Manuel Moreu – Chairman, Seaplace, Spain
Manuel Moreu, chairman of naval engineering specialists Seaplace, on the company’s current positioning within the industry, the perception of Spanish companies abroad, and Spain’s future prospects in terms of upstream E&P.
As one of the founders of the company, can you please highlight the growth trajectory of Seaplace over the past four decades?
“I believe it is well accepted that Spanish engineers are valuable assets. We are a very tough bunch.”
The story of Seaplace is a rather exciting one; we have had our fair share of ups and downs! First and foremost, when we founded the company, we were really too young to have credibility in the industry, which was an issue. We were very grateful to be able to partner with a fantastic company called Seaplace UK, then involved in marine operations in the North Sea. Collaborating with them on the Casablanca project with Repsol made clear the synergies between their captaining expertise and our naval architecture experience, so we decided to establish Seaplace Iberia as a 50-50 joint venture.
Initially, our work was focused on fixed platforms and we supported the marine operations in the North Sea as well as the first six jackets in Brasil. All these included structural and loading out operations, installations, and associated analyses. That was where we honed our skills. Having a partner in the North Sea meant that we could pool resources. When we had a project in Spain, we were able to call on additional expertise and personnel from the North Sea, while when offshore projects dried up in Spain, we could rely on North Sea work.
By the late-1980s, due to several Seaplace U.K. ownerships changes, we became a 100 percent Spanish company. At that time, we were involved in FPSO and Drillships projects at ASTANO (Astilleros y Talleres del Noroeste), a Spanish shipbuilding company based in Ferrolterra which at that point ranked number one in the world for building FPSOs.
In the 2000s, ASTANO´s Owners ran into trouble under new European regulations related to the provision of aid to the Spanish shipbuilding industry. The EU forbade ASTANO to get involved in the offshore industry in 2005 for a period of 10 years, limiting them to building only navy ships and restricting the non-militar contract to 20% of the contracts. When the 20% was relevant, it was not needed and when it was needed, it was negligible.
The Spanish economy was probably one of the hardest hit during the 2007 financial crisis, so it was unimaginable that a Spanish company could be prevented from running a profitable business that would have contributed to the economy.
Having endured these challenges, how is Seaplace positioned within the industry today?
We provide a diverse range of expert services: conceptual, contractual, basic and detailed design, fabrication supervision, installation and removal, etc. of Floating and Fixed installations, in Drilling and Production units, in Export and Auxiliary Units. With special structural, seakeeping, station keeping studies, risers analysis, flowlines installations, utilities and so on – whatever is needed onboard. Our responsibility normally ends with the process and wellhead controls as our clients generally have the necessary expertise to handle that themselves.
As a company, we currently have 50 people doing the engineering, of which 40 are naval architects. There are not that many ocean engineering expertise, so we are a fairly significantly-sized company when you consider the niche that we operate in.
Our clients have undoubtedly changed, and we have adapted through necessity. From offshore projects for oil and gas companies, we also work with the main contractors as well as shipyards and the ship-owners offering services to oil companies, who also need design and support. In terms of operations, we have been involved in many different projects, from fixed platforms to drilling and production floating units and special vessels for offshore operations. We also operate very internationally, with projects in Turkey, Mexico and West Africa, for instance.
Given your international presence, how would you say Spanish companies are viewed internationally?
I believe it is well accepted that Spanish engineers are valuable assets. We are a very tough bunch. Having personally earned an engineering degree at ETSIN in Madrid and a Masters in Ocean Engineering from the Massachusetts Institute of Technology (MIT), I can say that it was much harder to obtain my Spanish degree than my MIT degree! It is not a comment on which is more worthwhile, but there was just an unbelievable amount of work required by the Spanish degree. All Spanish engineers are survivors of that tough system.
Till the last crisis, the Spanish companies were not very much interested in working abroad, but it has changed a lot, as our economy will not need so many developments anymore, that heated up all economic sectors.
All Spanish companies are competing worldwide and our engineers and their background are our main asset.
For Seaplace in addition to support the Spanish shipyards in all kind of projects, either foreign or Spanish flag, we collaborate for foreign shipowners and shipyards. In countries like Mexico, we could offer them our expertise, with Spanish speaking engineers and competitive prices. To sum up, our strong points would be engineering expertise, connections, cultural fit as well as a competitive value offering. That said, it is not always easy for a smaller company like ours to win the confidence of large companies.
What proportion of your projects are inside Spain and what proportion outside?
