norway - ogfj · with 40 perfe coming from the sale of norwe- ... are turning their hungry gaze on...
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ANYTHING BUT STANDARD
The second most valuable industry to the Norwegian economy after oil
and gas production is the Norwegian oil service sector. Making a stand-
ing start in the 1970s, this sector today generates $63 billion in revenues
with 40 percent ($26 billion) of that fgure coming from the sale of Norwe-
gian technologies to foreign markets. Unable to exploit any natural cost advan-
tages, Norway’s international competitiveness has relied upon the strengths of
its innovations and its ability to redefne existing industry standards. But how
sustainable is this endless focus on the high-tech, high-cost solution?
NORWAY
Volstad Surveyor Varg Brace 2.
Picture courtesy of Deep Ocean
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Home to paradigm altering innovations like horizontal drilling,
multiphase fow, power-from-shore, 4D seismic and now “integrated
operations” and the “subsea factory”, Norway is the birthplace
of many of the offshore industry’s cornerstone technologies. The
remarkable aspect of this technological achievement is that it has
come from a country with a distinctly unremarkable technological
heritage – known for having invented not a great deal besides the
cheese slicer.
The Norwegian offshore industry has achieved this technological
feat by valuing innovation over the cheap solution, whether from
foreign contractors or domestic. But is Norway’s pursuit of the non-
standard product, which brought it so much success in the past,
now simply pushing up the cost curve? By focusing on the exacting
requirements of the Norwegian continental shelf (NCS) and riding a
wave of cost infation, is the Norwegian service sector now under-
mining its international competitiveness? Or, as the Norwegian min-
ister of petroleum and energy Ola Borten Moe believes, are the high
costs now driving a new wave of innovation?
Tethering to the Home MarketIn 2012 the domestic market for oil services rose
to $24.7 billion and is projected to hit $37 billion
in 2013, making Norway the number one offshore
investment market globally. For David Smith, man-
aging director of offshore logistics and mooring
specialist IOS Intermoor, this marks a stark contrast
to the situation a few years ago.
Smith explained: “In 2009, IOS InterMoor was
looking internationally, as many Norwegian companies were, to
expand its business. At that time, most Norwegian companies
started to think that the industry’s end was in sight.”
At the lowest point of the global fnancial crisis,
the domestic base of Norway’s oil service sector was
in decline and companies were targeting interna-
tional markets. Then in 2010 and 2011, Lundin and
Statoil made their giant discoveries on the Utsira
High, turning the international perception of Nor-
way’s oil potential on its head and sparking a surge
of investment in the sector.
It is not for nothing that Smith regards 2011 as a benchmark year
for the Norwegian service industry. “A year after those huge dis-
coveries, most Norwegian companies’ target market is now domes-
tic,” he said, forecasting a mini-boom in activity over the next 3-4
years. IOS Intermoor has responded by redirecting resources to the
Norwegian market and signifcantly expanding on the facilities at its
main Norwegian base in Mongstad,.
One of the founding fathers of Norway’s export-focused oil and
gas association INTSOK Håkon Skretting agreed that Norway’s sec-
ond oil boom has refocused attention. He explained:
“With the current booming activity in Norway, Norwegian compa-
nies had never been as busy as today on the NCS. Therefore many
companies argue that there is no need to go to other countries like
Russia when they have everything in their home country to prosper.”
Value Creation vs. Wage Infation: The downside of so much investment pouring into
the Norwegian market is an inevitable strain on
human resources, creating signifcant wage infation
as companies seek to entice the country’s limited
retinues of engineers and offshore workers. In 2010,
the year that Lundin made its giant oil discovery on
Avaldsnes, labor costs rose by 12 percent and since
then employee wages have increased signifcantly as
a proportion of the industry’s total spend.
The effect on Norway’s oil industry is a total lifting cost, which
has climbed to around $75 per barrel, threatening to increase the
threshold of what is considered to be a marginal feld. However, the
effect on the service industry is arguably more deleterious. Further
disadvantaged in exports by the strength of the Norwegian krone,
Norway’s fabricators have been losing work to international com-
petitors in countries where the cost of labor is several times cheaper.
For nine years until the 2011 demerger, Aker Solutions and
Kvaerner operated as one company and the history of their collabo-
ration dates back more than 40 years. Even after the separation,
these Norwegian frms remained close allies in bidding rounds for
major projects, but the conclusion drawn at Aker Solutions’ Q42012
briefng was that this fagship Norwegian pairing cannot endure
much longer.
USD 43 billion
USD 34.5 billion
USD 25.9 billion
USD 17.2 billion
USD 8.6 billion
0
Turnover Norway
Turnover internationally
2000 2003 2006 2009 2011
Gap Closing between international and Domestic Revenues until Lundin’s Discoveryin 2010, Gap Widens thereafter
Source: Rystad Energy study for the Ministry of Petroleum and Energy (2012)
The industry has been able to grow abroad
and meet record high demand at home
David Smith,
managing director,
Intermoor
Per Harald
Kongelf, COO,
Aker Solutions
ASA
Håkon Skretting,
regional director,
Intsok
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62 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
a more general trend towards consolidation where: “Smaller, bespoke
subsea specialists are becoming few and far between. The major com-
petition is between the big players: FMC Technologies, Kongsberg,
Cameron, GE and a few others. We are witnessing increased ‘produc-
tifcation’ and standardization. As such it is hard for the smaller players
to survive.”
Apply has completely pulled out of a subsea sector, which is predicted
to double in size between 2012 and 2016. The company will instead
concentrate on its competitive position in the MMO segment, which,
according to Sortland presents suffcient room to grow market share,
though dominated by Aker Solutions and Aibel.
The consolidation at the top end of the market is driven by the pro-
curement strategies of its main operators. Procurement offcers are now
attempting to contain costs in a new era of cost infation by dealing
with fewer contractors and transferring risk from buyer to supplier. As a
result, the structure of the service industry is going through some major
changes.
The Home AdvantageNorway’s drive towards consolidation in the service market does not
mean the end of the small players. For Stig Dahl, managing director of
Dahl Oilfeld Services, a downhole equipment supplier, small local play-
ers have unbeatable advantages over the large internationals in a market
renowned for high standards a preference for bespoke technologies.
“As a local Norwegian company, we are aware of the advantage
we have when conducting business with other Norwegian companies.
Large international companies with many offces around the world can-
not reach the level of infuence and knowledge in Norway compared to
a local Norwegian company like us - which has 90 percent of its activity
based here.”
Standardization may be the weapon of choice for the multinationals
in cost-reduction, but Dahl Oilfeld Services has opted for outsourcing
its supply chain to low-cost countries like Ukraine and China to stay
competitive.
In addition, Dahl explains that the stringent NS1 standards in the
Norwegian market created a degree of protection for those companies
purely focused on the Norwegian market. He said:
“As the standards are higher in Norway than in other countries, we
realize the advantage our drill pipes have in respecting high quality stan-
dards [of the Norwegian continental shelf]”.
