,
the role of oil bears a much different relationship to the world
economy.
As a consequence of challenging externalities and the underly-
ing reality of a declining resource, solidarity is needed at all levels
of government, from the First Minister at Holyrood in Edinburgh
all the way down. Lord Provost Peter Stephen represents the
Queen in Aberdeen, and in turn the city throughout the world,
as Aberdeen’s civic head – in partnership with political coun-
terpart Councillor Kate Dean. As a board member of WECP
(World Energy Cities Partnership), a grouping of 15 major world
oil and gas centres, Stephen meets other civic heads, business
leaders, and politicians, with the aim of creating and develop-
ing strong working relationships, which he says are a vital part
of doing business, particularly on the international stage. The
Lord Provost sums up the city’s image put forth in the economic
arena: “Aberdeen has half a century of experience in the oil and
gas sector. Initially expertise and education came from America;
over time the city has developed its own repository of skills and
expertise. Aberdeen’s expertise has been hard won in the hostile
environment of the North Sea and is highly valued in oil and gas
provinces throughout the World. We are very proud to boast that
Aberdeen City & Shire is the Energy Capital of Europe.” As host
of the WECP Annual General Meeting, Aberdeen will be show-
casing itself to others in the partnership including Houston, Baku,
Luanda, and North Sea neighbour Stavanger. Stephen is quick
to point out that, as a city, Aberdeen has “a broader perspective
than oil and gas alone and see ourselves as Europe’s Energy Cap-
ital. Over the past decade, alternative and renewable energy has
become increasingly important in the wider scheme of things.”
As proof of this importance, he offers that “Aberdeen hosts an
alternative energy conference that is growing in size year on year;
the 2009 conference holds a lot of promise. So we are very sup-
portive of local efforts to diversify from hydrocarbon production.”
These local efforts are indicated by the Aberdeen Renewable
Fig. 1: UK oil and gas production
Source: BERR
19700.0
0.5
1.5
2.5
3.5
4.0
1.0
2.0
3.0
4.5
5.0
1975 1980 1985 1990 1995 2000 2005
Mill
ion
bo
epd
OilGas
First Minister Alex Salmond
Lord Provost Peter Stephen
LloReg_OGFJ_0902 1 1/16/09 11:44:30 AM
60 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal February 2009
Energy Group’s work on several
projects including joint investiga-
tions into windfarm feasibility, and
establishing a new Professorship
in Energy Futures supported by
the University of Aberdeen, The
Robert Gordon University and
Aberdeen City Council.
However, for the time being,
it will be hydrocarbon production
and its related activities driving
the economy forward, and there
are still many challenges in the
way of extracting the rest of the
25 billion barrels remaining under UK waters. These challenges
are largely nothing new; after the industry went from $10 oil in
2000 to $60 oil in 2004, David Doig, Chief Executive of OPITO –
The Oil & Gas Academy, explains “the industry realized that its
behaviour was based on market demand but such a major change
in product price had made a significant change to future plans
and opportunities. Basically, this unpredicted and swift change
had caught the industry with inappropriate levels of infrastruc-
ture, plant, and people. What the industry decided to do was
realize its responsibility and take full ownership: to deal with
the issues itself, and understand them much quicker, rather than
relying on outside help.” Taking matters into its own hands, Doig
continues in explaining one such manifes-
tation. “At this point, what industry did
was look to its traditional skills body called
OPITO and morph it into a wider, bigger
and stronger entity,” he says, referring to
the entity he now heads, aimed to counter
a history of “wait-and-see” policies in a low
oil price environment. As Doig elaborates,
“There was almost no investment made
in workforce at $10 oil. And why would
there be? It didn’t make business sense. In
previous years, there were other industries
in the UK – shipbuilding, mining – which
don’t exist anymore. The oil and gas indus-
try doesn’t have an issue of attraction.
There’s a big long list of people trying to
get in. But there’s an issue of skillsets, and
transforming people with a given skillset to
the ones needed.”
Once transformed, those people will
be looking for work in robust, interna-
tionally competitive companies. Scottish
Enterprise, a main economic development
agency funded by the Scottish Govern-
ment, is charged with doing just that.
Brian Nixon, the organization’s Director
of Energy, states its importance to the
economy: “Energy, and the oil and gas
sector in particular, is obviously a priority
industry as it meets all the criteria: it has
Brian Nixon, Director of Energy, Scottish Enterprise
David Doig, Chief Executive, OPITO – The Oil & Gas Academy
● THE GREATEST CONCENTRATION OF SUBSEA ENGINEERING AND OPERATIONAL EXPERIENCE IN THE WORLD
● THE LARGEST CONCENTRATION OF ENERGY BUSINESSES IN EUROPE
● A DIVERSE AND EXPANDING MASS OF ENERGY SKILLS AND EXPERIENCE
● A MAJOR PROJECT MANAGEMENT, DEVELOPMENT AND COMMISSIONING CENTRE
www.aberdeencityandshire.com
Aberd_OGFJ_0902 1 1/16/09 12:00:45 PM
February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 61
huge opportunities for growth domestically and internationally,
a very strong supply chain, significant academic expertise in our
Universities and a real will to work with us towards prosperity and
growth.”
