Neil Douglas, Managing Director and Founder, Viper Subsea, UK
Neil Douglas of Viper Subsea details his consultancy and equipment supply business’ offering to the North Sea market. He highlights his new companies offering to the North Sea, particularly its ageing and subsea assets.
After two decades at Vetco Gray you founded Viper Subsea. Could you detail the founding vision of this company in 2007, when the business was formed?
I had been with Vetco Gray for most of my working life, since graduating, covering a number of positions. The latest of these was as Global Technical Director for control systems- I was responsible for the control system technology being developed by the company. When Vetco Gray was being sold, there was a strong priority on ensuring the company had the highest sales value- for instance by gaining a long order book- rather than setting up the company for long term growth. At that time, I was a little frustrated and started to look for opportunities within the industry. Subsea distribution equipment – connecting hydraulic and electrical services from an umbilical to subsea equipment was an area that had received limited attention from Vetco Gray or its competitors.
There was the opportunity to design and improve technology in this sphere- to create a niche for oneself.
Max Nodder, my co-director with whom I founded the business with was a colleague from ten years earlier. Meeting with him on a social occasion, we decided to move ahead with Viper Subsea. A business plan was created and stress-tested for around 18 months, looking for potential clients and at competitors before the business was founded with an initial working capital of 45,000 GBP. At first the business focused on purely consultancy work. This gave cash flow, generated profit and since day one, all profit has been reinvested in the business. A large proportion of the revenue is returned to research and development. Typically, 20-30percent of our engineering effort is spent on research and development. The business has been successful in obtaining a number of regional grants which have fuelled initiatives assisting Viper Subsea to continue on its journey from a consultancy business to a subsea service and supply company. Having now been developing products for six years, the business is well on the way to realising significant growth through the supply of hardware and control system integrity management services.
Viper Subsea received the prestigious innovation and technology award at the UK Subsea Business Awards in 2014, for its V-LIFE product. What makes this product so unique?
The V-LIFE tool originated in a brainstorming session internally aimed at establishing which of the industries key ‘problem operations’ could be eased. Our consultancy business had commonly encountered clients with problems caused by aging assets in the North Sea. Water and electricity do not mix well, so when electrical failures occur, they can cause expensive down time and loss of production. As a result of brain storming sessions, around three or four years ago, V- LIFE was developed. This was a scientific breakthrough, and the technology reverses the effects of water getting into subsea and umbilical equipment, it dries out the conducting elements and blocks the holes where the water has entered the equipment with a non-conducting precipitate. The fact is that this technology can obliviate the need for an operator to have an expensive subsea intervention, eliminate the need for replacement of umbilicals, which can cost many millions of pounds
Also, this technology can bring fields shut down by water ingress back into operation, which is of massive significance.
Secondly, with regard to aging North Sea assets, if there is a failure of the electrical distribution system towards the end of a field’s life, there may not be an economic justification to replace the umbilical. For this reason, some fields are abandoned early- and our V- LIFE technology can maintain production in this context.
This one technology is having massive impacts for our clients.
Often the oil and gas industry is an exceedingly conservative industry, with at times, reluctance to embrace new technologies. However, with the far reaching potential of V-LIFE, how has the industry received your product at first?
In 2012, we undertook a field trial before bringing this product to market, when it was launched at Offshore Europe 2013. The uptake and the interest has been phenomenal because the product is unique and solves a critical problem. The early adopters have also obtained confidence from the fact that the science has been independently verified by a UK university. Furthermore, as many of the projects where this technology can be applied are in highly challenging environments, given the lack of any similar technology the only alternative is the expenditure of large sums of money.
The adoption of this technology has been such that our business initially ran out of V-LIFE hardware resulting in us having to manufacture more systems to meet demand. Every unit we have provided has been successful.
Where next for technological development; to what extent is Viper Subsea prioritizing this as a strategic priority?
Well, at the moment, we are investing around ten percent of our cash revenue into research and development. This is added to by alternative sources of funds, as we have signed up to a joint industry project (JIP), with participants including Total, Shell, and BP. As an SME we also have access to regional development monies. The JIP will lead to a field trial of our next generation of technology next year.