Innovators, not Entrepreneurs: In a wry observation, Ståle Kyllingstad, CEO of the industrial group
IKM, characterized Norwegians as “innovators, not entrepreneurs.” Kyl-
lingstad described a situation in which would-be entrepreneurs were
often sidetracked from the arduous and long-term commitment to their
companies by the good life offered by Norwegian society. For him,
Norwegian culture is the root cause of a phenomenon of Norwegian
The Norwegian partners lost all of their Q4 bids to international chal-
lengers as Jon Arve Haugan, Kvaerner’s president and CEO, wrote
in their 2012 annual report. He stated, “in the most recent round of
awards, topside EPC contracts were awarded to Asian yards and jacket
contracts to European yards. Needless to say, we are not satisfed with
the outcome.”
As Aker Solutions recognized, the key factor in losing these bids was
a lack of price competitiveness. For Aker Solutions COO Per Harald
Kongelf, the poor performance signaled that, “Norwegian fabricators
as well as Aker Solutions need to work on competitiveness including
our subcontracting strategies and relationships with suppliers.” In an
era where the Korean behemoths of Daewoo, Hyundai and Samsung
are turning their hungry gaze on the oil and gas industry, to offset the
decline in global shipping, the ‘Made in Norway’ premium for offshore
fabrication appears conspicuously high.
On the back of more technologically driven business units, especially
subsea equipment, Aker Solutions actually enjoyed a strong 2012 with
revenues climbing by $1.44 billion to $7.68 billion; the let down was
based on labor-intensive fabrication. And as Kongelf announced that
Aker Solutions was seeking, “more fexibility regarding our [their] bid-
ding partners,” the 40-year partnership between Aker Solutions and
Kvaerner became another casualty of Norwegian cost infation.
Losing Nemo Better to be a big fsh in a small pond than a small fsh
in a big one, was the rationale behind the decision of
leading Norwegian contractor Apply to sell its sub-
sea division Apply Nemo to Kongsberg last year. For
Apply’s CEO Peder Sortland, “The subsea segment
is becoming a serious game, played by the very large
subsea specialists.” He explained that although a big
name in the Norwegian industry, Apply did not have
the balance sheet to remain competitive in the segment. Sortland sees
Revenues and average EBIT-margins
Source: Rystad Energy study for the Ministry of Petroleum and Energy (2012)
68.7
60
51.5
42.9
34.3
25.7
17.2
8.6
12%
10%
8%
6%
4%
2%
0%
USD
Revenues Average of EBIT
2007 2008 2009 2010 2011
Peder Sortland,
CEO, Apply
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demand from the operators to broaden the scope of contracts, which is
pushing the larger service providers to meet these needs.”
This in part explains the relative aggressivness of the M&A activity in
Norway over the last couple of years. In 2010 the transation market in
Norway represented $8 billion, marking the start of a continual climb in
M&A activity. For its part, Oceaneering’s expenditures on acquisitions
were almost triple its yearly average for the period 2006-10.
Whether Norwegians prefer their blue overalls to their business suits,
or whether the funding model stunts growth at the point it is most
needed, the tide of Norwegian intellectual capital being swept up by
Western multinationals remains unabated. The pickings are just too rich
to be ignored and operators now seem to demand it.
A Seismic Shift in Thinking: Bridging the gap between the realms of innovation and entrepre-
neurship is a Norwegian/American business model, which has trans-
formed the world of seismic: multi-client surveying. Not a technolog-
ical innovation per se, but rather a business innovation, multi-client
surveying has reshaped the relationship between governments,
oil companies and seismic contractors. This model evolved in the
North Sea and Gulf of Mexico and was pioneered by two compa-
companies moving swiftly along a conveyor belt from
innovation to acquisition by American multinationals.
“There is something fairly unusual about Norwegian
culture,” Kyllingstad said. We sell our companies a long
time before they do in other countries.”
For Kyllingstad, the unfortunate outcome of this phe-
nomenon is that, “compared to the technical successes
in Norway the number of companies which have gone abroad and made
an international success is relatively low.”
For other observers, the question is not simply one
of national character. Bjarte Fagerås, CEO of Octio, a
Norwegian start-up pioneering the technology for per-
manent seabed monitoring, may represent exactly the
type of Norwegian innovator about whom Kyllingstad
was talking. Fagerås started up fve companies prior
to his present brainchild and has spent his life working
with technology. However, in his view, the reason that
Norwegian tech wizards sell early is not so much an issue of culture as
one of fnancing.
“It is easy in Norway to get the frst funding, because of the support
from the government and various research institutions. The social wel-
fare system also provides a safety net in case you fail in your business.
However, after initial funding, it is very hard to secure funding for the
next stage. The only groups who are willing to invest and who see the
value are large international, French, British and American companies
who take over the company.”
The principal benefciaries of this “willingness to sell”
are the well-known multinational service companies
like Halliburton, Schlumberger, Weatherford, GE and
Cameron. Oceaneering, the global leader in remotely
operated vehicle (ROV) services, certainly sees Norway
as a crucial component within its global technological
progress. VP & Country Manager of Oceaneering Erik
H Saestad said, “Norway is an important place to look
for new technologies … the Norwegian oil and gas
cluster has been in the forefront with respect to developing and apply-
ing technology within areas Oceaneering operates in.”
NCA Group, acquired by Oceaneering in 2011, was one of the biggest
aqcuisitions for the company, and gave it a key foothold in the decom-
missioning market. Saestad said, “in the decommissioning market we
needed the expertise of the NCA Group to complement our services to
approach this market.” For Saestad, the idea was to broaden the scope
of operations, a key component in Oceaneering’s competitive interna-
tional standing against other ROV providers.
As an Ernst & Young 2013 paper highlights, broadening the portfolio
is one of the biggest drivers of M&A in the global oil service industry.
But in the Norwegian context there is an additional factor driving con-
solidation. According to Saestad, Norway is subject to “an ever-greater
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Stale Kyllingstad, CEO, IKM
Bjarte Fagerås, CEO, OCTIO
Erik H. Saestad, vice president & country manager, Oceaneering
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64 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
among multiple buyers. However, this model changes the nature of
competition between oil companies, which no longer compete over
the data itself, but over the interpretation of the data.”
The model also works out better for the seismic companies,
according to Isaksen. “When the model functions correctly and
depending on the attractiveness of the data, a seismic company can
potentially earn a lot more from a seismic survey since they have
multiple buyers.”
However, despite all of the benefts of this model, Isaksen pointed
out that there were challenges in gaining acceptance for multi-client
in some countries. In any country with a monopoly on production,
nies: American TGS and Norwegian Nopec, which merged in 1998
to form TGS Nopec.