Moving these abstractions towards concrete actions, Scottish
Enterprise has mapped the shape, size, and strength of supply
chains in energy across various sectors and subsectors, finding
not as many very large companies in the contracting sector as
the organization would like, but rather seeing a small number of
large and conversely a large number of small companies.
Nixon affirms that “Scottish Enterprise recognizes the need
to work with these companies to help them become the next
generation of major contracting companies: an ongoing program
is currently working to identify companies that have the right
technology and service expertise to meet the real market oppor-
tunities potential,” with the eventual aim of transforming such
candidates into the next generation of majors like Wood Group,
AMEC, and PSN.
Of course, to achieve this goal requires horizons beyond
Scotland. According to Nixon, growth in international markets has
been sustained over the last seven to eight years, and a third of the
supply chain business is now conducted in international markets,
accounting for approximately £4 billion annually. He notes “a large
majority of our companies are now active internationally, and we
support maximizing activity in the growing international market. We
do so in a number of different ways,” including market intelligence,
capex and opex projections in over 60 countries, all followed up by
Scottish Development International, a partner organization offering
in-country services to make the process as smooth as possible.
Nixon gives the big picture: “To sum it up, our action starts by iden-
tifying which markets are of interest now and why. We then offer a
range of information about the best market-entry strategy for each
market and each country, to give companies the necessary support
to develop sustainable long-term businesses.”
Aberdeen, hub for a spokeless world Notwithstanding such helpful associations, and Aberdeen’s
claim as Oil & Gas Capital of Europe – or for the more forward-
thinking, Energy Capital of Europe – there is a warranted level of
scepticism whether the city, despite years as an important centre
of offshore and subsea technology, can remain an attractive hub
for companies in need of increasing international expansion,
especially as the region enters long-term decline.
However, even in shifting times, some companies have never
had anything but an international reality. Garry Farquhar, Direc-
tor/Dogsbody of Vector Supplies Limited, states his company is
no stranger to foreign markets: “It’s a hard figure to put numbers
on, but 60-70% of Vector’s business is overseas, and those figures
have always remained fairly steady.” Strangely, and bucking the
trend of increased internationalization, Farquhar points out how
his company differs in having “a far greater international market
than a local market in the early days. We set out to deliberately
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target the overseas locations simply because they were the ones
suffering the most from the breakdown in the supply chains,
and we started helping them straight away.” Vector’s help has
come by representing three companies as main distributorships:
American ball valve manufacturer Balon Valves, and two Dutch
companies in De Wit for pressure gauges and instrumentation,
and Resato specializing in high pressure technologies and equip-
ment.
Although Farquhar admits Vector could operate anywhere
with good transportation and logistics infrastructure, he cites an
advantage of closer contact to large clients with significant city
presence and worldwide decision-making as important success
factors. However, even if opening up satellite offices would have
its advantages, he notes “as with everything else, when you’re
flat-out busy, as we currently are, these decisions never come
quickly.”
Flat-out busy could certainly also describe Aubin, whose 300%
growth in the past three years has been driven mostly outside
Scotland, by the recent NOC trend of using local independent
companies, with which Aubin counts itself in good stead. As Man-
aging Director Patrick Collins explains, “Although the company is
based in the North East of Scotland, about 75% of our business
is elsewhere, predominantly in the Middle East.” Focused on
cement and stimulation chemicals and subsea technologies, Col-
lins explains Aubin supplies “specialist cement stimulation chemi-
cals to local service companies in the Middle East rather than
Garry Farquhar, Director/Dogsbody, Vector Supplies Limited
Legal 500, 2008
34 Albyn PlaceAberdeenAB10 1FWT: 01224 626100
Camas House, Pavilion 3Fairways Business ParkInverness IV2 6AAT: 01463 713225
[email protected] www.stronachs.com
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February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 63
the big three major companies. It
might seem strange that, being
Aberdeen based, we sell most
of our products there, but Aubin
has been successful in developing
that market.”
Even if the majority of busi-
ness is done in the Middle East,
Collins says there is an advantage
to being located so far away:
“Presenting chemicals coming
from Europe and developed in
the North Sea gives them validity
and provides a level of comfort
for our customers’ customers. Indeed, the North Sea is perceived
as a technical area of expertise, therefore tools developed and
proved in the North Sea have a distinct advantage when mar-
keted in other parts of the world.”
