Paul Pedersen, CEO, Jasper Offshore, Singapore
“Singapore has a myriad of assets that makes this state an excellent place to run and build a business from and Singapore is a place where it is relatively easy to attract highly skilled expats. Nonetheless, the lack of ability to attract a stream of local and competent people to service the offshore industry is fast becoming its Achilles heel. The country must do more to abate this acute issue. If Singapore wants to instill longevity into the value creation from the offshore products the shipyards are competently delivering, then it must find solutions to this talent attraction issue,” states Paul Pedersen, CEO of Jasper Offshore, Singapore.
Arriving in Singapore in January 2013, what was the business strategy you drew up aimed at strengthening Jasper Offshore’s structure and market presence?
The first thing was to make sure that the operations worked. If a drilling company does not have a strong and safe operating team, progress ceases to exist. We reshaped the operating team and through some targeted hiring, we have added exceptional personnel to the company. Furthermore, ensuring the adherence to optimal safety standards and procedures has been the focal point of Jasper Offshore. Though we fixed operations quickly, the next step has been to verify that the amendments have worked and this involves building a track record.
To date, Jasper Explorer has successfully drilled two wells in the Republic of Congo, which attests to the fact we are back on the right path. We have been fortunate to work with a very competent operator in CNOOC, and our Singapore background has assisted us in working cooperatively with them. Indeed, we have successfully completed the program CNOOC set out to do. Thus, we have a start to a track record that we can work with and that our marketing effort can leverage. The next challenge is finding a replacement contract.
To introduce any type of strategy to the board, it was critical that we had an operation that not only functioned, but also operated in a safe and productive manner with high uptime compared to peers. We are there now with the steps we have put in place many taken from project management, an area I had headed extensively in both the rig and FPSO arenas.
The global rig market has been widely lamented as overtly competitive and overcrowded. What is your assessment on the healthiness of this market?
Generally, the global rig market is very competitive and there is currently excess supply in many areas; nonetheless, there are niche areas that need special rigs. For instance: in some countries there is a mandatory demand for high local content and therefore a need for keeping the technology on a manageable level, which compliments the characteristics of an older rig. Jasper Explorer also fits within another very important niche, namely the mid-water rigs where you cannot use jack-ups and the 5th and 6th generation drill ships are too expensive to be employed. The work can easily be done by a less advanced rig than the 6th generation new builds, and at an attractive commercial rate. Indeed, the broad desire for low day rates is one core area now working well for us but in general is restraining the evolution of rig technology in the oil and gas industry.
Ultimately, however, oil and gas companies have to focus on their bottom line and if they can save considerable amounts of cost on rig rates then of course they will try. Consequently, it is not always the most shining piece of equipment or cutting edge rig that is awarded the job, so there still is room for a well performing older rig like Jasper Explorer in the right markets.
What factors give Jasper Explorer a durable competitive advantage?
The drilling decision in an oil company is generally focused on the performance of the one rig for a specific job at hand. Thus, the global contractors will not always benefit from their large rig fleets. A small oil company with no global presence may be more inclined to choose a small contractor in order to get the A-team working on their project. With a contractor such as Jasper Offshore, our contract partner is guaranteed to be serviced by our whole key team; whereas a global contractor may not be able to offer such a bespoke service. Importantly, the global rig companies have greater marketing power, so they can flex their financial muscle to push up day rates. It is relevant to stress that if the geology, water depth and pressures in the well does not demand it, there is really no reason to select a highly sophisticated rig. Clearly, global contractors are not the ideal partners for smaller oil companies pursuing single exploratory wells. Such entities really need their costs to be streamlined and will look for partners who can offer a cost-effective bespoke solution, and which has top class management system to back the operations. In this capacity, Jasper Explorer can match the customer’s needs and add value, because we work safely, efficiently and at a considerably reduced day rate compared to the larger rigs.
In the niche Jasper Explorer covers, there is the need for dynamic positioning units as there are not that many mid-water rigs with such capabilities. This means that the rig is attractive in the deeper water, where it is not possible to moor. The Jasper Explorer will likewise work cost effectively in areas where it may be possible to moor semi-submersibles. This is because of the advantage of the DP ship such as its stability, largest storage capacity, flexibility in moving between shorter wells, and even working in areas such as Mexico where pipelines are causing trouble for mooring systems. Such advantages create a technical and commercial space where the Jasper Explorer can both work and flourish.
Singapore has a myriad of assets that makes this state an excellent place to run and build a business from and Singapore is a place where it is relatively easy to attract highly skilled expats. Nonetheless, the lack of ability to attract a stream of local and competent people to service the offshore industry is fast becoming its Achilles heel. The country must do more to abate this acute issue. If Singapore wants to instill longevity into the value creation from the offshore products the shipyards are competently delivering, then it must find solutions to this talent attraction issue.
Very simplified, Singapore is currently only getting the low value additions of the drilling rigs that they are producing. The yards are essentially welders and assemblers, where their core competency is project management. Indeed, the yards have to import most of the sophisticated equipment and only assemble the parts. Being a bit rude, one could claim that the value add for Singapore comes from shipyard welders and that is the lowest ranking of the value creation from the construction of a drilling rig.