Stein Ove Isaksen, TGS Nopec senior vice presi-
dent of the eastern hemisphere, explained that the
model has come a long way in the last 30 years in
replacing the two former models of seismic survey-
ing. For Isaksen, the frst model (proprietary seismic)
involved seismic surveying work remaining a fully
in-house competency of an oil company. This gave
way to a model (contract seismic), where oil compa-
nies outsourced survey work to specialized seismic
contractors.
TGS Nopec has been working towards building the market for the
third model: multi-client. Isaksen described the functioning of multi-
client surveying:
“In this model, seismic companies are the ones identifying pro-
spective areas for seismic operations. The seismic companies will fre-
quently conduct seismic surveys with only a part of the cost under-
written by oil companies and so will be exposed to fnancial risk (the
level of which will vary depending on the proportion of oil company
commitment obtained). In this system, the proftability of seismic
companies is fully dependent on the attractiveness of the data they
generate, and the number of oil companies that are willing to buy
these data.”
Isaksen describes this business innovation as a win-win-win situ-
ation, referring to the three principal stakeholders benefting from
the model: governments, oil companies and seismic contractors. For
governments, the multi-client model means that seismic data is no
longer the exclusive property of a handful of oil companies, but sold
to whomever is willing to pay. Because the initiative is undertaken by
seismic companies, governments can open up unexplored frontier
E&P areas faster, thereby providing an early stimulus for investment.
In a study by consultants Wood Mackenzie, multi-client data has
actually been shown to lead to a greater number of exploration wells
and to the collection of ten times more seismic data, compared to
traditional contract seismic. Isaksen explains that this is because
the incentive models form multi-client are very different to contract
seismic.
“Oil companies are seeking to minimize their expenses on seismic
surveying. Therefore, when an oil company makes a discovery fol-
lowing a seismic survey campaign, they have a tendency to high-
grade the assets early and perform minimal additional surveys in the
immediate area around the discovery. In the multi-client model, the
incentives are the opposite. Multi-client seismic companies seek to
maximize interest in their data by covering as wide an area as pos-
sible and producing as much data as possible.”
Isaksen continues: “From an operator perspective, the cost of
obtaining data is reduced with the fnancial costs being spread
Stein Ove Isaksen,
senior vice
president Eastern
hemisphere, TGS
THE PATH TOWARDS
COMMERCIALIZATION:
Former CEO of Norwegian fow-assurance
company Roxar (bought by Emerson in
2009) Morten Tønnesen did not see the sale of
Norwegian intellectual capital as inevitable. To
the contrary, for Tønnesen, the gap between in-
novation and commercialization in Norway was
actually one of the easiest in the world to bridge
and it should, in theory, be easy for companies
to go it alone.
However, Tønnessen observed that too often on the road
to commercialization, Norwegian oil service companies fell
into certain pitfalls, one of them being a tendency to become
overly reliant on Statoil funding.
“The Norwegian market is big, but not big enough…[ser-
vice companies] become complacent, pleased to have Statoil
as a client and then they just sit there supported by the funds
from software sales and recurring maintenance revenues.”
However, he warned against the other extreme of listing
too early on the stock market, letting fnanciers dominate the
strategy, killing innovation, and eventually forcing a sell-out
to international service companies. In his view, this was the
fate of Roxar.
For Tønnesen, the solution of how to commercialize Nor-
wegian technology successfully abroad lies in Norwegian
companies pooling resources, establishing networks and
common marketing budgets.
“Funding is not where the problem lies since that is readily
available,” said Tønnesen. “It is more in the area of over-
lap where work is needed: smaller Norwegian companies do
overlap too much on the administration, marketing, sales and
distribution side of things. So, we can all beneft from coordi-
nation and partnership on this.”
Morten Tønnesen,
managing director,
Geocap
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there are not enough buyers for multi-client to make economic sense nor can the model
function in any country wishing to restrict information about its resources. This makes it
apparent why multi-client grew out of the mature and open-access production environment
of the North Sea.
However, for seismic companies to move into this mode of operation marks a signifcant
break in their traditional way of working. Norwegian seismic company Spectrum moved into
multi-client work completely when it acquired CGG Veritas’ multi-client 2D library in 2011.
Spectrum president and CEO Rune Eng explained that while investors in the UK, the US and
Norway appreciate the asset-light nature of their multi-client business model, seismic com-
panies are working with a greatly increased risk-profle.
Eng said that multi-client seismic companies are transforming themselves
into early explorers by conducting surveys in areas, which they predict will
become interesting to oil companies years down the line. “We think and act
very much like an oil company in the early phase of exploration… If you had
asked anyone fve years ago whether Lebanon or Israel would be hot spots
for exploration, people would probably have laughed at you. Today, this is
truly a major E&P region thanks to Noble's gas discovery in the Levantine
basin…We have recently been opening up Brazil's Northern Margin, which
will likely come up in the 11th licensing round.”
Multi-client companies are taking on more fnancial risk, because oil companies do not
underwrite the costs of exploration. In theory, the proftability of these companies could be
completely undermined by a range of political risks including policy reversals, regional insta-
bilities and environmental disasters, among others.
In addition, the proftability of these companies depends on the company’s ability to sell
the data. Eng said that, “we have to come up with our own exploration stories and think like
an oil company. To this end, we have employed three former exploration managers from oil
companies. They are the ‘storytellers’ in our company and they have more credibility, having
worked for the oil companies.”
Yet despite the challenges of adaptation, the multi-client model is gathering momentum,
and it looks set to rapidly expand on what Eng believes is already a $2 billion market.
Norway’s Fixed-Asset Predilection:“You might ask, is the Norwegian oilfeld service industry different from
those in other countries? I would reply that in Norway, service companies
like owning fxed assets: rigs, ships, heavy machinery, etc,” explained John
Avaldsnes, global advisory oil & gas leader at Ernst & Young.
He continued, “Norwegian service companies have traditionally taken
more risk or have been more opportunistic than other countries. At the
moment, this can be an advantage for us because we do have the assets to
supply to Brazil, West Africa, etc already on the balance sheet and there is
no need to request fnancing for new assets.”
However, this predilection for fxed assets and acceptance of risk has been the undo-
ing of several formerly successful Norwegian companies. One of the most notable fnancial
falls from grace in recent years was the situation in which Norwegian FPSO designer Sevan
Marine found itself in 2011. Sevan Marine president and CEO Carl Lieungh contrasted what
he viewed as the remarkable success of pioneering a completely new innovation to global
players, such as Petrobras and ENI, against the huge fnancial black hole engulfng the com-
pany just before he took over.
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Rune Eng,
president & CEO,
Spectrum
John Avaldsnes,
partner EMEIA
oil & gas leader,
Ernst & Young
1305OGFJ_65 65 5/6/13 5:13 PM
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Lieungh admitted, “when I joined the company
in May last year, I understood the job would entail
restructuring Sevan Marine, but I really had no idea
of the magnitude of the task I was taking on.” After
exhausting the possibility of a private placement,
Lieungh moved towards the bondholders including
Jens Ultveit-Moe, one of Norway’s largest industrial
investors and one of the key fgures in the restructur-
ing of PGS, Norway’s fagship seismic company.