On the subsea side, Collins anticipates that with increased
commissioning and decommissioning activities in the UKCS, the
company’s pipeline gels and pigging technologies will be further
developed into a range of niche specialties and services to
provide alternative solutions for insulation, sealing, or buoyancy
applications. “In that respect our location helps us to enter our
market, especially as there are not many other companies with
chemistry skills operating in that sector. Aubin has been knocking
on doors of course, but subsea companies are also coming to us
looking for solutions that need a chemistry input,” he concludes.
Compared to Aubin, a relative newcomer to the international
scene in Aberdeen is G.O.T. Director Warren Anderson says that
“until two years ago, 90% of G.O.T.’s business was Aberdeen-
based, either onshore or offshore. This included refineries down
south, platforms in Yarmouth, Fife, Mosmorran, and customers as
Warren Anderson, Director, GOT
Patrick Collins, Managing Director, Aubin
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far north as Orkney. G.O.T. used to have customers as far away
as Baku, although this was though a third-party. That market fell
through, and G.O.T. decided to focus more on existing customers
to see where we could grow with them.”
Through one such existing customer in Mobil UK, G.O.T
piggybacked on a contract that led the firm down to the West
African country of Angola. Speaking to the country’s specificity,
Anderson explains: “Angola as a country is starting a project of
nationalization to reinvest back in infrastructure, development,
and education. Their stipulation for end-users like Chevron,
Total, and Esso is that if they want to do business in Luanda, their
suppliers must be on the ground operating on-site. Over the
course of the last year, G.O.T. has been back and forth to Luanda
looking at premises, staff, and going through a lengthy registra-
tion process.” The end result has been a current station of staff,
offices, and approvals – all waiting on final documentation, which
will see G.O.T. fully establish a satellite office in Luanda servicing
up to one third of company turnover. Staying cautiously optimis-
tic, Anderson admits that other than a Luandan outpost, “there
are no plans for G.O.T. to grow geographically, and the company
is quite comfortable managing what it has. A few years down the
line, if Luanda is performing well and we manage to control both
sides of the business, then expansion will be investigated.”
Founded in 2001, Petrowell recognized from day one that
the only certainty was change. Identifying decades-old oilfield
completion techniques not destined to forever remain the gold
standard, Colin Smith and Paul Day, Managing Director and Busi-
ness Development Director, explain that “Petrowell knew there
was an opportunity for a small service provider with engineering
excellence to get into the market and focus on new areas, like
open-hole completion and remote operation completion, in the
expanding subsea markets of West Africa and burgeoning busi-
ness in the Middle East, so these were focus areas for Petrowell
along with the UK.”
Elaborating on the technology focus, Petrowell’s expertise
has also expanded to develop RFID technology with IP partner
Colin Smith and Paul Day, Managing Director and Business Development Director, Petrowell
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February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 65
Marathon, a longstanding member of the North Sea community
on both the Norwegian and UK sides. “Petrowell was looking for
technology and services that would suit not just the low-cost land
markets of the UK and the Middle East, but the expensive, more
investment heavy markets like West Africa and the Gulf of Mexico
as well as the North Sea,” note Smith and Day.
Taking a practical approach, Smith and Day emphasize their
strategy’s core: “Petrowell wanted to concentrate on technology
and equipment development with operators, and then provide a
platform to the larger service companies where they could buy
and license our technology and take it into a much larger global
footprint.” This has reduced overhead requirements, and the no-
nonsense approach has achieved its goal of attracting some of
the world’s largest service companies like Weatherford.
A natural extension of this strategy is to avoid excesses
whenever possible. Smith and Day say that “although Petrowell
has one other international office in Baku, Azerbaijan, the aim
is not to have multiple Petrowell-branded offices, but rather to
adopt the most expedient and cost-effective method to support
customers wherever they are in the world.” In a phrase certain to
please its partners present and future, Smith and Day stress the
company’s focus: “Petrowell’s money is better spent on products
than infrastructure, and because infrastructure and supply chain
management exist around the world, Petrowell wants to plug into
that in a way beneficial to us and our customers.”
However, Petrowell could not afford to lack a physical pres-
ence in one particular major oil and gas center. Smith and Day
note, “Petrowell had to be in Houston, because many opera-
tors run deepwater fields exclusively from there, regardless of
their actual geographic location, and technology developments
applicable on a global basis are handled out of Houston.” To the
credit of their counterparts across the Atlantic, they describe the
city as “a springboard to integrate Petrowell into the technology
groups of the world’s biggest operators, the top four of which
are based in the city, and also to demonstrate relationships with
the service companies whereby if BP asks for Petrowell to be
in Australia, we can say we will be there with Weatherford, for
example. This approach has proven to be very successful.”
