Jean-Claude Perdigues, Managing Director, GDF Suez, UK
Jean-Claude Perdigues, Managing Director of GDF Suez E&P, discusses the company’s most recent discoveries in the UKCS, the company’s 2013-2015 investment strategy, and its ambitious exploration program stating that, “successful exploration requires a combination of both talent and good fortune.”
The Cygnus field represents the largest gas discovery for 25 years in the Southern North Sea. By 2016, the field is forecast to account for 5 percent of UK gas production. Is this a result of good luck or something more specific to GDF Suez’s E&P strategy?
Successful exploration requires a combination of both talent and good fortune. The Cygnus field was originally discovered by Marathon in 1988. At that time, Cygnus was considered to be a stranded gas reserve of little significance and thus deemed sub-commercial. GDF Suez picked up the license as operator in 2002 because we believed that, through additional preparatory subsurface work, we could locate greater reserves than had previously been identified. We then prepared a very intensive appraisal campaign that lasted from 2006 to 2009. This campaign confirmed what our geologists had already suspected. There is indeed a much larger accumulation of gas than previously accounted for. We were able to determine this through modern seismic techniques and a lot of dedication on the part of our geophysicists. Ultimately, in 2012, we felt ready to sanction this very high profile project and commit to a 1.4 billion GBP investment in the UK.
What is the true potential of the Cygnus field as a hub? Could it really be used to unlock further potential?
It is very much our intention that Cygnus will enable us to unlock new opportunities. Firstly, we need to deliver the project as sanctioned. But we do believe that Cygnus has the potential to become a regional hub. We have developed a good knowledge base because we have been active in the UK sector for over fifteen years and interact closely with our sister company on the Dutch side. Our combined knowledge and experience from the sub-surface perspective enables us to be confident in our predictions. We are already aware of some standard gas discoveries that would not work as stand-alone projects, but could be made commercially viable through harnessing Cygnus as a hub. Our priority for the moment is to develop what has already been discovered, but we do aim to attract more licenses, and to tie in more reserves and eventually bring them to market.
Juliet Field, which you discovered at the end of 2008, is another key development for the company. The first gas is expected to flow by the end of the year. How far are you on the road to production?
I am happy to confirm that we are now very close to first gas. We successfully drilled the Juliet exploration well at the end of 2008 and the development project was sanctioned in June 2012. We have since been very successful in the implementation and should be able to produce by the end of the year provided that everything is in place on the export side. Juliet is an exciting story where we have again benefited from an existing infrastructure being in place. The project is a subsea tieback that connects to the existing Pickerill platform, which is operated by Perenco UK Ltd. In this way, Juliet represents a good example of how we can fast track projects and then deliver the resources to market through cooperation agreements between operators.
As a group, GDF SUEZ has an investment strategy of between 7-8 billion euros per year for the period 2013-2015. What is the role of the E&P UK division within this strategy?
E&P represents a significant part of the wider GDF Suez Group. Within our E&P activities, the UK is one of five operating affiliates. These affiliates are currently concentrated in Northwest Europe with onshore activities in Germany and offshore operations in Norway, the UK and the Netherlands. The fifth affiliate is in Egypt and we are in the process of developing a large project in the Touat region of Algeria.
We aim to create a more balanced portfolio in the future and are entering exploration appraisal phases in Indonesia, Malaysia and onshore Brazil. The idea is to grow the business in a sustainable direction, but to simultaneously maintain our strong focus on the North Sea. The UK is important to us because we are confident there is still a lot of latent potential waiting to be realised.
Cygnus is our flagship project in the UK and represents a net investment of around £500-600 million throughout the project execution phase lasting from 2012 to 2015. We also have the Orca project which is a cross border development with our Dutch colleagues. On top of that, GDF Suez has a substantial exploration, appraisal and pre-development program which is global in reach and costs roughly £700 million. My vision is to deliver this string of high profile projects in the Southern North Sea, and then to go on and develop further projects in both the Southern and Central parts of the North Sea.