The main challenge facing Lieungh was that, “the company was
not fnanced from the top on a feet level, but rather the bonds
were assigned to individual vessels. Each bond-holder had their own
agenda. An important step in facilitating the process was the bond-
holders reaching agreement on a common set of fnancial and legal
advisers to harmonize the company’s restructuring.” Eventually, in
the autumn of 2011, Canadian ship-owner Teekay offered to fnance
the entire restructuring of Sevan Marine and the Sevan Voyager, an
offer that Sevan Marine’s bondholders accepted.
As a result of this cooperation with Teekay, Sevan Marine has
changed its business model completely, moving away from the Nor-
wegian tendency for fxed assets. The company transformed “from a
build-own-operate model to a design and technology company and
project developer. Sevan Marine is now concentrating on concept
studies that will lead into feed studies and a license contract like the
project for ENI’s Goliat Field.”
Seismic contractor Seabird Explorer, which simi-
larly found itself over-leveraged on its assets, is
another company abandoning the fxed-asset predi-
lection. Dag Reynolds, founder and CEO of Seabird
Explorer, explained that the 2D seismic market is
buoyant, but highly volatile. He said: “When there
is an upswing we swing quickly upwards and this
explains the strong performance in Q3. However, in
a downturn we nose-dive and this is why we have been working on
making the company more scalable.”
Reynolds continued: “In a good market situation, we want to
increase our capacity, but we do not want to add fxed assets to our
balance sheet. We are looking to be more opportunistic and have
more short-term contracts.”
Seabird Explorer has therefore switched to a tactic of chartering
vessels and focusing on operating them as effciently as possible.
For Reynolds,“Seabird has some key strengths within the market,
and I would say the principal value is that we can take 2D vessels and
operate them more effciently than anyone else. For example, we
can operate a seismic vessel at less than 50 percent of the cost of a
PGS-operated vessel, and this gives us a signifcant market edge.”
This comes in especially valuable given the current oversupply of
seismic vessels and low contract rates.
Dag Reynolds,
CEO, SeaBird
Exploration
Carl Lieungh,
president & CEO,
Sevan Marine
1305OGFJ_66 66 5/6/13 5:13 PM
There is also an external factor limiting the Nor-
wegian tendency to add large assets to the bal-
ance sheet: limited bank fnancing. The withdrawal
of many European banks from shipping fnance and
the introduction of Basel 3 regulations is restricting
access to capital for many players in the maritime
industry. However, Sveinung Stohle, president and
CEO of Norwegian LNG specialist Hoegh LNG, out-
lined the variation he saw in asset fnancing:
“Particularly in Europe, the fnancial markets are challenging, how-
ever last week we raised $250 million in bank debt for the Lithu-
anian project, showing that despite banks choosing not to lend to
any shipping company at the moment, Hoegh LNG can still receive
money. This is because we are not strictly in shipping, but in energy
and infrastructure in long-term contracts.”
Hoegh LNG has been moving from LNG carriers into foating
regasifcation and storage units, pioneering a market, which four years
ago did not exist and recently winning major contracts in Lithuania
and Indonesia. Particularly in relation to Southeast Asia, Stohle sees
his company assist the regionalization of LNG markets, allowing con-
sumption to occur in the same region as production for the frst time.
However despite these ambitious projects and the growth of the
LNG market, Stohle admits that he does not have the all the fnan-
cial capabilities needed to expand as he wishes. Financing assets
upward of $300 million is a challenge in the current fnancial envi-
ronment even if your business model is favored by the banking sec-
tor. In order to expand on his capital options, Hoegh LNG therefore
launched an IPO in 2011, in line with a growing trend for Norwegian
companies to focus more on the bond and equity markets, rather
than the traditional banking sector, to fnance their assets.
Automobiles and Standardization:
With service companies being asked to ramp up their throughput at
the same time as reducing their prices, John Avaldsnes, global advi-
sory oil & gas leader at Ernst & Young, feared that they would have
to sacrifce their margins. He said:
“As companies still try to increase throughput and grow their
operational capacity, more pressure is being placed on margins. At
some point, these suppliers will have to make some arrangements
with the oil and gas companies or their own suppliers in order to
produce sustainable margins.”
Eirik Bergsvik CEO of Norwegian downhole equipment and plug
supplier Interwell and former managing director of the Norwegian/
American giant National Oilwell Varco (NOV), explained that indus-
Sveinung J.S.
Stohle, President
and CEO, Hoegh
LNG
gas
FLOATING REGAS
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68 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
Cars now contain a large number of add-ons pre-
installed, which you cannot use unless you pay for
them. It is cheaper for the manufacturer to sup-
ply the add-ons even when they are not paid for
because of standardization.”
Bergsvik saw the possibility of applying this think-
ing, even to the downhole industry, even though
every well is different. In Bergsvik’s view, by manufacturing prod-
ucts with a broader operational span, he could even apply “add-on
thinking” to downhole plugs, having previously tried to apply this
thinking to NOV during his tenure there. In cooperation with Sam-
sung Heavy Industries, Bergsvik was pushing to standardize the drill-
ing packages delivered by NOV in order to increase effciency and
reduce cost, in its international business.
Current NOV Managing Director Tor Ramfjord is the benefciary of
this push towards standardization to a certain extent. NOV is Nor-
way’s tenth biggest exporter and much of its business depends on
the link with Southeast Asian Shipyards – Daewoo, Samsung and
Hyundai. Ramfjord explains that there has been a shift in the opera-
tional model over the last ten years. He said:
“The whole business model of constructing for the oil and gas
try clients were aggressively trying to negotiate down supplier con-
tracts, thereby reducing the topline for the supplier industry.
“[They] claim oil service companies are setting their prices too
high. In fact, we are not the ones responsible for this, but rather our
country’s wealth and standard of living. Cost drivers are therefore
outside of our control, and when companies like Statoil or Cono-
coPhillips attract employees with high salaries and social benefts,
we must align with them if we want to fnd the talent we need.”
Moreover, Bergsvik explained that operators were not willing to
see any reduction in standards, which could potentially lead to a fall
in costs.“The fact is that if we genuinely believe that these standards
cannot be compromised, then we must simply accept higher cost
levels and move on with our work.”
Bergsvik explained that his company had been working on
expanding the supply chain to low-cost labor countries, however he
believed that this would not be enough. Bergsvik saw the greatest
potential in standardization and took inspiration from the automo-
tive industry. He explained that two cars could:
“Look identical but one will cost $10,000 and the other will cost
$30,000 because under the hood and inside, certain elements have
been tweaked to optimize the performance and comfort of the car.