2 + 2 = 5Although this minimalist approach may work for some, not all
companies are as keen to keep such a large degree of their busi-
ness outside. Exemplifying the Gestalt adage of the whole being
greater than the sum of its parts, some have decided to parlay
this philosophy to maximize impact and reach across traditionally
segregated business lines. While niche specialists can operate in
silos, and take an appropriately narrow approach to their solu-
tions, bigger companies – increasingly composed of these smaller
niches themselves – are finding an advantage in hunting in packs.
Evolving out of necessity a decade ago from a diving company
into ROVs, subsea inspection, and fields as diverse as US Navy
nuclear submarine service and NASA space systems, Oceaneer-
ing International has created a virtuous cycle expanding its offer-
ings from first client contact. Alan Gray, Global Integrity Manager,
and Dave McKechnie, Deepwater Technical Solutions Eastern
Hemisphere Manager, explain: “It’s crucial; when one of us
appears, regardless of division, the client conversation may begin
Alan Gray, Global Integrity Manager, and Dave McKechnie, Deepwater Technical Solutions Eastern Hemisphere Manager, Oceaneering International
SWELLFIX12a Peterseat Park, AberdeenPhone +44 1224 896 100e: [email protected]
www.swellfix.com
SWELL
SWELL
SWELL
Swellable packers, a dynamic, yet simple solution for zonal isolation and inflow control, reduce risks and well costs, and increase production.
Swell_OGFJ_0902 1 1/16/09 11:49:11 AM
66 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal February 2009
on the intended subject, but very quickly opens up to equipment,
integration, ROVs, rope access, and it quickly expands from, for
example, the need for a torque tool into corrosion awareness.
There’s always an awareness of the bigger picture, and while
there may be a standard client presentation, many clients may
not be aware of the breadth of the offering.”
Of course, some areas may be more specialized than oth-
ers, but that just increases the need for cross-communication.
For example, Gray and McKechnie note that Oceaneering in
Aberdeen is pursuing international contracts in Egypt, Azerbai-
jan, and Trinidad, even if they will never see 90% of revenues.
Fortunately, this works both ways. They note, “Oceaneering is
working closer now than ever and there is a reciprocal relation-
ship between groups, so that even seemingly disparate interests
can work in concert in a synergistic manner. An individual may
be a small part of the whole system, but also be wired and con-
nected into the right person for a particular meeting and particu-
lar question,” which means that when Oceaneering is called upon
with a problem, it can put the relevant pieces together itself and
come back with a solution. “It may be a matter of all divisions
collaborating to solve a problem, but that’s the mechanism you
can call on in Oceaneering,” conclude Gray and McKechnie.
While Oceaneering’s evolution has occurred over the last
decade, Triton Group presents a less gradual example. Origi-
nating from current CEO Martin Anderson’s vision as former
head of underwater vehicle specialists and Technip subsidiary
Martin Anderson, CEO, Triton Group
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February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 67
Perry Slingsby Systems (PSS), Anderson explains the evolution
since its genesis in mid-2003: “Throughout 2004 and 2005, PSS
developed in a position to have a business plan going forward
including some acquisitions and add-ons to balance the business.
There were still some basic weaknesses of the company to be
addressed. Irrespective of how the technology came together,
PSS was still effectively selling products into the strategic capex
market, in other words, selling assets to service companies who
would then deliver their service. This is quite a cyclical market,
so the basic weakness was the reliance on one particular product
in one particular commercial model, and that market it sold into
was quite cyclical, with long gaps between capex, assets, and
replacement.”
Looking to smooth out this cycle, Anderson realized he would
have to grow the business. Being constrained financially within
Technip, Anderson took the company independent in Febru-
ary 2007 with private equity backing, creating Triton Group as
the umbrella for the planned expansion. Having all the pieces
in place, this newfound freedom enabled Triton to act quickly,
signing heads of agreement just one week later to acquire SubAt-
lantic, filling a product gap to complement PSS hydraulic power
with electric. In April of the same year came freelance offshore
personnel business UKPS, and since that time, DPS and VisualSoft
have joined the fold, simultaneously rounding out Triton’s offer-
ings and expanding the market for their own services. With infra-
structure developments in place covering Aberdeen, Houston,
and Singapore, Martin sums up: “The last 18 months have been
about putting building blocks in place. To use a Churchill phrase,
‘we’re at the end of the beginning.’”