Singapore’s rig building industry is facing colossal competition from neighboring markets such as China and Korea. These markets are now taking as many orders as Singapore and ultimately, Singapore has to develop much deeper engagement in this industry. In my perspective, the focus must be on education and subsequent engagement in the rig operations. Singapore has the right educational system to establish a regional drilling training facility and use that to create an eco-system for engineering of the expensive part of the drilling equipment and operation of drilling units.
Singapore can easily build a simulator based training center, which will act as the nucleus for the drilling activities spilling into the rig building and equipment engineering industry. It needs to be attached to one of Singapore’s principle polytechnics, which can foster a pipeline of young and aspiring engineering talent. A simulator focused training center will appeal to the students as the type of curriculum is innovative and aligns with computer gaming. It will help to reshape the image of offshore engineering, which has connotations of being mundane, rather than the cutting edge it is. The establishment of the training center will manifest rig crews. Rig crews earn very attractive salaries and will eventually bring back capital to Singapore without the country having to expand local onshore production capacity, a considerable benefit in Singapore’s land-constrained situation. Effectively, this is outsourcing talented and well-educated Singaporeans into the drilling industry.
As discussed, Singapore’s rig producing industry is facing more competition from China. The attraction of utilizing Singapore’s rig building companies would be dramatically enhanced if a training center, next door to the shipyards, churns out regularly a highly capable, trained and modern offshore rig workforce. Furthermore, training centers develop an environment of interest. When placed within a university or polytechnic, Singapore will start to see master’s students with drilling understanding. They will, of course, start to look at developing the equipment for the new rigs. In this next wave of improvements, automation will be key; thus, another core competency of Singapore’s manufacturing arsenal can be put to action in the value generation around rig building. In addition, a very large percentage of rig crews operating in Southeast Asia are from the region, but many of them do not get the necessary training in the region. If they come to Singapore and train at the center, they can receive a certified training that has Singapore’s stamp of quality attached to it. This acts as a further revenue stream for the center.
Underlying China’s manufacturing competitive advantage is vast amounts of state capital. Equally, one of Singapore’s core competitive disadvantages is the fact Singaporeans are reluctant to travel, particularly if there is no second career opportunity locally after experiencing an offshore life. Consequently, similar to what PETRONAS has done in Malaysia, Singapore needs to engender a Singaporean “state” company that can create such comfort for local’s second career. It would have to be energy services focused, as Singapore has no hydrocarbon reserves. Through this state-owned energy service vehicle, Singapore can foster an enduring link between its people and the oil service industry. The sovereign fund Temasek already engaged in the industry outside Singapore would be well placed to absorb a role of main investor. If any one country could pull this off, it would be Singapore being a forward thinking, constantly evolving nation that is always looking to be one step ahead of the game and prepared to invest public funds to get there.
After a long and distinguished career at Maersk Group, you are now spearheading Jasper Investments and Rubicon Oil & Gas. As your career has become increasingly commercial can you elaborate on key points in its evolution?
I finished University in 1980 and joined Maersk Group in 1981. Through a bottom-up approach, I was eager to learn about the technical elements of the industry, so I initially started working on barges in the swamps of Louisiana. The experience helped me tremendously and came to forge the backbone of my career.
In 1984 Maersk foresaw the FPSO business as a possible extension of the tanker industry, and I was asked to build a concept around this proposition. Ultimately assessing such an opportunity gave me a solid technical and operational perspective, in addition to steering me down a commercial path. I went on to do spearhead projects for Maersk Drilling and one of the projects was to participate in developing the company’s new big jack-ups, indeed the first one was built in Singapore. I subsequently went on to hold a number of management positions where I was responsible for the commercial and operational activities in parts of the global drilling fleet. Furthermore, in 1994 I had the opportunity to restart floating production in the tanker department. This brought me down the road of orchestrating large projects and seeing them grow into fruition. I have not looked back since.
Though my career trajectory has been increasingly commercial, having been grounded with a technical academic and practical background has helped facilitate my commercial career. The capability to simultaneously explain to customers technical nuances and find technical solutions, in addition to understanding commercial contracts and strategizing, has proven a complimentary and important mix.
I had a wonderful, exciting and diverse career at Maersk spanning 29 years. However, working for a smaller company such as Jasper Investments gives one a greater sense of totality without the support and decisions of the corporate service functions in the global companies. Moreover, one gets direct board responsibility something missed as head of business units in large companies.
If you could name one company that is a role model of Jasper Offshore, who would it be and why?
Jasper Offshore is a unique company because we are a one-rig drilling company. One advantage we hold is our entrepreneurial and decisive spirit. We are attracting some extremely competent people and well experienced drillers who would not adjust to the rigorous regime in big drilling companies; at Jasper Offshore our staff is given exposure and responsibility in the continuous improvement of the drilling process. We are setting our own benchmark. Our role model would be the Scandinavian management style of inclusion and delegation, with the Singaporean mentality of “can-do la”!
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