Eirik Bergsvik,
CEO, Interwell
S e v a n M a r i n e
Teekay’s “Piranema Spirit”, the world’s
first cylindrical FPSO, has been
operating for Petrobras S.A. on the
Piranema field offshore Brazil since
2007. “Piranema Spirit” symbolizes
Sevan Marine’s expertise.
Modification of the Sevan 300 FPSO,
“Voyageur Spirit”, is completed and
the FPSO is now on contract to E.ON
and will operate on the Huntington
field, UK North Sea, for five years with
an option for extension.
Eni Norge has selected the Sevan
1000 FPSO concept for the sub-Arctic
Goliat field in the Barents Sea. The
Sevan 1000 FPSO is currently under
construction at Hyundai Heavy Indus-
tries in Korea.
With strong focus on research and development, Sevan Marine, the original designer and world leader
of cylindrical FPSO Technology, continues to provide innovative solutions. As field developments move
to deeper waters and harsher environments Sevan Marine is changing the shape of the FPSO market.
Sevan Marine ASA, Kittelsbuktv.5, 4836 Arendal
www.sevanmarine.com
N o r w e g i a n Te c h n o l o g y f o r C h a l l e n g i n g E n v i r o n m e n t s
1305OGFJ_68 68 5/6/13 5:13 PM
www.ogfj.com • Oil & Gas Financial Journal May 2013 energy.focusreports.net 69
industry has changed from drilling contractors being
at the center of the value chain, managing vendors
and shipyards, to them only establishing the specif-
cations and negotiating frame contracts. The rest of
the responsibility has been transferred to the ship-
yards for a turnkey delivery of a rig or drillship.”
For Ramfjord, the effectiveness of this model has
come from generating standardization in drilling
packages and removing the drilling contractors from
the production process. He believed that rig contractors were so
obsessed with trying to optimize everything that the fabrication slot
was often missed and projects overran.
Ramfjord sees the necessity of maintaining a delicate balance
between standardization and innovation. He said: “Our success will
depend on a combination of standardized products and tailor-made
equipment. In the past, Norway probably favored tailor-made equip-
ment too much.”
He continued:
“Korean yards are excellent at managing the different vendors,
procuring the equipment and delivering a rig. We have an extremely
successful track record working with these yards. Between 2007 and
2011, 38 deepwater rigs have been delivered on time from Korea
using NOV’s complete packages.”
The Korean market has grown over the last decade to become
Norway’s largest export market for oil and gas services, ahead of
the other top-fve markets: Brazil, the UK, Singapore and Russia.
This relationship has recently been strengthened by the collapse of
global shipping Korean yards have had to make a challenging tran-
sition into the offshore market, partnering with Norwegian suppli-
ers to gain access to high end technologies. The high volume work
given to this successful international partnership is helping Norwe-
gian contractors move towards more cost-effcient standardization.
Clustering Around the “Drilling Bay”Tucked away in the verdant region of South Norway, near the city
of Kristiansand, is a technology cluster that has transformed Nor-
way’s position as an exporter of drilling technology. Following NOV’s
acquisition of Bjarne Skeie’s Hydralift and the establishment of Aker
Solutions, a cluster of companies has transformed this area into what
is now known internationally as “the drilling bay”, producing around
85 percent of the world’s offshore drilling packages.
Part of the success of this region comes from the collaboration of
companies within the Norwegian Offshore Drilling and Engineering
(NODE) cluster, which was established in 2006. Since then the cluster
has grown to 9,000 people from 1,500 and revenues have climbed to
$45 billion from $5 billion. NODE is one of 12 Norwegian National
Centers of Excellence and is a big draw for companies seeking to
gain access to key Norwegian intellectual capital.
In 2012, a third major player joined this cluster, when global leader
in fow equipment Cameron made a NOK 1.55 billion ($270 million)
acquisition of TTS Group’s drilling division in Kristiansand. Through
this merger Cameron gained work on drilling packages for the ultra-
deep-water drill ships allowing Cameron to seriously compete with
both Aker Solutions and NOV.
Cameron’s global CEO Jack Moore saw the acquisition of this Kris-
tiansand based company as an essential component in moving into a
tough ultra-deep-water drilling market. And curiously, the company
which recently awarded Cameron with a major drilling package con-
tract, Sigma Drilling, is backed by none other than the founder of
Hydralift Bjarne Skeie.
The Paternal Role of Statoil: Though the complex production challenges of Norway apparently
serve as a muse for the creation of new technologies, they are not
exceptional. So why then did Norway become the center of excel-
lence for all things offshore?
For Lars Mangal, chief commercial offcer of Welltec, a lot
depended on how the operators chose to focus their attention and
he believed that in the case of Norway it was Statoil’s leading role
Tor Henning
Ramfjord,
managing director
& VP operation
Norway, NOV
1305OGFJ_69 69 5/6/13 5:13 PM
70 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
in seeking to maximize recovery, which allowed
this Danish pioneer of well-tractor technology to
develop.
“From the very early days in Norway there was a
strong focus on maximizing recovery which became
the overriding driver of why production mainte-
nance and well work activities have been so strong
here compared to other markets,” he said.
Norway has been at the global forefront of techniques to increase
oil recovery and horizontal drilling, techniques which were enabled
by Welltec’s technology. Øystein Michelsen, Statoil’s executive vice
president of drilling and production in Norway, explained that his
focus was on taking the recovery factor to over 60 percent, fur-
ther widening the gap between Norwegian ambitions and global
standards.
For Mangal, this drive has, “forged a partnership between Welltec
and Statoil from the very early days to bring technologies that were
going to complete the portfolio, enable the step change and sup-
port continuous strides to improve the recovery factors from the off-
shore NCS.”
Håvard Devold, group vice president oil & gas upstream of ABB,
similarly believes the answer lies in the innovative
environment established by Statoil, Petoro and the
international majors at the dawn of the industry in
the 1970s. He explained:
“The entire regime was designed to favor the
development of the supplier industry. The positive
environment was not just about Norwegian suppli-
ers being favored in tenders; the system was set up
to allow for ‘active mentorship’ of the supplier industry.”
Devold contrasted the Norwegian environment with that in other
jurisdictions where risk-averse attitudes predominate and 5-year
proven track records are demanded -- even to this day. Devold
believed that unlike other jurisdictions Norway was willing to test out
technologies, which would take years to penetrate other markets.
He highlighted the example of ABB’s frst major project with Statoil:
“Our frst signifcant project was to install the control systems for
Statoil’s Gullfaks platform. Working with Statoil, we had the opportu-
nity to develop our latest control system into a fully distributed con-
trol system architecture. It took a further 20 years for these control
systems to reach full maturity in other markets.”