No field left behindNot limited to wartime or aspiring subsea conglomerates, another
beginning’s end can be found in the continued evolution of asset
transfers. The trend of majors divesting assets to smaller, more
dynamic companies is not news to anyone in the North Sea. Led
by a slew of Canadian international oil companies, the UKCS now
has a broad range of well-known names like Apache, Marathon,
and Petro-Canada increasing life production and pushing reserves
to their maximum. However, this trend has been taken to the next
level, with specialized companies cropping up, armed with spe-
cific expertise in the region’s geology and sufficient cash to rescue
underperforming or neglected assets – often smaller in size and
ENSCO 85 Drilling Breagh Prospect 2007
Fig. 2: Proportion and investment contribution, 1999-2007
Source: Wood Mackenzie
0
5
15
25
35
10
20
30
40
20012000 2002 2003 2004 2005 2006 2007
Per
cent
Proportion of total production 35%
21%
Proportion of total capital invested
Sterling Resources Ltd
DRILLING SUCCESS
WWW.STERLING-RESOURCES.COM
- STERLING ACREAGE
BREAGH
BREA
GH
- N
ORT
H S
EA
STEWART GIBSON - CEO
ANA
DOINA
ROMANIA
DO
INA
- BL
ACK
SEA
DRILLING SUCCESS ENHANCES TWO NEW EUROPEAN GAS CORE AREA DEVELOPMENTS
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Stronach’s Oil & Gas Team
www.venture-production.com
Breathing new life into ‘stranded’ reserves in the North Sea
Venture_OGFJ_0902 1 1/16/09 2:20:16 PM
February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 69
poorly matched to the scale of their
previous owners. Now, reserves
otherwise characterized as marginal
or stranded are seeing new life,
with three of 15 asset deals in 2007
alone from new entrants, the cohort
increasingly driving production and
investment going forward.
One such company is Venture
Production, whose Chief Executive
Mike Wagstaff assesses the asset
transfer
situation:
“There are
a number of reasons why old discoveries in
the North Sea became ‘stranded’: they are
either not material, too remote, commercially
complicated i.e. broken up into too many
partners, too difficult due to infrastructure or
can be unlocked by evolving technology. For
example, many of Venture’s assets repre-
sent discoveries made 10-20 or more years
ago. In late September, Venture brought
onstream the Chestnut oil field discovered
27 years ago, and the Chiswick field brought
onstream in 2007 was discovered in 1984.
On Chiswick between that time and now, 10
field partners had come and gone, and none
could make the field work.”
Clearly, however, with production of
over 40,000 boepd, Venture succeeded
where others failed. Wagstaff makes a
strong case for the company’s presence
in the region, noting “in terms of the
operating environment, as a location to do
business for an oil company, the UKCS is a
pretty good place. In fact, for a company
of Venture’s size and business model, it’s
hard to think of anywhere else that would
be better.” However, he acknowledges
not everyone shares this rosy view. “Most
people consider the North Sea mature, in
terminal decline, expensive, highly regu-
lated and bureaucratic, with high competi-
tion for opportunities – and if you do make
any money, the taxman’s going to take it
anyway. That’s the negative prejudice. On
the other hand, while the opportunities
may be smaller than in other less-mature
basins, it’s just a fact of life, and the UKCS
does have a number of things going for it,”
and Wagstaff points to items on the plus
side like infrastructure in the form of pipe-
lines, platforms, and terminals facilitating
tie-backs of discoveries or developments,
alongside a ready market onshore to snap
up any production. Add in a globally com-
petitive taxation regime compared to neighbouring Norway or
PSCs of Libya and Algeria in a higher oil price environment, with
market responsiveness for tools needed to get the job done, and
the picture of how Venture has grown from zero to FTSE 250 in
under a decade becomes clear.
Although Venture is among the largest UK independents,
there are many smaller companies at the table and plenty of
opportunities to whet their appetites. Stewart Gibson, CEO of
Sterling Resources, explains that at the company’s inception,
it “had to be quite selective where to operate, because there
were only two of us.” This was more out of necessity, given that
Mike Wagstaff, Chief Executive, Venture Production
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according to Gibson, “when Sterling started, it was very much
on a blank sheet, meaning no assets and no money.” From these
humble beginnings Sterling has come a long way. With a deep
knowledge of North Sea geology, Gibson explains the company
“entered areas with proven hydrocarbons, so it wasn’t high risk
exploration, but rather exploration within proven parameters,”
and counter to conventional correlations between risk and
reward, Gibson has frustrated actuaries worldwide with a spate of
successful discoveries.
Both Breagh and Doina assets were drilled by majors over a
decade ago, but “weren’t developed for various reasons, such
as gas prices, contractual terms, or materiality, whereas a smaller
company going into the same area can look at the situation with
a different perspective,” says Gibson. This perspective has seen
over 50% of Sterling’s drilled wells finding hydrocarbons, and
Breagh testing at rates six times those achieved by the previous
operator from the same reservoir, and as Gibson notes, “with
changing gas price and current terms, something that had been
stranded can be made to work.”
