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ANYTHING BUT STANDARD

The second most valuable industry to the Norwegian economy after oil

and gas production is the Norwegian oil service sector. Making a stand-

ing start in the 1970s, this sector today generates $63 billion in revenues

with 40 percent ($26 billion) of that fgure coming from the sale of Norwe-

gian technologies to foreign markets. Unable to exploit any natural cost advan-

tages, Norway’s international competitiveness has relied upon the strengths of

its innovations and its ability to redefne existing industry standards. But how

sustainable is this endless focus on the high-tech, high-cost solution?

NORWAY

Volstad Surveyor Varg Brace 2.

Picture courtesy of Deep Ocean

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Home to paradigm altering innovations like horizontal drilling,

multiphase fow, power-from-shore, 4D seismic and now “integrated

operations” and the “subsea factory”, Norway is the birthplace

of many of the offshore industry’s cornerstone technologies. The

remarkable aspect of this technological achievement is that it has

come from a country with a distinctly unremarkable technological

heritage – known for having invented not a great deal besides the

cheese slicer.

The Norwegian offshore industry has achieved this technological

feat by valuing innovation over the cheap solution, whether from

foreign contractors or domestic. But is Norway’s pursuit of the non-

standard product, which brought it so much success in the past,

now simply pushing up the cost curve? By focusing on the exacting

requirements of the Norwegian continental shelf (NCS) and riding a

wave of cost infation, is the Norwegian service sector now under-

mining its international competitiveness? Or, as the Norwegian min-

ister of petroleum and energy Ola Borten Moe believes, are the high

costs now driving a new wave of innovation?

Tethering to the Home MarketIn 2012 the domestic market for oil services rose

to $24.7 billion and is projected to hit $37 billion

in 2013, making Norway the number one offshore

investment market globally. For David Smith, man-

aging director of offshore logistics and mooring

specialist IOS Intermoor, this marks a stark contrast

to the situation a few years ago.

Smith explained: “In 2009, IOS InterMoor was

looking internationally, as many Norwegian companies were, to

expand its business. At that time, most Norwegian companies

started to think that the industry’s end was in sight.”

At the lowest point of the global fnancial crisis,

the domestic base of Norway’s oil service sector was

in decline and companies were targeting interna-

tional markets. Then in 2010 and 2011, Lundin and

Statoil made their giant discoveries on the Utsira

High, turning the international perception of Nor-

way’s oil potential on its head and sparking a surge

of investment in the sector.

It is not for nothing that Smith regards 2011 as a benchmark year

for the Norwegian service industry. “A year after those huge dis-

coveries, most Norwegian companies’ target market is now domes-

tic,” he said, forecasting a mini-boom in activity over the next 3-4

years. IOS Intermoor has responded by redirecting resources to the

Norwegian market and signifcantly expanding on the facilities at its

main Norwegian base in Mongstad,.

One of the founding fathers of Norway’s export-focused oil and

gas association INTSOK Håkon Skretting agreed that Norway’s sec-

ond oil boom has refocused attention. He explained:

“With the current booming activity in Norway, Norwegian compa-

nies had never been as busy as today on the NCS. Therefore many

companies argue that there is no need to go to other countries like

Russia when they have everything in their home country to prosper.”

Value Creation vs. Wage Infation: The downside of so much investment pouring into

the Norwegian market is an inevitable strain on

human resources, creating signifcant wage infation

as companies seek to entice the country’s limited

retinues of engineers and offshore workers. In 2010,

the year that Lundin made its giant oil discovery on

Avaldsnes, labor costs rose by 12 percent and since

then employee wages have increased signifcantly as

a proportion of the industry’s total spend.

The effect on Norway’s oil industry is a total lifting cost, which

has climbed to around $75 per barrel, threatening to increase the

threshold of what is considered to be a marginal feld. However, the

effect on the service industry is arguably more deleterious. Further

disadvantaged in exports by the strength of the Norwegian krone,

Norway’s fabricators have been losing work to international com-

petitors in countries where the cost of labor is several times cheaper.

For nine years until the 2011 demerger, Aker Solutions and

Kvaerner operated as one company and the history of their collabo-

ration dates back more than 40 years. Even after the separation,

these Norwegian frms remained close allies in bidding rounds for

major projects, but the conclusion drawn at Aker Solutions’ Q42012

briefng was that this fagship Norwegian pairing cannot endure

much longer.

USD 43 billion

USD 34.5 billion

USD 25.9 billion

USD 17.2 billion

USD 8.6 billion

0

Turnover Norway

Turnover internationally

2000 2003 2006 2009 2011

Gap Closing between international and Domestic Revenues until Lundin’s Discoveryin 2010, Gap Widens thereafter

Source: Rystad Energy study for the Ministry of Petroleum and Energy (2012)

The industry has been able to grow abroad

and meet record high demand at home

David Smith,

managing director,

Intermoor

Per Harald

Kongelf, COO,

Aker Solutions

ASA

Håkon Skretting,

regional director,

Intsok

1305OGFJ_60 60 5/6/13 5:13 PM

1305OGFJ_61 61 5/6/13 5:13 PM


a more general trend towards consolidation where: “Smaller, bespoke

subsea specialists are becoming few and far between. The major com-

petition is between the big players: FMC Technologies, Kongsberg,

Cameron, GE and a few others. We are witnessing increased ‘produc-

tifcation’ and standardization. As such it is hard for the smaller players

to survive.”

Apply has completely pulled out of a subsea sector, which is predicted

to double in size between 2012 and 2016. The company will instead

concentrate on its competitive position in the MMO segment, which,

according to Sortland presents suffcient room to grow market share,

though dominated by Aker Solutions and Aibel.

The consolidation at the top end of the market is driven by the pro-

curement strategies of its main operators. Procurement offcers are now

attempting to contain costs in a new era of cost infation by dealing

with fewer contractors and transferring risk from buyer to supplier. As a

result, the structure of the service industry is going through some major

changes.

The Home AdvantageNorway’s drive towards consolidation in the service market does not

mean the end of the small players. For Stig Dahl, managing director of

Dahl Oilfeld Services, a downhole equipment supplier, small local play-

ers have unbeatable advantages over the large internationals in a market

renowned for high standards a preference for bespoke technologies.

“As a local Norwegian company, we are aware of the advantage

we have when conducting business with other Norwegian companies.

Large international companies with many offces around the world can-

not reach the level of infuence and knowledge in Norway compared to

a local Norwegian company like us - which has 90 percent of its activity

based here.”

Standardization may be the weapon of choice for the multinationals

in cost-reduction, but Dahl Oilfeld Services has opted for outsourcing

its supply chain to low-cost countries like Ukraine and China to stay

competitive.