Devold saw this trend continuing with new projects like Statoil’s
subsea factory and integrated operations. Asked whether he saw the
same type of active mentorship with the newcomer operators on the
NCS, Devold replied:
“The minor companies do not have the same approach to technol-
ogy. They have their own role in developing resources, which require
a more lean and mean approach. As a consequence, their approach
to development is much more similar to other places in the world
from Southeast Asia to Africa, and they take fewer risks in trialing
out new technologies.”
Whether the newcomers and the minors are willing to invest in
technology or not, the list of companies choosing to invest in new
technologies is defnitely not restricted to Statoil, Petoro, Cono-
coPhilips and a few other majors. The Norwegian tax regime has
proven to be a major success in encouraging research and develop-
ment in Norway. The state SkatteFUNN scheme, established in 2002,
allows companies to offset innovation costs through tax credits. This
scheme allows for intramural expenditure of $950,000 and funds for
partnerships with research associations potentially receiving up to
$1.9 million.
While not the largest incentives in the world, this innovative tax
regime has seen companies claiming back more than $200 million
in deductions and has boosted research and development (R&D)
expenditure. For service companies, this has created a climate of
innovation in Norway. Wolfgang Wandl, managing director of Viking
Seatech Norway, commented on the willingness to adopt technolo-
gies between Norway and the UK. Wandl said:
“There have been cases where we presented ideas to an E&P
Lars Mangal,
chief commercial
officer, Welltec
Terje Skeie, senior
vice president,
Welltec
1305OGFJ_70 70 5/6/13 5:13 PM
company in the UK, and the UK offce asked the Norwegian sister
company to test out the product frst before it would be used in the
UK. Norwegian companies are apparently more willing to try out
new ideas, and several of our products have been supported by Det
Norske, Statoil and other Norwegian players.”
In developing a pre-lay mooring technology for
the NCS, which effectively cuts the rig move time
from four or fve days down to around four hours,
Viking Seatech is focused on innovation for the sake
of effciency. Wandl reported that thanks to using
this technology, Norwegian junior oil company Det
Norske would be able to drill one extra well over
its rig contract period. For Wandl, these effciency-
driven innovations alone are enough to create demand.
“Norway is an effciency driven market,” he said.“In Norway, work-
ers do two weeks on, four weeks off and in the UK they work two
weeks on and two weeks off for the same pay. When labor and rigs
are under-supplied to the market, the only solution to maximize on
these limited resources is to be effcient.
In the UK, they work to a minimum price and it may mean standing
off four or fve days during the winter. In Norway, they instead say:
tell me what you can do to have zero days off. If Norwegians can
eliminate ineffciency, they will do it – no matter the cost.”
This willingness to trial new innovations has been extremely useful
for Norway’s own service industry in its international expansion, a
point highlighted by Even Gjesdal, CEO of Norwegian mud cleaning
technology company Cubility.
“Even though the validation process of a new technology entering
a market is long, especially in Norway, we feel that the recognition of
our technology from the leaders of the NCS will give us the support
to continue our quest in other waters. Statoil is crucial to our tech-
nology, and we are aware that other companies outside of Norway
trust Statoil’s choices for newly implemented technologies.”
Gjesdal emphasized that Norway had managed to resist the strict
Positioned for innovation
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offshore energy assets.
Our clients welcome the breadth and depth of our service.
From conception to completion, from marine engineering
to equipment supply & rental, from positioning, mooring
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positioned for innovationTH
Viking Seatech
Wolfgang Wandl,
managing director,
Viking SeaTech
1305OGFJ_71 71 5/6/13 5:13 PM
72 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
will be less oil per well. This means that the oil service industry will
grow signifcantly. The supplier industry will take a greater share of
national value creation.”
In Haugane’s conception, the onus of technology development
will fall more on service companies themselves, and they will take
a greater share of the work of production, thereby redefning their
relationship with oil companies. So whilst there may be less money
for oil companies to spend, the demand for services is unlikely to
subside.
The Brazilian Statoil The idea of using international partnerships to nur-
ture the development of a strong domestic ser-
vice industry is nothing new, and it forms the main
motivation for every local content policy. However,
no country has come close to developing a service
sector as strong as Norway’s on the back of interna-
tional collaboration. Brazil, nonetheless, is making a
stab at it and engaging with Norwegian partners in
the process.
Chairman of the Brazilian-Norwegian Chamber of Commerce Terje
Staalstrom said that there were around 130 Norwegian companies
operating in Brazil, 100 of them in the oil and gas industry. In fact,
oil and gas represent roughly two-thirds of the real trade balance of
$1.7 billion between the two countries. However, Staalstrom admits
that,“the biggest challenge is for companies to meet the require-
ments for local content… we [Norway] had similar prerequisites for
local content in the late 1970s and early 1980s.” However, today
the Norwegian sector has matured to have more than 50 per cent
foreign ownership.
Oftentimes, it seems that Brazil is prioritizing local content even
at the expense of their own ambitions, with a restricted labor force
undermining signifcant projects. Those projects, which do proceed,
employ Brazilian employees on extremely high salaries. Staalstrom
mentions that, “to build an FPSO in Brazil today may be double the
price of Korea, and even 20-30% more expensive than building in
Norway.” Brazil is now far from a low-cost country in which the inter-
national service sector can establish itself.
Though onerous local content regulations provide a signifcant
impediment to Brazilian-Norwegian service sector cooperation, the
Brazilians have adopted one aspect of the Norwegian formula rea-
sonably well: active mentorship.
Sevan Drilling, the spun-off drilling division of FPSO designer
Sevan Marine, has managed to build a strong partnership with Petro-
bras. It was Petrobras which frst took on the Sevan Marine FPSO in
2004. It was Petrobras which then took the initiative to develop the
Sevan design for a potential drilling rig. And it was Petrobras which
awarded Sevan Drilling (then part of Sevan Marine) the frst contract
fnancial target to retrieve oil rapidly and move on.
“We believe Norway to be the best place to start
our technology on its international road to success,”
he asserted.
Shell Technology Ventures has recently commit-
ted to spending several hundred million dollars on
emerging technology companies on the NCS. So, it
appears that the spirit of active mentorship is far from dead, even if
the composition of operators on the shelf is evolving.
.
Marginal Fields Need More ServicesOne of the concerns for the future of Norwegian R&D funding is that
the felds being discovered are smaller than the giant developments
of the past. Therefore, the focus of companies will be on the eco-
nomic development of felds, not on piloting risky new technologies.
However, Erik Haugane, CEO of Norwegian junior Det Norske sees
the challenges of smaller and trickier felds as more of a call to action
for the Norwegian service industry rather than a omen of its demise..
“As a more mature province, which we expect to be in 2020, we
will need ffty felds to produce two million barrels. So, the number of
engineers and service companies necessary will increase, and there
Jon H. Willmann,
CFO & deputy CEO,
Sevan Drilling
Even Gjesdal,
CEO, Cubility
1305OGFJ_72 72 5/6/13 5:13 PM
www.ogfj.com • Oil & Gas Financial Journal May 2013 energy.focusreports.net 73
for the Gulf of Mexico and then a second contract in 2008.
