Nick Nooren, General Manager – Middle East, India, Africa Hub, Lloyd’s Register
Lloyd’s Register’s general manager for the Middle East, India and Africa talks Qatar in the regional context, looking at everything from risk factors to safety culture in the oil and gas sector. He also discusses the preliminary findings of his company’s new global oil and gas survey.
What is the history of Lloyd’s Register in Qatar?
Lloyd’s Register has been in Qatar since the early 1970s, with most of the company’s activities related to the shipping sector. Before I joined in 2008, the company had a very limited focus on the Qatari oil and gas sector, only working on projects when requested by a client, flying in and out of Dubai, but today we have a dedicated team of people in Qatar, working with a large portfolio of clients that includes Qatar Petroleum (QP), Maersk and Total. The majority of our current activity is focused on helping clients to operate their existing assets rather than on new builds: although a lot of projects are going on in Qatar, most are assembled in Qatar, based on components that are being shipped in.
The work we do is a combination of consulting, ensuring compliance with the local regulations or best practices that companies like Maersk and Shell have adopted from other parts of the world, based around understanding risk and managing it appropriately.
In Qatar, what do you see as being the greatest current risk factors for your clients?
Because of asset condition in Qatar, most operations are relatively low-risk: most plants are reasonably new, or if they were built in the 1980s they are today less significant because of newer installations. As a result, the biggest risk that any operator has in Qatar, but also around the world, is the interface between humans and the systems and equipment that they operate. This risk is compounded with the use of a transient workforce that tends to work on a project basis.
How successful are Qatari operators at building the right culture around safety?
It is very difficult to say because, in our experience, there are some Middle Eastern operators we have approached that have been unwilling to release their health and safety statistics. However, for a few years we have been involved with the petrochemical and chemical association (which is governed in the Middle East by all the major operators), reviewing their performance metrics. We are beginning to develop an understanding across associations and operators that it is positive to share health and safety performance – and while once this was probably their best kept secret, along with technology, the association members are coming round to the idea of transparency and benchmarking when it comes to safety.
One of the biggest upcoming challenges for the Middle East is that the regulatory regime is essentially non-existent. The region’s NOCs have established their own regulations based on best practices, but without an independent regulator, rules will not necessarily be followed.
Most operators in the Middle East today see safety as good business, but because of the costs involved in initial set-up and training, and the mistakes that have been made in order to learn the right lessons, the proper amount of time and energy is not yet being invested. Safety is a priority no matter where a company operates and improvement must always be a constant. There still needs to be more awareness and understanding of how assets should be managed so it is essential operators seek to identify and meet a defined set of safety solutions now and in the future; and the next 50 years will be no exception.
Petrochemical and downstream projects are the first step in Qatar’s diversification plan. What business have you seen from this so far? What are your thoughts on how this diversification is progressing?
Qatar is a role model when it comes to the way the industry has diversified into petrochemical installations and fertilizer production. Almost everything happening at Mesaieed industrial city today is related to the downstream sector, and the way that the companies based there are making proper use of associated gas and capitalizing on offshore production is very impressive. Ras Laffan has also developed in a very significant way in recent years: when I first visited in 2004, the city was virtually empty, but today everything has been built around the first companies to establish there, RasGas and Qatargas.
How has Lloyd’s Register’s investment in LR Senergy changed its business in Qatar?
LR Senergy’s strengths are in the subsurface, whereas Lloyd’s Register has traditionally been more focused on the top side, so as a result of our investment in LR Senergy, collectively we will be able to offer a much more integrated service to our clients, and it builds on the complementary capabilities we have built up through the acquisitions of West Engineering, ModuSpec, ODS, and Scandpower. The combined entity is now the industry’s leading provider in supporting safe operations in the discovery of new energy resources. We have a good range of skills and expertise across the value chain, and we are beginning to see the results of this in our work today.
LR Senergy and Lloyd’s Register worked together for many years, but now we do so even more than ever: we pass on leads to each other, share technical knowledge, and are beginning to do a number of shared promotions, which include a very focused world-wide client and industry events programme. The more we collectively brand ourselves as one entity, the easier it is for the industry to recognize the depth and breadth of the technical expertise available – from reservoir to refinery and beyond.
Most of LR Senergy’s work with Qatari companies is based outside of the country with operators like QPI – there is a big appetite today in Qatar to become a truly international player.