In addition, Dahl explains that the stringent NS1 standards in the

Norwegian market created a degree of protection for those companies

purely focused on the Norwegian market. He said:

“As the standards are higher in Norway than in other countries, we

realize the advantage our drill pipes have in respecting high quality stan-

dards [of the Norwegian continental shelf]”.

Innovators, not Entrepreneurs: In a wry observation, Ståle Kyllingstad, CEO of the industrial group

IKM, characterized Norwegians as “innovators, not entrepreneurs.” Kyl-

lingstad described a situation in which would-be entrepreneurs were

often sidetracked from the arduous and long-term commitment to their

companies by the good life offered by Norwegian society. For him,

Norwegian culture is the root cause of a phenomenon of Norwegian

The Norwegian partners lost all of their Q4 bids to international chal-

lengers as Jon Arve Haugan, Kvaerner’s president and CEO, wrote

in their 2012 annual report. He stated, “in the most recent round of

awards, topside EPC contracts were awarded to Asian yards and jacket

contracts to European yards. Needless to say, we are not satisfed with

the outcome.”

As Aker Solutions recognized, the key factor in losing these bids was

a lack of price competitiveness. For Aker Solutions COO Per Harald

Kongelf, the poor performance signaled that, “Norwegian fabricators

as well as Aker Solutions need to work on competitiveness including

our subcontracting strategies and relationships with suppliers.” In an

era where the Korean behemoths of Daewoo, Hyundai and Samsung

are turning their hungry gaze on the oil and gas industry, to offset the

decline in global shipping, the ‘Made in Norway’ premium for offshore

fabrication appears conspicuously high.

On the back of more technologically driven business units, especially

subsea equipment, Aker Solutions actually enjoyed a strong 2012 with

revenues climbing by $1.44 billion to $7.68 billion; the let down was

based on labor-intensive fabrication. And as Kongelf announced that

Aker Solutions was seeking, “more fexibility regarding our [their] bid-

ding partners,” the 40-year partnership between Aker Solutions and

Kvaerner became another casualty of Norwegian cost infation.

Losing Nemo Better to be a big fsh in a small pond than a small fsh

in a big one, was the rationale behind the decision of

leading Norwegian contractor Apply to sell its sub-

sea division Apply Nemo to Kongsberg last year. For

Apply’s CEO Peder Sortland, “The subsea segment

is becoming a serious game, played by the very large

subsea specialists.” He explained that although a big

name in the Norwegian industry, Apply did not have

the balance sheet to remain competitive in the segment. Sortland sees

Revenues and average EBIT-margins

Source: Rystad Energy study for the Ministry of Petroleum and Energy (2012)

68.7

60

51.5

42.9

34.3

25.7

17.2

8.6

12%

10%

8%

6%

4%

2%

0%

USD

Revenues Average of EBIT

2007 2008 2009 2010 2011

Peder Sortland,

CEO, Apply

1305OGFJ_62 62 5/6/13 5:13 PM


demand from the operators to broaden the scope of contracts, which is

pushing the larger service providers to meet these needs.”

This in part explains the relative aggressivness of the M&A activity in

Norway over the last couple of years. In 2010 the transation market in

Norway represented $8 billion, marking the start of a continual climb in

M&A activity. For its part, Oceaneering’s expenditures on acquisitions

were almost triple its yearly average for the period 2006-10.

Whether Norwegians prefer their blue overalls to their business suits,

or whether the funding model stunts growth at the point it is most

needed, the tide of Norwegian intellectual capital being swept up by

Western multinationals remains unabated. The pickings are just too rich

to be ignored and operators now seem to demand it.

A Seismic Shift in Thinking: Bridging the gap between the realms of innovation and entrepre-

neurship is a Norwegian/American business model, which has trans-

formed the world of seismic: multi-client surveying. Not a technolog-

ical innovation per se, but rather a business innovation, multi-client

surveying has reshaped the relationship between governments,

oil companies and seismic contractors. This model evolved in the

North Sea and Gulf of Mexico and was pioneered by two compa-

companies moving swiftly along a conveyor belt from

innovation to acquisition by American multinationals.

“There is something fairly unusual about Norwegian

culture,” Kyllingstad said. We sell our companies a long

time before they do in other countries.”

For Kyllingstad, the unfortunate outcome of this phe-

nomenon is that, “compared to the technical successes

in Norway the number of companies which have gone abroad and made

an international success is relatively low.”

For other observers, the question is not simply one

of national character. Bjarte Fagerås, CEO of Octio, a

Norwegian start-up pioneering the technology for per-

manent seabed monitoring, may represent exactly the

type of Norwegian innovator about whom Kyllingstad

was talking. Fagerås started up fve companies prior

to his present brainchild and has spent his life working

with technology. However, in his view, the reason that

Norwegian tech wizards sell early is not so much an issue of culture as

one of fnancing.

“It is easy in Norway to get the frst funding, because of the support

from the government and various research institutions. The social wel-

fare system also provides a safety net in case you fail in your business.

However, after initial funding, it is very hard to secure funding for the

next stage. The only groups who are willing to invest and who see the

value are large international, French, British and American companies

who take over the company.”

The principal benefciaries of this “willingness to sell”

are the well-known multinational service companies

like Halliburton, Schlumberger, Weatherford, GE and

Cameron. Oceaneering, the global leader in remotely

operated vehicle (ROV) services, certainly sees Norway

as a crucial component within its global technological

progress. VP & Country Manager of Oceaneering Erik

H Saestad said, “Norway is an important place to look

for new technologies … the Norwegian oil and gas

cluster has been in the forefront with respect to developing and apply-

ing technology within areas Oceaneering operates in.”

NCA Group, acquired by Oceaneering in 2011, was one of the biggest

aqcuisitions for the company, and gave it a key foothold in the decom-

missioning market. Saestad said, “in the decommissioning market we

needed the expertise of the NCA Group to complement our services to

approach this market.” For Saestad, the idea was to broaden the scope

of operations, a key component in Oceaneering’s competitive interna-

tional standing against other ROV providers.

As an Ernst & Young 2013 paper highlights, broadening the portfolio

is one of the biggest drivers of M&A in the global oil service industry.

But in the Norwegian context there is an additional factor driving con-

solidation. According to Saestad, Norway is subject to “an ever-greater

��

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Stale Kyllingstad, CEO, IKM

Bjarte Fagerås, CEO, OCTIO

Erik H. Saestad, vice president & country manager, Oceaneering

1305OGFJ_63 63 5/6/13 5:13 PM


among multiple buyers. However, this model changes the nature of

competition between oil companies, which no longer compete over

the data itself, but over the interpretation of the data.”

The model also works out better for the seismic companies,

according to Isaksen. “When the model functions correctly and

depending on the attractiveness of the data, a seismic company can

potentially earn a lot more from a seismic survey since they have

multiple buyers.”