John Willman, CFO & Deputy CEO of Sevan Drilling, explained:
“Petrobras has been extremely supportive of both Sevan Marine
and Sevan Drilling. Without this company, it is clear that neither
company would be in the market today. Petrobras took a bet on
this company, awarding contracts without any track record, which is
pretty bold, and they have been extremely important in developing
this company.”
The frst unit, the Sevan Driller, suffered severe cost overruns due
to what Willman saw as unrealistic expectations placed on COSCO
shipyards. Nonetheless, Petrobras stuck by the technology. Willman
believes that the Brazilian company should have been able “to pro-
pose discounted rates for these drilling units because there was no
buyer competition for this untested concept.” However, the proj-
ect needed to attract fnancing to get off the ground and Willman
believes that “the agreement was reached in order to prioritize the
development of this concept, rather than cost savings for Petrobras.”
Despite its challenges, the Brazilian market is still projected to be
valued at/worth $42 billion in 2015. So, the draw for the Norwe-
gian service industry is evident, and in spite of local content regula-
tions, Petrobras seems capable of championing the types of high-
end technology produced by Norway over cost effciency – thereby
adapting Statoil’s role on the NCS for the Brazilian market. Brazil is
just setting out on a path Norway took 40 years ago. So, time will tell
whether it succeeds in replicating the Norwegian forumula.
In-Norway-tion Recent criticisms about Western economies have
often been centered on whether these countries are
still innovating and adding economic value. With
Asia spending almost double that of Western econ-
omies on research and development, are we about
to witness a steady tide of value creation fowing
towards Asia?
Not so, said Henrik Madsen, Group CEO of Norwe-
gian foundation DNV.
“I would not agree that there is a lack of innovation in Europe, I believe
the opposite is true. Even if spending in Asia is much higher, Europe
has an educational system and philosophy which is strong in promoting
innovation; in Europe you are allowed to fail and this means that people
are more willing to take bigger risks. Europe will survive as an economic
power because we remain at the forefront of innovation.”
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group CEO, DNV
1305OGFJ_73 73 5/6/13 5:13 PM
The global oil and gas industry
faces many different challenges.
3M has years of proven innovation in
material sciences to build and support
advances in technology, meeting the
demanding requirements for this critical industry.
This gives us the resources to provide you with a
continually evolving range of world-class solutions for
upstream, midstream and downstream applications:
• to protect your people and the environment
• to extend the life of critical assets
• to improve productivity in your operations
To discover more, contact 3M.com/oilandgas 11©
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3M: APPLIED INNOVATIONS
Probably best known as the people who make offce station-
ary, 3M has an incredible depth of technologies ranging across
many industries, from healthcare to oil and gas. In fact, 3M has been
nominated as the third most innovative company in the world after
Apple and Google by Booz & Co. Focus Reports therefore caught
up with 3M VP and GM of Oil & Gas Jeff Lavers to ask what Norway’s
innovative oil industry represented within this industrial constellation.
FOCUS: What is Norway’s Role within 3M’s oil & gas innovation?
LAVERS: Norway is a primary market for 3M globally, for the very
fact that it is a key site of innovation in the oil and gas industry. Nor-
wegians value technology, and they are adept at building new tech-
nologies – traits that are extremely valuable for a technology-driven
company like 3M.
Innovation is the magical blend of invention with practical application
and to be truly innovative, you need to have that mix. By continuing to
work in the Norwegian market in an industry like oil and gas, our ability
to innovate on a global level is much higher than it would otherwise be.
One of the main issues that 3M is facing as a com-
pany right now is that we have traditionally used the
approach with products defning the market. However,
the market dynamic is playing an ever more important
role in steering the company, and we are now starting
to see within 3M a shift towards allowing markets to
increasingly inform our innovative processes.
FOCUS: How does Norway ft within 3M’s oil
and gas brand recognition?
LAVERS: 3M's strategy is to target the early adopters to see how
products can beneft our markets, and then try to replicate this suc-
cess with the other companies in the industry to build a broad base
of acceptance.
We have identifed some regulatory developments as "one-offs",
where they arise out of a particular local dynamic, but they will not be
replicated in other parts of the world.The interesting thing about the
various regulatory and technology fronts in the Norwegian market, is
Jeffrey Lavers,
Vice President
and General
Manager,3M
Mining, Oil and
Gas Solutions
Division
1305OGFJ_74 74 5/6/13 5:13 PM
www.ogfj.com • Oil & Gas Financial Journal May 2013 energy.focusreports.net 75
������ ���� ��������� ��������� � ������ �������������������� � ��������� ������� ����� ��� ������ ������������ ���� ���� ��� ������������� �� ���� ���� �������
���� ��� �� ������ �������� ���������� ���� ������� ����������� � ������� ��� ������ ��������������� ������� ������ ������ ����������
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���� ��� �� ��������� ����
Madsen went on to point out the distinguishing feature between
Western and Asian innovative models. Westerners are more prone to the
creative destruction or Schumpeter model of value creation, where ideas
are created and destroyed with the success of their host companies. Asia
Norwegian Past Innovation: the Condeep Platform by Jan Ulriksen/Statoil/Norwegian
Petroleum Museum
that they are actually replicated in other markets.... Norway has a
leadership role in the industry.
FOCUS: As a major consumer of hydrocarbons, how would
you describe 3M’s own relationship with oil and gas?
LAVERS: If you look at the recent trends in US gas prices, which
have dropped dramatically simply because the industry has man-
aged to become more effcient in extracting gas, this has deliv-
ered huge savings to American industry. As a major industrial
consumer, 3M has gained a lot from this price movement as our
variable costs have gone down and we have been able to use
these savings to fund more R&D investment and commercial
opportunities.
3M, as a company, does consume a lot of oil and gas both on an
operational basis and as the feedstock for a lot of our products. This
makes our search for effciencies a circular initiative. We are often
looking to beneft as a company from the same effciency-driven
products that we provide for the oil and gas industry.
1305OGFJ_75 75 5/6/13 5:13 PM
76 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
“Given the country’s strategic positioning in the
Arctic Circle, Norway is still our focus in technology
development for Arctic environments… However,
even here the R&D for Arctic environments is shared
across Russia, Alaska, Canada and Norway. These
different research environments can be leveraged to
beneft our work in Norway.”
Expanding from a relatively small base of compa-
nies in 2009 to more than 35 offces today, Scandpower accelerated its
internationalization by integrating with various subsidiaries of the Lloyd’s
Register group.
“Ten years ago the Norwegian staff represented around 75 percent
of our employees whereas today they represent around 30 percent. In
addition, we have global centers of excellence such as Lloyd's Register’s
Global Technology Center in Singapore and in Southampton.”