Fundamentally, what makes the assets work is the ease with
which they can change hands. “There are major issues around
the complexity of title transfer in the UK,” remarks David Sheach,
Managing Partner of Stronachs, a law firm with an Aberdeen his-
tory stretching back over two centuries, who estimates that with
the city’s evolution toward the oil and gas industry, his business
evolved as well to 75-80% of commercial activity being linked in
some way to the sector. “Unfortunately,” he says, “it’s not a nice,
neat, registered title system, but layer upon layer of contract,
and therefore the legal process involved in transferring owner-
ship of assets can be quite complicated and time consuming. The
fractional ownership of many fields can be quite a challenge as
well, which is more a commercial than legal point, but obviously
it impacts on the speed of the legal process.”
Sheach differentiates the UKCS from other areas: “Unlike
regions with onshore licenses, where the capital costs are much
less and therefore there may be a single company or two who
buy, in the UK it’s not unusual to have four or more field owners,
Stewart Gibson, CEO, Sterling Resources
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February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 71
and the dynamics of getting all of them to go in the same direc-
tion at the same time can be interesting.”
One equally interesting case is Fairfield Energy, whose Chief
Executive Mark McAllister explains how initially, it was a ques-
tion of getting the sellers to go in the same direction. Harkening
back to the halcyon days of 2005, McAllister explains “Fairfield
had existed for a month, so for large companies like Shell, OMV,
Exxon, and Statoil to come to terms with selling an asset of that
scale to a company of our immaturity was not an easy task; it
took a lot of work to persuade them,” including establishing a
duty-holder relationship with AMEC and presenting a consortium
of six international private equity financiers.
The tall order of skills shortagesFinancing is not the only area in short supply. Indeed, lack of
human capital is an oft-cited roadblock in the way of expansion.
However, regardless of a new recessionary reality, the pressure
to find the best and brightest is not likely to ease significantly.
According to David Edwards, Chief Executive of the Engineer-
ing Construction Industry Training Board (ECITB), “the current
skills base is just not big enough. The number of people needed
for growth might soften, but we still need to replace the exist-
ing workforce.” The association, acting as a government body
directly on the interface between government and industry,
collects £5 of £18 million in annual training levies from the oil and
gas industry, which it uses towards
a system of grants which support
training products and qualifica-
tions, designed in partnership
with industry. Edwards continues,
“Our core business is provid-
ing the right people with the
right skill set, and by 2014, there
will be a need to recruit, train,
and retain in the area of 44,000
people across the skills range,
of which 15-20% will be in the
upstream oil and gas sector. This
includes high-level engineering
at the graduate level, as well as craft, technician, and operator
level. ECITB now has the best-ever picture of industry needs and
how to address them, and by and large the industry players have
subscribed to it.”
Of course, addressing the full spectrum of industry needs is
difficult on a limited budget, and even then, in niche cases requir-
ing years of experience, no amount of training is likely to provide
an immediate solution.
This is especially true for Maxoil Solutions, a firm created
by bringing together experienced consultants with a wealth
of hands-on and practical experience. Speaking to the search
for qualified personnel, Wally Georgie and Mel Dow, Maxoil’s
Wally Georgie, Principal Consultant, Maxoil Solutions
David Edwards, Chief Executive, ECITB
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and development because this is an important fit for Maxoil’s
plans.”
One company helping to round out the knowledge of such
technical experts is Adept Knowledge Management. Direc-
tor Colin Balchin explains the reasons behind what made the
company a preferred training provider for ECITB among many
others: “The first thing that Adept has is knowledge: we know
about project management, and managing big and small proj-
ects, because our people have done it. So our knowledge comes
from practice, expertise, and also study, because we aren’t afraid
to study and learn from others. Secondly, Adept has very good
material and case studies, and tries to understand client needs
and what they’re trying to do with the courses.” Understandably,
knowledge and materials are necessary but not sufficient, which
is why Balchin points to the last piece of the puzzle. “Thirdly,
Adept staff take pride in being good teachers. All of the people
who deliver the courses are really excellent at communicating,
and do so with enthusiasm and humour, which is always appreci-
ated,” Balchin remarks.
Perhaps ironically, Adept’s growth is itself limited by a lack of
skilled people. “Adept’s overseas presence has to be limited by
the quality and number of people who can successfully deliver
the courses to our standard.” Being a smaller training firm, Adept
can’t afford to adopt the shotgun approach of bigger competi-
tors “because we are not organized to put out 50 different types
of courses. We have ten or so courses, of which four are really
Principal Consultant and Director, note “they’re proving very
difficult to find. Many of our existing employees were acquired
via networking after having been in the industry for a number of
years and establishing good contacts. Unlike other companies in
Aberdeen who can more readily acquire people from different
industries, Maxoil requires certain in-depth oil and gas process
knowledge.”