However, despite all of the benefts of this model, Isaksen pointed

out that there were challenges in gaining acceptance for multi-client

in some countries. In any country with a monopoly on production,

nies: American TGS and Norwegian Nopec, which merged in 1998

to form TGS Nopec.

Stein Ove Isaksen, TGS Nopec senior vice presi-

dent of the eastern hemisphere, explained that the

model has come a long way in the last 30 years in

replacing the two former models of seismic survey-

ing. For Isaksen, the frst model (proprietary seismic)

involved seismic surveying work remaining a fully

in-house competency of an oil company. This gave

way to a model (contract seismic), where oil compa-

nies outsourced survey work to specialized seismic

contractors.

TGS Nopec has been working towards building the market for the

third model: multi-client. Isaksen described the functioning of multi-

client surveying:

“In this model, seismic companies are the ones identifying pro-

spective areas for seismic operations. The seismic companies will fre-

quently conduct seismic surveys with only a part of the cost under-

written by oil companies and so will be exposed to fnancial risk (the

level of which will vary depending on the proportion of oil company

commitment obtained). In this system, the proftability of seismic

companies is fully dependent on the attractiveness of the data they

generate, and the number of oil companies that are willing to buy

these data.”

Isaksen describes this business innovation as a win-win-win situ-

ation, referring to the three principal stakeholders benefting from

the model: governments, oil companies and seismic contractors. For

governments, the multi-client model means that seismic data is no

longer the exclusive property of a handful of oil companies, but sold

to whomever is willing to pay. Because the initiative is undertaken by

seismic companies, governments can open up unexplored frontier

E&P areas faster, thereby providing an early stimulus for investment.

In a study by consultants Wood Mackenzie, multi-client data has

actually been shown to lead to a greater number of exploration wells

and to the collection of ten times more seismic data, compared to

traditional contract seismic. Isaksen explains that this is because

the incentive models form multi-client are very different to contract

seismic.

“Oil companies are seeking to minimize their expenses on seismic

surveying. Therefore, when an oil company makes a discovery fol-

lowing a seismic survey campaign, they have a tendency to high-

grade the assets early and perform minimal additional surveys in the

immediate area around the discovery. In the multi-client model, the

incentives are the opposite. Multi-client seismic companies seek to

maximize interest in their data by covering as wide an area as pos-

sible and producing as much data as possible.”

Isaksen continues: “From an operator perspective, the cost of

obtaining data is reduced with the fnancial costs being spread

Stein Ove Isaksen,

senior vice

president Eastern

hemisphere, TGS

THE PATH TOWARDS

COMMERCIALIZATION:

Former CEO of Norwegian fow-assurance

company Roxar (bought by Emerson in

2009) Morten Tønnesen did not see the sale of

Norwegian intellectual capital as inevitable. To

the contrary, for Tønnesen, the gap between in-

novation and commercialization in Norway was

actually one of the easiest in the world to bridge

and it should, in theory, be easy for companies

to go it alone.

However, Tønnessen observed that too often on the road

to commercialization, Norwegian oil service companies fell

into certain pitfalls, one of them being a tendency to become

overly reliant on Statoil funding.

“The Norwegian market is big, but not big enough…[ser-

vice companies] become complacent, pleased to have Statoil

as a client and then they just sit there supported by the funds

from software sales and recurring maintenance revenues.”

However, he warned against the other extreme of listing

too early on the stock market, letting fnanciers dominate the

strategy, killing innovation, and eventually forcing a sell-out

to international service companies. In his view, this was the

fate of Roxar.

For Tønnesen, the solution of how to commercialize Nor-

wegian technology successfully abroad lies in Norwegian

companies pooling resources, establishing networks and

common marketing budgets.

“Funding is not where the problem lies since that is readily

available,” said Tønnesen. “It is more in the area of over-

lap where work is needed: smaller Norwegian companies do

overlap too much on the administration, marketing, sales and

distribution side of things. So, we can all beneft from coordi-

nation and partnership on this.”

Morten Tønnesen,

managing director,

Geocap

1305OGFJ_64 64 5/6/13 5:13 PM


there are not enough buyers for multi-client to make economic sense nor can the model

function in any country wishing to restrict information about its resources. This makes it

apparent why multi-client grew out of the mature and open-access production environment

of the North Sea.

However, for seismic companies to move into this mode of operation marks a signifcant

break in their traditional way of working. Norwegian seismic company Spectrum moved into

multi-client work completely when it acquired CGG Veritas’ multi-client 2D library in 2011.

Spectrum president and CEO Rune Eng explained that while investors in the UK, the US and

Norway appreciate the asset-light nature of their multi-client business model, seismic com-

panies are working with a greatly increased risk-profle.

Eng said that multi-client seismic companies are transforming themselves

into early explorers by conducting surveys in areas, which they predict will

become interesting to oil companies years down the line. “We think and act

very much like an oil company in the early phase of exploration… If you had

asked anyone fve years ago whether Lebanon or Israel would be hot spots

for exploration, people would probably have laughed at you. Today, this is

truly a major E&P region thanks to Noble's gas discovery in the Levantine

basin…We have recently been opening up Brazil's Northern Margin, which

will likely come up in the 11th licensing round.”

Multi-client companies are taking on more fnancial risk, because oil companies do not

underwrite the costs of exploration. In theory, the proftability of these companies could be

completely undermined by a range of political risks including policy reversals, regional insta-

bilities and environmental disasters, among others.

In addition, the proftability of these companies depends on the company’s ability to sell

the data. Eng said that, “we have to come up with our own exploration stories and think like

an oil company. To this end, we have employed three former exploration managers from oil

companies. They are the ‘storytellers’ in our company and they have more credibility, having

worked for the oil companies.”

Yet despite the challenges of adaptation, the multi-client model is gathering momentum,

and it looks set to rapidly expand on what Eng believes is already a $2 billion market.

Norway’s Fixed-Asset Predilection:“You might ask, is the Norwegian oilfeld service industry different from

those in other countries? I would reply that in Norway, service companies

like owning fxed assets: rigs, ships, heavy machinery, etc,” explained John

Avaldsnes, global advisory oil & gas leader at Ernst & Young.

He continued, “Norwegian service companies have traditionally taken

more risk or have been more opportunistic than other countries. At the

moment, this can be an advantage for us because we do have the assets to

supply to Brazil, West Africa, etc already on the balance sheet and there is

no need to request fnancing for new assets.”

However, this predilection for fxed assets and acceptance of risk has been the undo-

ing of several formerly successful Norwegian companies. One of the most notable fnancial

falls from grace in recent years was the situation in which Norwegian FPSO designer Sevan

Marine found itself in 2011. Sevan Marine president and CEO Carl Lieungh contrasted what

he viewed as the remarkable success of pioneering a completely new innovation to global

players, such as Petrobras and ENI, against the huge fnancial black hole engulfng the com-

pany just before he took over.

