Thomas Espeland – Australian Director, Advantec
Thomas Espeland explains how the current pricing environment has helped facilitate Advantec’s market entry and introduce their industry-leading Workover Control Systems (WOCS) into Australia. He also highlights the core principles of the company’s operating model and how their unique concept of equipment sharing has been very well received by the market in Australia, with its potential for long term cost saving in service and operation during the life time of oil fields.
What were the main rationales behind the decision to open an Advantec affiliate in Australia?
Considering that Advantec is only ten years old, the company had been mainly and progressively developed within a limited number of strategic and financial hubs, firstly in the North Sea area, then in Houston, Aberdeen, and Rio de Janeiro. We also opened a manufacturing facility in Lithuania. When evaluating the next step in the company’s internationalization strategy, we explored both opportunities in South East Asia and Australia before ultimately choosing to settle on establishing our activities in Perth, due to invitations to conduct multiple studies for some of the majors, and a general interest in the solutions Advantec’s technology can offer.
The Australian market is set to become bigger than the United States and than all European markets combined, if it follows its expected development curve. The potential we identify locally is extremely promising. But, a year and a half ago, it would have been particularly difficult to open our Australian affiliate when oil prices were tremendously high and operators and established service companies were making substantial profits, causing difficulties in shaking-up frame-agreements in order to ad Advantec to the mix.
Considering this context, penetrating such a market appeared as extremely tricky for a recently created company like Advantec. Nevertheless, as soon as prices started to plummet, it also opened up doors for us, as operators identified a need for change. They indeed estimated that they were almost solely carrying a major part of the financial burden, while many service providers were not able to meet operators’ demand to streamline operational costs. The largest service providers were probably in a tougher situation because they needed even more time than others to structurally adapt their activities to this new economic reality.
What has been the road map for the Australian affiliate’s development so far?
Advantec is a very lean organization, and our in-house technology is our best asset when it comes to greatly lowering our clients’ costs. With successful business experiences in major European hubs, we want to replicate in Australia the successful recipe we have been implementing in our other geographies over the last ten years. Since mid-2015, we have been invited by some local major players to conduct studies and evaluate how we could implement our cost-saving solutions, and we are now steadily moving to the implementation phase of these projects. In a certain manner, the current low prices have been beneficial for us, although on the other hand we are also affected by the postponement of many greenfield projects like everyone else.
When we opened the local affiliate in August 2015, we found many open doors. Although generally regarded as conservative, the industry is much more forthcoming when it comes to embracing innovation if it saves costs. Usually, when a new player enters a market with a new technology, it frequently entails a lot of scrutiny, and business partners are reluctant to embrace a new technology without having previously and comprehensively tested it. Even if our technology hadn’t been tested in Australia, our clients nevertheless acknowledge the value of our proven overseas successes and achievements. Furthermore, some of our clients in Perth have already cooperated with us in the North Sea region, giving us an added layer of credibility when penetrating the Australian market.
So far, the Australian team has only been composed of three people, with strong support from staff at Norway HQ. Our main responsibilities were to conduct prospective activities and prepare the administrative and supportive structure of the newly created entity. We have made important progress in this regard, and we are now finally ready to welcome in Australia our engineering teams to truly start our first operative projects.
How do you envision Advantec’s Australian affiliate growing in the upcoming years?
Looking at the future, we really want to favor a small-step development approach: we don’t want to become unnecessarily big, as being extremely lean and flexible will always be one of our key competitive advantages. So far, we are currently collaborating with several of the majors and some minor operators in town, but in the upcoming months, we will steadily target all operators present locally.
Furthermore, although GE Oil and Gas acquired Advantec at the end of November 2015, we still operate as a separate legal entity. Perhaps more importantly, we also have been able to preserve our specific corporate culture. In Australia, this acquisition didn’t have any impact on our development strategy, while it will more largely impact our European and American operations, where more synergies will be fostered between the two organizations, including introducing us to the African market.
What would you consider Advantec’s value proposition and how does it differ from what other players can offer in the market?
A strategic pillar of our business model is that we offer the opportunity to share equipment between various operators, and also between different service providers. We thus design sharable integrated systems that can fit into several companies’ schedules and timelines. To counter any potential equipment shortage and guarantee our customers’ efficiency at any moment, our clients can always rely on secondary system alternative in case a shared option, in busy periods, would not work out.
Looking at our control technology, we have multi-field workover control systems where we have ample experience with integrating third party x-mas trees control onto our platform and integrate this into a single operator interface. Thanks to this kind of multi-purpose platform, we can create innovative solutions to serve legacy subsea equipment across fields and supplied by various OEM’s. Often over the lifetime of a field, various generations of control equipment are employed and we seek to minimize the need for redundant equipment for each generation of gear by consolidating this into a single package wherever possible.
Another point worth mentioning is our experience in delivering SIL-approved (Safety Integrity Level) systems according to the IEC 61511 & IEC 61508 standards. This type of approval has been mandatory on the Norwegian sector for a number of years and seems to be the direction the industry is looking to internationally as well when attempting to find a common understanding for certifying safety and shutdown systems.
There are already multiple subsea interventions companies present locally, but, to my knowledge, none of them boasts this shared-multi-field-system approach that we have developed. In an industry branch gathering various operators in several fields and under arduous operating conditions, I humbly believe this expertise stands out as a clear competitive advantage. If operators are ready to share equipment, we are able to swiftly move from a field to another, by simply changing the control system configuration to match the subsea equipment, and to reduce the overall amount of equipment needed—benefitting all stakeholders. In the Australian context, logistic concerns will indeed mainly determine the final price of most of the projects, as many of them are extremely far away from existing infrastructures.
What are your ambitions for the upcoming five years?
Within a five-year horizon, Advantec Australia will indisputably be much larger affiliate than what it stands now, particularly thanks to a strong footprint in North Western Australia. We would like to focus our activities on control system interventions, as well as on storage and maintenance, in order to further offer more cost-effective solutions. Our business model is strong and particularly relevant in our current low price era, as there is great cost-savings potential in gathering and sharing equipment between operators. On a broader perspective, our plan isn’t to become a massive player in Western Australia, but we want to work with all operators to provide them with our unique expertise, and also alongside other OEM’s so we together can be able to provide the operators with the best possible solutions, in the most cost efficient manner.