Kooy – CEO, Offshore Group, Peterson – Netherlands
The CEO of Peterson offshore group discusses the challenges of introducing a brand new logistics model to the Dutch North Sea, and how this model can be applied in other markets.
Please start by introducing Peterson and explaining how the company entered the oil and gas logistics market.
Peterson was established in 1920, starting its business with quality control of grain shipments at the Port of Rotterdam and today quality assurance remains one of the company’s three key areas of expertise, although it now also includes certification across multiple sectors and multiple global locations.
Logistics is another core competency of the company that grew naturally out of this activity: from quality assurance, our offer quickly grew into providing logistics services for companies at the port, and then expanded into other sectors, including coal and oil and gas.
Peterson’s oil and gas activities began in the 1970s, working out of Amsterdam as a provider of logistics services to ‘one well’ operators. The company expanded in this sector following a successful bid to become the logistics provider to Nederlandse Aardolie Maatschappij (NAM) when the company moved from Rotterdam to Velsen. Gradually, some of the larger operators at that time, decided to divest in their supply bases, and come to us, looking for integrated services, as they started to think about focusing on core competencies.
We eventually saw a huge opportunity for these companies to start sharing resources more comprehensively when, in the late 1980s, they started to talk more to each other as a group of operators. We presented a plan for the operators to pool their logistics resources, including the chartering of vessels and supply bases. Although at this point, operators were beginning to share vessels, we saw an opportunity to step in as an independent charterer, acting as a central point for planning supply runs and also dealing with the details of how to invoice each company for the capacity it was using on these vessels. In the Netherlands, we call such thinking ‘farmer’s intelligence’ – applying common sense approach to complex situations.
As part of the natural evolution within this arrangement, we gradually cut down the number of supply bases we were maintaining, until eventually, we ended up with the opportunity to create a single supply base in Den Helder for all of our clients. Our solution integrated the pool that had been established in the south of the country with the two operators currently working out of Den Helder, companies which eventually became GDF Suez and Total.
The combined pool made a lot of sense for operators, and eventually became known as the South North Sea (SNS) pool. We opened the new base in Den Helder in 2004, which reduced overall sailing time and allowed us to create a state-of-the-art facility. Over the last decade, most of the industry has moved its operations to our base in Den Helder which is a further testament to the success of the SNS Pool and our initative in making it happen
The supply base today is still one of the most modern on the globe, and also one of the most compact. Today, we serve nine operators from it: all the operators active on the Dutch continental shelf, as well as some working in the UK North Sea.
What were the biggest challenges in getting the Den Helder supply base up and running?
Optimising the efficiency of the base wasn’t done overnight, especially because nothing on this scale had ever been achieved before. One issue to solve was the pricing mechanism – the nine operators around the table had a very strong negotiating position, but we came up with a good solution that also allowed us to continue to invest in improving our services. One of the challenges of fourth-party logistics (4PL) is always how to remunerate the facilitator: all models have their downsides, including paying from savings and cost plus. In our model, we had the added complexity of working out the best way to allocate costs to individual members of the pool. I was very proud of the way we overcame these challenges.
What are your thoughts on the long-term sustainability of such a pool?
The demand for the pool is strong because of the relatively low volume of deck cargo being sent out to the Dutch North Sea today – which guarantees business for us, but in small volumes: last year Peterson shipped 400,000 tonnes of deck cargo to its operators in the pool. This volume created by the nine operators that make up the pool is equivalent to one operator in other regions.
The big challenge for us is that at some point in the future, production will cease on the Dutch continental shelf. As a result, we have had to search for ways to improve the sustainability of our oil and gas focused business. We have done this in a number of ways, such as the recent contract we signed for providing logistics services to Sellafield nuclear power plant in the UK, which relies on many of the same concepts and services we provide to oil and gas operators, but in an onshore context and for a utility rather than a producer.
We also looked to the UK as another potential oil and gas market. While it was difficult to get a foot in the door as a newcomer in Aberdeen, through the acquisition of SBS, a UK company, we have made in-roads since 2008. We are now working to develop a more ambitious internationalization strategy, which is helped by the fact that in quality assurance, Peterson is present in more than 70 countries: it’s not the same as going to a country and starting to make connections from scratch.
Although the concept is difficult to introduce to new markets, there are a lot of savings to be made. When we first started the service here in Den Helder, 70 platforms were being served by 10 vessels. Today, 135 platforms are served by 4.8 vessels. And it’s not just about efficiency: it’s also about flexibility. An operator with one boat, even if they manage to use it 100 percent efficiently, still only has one boat. With our concept, when you need to go above or below that capacity, you can share the cost of chartering and get access exactly when you need it. It’s the difference between a bus and a taxi: if you need transportation when the bus is not running, we can order you a taxi, but we can also work with the other operators to see if that taxi can be shared between them, turning it into a bus and reducing costs further. It’s a question of whether you need the ship, or the capacity that the ship provides.
In the Netherlands, what do you see as the eventual evolution of the logistics service market for the offshore oil and gas sector?
If and when the market shrinks, players will start to be left empty-handed. This is why ship owners and stakeholders need to accept that the world is changing and embrace the change. We might see platform supply vessels shift to more of a commodity, rather than being custom-designed for each operator as currently happens, which will mean that some companies might lose out if they have chosen to specialise in this area, for example.
Technology will also play a big role in how the sector evolves. Customers, with the advancement of technology in other aspects of their businesses, are looking for suppliers to demonstrate added value, sophisticated measurement and increased efficiency. Logistics is no different and through our proprietary systems such as e-cargo and Ship Management & Information System (SMIS), we have developed a platform that provides our customers with increased access to data and information about their current projects with Peterson.
For example, the SMIS software supports the complex planning process of the vessels chartered by the SNS Pool by allocating each partner’s monthly share of all the operational costs, taking into account variable factors, such as all supply base activities, actually used vessel capacity and handling time per offshore installation. And our e-cargo software provides a number of benefits including real time data and reduction in paper forms, as well as reducing risk through more effective communications by digitising quayside operations making them more transparent and efficient.
When looking at new markets, what has to be in place for it to be attractive to Peterson?
It has to be a mix of good infrastructure and good operators. I think there will always be some resistance to the introduction of this model in a new market: at first, the port companies and ship owners in the Netherlands didn’t believe in the concept, but slowly, they have embraced it, because it involves fewer changes for them, and a level of consistency as operatorships change hands.
We are involved in a number of tenders globally, but the operators’ willingness to embrace new concepts will be a key part of winning them: old logistics tenders are simply repackaged and put out again, and our new model cannot easily be compared to traditional offers. Companies need to be able to look critically at their current model first.