� ��

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Rune Eng,

president & CEO,

Spectrum

John Avaldsnes,

partner EMEIA

oil & gas leader,

Ernst & Young

1305OGFJ_65 65 5/6/13 5:13 PM

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Lieungh admitted, “when I joined the company

in May last year, I understood the job would entail

restructuring Sevan Marine, but I really had no idea

of the magnitude of the task I was taking on.” After

exhausting the possibility of a private placement,

Lieungh moved towards the bondholders including

Jens Ultveit-Moe, one of Norway’s largest industrial

investors and one of the key fgures in the restructur-

ing of PGS, Norway’s fagship seismic company.

The main challenge facing Lieungh was that, “the company was

not fnanced from the top on a feet level, but rather the bonds

were assigned to individual vessels. Each bond-holder had their own

agenda. An important step in facilitating the process was the bond-

holders reaching agreement on a common set of fnancial and legal

advisers to harmonize the company’s restructuring.” Eventually, in

the autumn of 2011, Canadian ship-owner Teekay offered to fnance

the entire restructuring of Sevan Marine and the Sevan Voyager, an

offer that Sevan Marine’s bondholders accepted.

As a result of this cooperation with Teekay, Sevan Marine has

changed its business model completely, moving away from the Nor-

wegian tendency for fxed assets. The company transformed “from a

build-own-operate model to a design and technology company and

project developer. Sevan Marine is now concentrating on concept

studies that will lead into feed studies and a license contract like the

project for ENI’s Goliat Field.”

Seismic contractor Seabird Explorer, which simi-

larly found itself over-leveraged on its assets, is

another company abandoning the fxed-asset predi-

lection. Dag Reynolds, founder and CEO of Seabird

Explorer, explained that the 2D seismic market is

buoyant, but highly volatile. He said: “When there

is an upswing we swing quickly upwards and this

explains the strong performance in Q3. However, in

a downturn we nose-dive and this is why we have been working on

making the company more scalable.”

Reynolds continued: “In a good market situation, we want to

increase our capacity, but we do not want to add fxed assets to our

balance sheet. We are looking to be more opportunistic and have

more short-term contracts.”

Seabird Explorer has therefore switched to a tactic of chartering

vessels and focusing on operating them as effciently as possible.

For Reynolds,“Seabird has some key strengths within the market,

and I would say the principal value is that we can take 2D vessels and

operate them more effciently than anyone else. For example, we

can operate a seismic vessel at less than 50 percent of the cost of a

PGS-operated vessel, and this gives us a signifcant market edge.”

This comes in especially valuable given the current oversupply of

seismic vessels and low contract rates.

Dag Reynolds,

CEO, SeaBird

Exploration

Carl Lieungh,

president & CEO,

Sevan Marine

1305OGFJ_66 66 5/6/13 5:13 PM

There is also an external factor limiting the Nor-

wegian tendency to add large assets to the bal-

ance sheet: limited bank fnancing. The withdrawal

of many European banks from shipping fnance and

the introduction of Basel 3 regulations is restricting

access to capital for many players in the maritime

industry. However, Sveinung Stohle, president and

CEO of Norwegian LNG specialist Hoegh LNG, out-

lined the variation he saw in asset fnancing:

“Particularly in Europe, the fnancial markets are challenging, how-

ever last week we raised $250 million in bank debt for the Lithu-

anian project, showing that despite banks choosing not to lend to

any shipping company at the moment, Hoegh LNG can still receive

money. This is because we are not strictly in shipping, but in energy

and infrastructure in long-term contracts.”

Hoegh LNG has been moving from LNG carriers into foating

regasifcation and storage units, pioneering a market, which four years

ago did not exist and recently winning major contracts in Lithuania

and Indonesia. Particularly in relation to Southeast Asia, Stohle sees

his company assist the regionalization of LNG markets, allowing con-

sumption to occur in the same region as production for the frst time.

However despite these ambitious projects and the growth of the

LNG market, Stohle admits that he does not have the all the fnan-

cial capabilities needed to expand as he wishes. Financing assets

upward of $300 million is a challenge in the current fnancial envi-

ronment even if your business model is favored by the banking sec-

tor. In order to expand on his capital options, Hoegh LNG therefore

launched an IPO in 2011, in line with a growing trend for Norwegian

companies to focus more on the bond and equity markets, rather

than the traditional banking sector, to fnance their assets.

Automobiles and Standardization:

With service companies being asked to ramp up their throughput at

the same time as reducing their prices, John Avaldsnes, global advi-

sory oil & gas leader at Ernst & Young, feared that they would have

to sacrifce their margins. He said:

“As companies still try to increase throughput and grow their

operational capacity, more pressure is being placed on margins. At

some point, these suppliers will have to make some arrangements

with the oil and gas companies or their own suppliers in order to

produce sustainable margins.”

Eirik Bergsvik CEO of Norwegian downhole equipment and plug

supplier Interwell and former managing director of the Norwegian/

American giant National Oilwell Varco (NOV), explained that indus-

Sveinung J.S.

Stohle, President

and CEO, Hoegh

LNG

gas

FLOATING REGAS

1305OGFJ_67 67 5/6/13 5:13 PM


Cars now contain a large number of add-ons pre-

installed, which you cannot use unless you pay for

them. It is cheaper for the manufacturer to sup-

ply the add-ons even when they are not paid for

because of standardization.”

Bergsvik saw the possibility of applying this think-

ing, even to the downhole industry, even though

every well is different. In Bergsvik’s view, by manufacturing prod-

ucts with a broader operational span, he could even apply “add-on

thinking” to downhole plugs, having previously tried to apply this

thinking to NOV during his tenure there. In cooperation with Sam-

sung Heavy Industries, Bergsvik was pushing to standardize the drill-

ing packages delivered by NOV in order to increase effciency and

reduce cost, in its international business.

Current NOV Managing Director Tor Ramfjord is the benefciary of

this push towards standardization to a certain extent. NOV is Nor-

way’s tenth biggest exporter and much of its business depends on

the link with Southeast Asian Shipyards – Daewoo, Samsung and

Hyundai. Ramfjord explains that there has been a shift in the opera-

tional model over the last ten years. He said:

“The whole business model of constructing for the oil and gas

try clients were aggressively trying to negotiate down supplier con-

tracts, thereby reducing the topline for the supplier industry.

“[They] claim oil service companies are setting their prices too

high. In fact, we are not the ones responsible for this, but rather our

country’s wealth and standard of living. Cost drivers are therefore

outside of our control, and when companies like Statoil or Cono-

coPhillips attract employees with high salaries and social benefts,

we must align with them if we want to fnd the talent we need.”

Moreover, Bergsvik explained that operators were not willing to

see any reduction in standards, which could potentially lead to a fall

in costs.“The fact is that if we genuinely believe that these standards

cannot be compromised, then we must simply accept higher cost

levels and move on with our work.”

