Laurent Schirrer, Managing Director, Oilgen, UK
“There is no reason for the UK not to be equipped with a robust regulatory, legal, political, and fiscal framework that allows to produce more from existing oil fields.” Laurent Schirrer, Managing Director, Oilgen, UK.
Oilgen was created in 2011 from the company Gisement Ltd. You have now doubled in staff and invested a five-figure sum to establish Oilgen USA. Why is Oilgen an interesting player on the UKCS and international market?
Oilgen is a company truly born with the North Sea culture, which means that you only have the chance to drill two or three wells to get the oil out of the ground. As such, you have to maximize the underground knowledge from a few wells and very advanced technology, such as 3D seismic, advanced logging, and well testing techniques. Oilgen is able to crystalize this knowledge to provide services to the international market. As such, about 80 percent of Oilgen’s turnover is international, both in the reservoir management division and the advisory division. This advisory branch mainly helps mainly in the data room process and assists them in completing due diligence for data acquisition work.
2013 marked record high capital investments of 13.5 billion USD on the UKCS. Has this increase in economic activity translated into more business for Oilgen in the UK?
In 2013, this investment did not increase our business in Aberdeen, mainly because Oilgen was busy working on projects for core clients, mostly in Africa.
We hope that in 2014 increased investment will bring more business to Oilgen. I expected that an increased level of M&A in Aberdeen in 2014 could mean a rise in business for Oilgen, especially on the advisory side. For example, we would be very keen to help a new entrant to the North Sea evaluate oilfields and the economics of these fields to find the likely price of acquiring an asset from Talisman or Shell, if they are divesting. The company is now mature enough to work for more ambitious clients.
Oilgen is one of the few companies in Aberdeen specializing in high-tech reservoir and geological modeling to forecast and improve oil and gas production. What is the balance between Oilgen’s onshore and offshore projects?
Our contract with Maurel and Prom in Gabon is so big for the company that 80 percent of our business in currently onshore. Oilgen’s offshore work was mainly done for TAQA Energy in Holland. I hope to have increased activity in Aberdeen and the North Sea in 2014. In the more medium and long term, if the recommendations suggested in the Wood Report actually materialize, I see great prospects for increasing our market share in Aberdeen.
The Wood Report is very promising for Oilgen and was overall promising for Aberdeen as it showed a political will to improve the situation in the UKCS. There have been points of pessimism in the past four to five years in Aberdeen when companies understood that the industry was at a turning point and tried to protect their interests by opening to the outside.
It is also good for the industry to hear alternative proposals from both the Scottish and UK governments in regards to the regulatory framework and the chance to develop currently underdeveloped discoveries. For example, a Norway-style regulatory framework, where exploration costs are subsidized, could be a good model.
There is no reason for the UK not to be equipped with a robust regulatory, legal, political, and fiscal framework that allows to produce more from existing oil fields. For example, it is great to hear an independent regulatory body would take care of managing and maximizing recovery in the North Sea. Oilgen could certainly help such a body, while also helping companies via our reservoir management and advisory services.
Oilgen has been focusing more and more on unconventionals and in 2013 introduced new Shale Gas Reservoir Simulation Services. What is the rationale behind this strategic shift, especially for a company based in Aberdeen?
Shale gas activity is dormant in the UK for now. We will start first by providing service in the US, which allows us to gain knowledge and expertise. It is like preparing a TV to be HD ready before HD arrives. As such, we are unconventional ready in the UK thanks to this US endeavor.
Oilgen prides itself on offering complex solutions. Which recent projects or partnerships would you highlight as an example of the scope of work that Oilgen is ideally placed to carry out for today’s demanding oil and gas industry?
Our flagship project is the reservoir engineering work we do for Maurel and Prom in Gabon. Maurel and Prom is a multinational billion-dollar company based in Paris and quoted on the Paris stock exchange doing exploratory and development work, mainly in Africa.
Three years ago they approached us to build and maintain large, complex, and extensive reservoir models of their new discovery, Omoc-Nord. We completed the work and designed a development plan. Two years down the line, we now upgrade the model and have the pleasure of seeing that the wells we recommended have been drilled.
We are a partner to Maurel and Prom to such an extent that we are their outsourced reservoir simulation department. This does not mean that Maurel and Prom do not have reservoir engineers; they are staffed with a full reservoir engineer team. Instead, we free these engineers to work on operations, while we complete conceptual preparation of all well targets. Applying such technology to an onshore field with more than 400 billion barrels adds a lot of value. There are actually two such fields in Gabon that we work on. In 2012, immediately after starting work on the Omoc-Nord field, we received the contract to manage a second field, Onal, which is a bit more mature field.
