THE CLUSTER CHARACTERISTICS AND COMPETITIVENESS OF THE NORWEGIAN FPSO INDUSTRY - COMPETITIVE FOR THE FUTURE?

GRA 6829 Strategy for Industrial Competitiveness 2010

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Torleiv OpsalNicolai A. Kirkeng

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

What is an FPSOThe emergence and current position of the industry

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal

Agenda• Introduction– What is an FPSO– The emergence and current position of the industry

• Cluster and national competitiveness– National diamond analysis– Challenges for the cluster

• Recommendations– For the industry– For the government

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INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

What is an FPSOThe emergence and current position of the industry

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal

What is an FPSOFloating Production, Storage and Offloading unit

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Accommodation, central control and

helideck

Process and utilities e.g. separation train, gas compression, power

generation

Hull & marine utilities e.g. cargo,

ballast,boilers, propulsion

Turret and fluid/control transfer swivel

Moorings and risers

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

What is an FPSOThe emergence and current position of the industry

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal

• Emerged from two traditionally strong industries

• Unique international position

– 10 of 28 international actors are Norwegian

– No other country has similar agglomeration

• More national than regional agglomeration

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In the intersection of shipping and offshore

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INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

What is an FPSOThe emergence and current position of the industry

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 5

Trondheim:- R&D- Education

Oslo:- Maritime operations- Ship owners- Financial

Arendal area:- R&D- Ship Equipment

Stavanger area:- Oil & Gas- Offshore

The industry is spread around the country

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 6

The national diamondFirm strategy, structure

and rivalry

Factor conditions

Related and supporting industries

Demand conditions

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 7

The national diamond

• Specialized skills• Available capital• Marintek and NODE

Firm strategy, structure and rivalry

Factor conditions

Related and supporting industries

Demand conditions

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 8

The national diamond

• Specialized skills• Available capital• Marintek and NODE

• Global demand• Demanding conditions• Strict regulatory

framework

Firm strategy, structure and rivalry

Factor conditions

Related and supporting industries

Demand conditions

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 9

The national diamond

• Oil & Gas• Shipping• Offshore• Ship equipment

• Specialized skills• Available capital• Marintek and NODE

• Global demand• Demanding conditions• Strict regulatory

framework

Firm strategy, structure and rivalry

Factor conditions

Related and supporting industries

Demand conditions

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 10

The national diamond

• Numerous actors• High rivalry• Heterogeneity

• Oil & Gas• Shipping• Offshore• Ship equipment

• Specialized skills• Available capital• Marintek and NODE

• Global demand• Demanding conditions• Strict regulatory

framework

Firm strategy, structure and rivalry

Factor conditions

Related and supporting industries

Demand conditions

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 11

The national diamond

• Numerous actors• High rivalry• Heterogeneity

• Oil & Gas• Shipping• Offshore• Ship equipment

• Specialized skills• Available capital• Marintek and NODE

• Global demand• Demanding conditions• Strict regulatory

framework

Firm strategy, structure and rivalry

Factor conditions

Related and supporting industries

Demand conditions

Government

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 12

Challenges

• FPSO projects are risky – smaller actors lack sufficient financial strength• Pressured margins• Low profitability

Lack of competitive scale

• High cost labor• Focus on knowledge intensive and core activities

Keeping the right activities in Norway

• Qualified engineers• Workers with operational experience

Future access to qualified labor

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 13

Challenges

• FPSO projects are risky – smaller actors lack sufficient financial strength• Pressured margins• Low profitability

Lack of competitive scale

• High cost labor• Focus on knowledge intensive and core activities

Keeping the right activities in Norway

• Qualified engineers• Workers with operational experience

Future access to qualified labor

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 14

Challenges

• FPSO projects are risky – smaller actors lack sufficient financial strength• Pressured margins• Low profitability

Lack of competitive scale

• High cost labor• Focus on knowledge intensive and core activities

Keeping the right activities in Norway

• Qualified engineers• Workers with operational experience

Future access to qualified labor

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

National diamond analysisChallenges for the cluster

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 15

Challenges (2)

• Changing policies• FPSOs not included in NIS tax beneifts

Political instability

•No recent major oil findings• Restrictions Lofoten and Vesterålen• Activity push innovation and new technology

Decreasing activity on the Norwegian continental shelf

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

For the industryFor the government

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 16

Industry recommendations

A strengthened and competitive

Norwegian FPSO cluster – With a bright

future

Challenges

Lack of competitive size

Keeping key activities

Future access to labor

Political instability

Decreased activity in the home market

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

For the industryFor the government

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 17

Industry recommendations

A strengthened and competitive

Norwegian FPSO cluster – With a bright

future

Industry consolidation

- Increase size & financial strength

- Increased bargaining power

- Still maintain cluster dynamics

Establish a cluster initiative

- Cluster promotion

- Address common issues

- Cooperate with government, universities and industry actors

Challenges

Lack of competitive size

Keeping key activities

Future access to labor

Political instability

Decreased activity in the home market

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

For the industryFor the government

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal 18

Governmental recommendations

A strengthened and competitive

Norwegian FPSO cluster – With a bright

future

Secure long term policy stability

- Consensus driven decisions- Cooperation with the industry

Open oil & gas activity in the North

- Activity crucial to innovativeness- Recent report degrading environmental hazard

Invest in cluster related knowledge

- Strengthen scientific infrastructure- Joint effort from the government, industry and universities

Challenges

Lack of competitive size

Keeping key activities

Future access to labor

Political instability

Decreased activity in the home market

INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

For the industryFor the government

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal19

Conclusion

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INTRODUCTIONCLUSTER AND NATIONAL COMPETITIVENESS

RECOMMENDATIONS

For the industryFor the government

GRA 6829 Strategy for Industrial Competitiveness 2010 | Nicolai A. Kirkeng & Torleiv Opsal20

Conclusion

By implementing the suggested recommendations the FPSO cluster might develop into a stronger FPSO hub for the future and prove to be an important industry in the exciting intersection of

the oil & gas, offshore and shipping industry.

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Thanks for your attention!

Q&A