Bergsvik explained that his company had been working on

expanding the supply chain to low-cost labor countries, however he

believed that this would not be enough. Bergsvik saw the greatest

potential in standardization and took inspiration from the automo-

tive industry. He explained that two cars could:

“Look identical but one will cost $10,000 and the other will cost

$30,000 because under the hood and inside, certain elements have

been tweaked to optimize the performance and comfort of the car.

Eirik Bergsvik,

CEO, Interwell

S e v a n M a r i n e

Teekay’s “Piranema Spirit”, the world’s

first cylindrical FPSO, has been

operating for Petrobras S.A. on the

Piranema field offshore Brazil since

2007. “Piranema Spirit” symbolizes

Sevan Marine’s expertise.

Modification of the Sevan 300 FPSO,

“Voyageur Spirit”, is completed and

the FPSO is now on contract to E.ON

and will operate on the Huntington

field, UK North Sea, for five years with

an option for extension.

Eni Norge has selected the Sevan

1000 FPSO concept for the sub-Arctic

Goliat field in the Barents Sea. The

Sevan 1000 FPSO is currently under

construction at Hyundai Heavy Indus-

tries in Korea.

With strong focus on research and development, Sevan Marine, the original designer and world leader

of cylindrical FPSO Technology, continues to provide innovative solutions. As field developments move

to deeper waters and harsher environments Sevan Marine is changing the shape of the FPSO market.

Sevan Marine ASA, Kittelsbuktv.5, 4836 Arendal

www.sevanmarine.com

N o r w e g i a n Te c h n o l o g y f o r C h a l l e n g i n g E n v i r o n m e n t s

1305OGFJ_68 68 5/6/13 5:13 PM


industry has changed from drilling contractors being

at the center of the value chain, managing vendors

and shipyards, to them only establishing the specif-

cations and negotiating frame contracts. The rest of

the responsibility has been transferred to the ship-

yards for a turnkey delivery of a rig or drillship.”

For Ramfjord, the effectiveness of this model has

come from generating standardization in drilling

packages and removing the drilling contractors from

the production process. He believed that rig contractors were so

obsessed with trying to optimize everything that the fabrication slot

was often missed and projects overran.

Ramfjord sees the necessity of maintaining a delicate balance

between standardization and innovation. He said: “Our success will

depend on a combination of standardized products and tailor-made

equipment. In the past, Norway probably favored tailor-made equip-

ment too much.”

He continued:

“Korean yards are excellent at managing the different vendors,

procuring the equipment and delivering a rig. We have an extremely

successful track record working with these yards. Between 2007 and

2011, 38 deepwater rigs have been delivered on time from Korea

using NOV’s complete packages.”

The Korean market has grown over the last decade to become

Norway’s largest export market for oil and gas services, ahead of

the other top-fve markets: Brazil, the UK, Singapore and Russia.

This relationship has recently been strengthened by the collapse of

global shipping Korean yards have had to make a challenging tran-

sition into the offshore market, partnering with Norwegian suppli-

ers to gain access to high end technologies. The high volume work

given to this successful international partnership is helping Norwe-

gian contractors move towards more cost-effcient standardization.

Clustering Around the “Drilling Bay”Tucked away in the verdant region of South Norway, near the city

of Kristiansand, is a technology cluster that has transformed Nor-

way’s position as an exporter of drilling technology. Following NOV’s

acquisition of Bjarne Skeie’s Hydralift and the establishment of Aker

Solutions, a cluster of companies has transformed this area into what

is now known internationally as “the drilling bay”, producing around

85 percent of the world’s offshore drilling packages.

Part of the success of this region comes from the collaboration of

companies within the Norwegian Offshore Drilling and Engineering

(NODE) cluster, which was established in 2006. Since then the cluster

has grown to 9,000 people from 1,500 and revenues have climbed to

$45 billion from $5 billion. NODE is one of 12 Norwegian National

Centers of Excellence and is a big draw for companies seeking to

gain access to key Norwegian intellectual capital.

In 2012, a third major player joined this cluster, when global leader

in fow equipment Cameron made a NOK 1.55 billion ($270 million)

acquisition of TTS Group’s drilling division in Kristiansand. Through

this merger Cameron gained work on drilling packages for the ultra-

deep-water drill ships allowing Cameron to seriously compete with

both Aker Solutions and NOV.

Cameron’s global CEO Jack Moore saw the acquisition of this Kris-

tiansand based company as an essential component in moving into a

tough ultra-deep-water drilling market. And curiously, the company

which recently awarded Cameron with a major drilling package con-

tract, Sigma Drilling, is backed by none other than the founder of

Hydralift Bjarne Skeie.

The Paternal Role of Statoil: Though the complex production challenges of Norway apparently

serve as a muse for the creation of new technologies, they are not

exceptional. So why then did Norway become the center of excel-

lence for all things offshore?

For Lars Mangal, chief commercial offcer of Welltec, a lot

depended on how the operators chose to focus their attention and

he believed that in the case of Norway it was Statoil’s leading role

Tor Henning

Ramfjord,

managing director

& VP operation

Norway, NOV

1305OGFJ_69 69 5/6/13 5:13 PM


in seeking to maximize recovery, which allowed

this Danish pioneer of well-tractor technology to

develop.

“From the very early days in Norway there was a

strong focus on maximizing recovery which became

the overriding driver of why production mainte-

nance and well work activities have been so strong

here compared to other markets,” he said.

Norway has been at the global forefront of techniques to increase

oil recovery and horizontal drilling, techniques which were enabled

by Welltec’s technology. Øystein Michelsen, Statoil’s executive vice

president of drilling and production in Norway, explained that his

focus was on taking the recovery factor to over 60 percent, fur-

ther widening the gap between Norwegian ambitions and global

standards.

For Mangal, this drive has, “forged a partnership between Welltec

and Statoil from the very early days to bring technologies that were

going to complete the portfolio, enable the step change and sup-

port continuous strides to improve the recovery factors from the off-

shore NCS.”

Håvard Devold, group vice president oil & gas upstream of ABB,

similarly believes the answer lies in the innovative

environment established by Statoil, Petoro and the

international majors at the dawn of the industry in

the 1970s. He explained:

“The entire regime was designed to favor the

development of the supplier industry. The positive

environment was not just about Norwegian suppli-

ers being favored in tenders; the system was set up

to allow for ‘active mentorship’ of the supplier industry.”

Devold contrasted the Norwegian environment with that in other

jurisdictions where risk-averse attitudes predominate and 5-year

proven track records are demanded -- even to this day. Devold

believed that unlike other jurisdictions Norway was willing to test out

technologies, which would take years to penetrate other markets.

