Oil and Gas Aberdeen report 2008

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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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


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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“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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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


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


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


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


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


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


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


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


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


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


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


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.

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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


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


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

Cosalt_OGFJ_0902 1 1/16/09 11:40:24 AM


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

Stron_OGFJ_0902 1 1/16/09 11:51:22 AM


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

Petro_OGFJ_0902 1 1/16/09 1:52:31 PM


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

Amec_OGFJ_0902 1 1/16/09 11:38:48 AM


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


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

Bibby_OGFJ_0902 1 1/16/09 11:41:54 AM


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

Sterling_OGFJ_0902 1 1/16/09 1:59:16 PM


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


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

Ecitb_OGFJ_0902 1 1/16/09 11:27:39 AM


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

Maxoil_OGFJ_0902 1 1/16/09 1:56:53 PM


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

Adept_OGFJ_0902 1 1/16/09 2:00:52 PM


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

Ocean_OGFJ_0902 1 1/16/09 11:28:53 AM


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

Triton_OGFJ_0902 1 1/16/09 2:04:35 PM


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


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


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


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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Oil and Gas Aberdeen report 2008

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