However, Georgie and Dow have recently addressed the
skills gap by taking on graduate engineers, fuelling a younger
wave benefiting from older consultants and specialists. This
bumper crop is likely to aid in the company’s ongoing inter-
national expansion, which has seen inroads to Norway, Gulf of
Mexico, and Alaska. “In Houston for example, Maxoil’s plans in
the medium term are to recruit people locally and bring them to
Aberdeen for familiarization. They will then return as local Maxoil
staff. Aberdeen is Maxoil’s training base and though there is
good knowledge in all the spheres of the world, it is absolutely
essential to have grounding in the fundamentals of the Maxoil
philosophy and applying all the skills we’ve learned throughout
our many years of offshore and onshore operating experience,”
Georgie and Dow say. Maxoil has also diversified its talent base,
reaching out to “technically orientated people to help with busi-
ness development because at the end of the day, we need to
build on our resources. There’s an important balance in having
both technical understanding and capabilities for business devel-
opment rather than solely depending on personnel recruitment
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February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 73
the most popular. This also means that we can design and build
courses to fit client needs and emphasis; and that’s what works
well for us and our clients.”
Not everyone is feeling the talent pool pinch. When asked
whether he has noticed an impact on employee attraction and
retention in recent months, Neil Bruce, COO of AMEC Natural
Resources, replies bluntly: “Not at all. The people who have
suffered from resource shortages are the ones who haven’t had
a long term investment program in people. If you are out in
the market trying to hire people, and your only differentiator is
paying them an extra dollar or pound an hour, you’re going to
struggle.” Despite its size of nearly 11,000 individuals, AMEC
has hardly struggled, increasing professional staff in 2007 by
15-16%, compared to the same figure the year before, and 12%
in 2005. Bruce continues, noting that “Additionally, the com-
pany maintains a structured program in place to bring graduates
through, with 200 technicians in our system at any point in time.
Effectively, AMEC has an entire development program around
human resources, and in constantly recruiting and developing its
people, has found an increase in numbers by 15-16% annually
very achievable.”
Bruce says that “for the people who want to go for the extra
pound, we aren’t particularly bothered about them leaving.
AMEC has people leaving, but has excellent retention rates, with
employee turnover less than 5% across Natural Resources. If you
provide people with training, development, and good interest-Colin Balchin, Director, Adept Knowledge Management
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74 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal February 2009
ing work, then you will keep the vast majority of your people
motivated to stay with you. And the small amount interested in
an extra dollar per hour can go get it elsewhere.”
Although not for directly financial reasons, Bibby Offshore’s
CEO Howard Woodcock found he could keep a similar minority
from leaving by bringing the business closer to its employees –
literally. Woodcock explains “the company opened an office in
Newcastle-upon-Tyne in early 2008 after recognizing that Tyne-
side, historically, has a lot of links with the subsea and offshore
industry, and there are many people living and working in the
area who have the kind of skills needed up here. The fact is that
many of those people make a weekly commute to Aberdeen to
work in the offshore industry, which is what gave us the inspira-
tion to open an engineering facility in Newcastle.” Although
still early days yet for this operation, he explains it “has both
extended reach in terms of our resource pool whilst reducing
carbon footprint in travel to and from, hopefully creating more
satisfying and happier jobs and careers for our people.”
Leading by example, Woodcock himself is in his 16th year at
Bibby, working his way up from deck cadet in the 1980s. Still, an
available person with such experience is hard to come by. “The
number of highly competent and qualified people available is
limited, especially in the North East of Scotland, because there’s
a lot of large calls from many companies, and choice in terms of
employment at the moment. To overcome this, Bibby Offshore has
had to think a little bit laterally and be innovative,” he concludes.
Howard Woodcock, Chief Executive, Bibby Offshore
GOT_OGFJ_0902 1 1/16/09 11:45:51 AM
February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 75
Do the safety danceInnovation in the UKCS has not only been a product of busi-
ness necessity, but sometimes a matter of life and death, as the
community was recently reminded with 2008 marking the 20th
anniversary of the world’s worst offshore oil disaster at the Piper
Alpha production platform. Since that time, safety responsibili-
ties transferred to the Health and Safety Executiv (HSE), which
has set in place a system with mandatory approval of safety cases
documenting management controls on every installation prior to
use, and conducts reports on a continual basis into key indus-
try interest areas. KP3, the HSE’s most recent report, involved
an inspection of close to 100 offshore installations. Its findings
acknowledged a lingering legacy of underinvestment, while iden-
tifying, as HSE Chair Judith Hackitt puts it, “the need for greater
leadership, more good practice sharing and improved worker
involvement.”
