Anupam Ghosal – Area Manager, DNV GL Middle East & India
The area manager for the Middle East & India of DNV GL Oil and Gas in the UAE elaborates the strategic changes DNV GL implemented as response to the landslide in commodity prices and furthermore discusses digitalization as a leading trend in the hydrocarbons industry.
Since taking the position as the manager for DNV GL Oil and Gas in Middle East and India, you have witnessed oil prices of USD 110, USD 30 and now USD 50 again. How have you navigated the business through the volatility of the market?
“The slump in oil prices for us meant, that 2016 was a year of internal re-strategizing, making sure that as an organization we are aligned with the new market reality.”
Before the merger of DNV and GL in 2013, both companies individually already had legacies to be reckoned with. The merger significantly increased this breadth, leveraged the strength of both legacy companies, and was particularly impactful in the Middle East, where both companies had a significant stance prior to the merger. Moreover, both companies were highly complementary in the service delivery portfolio which made the integration of both organizations relatively easier. The natural focus until 2014 was internal consolidation and integration. Integration efforts were not only about DNV and GL but also covering other companies that both DNV and GL had acquired shortly before the merger.
The substantial depletion in commodity prices started to show its disastrous effect in the oil and gas market from halfway through 2015 with the impact becoming appreciable from the fourth quarter of 2015. The year of 2016 has been a period of adaptation to change in the form of cost optimization, recognizing possible opportunities arising out of these market challenges as well as focusing on long term positioning. The emirate had a plan to significantly increase their oil production with plans made in 2011 and 2012. Some of these flagship projects slowed down significantly when the commodity prices went down, affecting the supply chain, including us.
We focused on how we could seize the most benefits from the market challenges. While the investments on upstream new or on-going projects (CAPEX) slowed down in the market, we re-oriented our focus to services around operational expenditures (OPEX). Although this did not entirely compensate the depletion of CAPEX, we did cover significant ground with our OPEX services. We also concentrated more on down-stream segments in the region, where significant investments have still been taking place. The slump in oil prices for us meant, that 2016 was a year of internal re-strategizing, making sure that as organization we are aligned with the new market reality.
The latest available financial figures show that the group achieved USD 2.78 billion in revenues. Given that your region is home to over 32.5 bdp production – the largest oil and gas region in the world – to what extent is this represented in the contribution of revenue, workload and resource allocation to the global operations?
The oil and gas business in the Middle East and India region–combining all services we offer to this sector—amounts to a significant percentage of global oil and gas revenue. Of course, this is also due to the clients present here. The ADNOC group of companies is one of the largest clients in the region, among a few others that are part of our global NOC key account. Other significant clients are Oman’s PDO (Petroleum Development), Qatar Petroleum, K-companies in Kuwait, and ONGC in India.
What are the most important countries in your region?
The UAE is our competency hub for the region and also where we generate a substantial part of the revenue, which includes the service delivery that Abu Dhabi office does for other ME countries. We also have a strong presence in Qatar, Oman and India. We generate a substantial amount of business in these countries. In Oman, we are servicing significant projects with PDO. We also have appreciable business in Kuwait, which is coming up with significant opportunities for future as well and we are currently focusing more efforts towards Kuwait. Investments in Saudi Arabia has always been significant and we have also been providing various services in Saudi.
Which countries are most disposed to spending on new technology and which lean more towards ‘old school’ technology?
In the region, UAE has traditionally adopted innovation and technology early. To an extent, ADNOC does take leadership position in various initiatives. For example, for more than ten years now the UAE has adopted a safety case verification approach based on the traditional UK approach, which is now being used or considered in other countries.
Oman has been the leader in embracing EOR techniques and technologies and is the innovative leader in this aspect; likely leading in the world even! The Oman oil business and facilities are marginal; therefore, depletion completion has been an utmost priority for the country for which it needed the right technology. Consequently, Oman has been highly successful in implementing the most innovative EOR techniques to get the most out of the assets that they have.
Like Oman, some countries lead in niches: Oman in EOR, Qatar in the gas segment, and India in statutory rules and regulation.
Business efficiency seems to be the big buzzword of the industry. Especially when oil prices went down, national companies like ADNOC just recently consolidated its offshore subsidiaries into one entity to increase operational efficiency. Mr. Gharesifard from INTSOK (NEP) said that this can have advantages and disadvantages depending on one’s perspective. From your perspective, how would you assess these developments?