He highlighted the example of ABB’s frst major project with Statoil:

“Our frst signifcant project was to install the control systems for

Statoil’s Gullfaks platform. Working with Statoil, we had the opportu-

nity to develop our latest control system into a fully distributed con-

trol system architecture. It took a further 20 years for these control

systems to reach full maturity in other markets.”

Devold saw this trend continuing with new projects like Statoil’s

subsea factory and integrated operations. Asked whether he saw the

same type of active mentorship with the newcomer operators on the

NCS, Devold replied:

“The minor companies do not have the same approach to technol-

ogy. They have their own role in developing resources, which require

a more lean and mean approach. As a consequence, their approach

to development is much more similar to other places in the world

from Southeast Asia to Africa, and they take fewer risks in trialing

out new technologies.”

Whether the newcomers and the minors are willing to invest in

technology or not, the list of companies choosing to invest in new

technologies is defnitely not restricted to Statoil, Petoro, Cono-

coPhilips and a few other majors. The Norwegian tax regime has

proven to be a major success in encouraging research and develop-

ment in Norway. The state SkatteFUNN scheme, established in 2002,

allows companies to offset innovation costs through tax credits. This

scheme allows for intramural expenditure of $950,000 and funds for

partnerships with research associations potentially receiving up to

$1.9 million.

While not the largest incentives in the world, this innovative tax

regime has seen companies claiming back more than $200 million

in deductions and has boosted research and development (R&D)

expenditure. For service companies, this has created a climate of

innovation in Norway. Wolfgang Wandl, managing director of Viking

Seatech Norway, commented on the willingness to adopt technolo-

gies between Norway and the UK. Wandl said:

“There have been cases where we presented ideas to an E&P

Lars Mangal,

chief commercial

officer, Welltec

Terje Skeie, senior

vice president,

Welltec

1305OGFJ_70 70 5/6/13 5:13 PM

company in the UK, and the UK offce asked the Norwegian sister

company to test out the product frst before it would be used in the

UK. Norwegian companies are apparently more willing to try out

new ideas, and several of our products have been supported by Det

Norske, Statoil and other Norwegian players.”

In developing a pre-lay mooring technology for

the NCS, which effectively cuts the rig move time

from four or fve days down to around four hours,

Viking Seatech is focused on innovation for the sake

of effciency. Wandl reported that thanks to using

this technology, Norwegian junior oil company Det

Norske would be able to drill one extra well over

its rig contract period. For Wandl, these effciency-

driven innovations alone are enough to create demand.

“Norway is an effciency driven market,” he said.“In Norway, work-

ers do two weeks on, four weeks off and in the UK they work two

weeks on and two weeks off for the same pay. When labor and rigs

are under-supplied to the market, the only solution to maximize on

these limited resources is to be effcient.

In the UK, they work to a minimum price and it may mean standing

off four or fve days during the winter. In Norway, they instead say:

tell me what you can do to have zero days off. If Norwegians can

eliminate ineffciency, they will do it – no matter the cost.”

This willingness to trial new innovations has been extremely useful

for Norway’s own service industry in its international expansion, a

point highlighted by Even Gjesdal, CEO of Norwegian mud cleaning

technology company Cubility.

“Even though the validation process of a new technology entering

a market is long, especially in Norway, we feel that the recognition of

our technology from the leaders of the NCS will give us the support

to continue our quest in other waters. Statoil is crucial to our tech-

nology, and we are aware that other companies outside of Norway

trust Statoil’s choices for newly implemented technologies.”

Gjesdal emphasized that Norway had managed to resist the strict

Positioned for innovation

Viking SeaTech provides consistent service, expertise and

innovations globally to meet the demands of the worldís

offshore energy assets.

Our clients welcome the breadth and depth of our service.

From conception to completion, from marine engineering

to equipment supply & rental, from positioning, mooring

& inspection to maintenance & manpower projects, our

offshore seatech services consistently increase customer

uptime.

Our innovation and performance will change the way the

world sees offshore SeaTech services.

- Marine Engineering

- Survey & Positioning

- Moorings

- Inspection

- Maintenance

- Manpower

www.vikingseatech.com

[email protected]

��

positioned for innovationTH

Viking Seatech

Wolfgang Wandl,

managing director,

Viking SeaTech

1305OGFJ_71 71 5/6/13 5:13 PM


will be less oil per well. This means that the oil service industry will

grow signifcantly. The supplier industry will take a greater share of

national value creation.”

In Haugane’s conception, the onus of technology development

will fall more on service companies themselves, and they will take

a greater share of the work of production, thereby redefning their

relationship with oil companies. So whilst there may be less money

for oil companies to spend, the demand for services is unlikely to

subside.

The Brazilian Statoil The idea of using international partnerships to nur-

ture the development of a strong domestic ser-

vice industry is nothing new, and it forms the main

motivation for every local content policy. However,

no country has come close to developing a service

sector as strong as Norway’s on the back of interna-

tional collaboration. Brazil, nonetheless, is making a

stab at it and engaging with Norwegian partners in

the process.

Chairman of the Brazilian-Norwegian Chamber of Commerce Terje

Staalstrom said that there were around 130 Norwegian companies

operating in Brazil, 100 of them in the oil and gas industry. In fact,

oil and gas represent roughly two-thirds of the real trade balance of

$1.7 billion between the two countries. However, Staalstrom admits

that,“the biggest challenge is for companies to meet the require-

ments for local content… we [Norway] had similar prerequisites for

local content in the late 1970s and early 1980s.” However, today

the Norwegian sector has matured to have more than 50 per cent

foreign ownership.

Oftentimes, it seems that Brazil is prioritizing local content even

at the expense of their own ambitions, with a restricted labor force

undermining signifcant projects. Those projects, which do proceed,

employ Brazilian employees on extremely high salaries. Staalstrom

mentions that, “to build an FPSO in Brazil today may be double the

price of Korea, and even 20-30% more expensive than building in

Norway.” Brazil is now far from a low-cost country in which the inter-

national service sector can establish itself.

Though onerous local content regulations provide a signifcant

impediment to Brazilian-Norwegian service sector cooperation, the

Brazilians have adopted one aspect of the Norwegian formula rea-

sonably well: active mentorship.

Sevan Drilling, the spun-off drilling division of FPSO designer

Sevan Marine, has managed to build a strong partnership with Petro-

bras. It was Petrobras which frst took on the Sevan Marine FPSO in

2004. It was Petrobras which then took the initiative to develop the

Sevan design for a potential drilling rig. And it was Petrobras which

awarded Sevan Drilling (then part of Sevan Marine) the frst contract

fnancial target to retrieve oil rapidly and move on.

“We believe Norway to be the best place to start

our technology on its international road to success,”

he asserted.

Shell Technology Ventures has recently commit-

ted to spending several hundred million dollars on

emerging technology companies on the NCS. So, it

appears that the spirit of active mentorship is far from dead, even if

the composition of operators on the shelf is evolving.