Iain Light, Oil & Gas Director of Lloyd’s Register, offers a
snapshot of the current state of affairs: “There are competing
objectives in terms of production, operations, and what really
does needs to be taken care of. One of the challenges we have
in the offshore business here in the North Sea is that many
platforms and structures are well beyond their design life. The
question arises of how operators and owners can reliably sweat
their assets safely.”
Light stresses the difficulty many operators have justifying
the necessary investments to do so under any circumstances:
“In times of high oil prices, operations become so important at
a time when you can afford to spend the money to improve the
assets for the longer term. This is the dilemma when you have the
money for the work but the pressure is on production. Now, with
lower oil prices, they suddenly don't have any money to spend.
The question arises: will we ever have the right amount of money
to spend on the things we should be doing?” Light, explaining
the nature of the group’s role in trying, says “the organization is
very much about having an independent role, acting as an honest
broker and company that is trusted by society, government, and
operators.”
“Lloyd's Register's focus is going to be on getting a better
balance with asset assurance issues, and understand not just the
safety-critical issues, but also the business-critical issues,” Light
articulates, a fact evidenced in work at 80% of the largest US
refineries, where the Lloyd’s approach has enabled reductions
in inspection and maintenance costs, improved environmental
performance and safety records, and a better bottom line. In a
message meant to clarify the traditionally UK-focused enterprise’s
move towards true international dominance, the man bringing
the organization forward at ‘the speed of Light’ says “Lloyd's
Register wants to be very much positioned in that space of
helping organizations strike the balance between their business,
safety, and environmental agenda. We are about providing inde-
pendent assurance helping our clients year by year improve the
safety and sustainability of their contributions to the increasingly
important energy supply chain.”
Improving safety in a more specific area of the value chain,
Cosalt’s new Managing Director Calum Melville explains the
company’s revised role after combining efforts with his former
company GTC, noting “The products and services supplied as
Iain Light, Oil & Gas Director, Lloyd’s Register
Aubin_OGFJ_0902 1 1/16/09 11:47:00 AM
76 www.focusreports.net www.ogfj.com • Oil & Gas Financial Journal February 2009
GTC and those offered by Cosalt, on the face of it, do not have
a particular match, but they’re all safety-critical and driven by
legislation. Looking at the range of products and services Cosalt
now offers, this includes lifejackets, life rafts, lifeboat servicing,
things that GTC historically didn’t do before.”
Broadening this range has meant a multifaceted approach to
increasing safety. Citing an impressive case study, since Cosalt’s
writing of a scheme of compliance for Shell, statistics have shown
a 70% drop in incidents. Melville emphasizes the company’s
three-pronged strategy that “for Cosalt, we are looking to drive
safety in a number of ways: internally, through the equipment,
and added value in supporting our clients.”
The oil and gas industry’s well-known conservatism and neces-
sity for safety, extending to new technology adoption, perhaps
explains Swellfix’s trajectory as a provider of innovative swellable
elastomers. Despite a stellar failure-free performance record,
CEO Arie Vliegenthart talks about
the difficulties in swaying poten-
tial clients. “It takes a while to
convince people to change their
ways, especially with a matur-
ing industry that may have been
doing things one way for 40 years.
It was not always an easy sell,
entering an office with a “funny-
looking” packer and convincing
potential clients that it will replace
or change the way they work.
Having a good track record of
course helped, and Shell’s techno-
“Chevron’s ALBA FSU, managed and run by Bibby Offshore”
Arie Vliegenthart, CEO, Swellfix
Vector_OGFJ_0902 1 1/19/09 8:54:56 AM
February 2009 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 77
logical reputation was like an approval stamp,” says Vliegenthart,
referring to the company’s origins as a spin-off from the major.
However, the approval stamp was hardly a free ticket. “The first
milestone, quite bluntly, was to get sales outside Shell. Having
already run over 2,500 packers inside Shell, with a product suited
to a few operations inside the company, Swellfix had the reputa-
tion inside, but not outside, Shell. Nobody knew Swellfix or the
product, and it looks different than the competition,” Vliegenthart
states, with the realistic assessment of his clients expectation that
“In entering the market with a new technology to put in wells,
there has to be a certain level of belief in the technology and the
providing company’s structure and stability, because the company
still has to be around when the well starts producing.”
“The DSV Bibby Topaz arrives in Aberdeen, April 2008”
Calum Melville, Managing Director, Cosalt
FocRepREV_OGFJ_0902 1 1/28/09 10:52:24 AM
email: [email protected]
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