Our cooperation with Maurel and Prom has not only been a great success story, it has also been a very high tech operation. Not many operators run full field reservoir simulation on onshore fields, mainly because they have the perception that this will be very costly and slow down operation reactivity and efficiency, but this is not true. Oilgen can deploy reservoir simulation for fields as large as any North Sea Brent reservoir for a reasonable price.
We are also able to scale our technology to fit small operators. For example, we recently completed a simulation to show a field that currently produced 35 barrels per day will produce 350 barrels per day next year. It is economical for small operators to order such studies, as they only cost in the tens of thousands of dollars, increasing of course for larger fields.
This month, Oilgen announced the opening of an office in Houston, your first office outside the UK. What is your internationalization strategy and why did you choose to open this office in Houston?
The first reason is that Houston is the undisputed centre of technology for new reservoirs. The second reason is that the American acquisition and divestment market is very liquid. In one day, you can buy or sell a property and have access to hundreds of opportunities. You can finalize deals quickly, and there is a very stable fiscal and political regime. Houston also fits the profile of some less wealthy investors, who are not the big majors or big independents.
Overall, there is a great technology and acquisition & divestment market in Houston, especially around the new unconventional plays. I was impressed when attending the last Society of Petroleum Engineers annual conference at how things have progressed in the past two years. During this period, we prepared ourselves and we are now ready to sell reservoir simulation applied to horizontal hydraulically fractured wells.
For sure, Oilgen will increase its presence in Houston in 2014, and I will personally spend more time in Houston. If any partnership opportunities with US companies arise, we will be happy to consider such proposals.
Why did you decide to set up an advisory service rather than a reservoir management service in this market?
We decided to first launch an advisory shop in Houston as we identified a niche. Most brokers and company listing companies work on the seller’s side. We observed that most of the due diligence work was left to the managing teams of the investors side. There was thus room for an advisory company working on the buyers side, providing a different shift to the valuation of the oilfield, taking care to advise our clients best on the value of what they are buying. This information could be biased to the sellers’ side since it is marketed by brokers that are indeed commissioned by the sellers. In this new business, we are not competing with brokers. We are competing with few companies, and we expect to work on demand and on our own.
What does Oilgen see as the value in maintaining its headquarters in Aberdeen, as many of your projects are outside the UKCS in France, Egypt, West Africa and Holland?
A bit paradoxically, we are currently an Aberdeen-based company with most of our work abroad, mainly because we started small and did not have the critical size to attract large players. However, this is going to change, as we grow bigger and the market changes in Aberdeen, with more emphasis on continuing to extract oil from the myriad of underdeveloped discoveries.
In addition, we thought about relocating HQ to Houston, but we have decided to stay in Aberdeen. For the African work we are doing, we are better in Aberdeen from a time zone point of view, while staying in Aberdeen also allows us to remain close to our historical clients in Paris and the Hague. We would not let down these clients, which would perhaps result from an HQ in Houston.
How do you view Oilgen’s role in innovating and creating value through its cutting-edge reservoir management services?
We will continue to bring foreign work to Aberdeen, which is valuable to the local community, as we employ local staff and bring in business. We will deploy our historical brand and North Sea expertise to new clients, especially new entrants to the market. New entrants will look for specific services and will want to outsource the right services to us.
As such, we recently hired a geologist and introduced geological modeling in order to offer a package of simulation services, comprising geo modeling and dynamic modeling (both static and dynamic description). Small companies would be interested in these services because they lack the resources to undertake this work with the high level of technicity required.
Moreover, if big companies received the incentive to work on their neglected oilfields, we can do great things. We can complete studies to market the value of a neglected oilfield, increase the value of this field, and put this oilfield back in development. As of now, there is no real incentive for big companies to recover more oil from neglected field. We need a catalyst to make this happen. As of now, E&P companies in Aberdeen work too much on their own, whereas these companies should share more knowledge and offer more public availability of data, as per the Wood Report.
If we were to come back in three years’ time, where will you have taken the company?
My ambition is to have Oilgen as the reference company in reservoir engineering. I would like oil and gas companies to think of Oilgen when they think of reservoir engineering. Our acquisition and divestment branch is a byproduct of the reservoir engineering and petroleum engineering expertise. You can certainly do acquisition and divestment advising if you know about reservoir engineering, but the opposite is not true. Reservoir engineering is very versatile as a service.