Value creation is clearly moving into an interna-
tional arena for Scandpower. However, the most
recent merger between ABS and Safetec shows yet
another mode. ABS and Safetec have not integrated
to the same extent as Scandpower and Lloyd’s group.
According to Jan Morten Erstaas CEO of Safetec
and Vice-President of Offshore Oil & Gas, ABS
Group the value of the merger comes from sharing
knowledge and methodologies.
“We have not physically integrated with ABS Group, and the manage-
ment of Safetec has been fully maintained. Safetec is an ABS Group
company, but we have maintained our brand name and recognition in
the market. We are simply looking at how the two companies can ben-
eft from each other's experiences and methodologies. We are concen-
trating on how to share knowledge.”
For Safetec, Norway therefore remains the hub of
R&D. Rather than transferring to a new location, inno-
vation is becoming globalized, and while that might
threaten Norway’s dominant position in certain felds,
it does diminish its role in innovation overall. Particu-
larly, in the case of ABS and DNV, Norwegian exper-
tise remains at the center of global innovation.
Funding Norway’s Innovative Future:Despite the private bent of the Norwegian model of innovation, the
Norwegian state is regarded as playing a major role in the development
of new technologies. State funding to the oil and gas sector is delivered
through two principal funding bodies Petromaks and Demo2000, which
distribute a budget of $70 million to the industry. Petromaks handles all
funding for basic research, while Demo2000’s rationale is to co-sponsor
pilot projects for applied technologies. Anders Steensen, program coor-
dinator of Demo2000 explains:
“Government spending has traditionally been a major part of R&D
tends to adopt more incremental innovation model, where innovations
are slowly established within a few continuously operating research cen-
ters. As a consequence, according to Madsen, “Asia does not have the
same number of small entrepreneurs willing to develop their ideas.”
Madsen continued on the subject of where value would be
created.“DNV has made two commitments to value creation in Nor-
way and the frst is that the headquarters of the organization will always
remain in Norway. Secondly the majority - 80 to 90 percent - of our R&D
will be conducted in Norway.”
He clearly saw Norway maintaining a dominant role in the world of
innovation. However, one of the telltale signs of an industry running low
on in-house value creation is the tendency towards mergers and acqui-
sitions. Looking at the risk management sector over the past couple
of years, DNV has merged with Kema, Scandpower has merged with
Lloyd’s Register and, most recently, Safetec has merged with ABS. So is
this a sign that value creation is suffering in Norway?
Bjorn Inge Bakken, CEO of Scandpower, sees it differently. For him,
Scandpower’s merger with Lloyd’s Register in 2009 brought with it great
opportunities to launch joint international projects. Even in the feld of
Arctic R&D, Norway is far from alone as a source of expertise and Bak-
ken highlighted the joint research potential:
Bjørn Inge
Bakken, CEO,
Scandpower
Egil C. Legland,
country manager,
ABS
Jan Morten
Ertsaas , VP of
offshore oil & gas,
Safetec
1305OGFJ_76 76 5/6/13 5:13 PM
www.ogfj.com • Oil & Gas Financial Journal May 2013 energy.focusreports.net 77
spending in Norway and has played the role of encouraging private sec-
tor investment in innovation… From Demo 2000’s inception in 1998, the
export of Norwegian technology in the oil and gas business has increased
from 30 billion NOK ($5 billion) to 152 billion NOK ($26 billion) today.”
Steensen believes that the majority of the success can be attributed to
the involvement of the private sector in the technology forum, including
a range of players from Statoil to Total and Lundin. This involvement
helps to keep public funding directed at the most useful technologies.
Anna Aabø of the International Research Institute of Stavanger (IRIS)
agreed “One of the strong aspects of the Norwegian R&D environment
so far has been the applied nature of our research in oil and gas.”
Aabø emphasizes the necessity of making research relevant, stat-
ing that while 30-70 percent of funding can come from the public
sector:“The rest of our fnancing has to come from the industry itself and
they need to fnd our project interesting in order to invest. The system is
therefore set up for research to be relevant.”
IRIS functions as one of the connection points for the public and pri-
vate sectors, establishing a link between diverse international research
bodies from NASA, which is looking to adapt Norwegian drilling tech-
nologies for use on Mars, to other Norwegian clusters, the University of
Stavanger and the private sector.
We have significant growth ambitions, and we are looking for skilled persons to our 32 offices around the world. We can promise you an exciting position in an international company.
We are a subsidiary of Lloyd’s Register Group Limited. Together we form a world-leading, independent risk management organisation that works to improve our clients’ quality, safety, environmental and business performance throughout the world, because life matters.
Read more at www.scandpower.com
Will you GROW with us?
SWEDEN
FINLAND
NO
R
W
A
Y
NCE Instrumentation
NCE Aquaculture
NCE Maritime
NCE Tourism
FJORD Norway
NCE Subsea
NCE Culinology
NCE Node
NCE Raufoss
NCE Oslo Cancer Cluster
NCE Systems EngineeringKongsberg
NCE Micro-and Nanotechnology
NCE Energy and Emissions Trading Halden
North
Sea
A r c t i c O c e a n
Norwegian
Sea
Baltic Sea
Gulf
of
Bothnia
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78 energy.focusreports.net May 2013 Oil & Gas Financial Journal • www.ogfj.com
tially explode. However, they do not accept the storage of a perfectly
inert gas in their country.”
Though, as Haugan puts it, the naysayers currently have the upper
hand, Norway’s steadfast publicly funded commitment to this technol-
ogy and the recent opening of the new Technology Center in Mongstad.
“Norway could end up playing a crucial role in reversing the swing.”
Carbon Capture Storage in the Valley of DeathThe value of long-term public funding in the area of research and devel-
opment is clearly evident in the story of carbon capture storage (CCS).
Bjorn-Erik Haugan of Norway’s publicly funded CCS-focused research
institute Gassnova explained:
“Going back just over two or three years, there where
huge expectations being placed on CCS technology in
terms of how fast it might contribute to combat global
warming. Reality has now set in, in the sense that a
lot of the projects for the development of CCS tech-
nology have not materialized at the pace that people
expected. We are now in what others might refer to as
the “valley of death” in CCS innovation.”
Haugan said that the popular mandate for exploring this type of tech-
nology had subsided with climate change being taken off the agenda,
and a carbon market has not emerged. Even Germany has bowed down
to popular misconceptions.
“Germany has practically banned the storage of CO2 because the
government has bowed to popular but erroneous belief. This has led to
the situation where they are quite happy to accept the storage of natural
gas under their football stadium in Berlin – which is a gas that can poten-
Bjørn-Erik
Haugan, managing
director, Gassnova
The next issue in our series of reports on Norway
will be published in a late summer edition of
Oil & Gas Financial Journal
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Carbon storage at Sleipner, Photo Alligator film, BUG, Statoil
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