Typically, after a company is acquired, we tend to work alongside the newly-acquired company for a period of time before full integration in to Lloyd’s Register. Depending on the size of the acquisition, this can take from one year up to five years and is dependent on a number of factors. We understand how to integrate these companies and the value they can bring to industry with the new depth of resources available. We work closely with all employees to ensure everyone is kept informed on progress and that best practice is maintained through ‘integration teams’ which manage a seamless bringing together of IT systems, operational support and technical experts through to client engagement. Lloyd’s Register and LR Senergy are a perfect fit as we share similar ambitions to make a difference to the industry, purpose and values. We also believe it is vital to the future success that we create an environment that will retain and attract those individuals whose skills and talent will take our business forward.
Lloyd’s Register has a number of agreements in the Middle East for cooperation in the field of education. Is this something that you would be interested in doing in Qatar as well?
Absolutely: training of the local workforce should be a big priority for the whole region. Even Lloyd’s Register only employs ten percent of its staff from the local workforce, with the rest coming from Asia and Europe. Expats come here because there are still jobs for them. While we should recognize that we are now a globalized workforce, countries like Qatar need to look at how to generate jobs for their own people too, not just for the sake of employment, but in order to move from being seen just as investment partners to having their own technical skills, so they are able to make their own decisions based on experience. This is already happening in other sectors, like finance. When the motivation is right, and the right mentoring is in place, it can happen in oil and gas too.
Increasingly, companies in the Middle East are recognizing that they have to work with local institutes and research centers. We recently signed our first MoU in Oman to tap into the talent that is available in this part of the world, but also to try to start a two-way conversation about what we have to offer each other.
However, one thing that the Qatari operators have common is that they are very good at bringing in international knowledge and retaining it, learning to operate their facilities very well and training a local workforce at the same time.
Lloyd’s Register just completed its first global oil and gas survey. Please tell us a little about the preliminary results.
We have had more than 250 respondents to the survey, from 21 countries, with around 20 percent of respondents based in USA and 11% in the UK, and the rest coming from around the world. The aim was to get an understanding of the short term trends in the oil and gas sector to 2015, then from 2016 to 2020, then to 2025, and finally, beyond 2025, looking at where oil and gas operators are going to put their money and where they are expecting investment will be needed.
Whereas a few years ago, investment was focused on building new plants and capacity, it is now focused around operational excellence, looking at managing costs in the most appropriate way. This significant shift is not very much of a surprise to us: Safety is still key which is extremely positive, but the other prime drivers for innovation are being seen more from a cost point of view which may suggest that the industry is on a cusp. I think that the survey is actually supporting what we are starting to see from an industry perspective. We are now seeing it start to enter more into a phase where operators have to look at their cost base with a lot more focus to ensure they can continue to capitalize on the opportunities that are out there.
One of the other topics we covered in the survey was how companies look at innovation: a lot is going to be spent on innovation in the coming years, and around technology innovation. One key area will be additive manufacturing through 3D printing, something that companies will be investing in now in order to get benefits in in the next five to ten years.
In the whole region, enhanced oil recovery is a big topic. It’s an area where the Middle East’s NOCs really need IOCs and service providers, because they don’t have that knowledge in-house. Operational efficiency and cost reduction are major considerations across the industry today, which was relatively well shielded from the effects of the financial crisis: now it is time to strip out some of the fat that has grown. This is a big challenge for NOCs: cost reduction almost definitely means cutting employee numbers, and with that it reduces the chance of meeting nationalization targets, which makes it easier said than done.
It is fair to say that we consider this first survey to have been a success – we asked an external research company to do it on our behalf, because we wanted to have that independence, and we intend to do it every year from now on.
What do you see as the future of Lloyd’s Register in Qatar?
With a more integrated service offering we see more opportunities across the energy value chain: and while new projects are not necessarily being planned as they once were or built onshore, there are still high profile drilling programs already underway or being planned by several operators. We like to be engaged in these projects with them, in both the drilling and the subsurface work.
Shale gas might make a temporary blip in Qatar’s global gas supply dominance, but in the long-term I believe it will continue to be a very dominant global player. The Middle East can now be less reliant on the US, which will allow them to look more closely where their supply markets are, and see how they can build better connections with countries like China and Japan.
Note: Lloyd’s Register and variants of it are trading names of Lloyd’s Register Group Limited, its subsidiaries and affiliates.