.

Marginal Fields Need More ServicesOne of the concerns for the future of Norwegian R&D funding is that

the felds being discovered are smaller than the giant developments

of the past. Therefore, the focus of companies will be on the eco-

nomic development of felds, not on piloting risky new technologies.

However, Erik Haugane, CEO of Norwegian junior Det Norske sees

the challenges of smaller and trickier felds as more of a call to action

for the Norwegian service industry rather than a omen of its demise..

“As a more mature province, which we expect to be in 2020, we

will need ffty felds to produce two million barrels. So, the number of

engineers and service companies necessary will increase, and there

Jon H. Willmann,

CFO & deputy CEO,

Sevan Drilling

Even Gjesdal,

CEO, Cubility

1305OGFJ_72 72 5/6/13 5:13 PM


for the Gulf of Mexico and then a second contract in 2008.

John Willman, CFO & Deputy CEO of Sevan Drilling, explained:

“Petrobras has been extremely supportive of both Sevan Marine

and Sevan Drilling. Without this company, it is clear that neither

company would be in the market today. Petrobras took a bet on

this company, awarding contracts without any track record, which is

pretty bold, and they have been extremely important in developing

this company.”

The frst unit, the Sevan Driller, suffered severe cost overruns due

to what Willman saw as unrealistic expectations placed on COSCO

shipyards. Nonetheless, Petrobras stuck by the technology. Willman

believes that the Brazilian company should have been able “to pro-

pose discounted rates for these drilling units because there was no

buyer competition for this untested concept.” However, the proj-

ect needed to attract fnancing to get off the ground and Willman

believes that “the agreement was reached in order to prioritize the

development of this concept, rather than cost savings for Petrobras.”

Despite its challenges, the Brazilian market is still projected to be

valued at/worth $42 billion in 2015. So, the draw for the Norwe-

gian service industry is evident, and in spite of local content regula-

tions, Petrobras seems capable of championing the types of high-

end technology produced by Norway over cost effciency – thereby

adapting Statoil’s role on the NCS for the Brazilian market. Brazil is

just setting out on a path Norway took 40 years ago. So, time will tell

whether it succeeds in replicating the Norwegian forumula.

In-Norway-tion Recent criticisms about Western economies have

often been centered on whether these countries are

still innovating and adding economic value. With

Asia spending almost double that of Western econ-

omies on research and development, are we about

to witness a steady tide of value creation fowing

towards Asia?

Not so, said Henrik Madsen, Group CEO of Norwe-

gian foundation DNV.

“I would not agree that there is a lack of innovation in Europe, I believe

the opposite is true. Even if spending in Asia is much higher, Europe

has an educational system and philosophy which is strong in promoting

innovation; in Europe you are allowed to fail and this means that people

are more willing to take bigger risks. Europe will survive as an economic

power because we remain at the forefront of innovation.”

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Henrik O. Madsen,

group CEO, DNV

1305OGFJ_73 73 5/6/13 5:13 PM

The global oil and gas industry

faces many different challenges.

3M has years of proven innovation in

material sciences to build and support

advances in technology, meeting the

demanding requirements for this critical industry.

This gives us the resources to provide you with a

continually evolving range of world-class solutions for

upstream, midstream and downstream applications:

• to protect your people and the environment

• to extend the life of critical assets

• to improve productivity in your operations

To discover more, contact 3M.com/oilandgas 11©

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3M: APPLIED INNOVATIONS

Probably best known as the people who make offce station-

ary, 3M has an incredible depth of technologies ranging across

many industries, from healthcare to oil and gas. In fact, 3M has been

nominated as the third most innovative company in the world after

Apple and Google by Booz & Co. Focus Reports therefore caught

up with 3M VP and GM of Oil & Gas Jeff Lavers to ask what Norway’s

innovative oil industry represented within this industrial constellation.

FOCUS: What is Norway’s Role within 3M’s oil & gas innovation?

LAVERS: Norway is a primary market for 3M globally, for the very

fact that it is a key site of innovation in the oil and gas industry. Nor-

wegians value technology, and they are adept at building new tech-

nologies – traits that are extremely valuable for a technology-driven

company like 3M.

Innovation is the magical blend of invention with practical application

and to be truly innovative, you need to have that mix. By continuing to

work in the Norwegian market in an industry like oil and gas, our ability

to innovate on a global level is much higher than it would otherwise be.

One of the main issues that 3M is facing as a com-

pany right now is that we have traditionally used the

approach with products defning the market. However,

the market dynamic is playing an ever more important

role in steering the company, and we are now starting

to see within 3M a shift towards allowing markets to

increasingly inform our innovative processes.

FOCUS: How does Norway ft within 3M’s oil

and gas brand recognition?

LAVERS: 3M's strategy is to target the early adopters to see how

products can beneft our markets, and then try to replicate this suc-

cess with the other companies in the industry to build a broad base

of acceptance.

We have identifed some regulatory developments as "one-offs",

where they arise out of a particular local dynamic, but they will not be

replicated in other parts of the world.The interesting thing about the

various regulatory and technology fronts in the Norwegian market, is

Jeffrey Lavers,

Vice President

and General

Manager,3M

Mining, Oil and

Gas Solutions

Division

1305OGFJ_74 74 5/6/13 5:13 PM


��

��

��

��

Madsen went on to point out the distinguishing feature between

Western and Asian innovative models. Westerners are more prone to the

creative destruction or Schumpeter model of value creation, where ideas

are created and destroyed with the success of their host companies. Asia

Norwegian Past Innovation: the Condeep Platform by Jan Ulriksen/Statoil/Norwegian

Petroleum Museum

that they are actually replicated in other markets.... Norway has a

leadership role in the industry.

FOCUS: As a major consumer of hydrocarbons, how would

you describe 3M’s own relationship with oil and gas?

LAVERS: If you look at the recent trends in US gas prices, which

have dropped dramatically simply because the industry has man-

aged to become more effcient in extracting gas, this has deliv-

ered huge savings to American industry. As a major industrial

consumer, 3M has gained a lot from this price movement as our

variable costs have gone down and we have been able to use

these savings to fund more R&D investment and commercial

opportunities.

3M, as a company, does consume a lot of oil and gas both on an

operational basis and as the feedstock for a lot of our products. This

makes our search for effciencies a circular initiative. We are often

looking to beneft as a company from the same effciency-driven

products that we provide for the oil and gas industry.

1305OGFJ_75 75 5/6/13 5:13 PM


“Given the country’s strategic positioning in the

Arctic Circle, Norway is still our focus in technology

development for Arctic environments… However,

even here the R&D for Arctic environments is shared

across Russia, Alaska, Canada and Norway. These

different research environments can be leveraged to

beneft our work in Norway.”