You were awarded five more licenses last week in the Southern North Sea and are now the fastest growing operator out there. Do you have the capacity to continue this pace of growth and become one of the leading operators?
We certainly do have the capacity. We also have the right level of ambition to be a lead operator. The five licenses you mention are all for blocks in the Southern North Sea, three of which are very close to the Cygnus field, and therefore are consistent with our plans for developing the area as a hub. In total we were awarded fourteen new licenses for the UK’s 27th licensing round. We are already one of the leading operators in both the UK and the Dutch North Sea. By combining our resources and technologies we are able to deliver first class projects.
With such an active exploration program, how do you balance the ratio between producing and exploring? What is your perspective on risk management?
We want to grow both the company and the portfolio to extract a high value for the shareholders. To do this we need to focus on development and production, while simultaneously preparing for the future through exploration and approval. Both elements are fully complementary and together enable us to be a fully-fledged operator that encompasses the entire added value chain.
When GDF SUEZ started out in the UK fifteen years ago, we were primarily known as an exploration operator despite our partnerships with significant operators such as ConocoPhillips and Total. Gradually, over time, we have asserted ourselves across the entire value chain and become an operator in our right in areas such as development and production. Our work on the Cygnus and Juliet fields forms part of this process along with our mid-term plans for the Central North Sea.
We also consider safety to be fundamental. We have an excellent reputation as an operator that puts safety first. As we seek to grow in a sustainable and profitable manner, it is essential that we maintain and build upon this reputation.
Besides your reputation for safety, what else does GDF Suez bring to its partners?
Whether as an operator or as a partner, we always bring a very robust approach to projects. What marks us out is the quality of our people starting from the geological and geophysical dimension right up to the engineering. Our business is ultimately about managing a variety of different risks—technological risk, safety risk, and market risk—and the best way to do this is by having the best people.
A company of our size and reach also brings many other benefits. We can afford to invest in the innovation and R&D that many projects require. Our leverage over the supply chain and engagement with suppliers from round the world also make us a great partner to have.
In a recent interview you said: “There are still plenty of opportunities that can benefit from existing and new infrastructure, provided that the right incentives are in place for new investments”. What suggestion would you give the UK government about placing the right incentives?
Over the past two years, the UK government has been engaging intensively with the industry and we at GDF SUEZ have been part of that dialogue. The new and extended tax allowances have most likely been a decisive factor in encouraging the current high levels of market activity. There is therefore clear evidence of the benefits that targeted support can bring to the market. We hope that the government will act in exactly the same manner when legislating on onshore activities.
We also fully support the recommendations outlined in the Wood Review. We firmly believe that these recommendations, if executed in full, would help to unlock potential. Right now, there is a window of opportunity in the UK market. This is because of the favourable stance of the government and also because of the levels of infrastructure already present. Nevertheless oil and gas companies still require the right commercial framework to allow them to make use of this infrastructure. We need greater cooperation and easier access to that infrastructure to ensure that we can really deliver the gas and oil to market.
The UK market is highly sophisticated and many of the fundamentals are already in place. I personally believe that there is a strong case for extending the lifespan of existing infrastructure by unlocking the stranded resources that are out there. Cygnus is very much part of that game. Capturing resources in challenging environments does mean, however, that there will have to be advancements in technology and greater collaboration between operators, the government and other stakeholders to ensure that we can unlock the remaining resources in a cost effective and safe manner. Otherwise the moment of opportunity will pass and the UKCS will enter into the decommissioning phase.
You were appointed Managing Director in 2010. On a personal note, what would you like to have achieved in your fifth year anniversary as Managing Director?
I hope to have delivered high levels of safety and high levels of performance for our already sanctioned projects. I am specifically referring to our flagship Cygnus project, the Juliet project which in now coming on-stream and our first Central North Sea operated project now in pre-development phase. If we can also make further significant discoveries then that would be great. My aim is for GDF SUEZ E&P to be perceived as the operator of choice for safety and performance in this very competitive UK market.