Paul van Riel – Chairman & CEO, Fugro – Netherlands
The global CEO of Fugro highlights the company’s strategy to maintain its position as the world’s leading independent geotechnical and survey data and service provider, and its strengthening of the core geotechnical and survey business lines both in terms of service offering and geographic coverage.
You took on the role of CEO back in 2012 after the sale of the geoscience division at Fugro. How did you approach the situation going forward?
What we saw is that Fugro grew into geoscience as a third leg, which followed from a strategy review in the late 1990s. Questions then arose about what to do on the seismic fleet side since we had a very small seismic acquisition capability. We then decided to invest significantly into geoscience. We can arguably say that we were the first movers in this area once the business started coming back in 2004-2005. We were the first to get very active in the market, and we were able to grow rapidly and successfully. Our target at that time was to become one of the four major players, which we became. Our customers were worldwide and world class; however, we began to see that the opportunities for differentiation were difficult to achieve and were going to require serous investment in the long run. At the same time, we saw all these other competitors entering the market as well, so we decided, given the fact that we had achieved the number four position in the field, that the investments over time to move into a market leadership position would be too large to maintain. As such, we started up the consolidation round and divested from our geoscience side.
What changes have you implemented in the company’s vision since the divestment?
The divestment of the geoscience division allowed us to move at least part of the business, which was extremely capital intensive, to less capital intensive. This all took place as the downturn started, and we began reviewing our position in the seabed part of the business and subsea part of the business—areas which are capital intensive and work with very large projects. We can still do this at Fugro, but we are honestly not particularly attuned to doing it anymore. Ultimately, the direction over the last two years has been a return to our core of geotechnical surveys. In the conventional sense, geotech is looking into the ground—the shape of the soil —but what we are going to focus more on in the future is the inspection process of the infrastructure on the seabed. We have a big business already doing inspections—annual inspections, pipelines and well head, for example — but the amount of seabed furniture is increasing, and we see this as a growth area for the company. Also in terms of technology and methodologies applied, it leans very closely to what we do with survey anyways.
Although we are undertaking a return to our roots, we are continuing with our geographical growth and technology growth ambitions. Within our geotech focus, we are still undertaking acquisitions and Fugro is very good at stringing together smaller acquisitions. We really know how to do this well and we have a particular methodology when we approach these types of acquisitions—we have a checklist, as we call it, and you really must meet all the criteria on the checklist before we make an acquisition. We have been very rigorous about this, which I think helps us maintain a coherence throughout our work.
As the company stands today, what are your ambitions still, and how is Fugro particularly suited to this new era of big data?
In the areas that we operate we want to be the market leader. Over the long run we see a very intense digitalization of the business. Remote inspection will have a huge role to play in the future. The fact that in survey we are the biggest offshore and onshore survey conductors in the world means that traditionally, we have always been at the forefront of data collection. With modern day technology, it is more a question of what we can do with the data that we are collecting.
Once the prices go back up, how do you think this will position the company?
If we continue to do what we are currently doing, maintain our focus in our restructuring, we will be able to survive this downturn. What we’ve decided here at Fugro is that we will not cut out our R&D unit, and we will continue to protect all our efforts in innovation. We are very careful to maintain our expertise, and when the market goes back up we will use this core of knowledge.
What new technologies that you have released into the market recently are you most proud of?
We have recently released a standardized geotechnical laboratory data analysis package. Though it doesn’t sound like much, it is actually quite an achievement. We also recently released an upgrade to our satellite positioning, and Fugro provides the most accurate GPS positioning system in the world for offshore use. We are also working on introducing subsea machine vision technology for automated fast pipeline and subsea structure inspection, which will be on the market quite soon.
The Netherlands is traditionally our headquarters, so we are putting a lot of effort towards professionalizing the organization, which means improved controls and quality measures, for example. We run all of these efforts from the Netherlands and all of our operational expertise comes from here. Technically speaking, we have our geotechnical R&D unit in the Netherlands as well. Fugro is truly a multinational company with one or two locations of expertise in the Netherlands and the rest spread out around the world. In the oil and gas scene, the Netherlands is a bit slow at the moment; however, wind farm development is incredibly important for us.
What is the strategic importance of being a publicly listed company, and what’s the rationale for remaining an independent company?
At the time, the IPO of Fugro was to raise money. As such, the stock exchange was really used what it was designed for—as a mechanism to raise money. We have to be careful about the meaning of independent. We are an independent company in the sense that we are a listed company on the stock exchange, but this is not necessarily the goal. We want and need to be an independent service provider. Unfortunately, both words are independent but the latter of the two meanings is our real goal. Sometimes it’s a bit confusing for people. We are not striving to be an independent company, but we do want to function as an independent service provider because our strategy completely depends having access to every possible client in the market, whether they are oil companies, government bodies or contractors in the business. If you are not an independent service provider and part of a larger group, you immediately have conflicts of interest. We want and need to avoid this.
From a leadership position, how do you balance your vision for the organization with new shareholders?
Well, we would like those shareholders to completely subscribe to our strategy. If they don’t, it potentially generates a very uneasy situation. As long as the shareholders recognize and support our strategy, it’s fine. Being an independent service provider is core to Fugro, and if we were no longer independent, we would lose approximately 10% of our market because people would simply not accept as us anymore. It is key in how we create value for our shareholders and that is were our obligation lies.
How would you explain Fugro’s resilience through the years, and what has been your strategy to maintain Fugro’s status of world’s leading independent geotechnical and survey date service provider?
Ultimately, our strategy is performance based. If we perform as a company, our share price will be at such a level that maintaining independence is possible. You can only get strong financial performance if you are a market leader and your clients see you produce good work consistently.