When the commodity prices went down, in DNV GL we believed that the challenges that the industry felt were more of a cost pressure than a price pressure. The luxury the industry lived in at time of an oil price above USD 100 had greatly diluted any industry perspective on increasing efficiency. A large portion of the efficiency gains that were made after the landslide in commodity prices could have easily been made before. The most important one—and what we are strongly pushing—is standardization across the industry. When the oil price was booming, every company had different standards and even within these standards there were different requirements. These then get passed down to the EPC company for instance, which will be forced to charge a higher price. This could have been avoided by simply eradicating overlapping requirements. This price drop has started an increase of efficiency through the entire supply chain which most certainly is the good aspect of it.
In the particular case of ADNOC, I feel that the increase of operational and organizational efficiency was not only because the slump in oil prices. After taking over as ADNOC CEO in February 2016, H. E. Dr. Sultan Ahmed Al Jaber in turn replaced six CEOs of group companies. ADNOC underwent significant internal re-structuring and re-orientation during the first half of 2016, resulting in slower decision process. Ultimately however, ADNOC is emerging stronger than before from this process which will benefit overall industries in the future. Like in other parts of the world, in the region as well the slowdown in investment however, could haunt companies and local industry in the future, when demand rises again and the lack of investment decision taken today becomes apparent.
A current trend emerging seems to be the increasing need for digitalization of Oil & Gas businesses. What can DNV GL offer in the arena of digitalization?
Our group CEO Remi Erikson made digitalization a priority focus for the company as well as also making DNV GL itself more digitalized and to open up more opportunities for the industry. In the Oil and Gas business area as well, ably led by our CEO, Elisabeth Tørstad, we have taken some important strides in 2016 towards a digitalized future. Personally, I feel we do not have any choice but to embrace this topicality. As a company, we are aware that our 150-year tradition does not guarantee DNV GL’s relevance in the future unless we remain agile to the new trends—and we see digitalization as one of the largest trends.
Of course, this is a work in progress for us; even though we have made significant progress and continue to invest in various digital initiatives, we do not have complete clarity about end fruition of all these endeavors. In DNV GL, we pride ourselves on being at the forefront of innovations and even in digitalization, we are pushing this envelop. We want to make ourselves and our services more digitalized, then see what the resulting business model can be in various cases. In our service portfolio, we already have developed several pilots with some clients around the world. ‘’MyDNVGL’’, for example, is one of them; an interactive platform which allows customers, partners, sub-contractors, and you to access our external digital services from the same, single starting point. My DNV GL currently hosts more than 100 digital services and can be accessed through external DNV GL website. MyDNVGL provides quick, easy to access services and already have larger number of registered users. “Noble Denton Marine Services warranty standards wizard”, launched a few months back, is available through this portal.
MyQRA is another digital development that we have rolled out. This tool has an interactive digital presentation interface and provides our customers with better risk understanding throughout the project life-cycle. LNGi is another digital interface that is also available through MyDNVGL portal. LNGi Map with LNG bunkering infrastructure with detailed project data and helps customer to remain on top of the development of LNG bunkering for ships.
DNV GL has recently launched VERACITY, which is DNV GL’s industry data platform, based on Microsoft’s Azure. DNV GL is developing this platform by working together with several industry leaders on big data projects in pursuit of reduced downtime, improved safety, predictive maintenance, performance forecasting, energy efficiency and real-time risk management.
Today we are at the vanguard of the next digital age surrounding phrases such as “big data”, “advanced analytics”, and “the Internet of Things” – the hydrocarbons industry seems to be rather slow to embrace these topics. What do you consider to be the reasons for this lack of momentum to embrace this new digital age?
I think we need to deconstruct the word digitalization. This is still very much a buzz word with not enough clarity on what it means on the ground level for the companies. It must be clear what that means all through the organization to clearly show possible opportunities. The second issue is about data security. In this part of the world, the companies are very sensitive when it comes to data protection. Over the years, what DNV GL has always been trusted with data, trusted in giving independent views and connecting industry leaders. We believe that DNV GL can play a huge role in this segment, as an independent organization to help the customer realize the value of their data. Another aspect is cyber security, which is a large problem that many companies are not entirely sure how to handle.
What do you tell companies to convince them of the benefits digitalization offers?
The success we have witnessed with our digital solutions so far we have not witnessed in this part of the world so far. There are issues about cultural sensibility, the need of protecting data and understanding what happens with this data as topically is not as advanced as much here as it is in in other places. It is about building trust and we are working on it. We proactively discuss this subject with customers ensuring that they understand that digitalization is inevitable and that data is a resource bearing the potential to significantly increase efficiency. Eventually, this resource will need to be tapped into and that rather sooner than later. In DNV GL, we are in journey of connecting data analytics with domain knowledge expertise that we have developed in so many years.