A significant proportion of our engineering effort, funded by ourselves or through grants goes on to research and development.
At the moment we have 14 patents filed, some of which are granted, others published and some are in the early phases of development which are not as yet published. Two of our products in the pipeline are particularly exciting. One is called V-SLIM, the subject of the JIP and following on the back of that, we have another product which has had a patent filed for it.
Investment also continues in V- LIFE, which will have an improved version launched later this year. We are not only pursuing new products, but improving existing products as well. The process that V- LIFE uses is a scientific breakthrough, but our further work to enhance the product shows that we can not only repair failing subsea systems, but it also allows us to better understand what particular part of the system is failing as well.
How do you characterize your client relationships- and how are you gaining clientele overseas?
As a result of V- LIFE’s impact on clients’ bottom lines, most of our clients are very happy to meet with us. This technology is the talk of the town, and we are getting calls out of the blue from operators which have heard of our technology.
In Brazil, for example, due to the subsea market’s organization there, our most applicable product is the V-LOCK, a subsea hydraulic stab plate. Clearly with Brazil’s huge potential for subsea equipment yet challenging reputation, this is a market that must be shrewdly tackled.
Access to UK based trade initiatives, trade advisors and the local consulate in Sao Paulo Brazil, helped facilitate the move. Santander’s breakthrough program, aimed at SMEs was also useful- it is designed to help such company’s access foreign markets. We were confident our product was needed by Petrobras, and indeed, our initial sale was within two years, faster than I expect other companies typically gain a contract in Brazil.
Our entry into Brazil was relatively low key, as we did not in fact have to sell directly to Petrobras– one of their suppliers used our equipment was brought into common usage by Brazil’s hegemon in that manner.
In terms of potential, the Gulf of Mexico and Australia are markets where V- LIFE and integrity monitoring technology have significant prospects. The V-LOCK technology follows the big projects- West Africa, Australia, Brazil, but there has been particular success in Azerbaijan, with AIOC, Azerbaijan’s national oil company, a BP owned subsidiary. This success piggy backs on Viper Subsea’s previous provision of services and hardware to BP– which is continuing to be a route to further contracts for us.
What is the geographic spread of your operations?
Our exports account for around 80 percent of our revenue. However, because our clients operate and our products are sent globally, yet are often based in Europe, our base in Europe is better as clients often assemble our products here before shipping them out globally. The asset-integrity products, V- LIFE and V-SLIM, however, are mainly sold to operators. Looking forward, a few years, this will likely see Viper Subsea open up overseas offices.
V-LIFE has only been a commercial product for eight months. The North Sea is likely to grow immensely in importance to our business solely due to the value of this product in that environ.
Viper Subsea also provides control system integrity management for a number of North Sea operators, and this was a key reason to be located in Aberdeen as for this niche, one must be local. Hardware and supply can be handled remotely, but when you are speaking with clients, providing a service, one must be close in to one’s clients.
Viper Subsea is still looking for high caliber staff. How do you attract and retain these staff?
Our business has a very low staff turnover, and also because of our reputation for innovation, this is quite attractive to engineers. Such staff want to be at the forefront of modernization, improvement and progress- engineers particularly find working in research and development to be engaging. We are actually finding a great deal of engineers approaching our business looking for work because of our reputation. Whilst Aberdeen is still a difficult area reputation wise, Viper Subsea likely has an easier ride than some other companies, because of our achievements.
The company also continues to pursue the recruitment of graduates, seeking high caliber graduates for further training and development.
What are the main challenges and opportunities that lie ahead over the next five years for Viper Subsea?
The opportunities arise from further development of unique products. Producing tools and abilities that no one else has clearly presents opportunities for growth. The challenges come down to resources, which may limit the speed of growth of the company- access to the right people is needed.
Viper Subsea is also seeking to grow, but in a manageable fashion. Year on year growth has been around 40 percent, looking likely to increase to about 65 percent in the near future. This is achievable. Quite clearly, were Viper Subsea to develop more fantastic products, the growth rate would go up- but this would be a challenge.