Firstly, even if we work on projects in Spain, the finished products are exported as there is minimal oil and gas production in Spain. Spain was very lucky to have its first production in 1971 in Mediterranean waters, then the first FPSO in the world operating in 1976, also in Mediterranean waters, as well as the Casablanca fields in the late-1970s and so on. We are now connecting some marginal fields to Casablanca while the Poseidon gas fields in the Gulf of Cadiz are now being used for storage. But there have been no new major developments since and our offshore oil and gas industry is non-existent.
Currently, we are making extensive preparations for future contracts and projects, particularly now that Repsol is extending the life of some of their assets and dismantling others, that we would quite like to be involved in. CEPSA also has some projects in the Far East we are looking at. The offshore market is recovering, slowly but surely. While the oil price is not at USD 100 yet, in euro equivalent it is almost at 70, which is a good figure to restart industry activity.
The auxiliary offshore vessels are recovering at an even slower pace. There are a huge number of vessels idling globally at the moment, so there is oversupply, but the fact is that a significant percentage of those are too old for use. After three years of laying down, many of them would not be able to return to work so I expect the industry globally will need new vessels in a few years’ time.
I believe that the 2014 bubble was not about oil production capacity but investment capacity. Globally, the oil and gas industry was seeing such a gigantic amount of investment that in five years’ time, there would be 10 percent overcapacity! Adjustments had to be made. Previously, the industry could manage overcapacity of 2 to 3 percent by adjusting maintenance but with overproduction by say 15 percent extrapolated to 2022, who will be the ones to close the valves? It is always the Arabs. With the barrel at USD 55, many developments continue to have fantastic internal rates of return, but no doubt many projects had been cancelled. The investment now is probably at a third of its 2014 level.
On a broader note, what further potential do you see for Spain in terms of domestic upstream exploration and production activities?
We have to understand that Spain possesses a rather complicated and unusual geology. When Spain received the first LNG shipment in the 1960s, it looked like the country was blessed with immense potential for offshore. The Americans and British thus came exploring Spanish territory in the quest for a continuation of the highly prolific North Sea sediments. Where, though, are those sediments today? Not 2000 meters under the sea bottom as you might expect, but with their presence being recorded as high as 1000 meters above sea level. In short, the movement of the tectonic plates and subsequent formation of the Pyrenees mountain rage mean that, quite unlike oil and gas deposits in the North Sea, these sediments have been essentially rotated or displaced upside down. Much of the easy resources to extract have already been exploited such as the historic gas reservoirs of the 1980s in Huesca, Serrablo. Getting the rest out would entail thorough exploration and high tech and costly solutions. Under the current conditions of austerity and a lack of liquidity it is hardly surprising that investment is instead flowing towards easier plays around the world.
Now, we have oil and gas approaching from the south and north of the Canary Islands. The potential of oil and gas within the Canary Islands themselves is rather restricted by the fact that it is a volcanic hotspot. Nevertheless, many of our neighbors have found significant oil and gas deposits, which need to be properly developed. Moreover, the Canary Islands is the logical choice for establishing a regional service hub: we are talking about a location that is comparatively well connected with plenty of flights and there is a ready availability of essential services ranging from storage, logistics, and repair to maintenance.
Another specific hurdle constitutes prevailing public attitudes towards domestic oil and gas exploration within Spain. You can drill in the North Sea without any problems but every time a project is proposed within Spain itself, there is considerable environmental groups’ opposition. This happened in 2002 with Repsol’s plans to drill in the Canary Islands, for instance. The environmentalist lobby wields undue influence and our governments and Society do not react. Private enterprise will always be wary of investing there if they believe they are likely to attract a lot of negative publicity and not receive proper backing from the political class.
What final message would you like to send to our audience?
On the cover of an American publication a few years ago, the headline was animals at risk of extinction. They had various endangered animals on the cover like the panda and the white tiger and so on, and in the middle was a man with glasses, and he was a naval architect! That was the perception of our industry – but we are still here today. We have responded to different challenges in the past and we will continue to do so, taking care of 90% of the world transport in tons x mile and more than 30% of the hydrocarbons.
Seaplace offers very high-level engineering related to fixed, floaters and subsea projects, drilling production, offshore vessels and transportation. With services running the gamut from conceptual engineering to contractual to basic (approved engineering) and detailed, providing the shipyards, fabrication drawings – involved in the structure and outfitting of oceanic system, station keeping, etc. We are here to help our clients to the fullest of our capabilities.