Expanding from a relatively small base of compa-

nies in 2009 to more than 35 offces today, Scandpower accelerated its

internationalization by integrating with various subsidiaries of the Lloyd’s

Register group.

“Ten years ago the Norwegian staff represented around 75 percent

of our employees whereas today they represent around 30 percent. In

addition, we have global centers of excellence such as Lloyd's Register’s

Global Technology Center in Singapore and in Southampton.”

Value creation is clearly moving into an interna-

tional arena for Scandpower. However, the most

recent merger between ABS and Safetec shows yet

another mode. ABS and Safetec have not integrated

to the same extent as Scandpower and Lloyd’s group.

According to Jan Morten Erstaas CEO of Safetec

and Vice-President of Offshore Oil & Gas, ABS

Group the value of the merger comes from sharing

knowledge and methodologies.

“We have not physically integrated with ABS Group, and the manage-

ment of Safetec has been fully maintained. Safetec is an ABS Group

company, but we have maintained our brand name and recognition in

the market. We are simply looking at how the two companies can ben-

eft from each other's experiences and methodologies. We are concen-

trating on how to share knowledge.”

For Safetec, Norway therefore remains the hub of

R&D. Rather than transferring to a new location, inno-

vation is becoming globalized, and while that might

threaten Norway’s dominant position in certain felds,

it does diminish its role in innovation overall. Particu-

larly, in the case of ABS and DNV, Norwegian exper-

tise remains at the center of global innovation.

Funding Norway’s Innovative Future:Despite the private bent of the Norwegian model of innovation, the

Norwegian state is regarded as playing a major role in the development

of new technologies. State funding to the oil and gas sector is delivered

through two principal funding bodies Petromaks and Demo2000, which

distribute a budget of $70 million to the industry. Petromaks handles all

funding for basic research, while Demo2000’s rationale is to co-sponsor

pilot projects for applied technologies. Anders Steensen, program coor-

dinator of Demo2000 explains:

“Government spending has traditionally been a major part of R&D

tends to adopt more incremental innovation model, where innovations

are slowly established within a few continuously operating research cen-

ters. As a consequence, according to Madsen, “Asia does not have the

same number of small entrepreneurs willing to develop their ideas.”

Madsen continued on the subject of where value would be

created.“DNV has made two commitments to value creation in Nor-

way and the frst is that the headquarters of the organization will always

remain in Norway. Secondly the majority - 80 to 90 percent - of our R&D

will be conducted in Norway.”

He clearly saw Norway maintaining a dominant role in the world of

innovation. However, one of the telltale signs of an industry running low

on in-house value creation is the tendency towards mergers and acqui-

sitions. Looking at the risk management sector over the past couple

of years, DNV has merged with Kema, Scandpower has merged with

Lloyd’s Register and, most recently, Safetec has merged with ABS. So is

this a sign that value creation is suffering in Norway?

Bjorn Inge Bakken, CEO of Scandpower, sees it differently. For him,

Scandpower’s merger with Lloyd’s Register in 2009 brought with it great

opportunities to launch joint international projects. Even in the feld of

Arctic R&D, Norway is far from alone as a source of expertise and Bak-

ken highlighted the joint research potential:

Bjørn Inge

Bakken, CEO,

Scandpower

Egil C. Legland,

country manager,

ABS

Jan Morten

Ertsaas , VP of

offshore oil & gas,

Safetec

1305OGFJ_76 76 5/6/13 5:13 PM


spending in Norway and has played the role of encouraging private sec-

tor investment in innovation… From Demo 2000’s inception in 1998, the

export of Norwegian technology in the oil and gas business has increased

from 30 billion NOK ($5 billion) to 152 billion NOK ($26 billion) today.”

Steensen believes that the majority of the success can be attributed to

the involvement of the private sector in the technology forum, including

a range of players from Statoil to Total and Lundin. This involvement

helps to keep public funding directed at the most useful technologies.

Anna Aabø of the International Research Institute of Stavanger (IRIS)

agreed “One of the strong aspects of the Norwegian R&D environment

so far has been the applied nature of our research in oil and gas.”

Aabø emphasizes the necessity of making research relevant, stat-

ing that while 30-70 percent of funding can come from the public

sector:“The rest of our fnancing has to come from the industry itself and

they need to fnd our project interesting in order to invest. The system is

therefore set up for research to be relevant.”

IRIS functions as one of the connection points for the public and pri-

vate sectors, establishing a link between diverse international research

bodies from NASA, which is looking to adapt Norwegian drilling tech-

nologies for use on Mars, to other Norwegian clusters, the University of

Stavanger and the private sector.

We have significant growth ambitions, and we are looking for skilled persons to our 32 offices around the world. We can promise you an exciting position in an international company.

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SWEDEN

FINLAND

NO

R

W

A

Y

NCE Instrumentation

NCE Aquaculture

NCE Maritime

NCE Tourism

FJORD Norway

NCE Subsea

NCE Culinology

NCE Node

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NCE Systems EngineeringKongsberg

NCE Micro-and Nanotechnology

NCE Energy and Emissions Trading Halden

North

Sea

A r c t i c O c e a n

Norwegian

Sea

Baltic Sea

Gulf

of

Bothnia

1305OGFJ_77 77 5/6/13 5:13 PM


tially explode. However, they do not accept the storage of a perfectly

inert gas in their country.”

Though, as Haugan puts it, the naysayers currently have the upper

hand, Norway’s steadfast publicly funded commitment to this technol-

ogy and the recent opening of the new Technology Center in Mongstad.

“Norway could end up playing a crucial role in reversing the swing.”

Carbon Capture Storage in the Valley of DeathThe value of long-term public funding in the area of research and devel-

opment is clearly evident in the story of carbon capture storage (CCS).

Bjorn-Erik Haugan of Norway’s publicly funded CCS-focused research

institute Gassnova explained:

“Going back just over two or three years, there where

huge expectations being placed on CCS technology in

terms of how fast it might contribute to combat global

warming. Reality has now set in, in the sense that a

lot of the projects for the development of CCS tech-

nology have not materialized at the pace that people

expected. We are now in what others might refer to as

the “valley of death” in CCS innovation.”

Haugan said that the popular mandate for exploring this type of tech-

nology had subsided with climate change being taken off the agenda,

and a carbon market has not emerged. Even Germany has bowed down

to popular misconceptions.

“Germany has practically banned the storage of CO2 because the

government has bowed to popular but erroneous belief. This has led to

the situation where they are quite happy to accept the storage of natural

gas under their football stadium in Berlin – which is a gas that can poten-

Bjørn-Erik

Haugan, managing

director, Gassnova

The next issue in our series of reports on Norway

will be published in a late summer edition of

Oil & Gas Financial Journal

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Carbon storage at Sleipner, Photo Alligator film, BUG, Statoil

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