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with Alasair Cowie, CEO, TSMarine

14.07.2008 / Energyboardroom

What was the vision behind the creation of TSMarine, and how did you get involved in this dynamic new company?

TSMarine was set up by me and two others Ivar Spurkeland and Kenny Macleod after many years of having known each other and worked together in different projects. Based on our experience specialized in the subsea and financing industries, we decided to create a company that would respond to growing needs in the field of subsea decommissioning and rigless intervention solutions to the marketplace, through the use of mono-hull vessels, on a much lower-cost facility when compared to drilling rigs.

The vision from the start has been to engage in these specific subsea activities, not to become an EPIC type company or drilling contractor ourselves. The idea was to open up new opportunities in subsea decommissioning and rigless intervention, going beyond the traditional thinking in the subsea market.

I joined as Managing Director in 2005, and engaged in a step by step development process of the company through undertaking small opportunities in the UK subsea well decommissioning area where we quickly got contracts with oil companies like ConocoPhilips, Nexen and Talisman, through partnerships with other service providers. Thereafter, TSMarine continued to grow by providing the specialized subsea services, delivering continued progress and building up our capabilities to where we are today.

In less than 5 years TSMarine has experienced phenomenal growth and is already consolidated as one of the leading global companies in the subsea niche markets of rigless well intervention and abandonment. What has been the key to this initial success?
The main aspects of our success have been timing and commitment to our visions, values and goals as a company. After several false starts over the last 20 years, the subsea well intervention business has finally started to take off. For many years the industry has documented that the production yield of a subsea well was around 35% versus 55% for platform-based wells. The operators of these subsea wells have been looking to the cost effective solution to close the gap between a subsea and platform based well, traditionally they have always had the drilling rig solution to undertake the well intervention or well decommissioning on the subsea well but as rates have increased and availability tightened on drilling rigs the need to consider and contract a specific rigless intervention capability is being seen to add real value to the operator; a more costs effective operating platform and release the drilling rig to drill.

In this booming niche market, TSMarine is positioning itself as one of the major players on a global scale. Our contract with Woodside puts us alongside the only other two contractors with similar capabilities, Island Offshore / FMC and Well-Ops (Helix), which are working with StatoilHydro and Shell respectively.

What are the cornerstones of TSMarine’s value-adding offer to operators?

TSMarine offers clients a wealth of accumulated experience from our people, most of who have a high degree of experience and backgrounds in subsea construction and well services. Our capabilities allow us to provide much more than just the well servicing aspect. We are interested in adding value to the customer, and we have a very clear strategy to secure the value to our customers and TSMarine’s business. The more benefit you offer on subsea production recovery; the more important you are towards the operator.

Within this perspective, TSMarine is focusing its business on the rigless intervention side, while complementing our portfolio of services with subsea decommissioning and indeed installation capabilities. Operators are now really starting to establish long-term subsea field support contracts which include a high level of well intervention, IRM, component installation and indeed decommissioning services. They are only three operators doing subsea well intervention for the moment, but there is no doubt that they are going to be joined by a large number of the other major oil companies over the next 5 years.

In the future it is important for TSMarine to be in the position to go directly to an operator and offer services throughout the entire life of a subsea field. This includes everything from supporting drilling, the installation of subsea production systems, maintaining the well through production life, and carrying out the decommissioning in the end. As some of the major subsea contractors move on with the majors to massive projects in areas like West Africa and Brazil, a huge gap opens up which companies like TSMarine are in a prime position to fill. We are crossing into a different segment of the subsea world, offering a broad range of solutions to operators. It is a new dimension in the subsea industry which TSMarine is a leading participant.

What would you highlight as TSMarine’s main milestone in its short but already eventful existence?

TSMarine’s signature project to date would be our contract with Woodside for rigless intervention offshore Australia. This has been a major milestone for us, as we have always looked towards building our core competences and capabilities not just for the UK, but for the global arena. Another key achievement for TSMarine has been the ability to internationalize the business in a very short period of time, and build on this for the future.

Which markets do you consider offer the most potential for TSMarine to grow overseas?

TSMarine has been focusing its attention on two key regions. The first, of which the UK business is a part of, is an area comprising both Europe and West Africa together. The second focus region for us is Asia-Pacific, including Australia, where we are already active and see great potential. Though there are certainly other opportunities around the world, the development of activity in these regions will drive TSMarine’s business over the coming years.

Further down the line, I would say that areas like Brazil and Gulf of Mexico could be new sources of business for TSMarine. There are potentially huge opportunities, but with a whole other set of challenges as well.

How important are TSMarine’s international sales currently compared to domestic activity and to what extent is global growth a strategic priority for the coming years?

Currently about 70% of total revenues come from overseas. The North Sea has been particularly quiet in 2008 in comparison the 2006 and 2007 the market should pick up again in 2009. With regard to the two regions in which we have divided our operations, the objective is to maintain a 50-50 situation over the coming years.

We see many big offshore projects coming up in West Africa, we also have Southeast Asia and Australia really booming now with a number of major projects being considered. In the end it’s about being where the work is, and TSMarine is prepared to support our key markets and remain flexible enough to move resources in order to deliver.

How important is it for TSMarine to own the vessels that you operate with?

Our business is based around the vessel, serving as an operating platform offshore. The vessel and all the supporting equipment to perform the operation in the subsea area is seen as one package, the vessel as a basic ship is only part of the equation as its what we can do subsea that creates value. We are not ship owners rather the contrary, we are a service company yet in early 2007 we decided to build two new ships, as we saw it as the only way to ensure that we get the right type of vessel profile for future opportunities. We were able to raise over Euro 200 million in debt facilities to finance the construction of these vessels in Spain through ABN-AMRO, now part of the Royal Bank of Scotland.

Later on, in early 2008, TSMarine received an injection of new equity worth £53 million pounds from ABN-AMRO merchant banking and 3i. This entailed a restructuring of our shareholder structure, with the management team still retaining a large proportion of the shareholding.

These fresh new resources are helping finance TSMarine’s growth, bringing us closer to our ultimate goal of becoming the leading rigless intervention and decommissioning services company for subsea in the world. We term ourselves for 2010, when TSMarine will be fully invested with a fleet of five vessels capable of subsea rigless intervention, decommissioning and installation work in deepwater environments around the world.

How has TSMarine been performing in terms of turnover and profitability, and what are your expectations for the current year?

In 2005, our first year, we managed to have a turnover of £10 million and to break even in terms of profits, well beyond our initial expectations. In 2006, turnover more than doubled to £25 million with about £3.5 million in profits, and we carried that momentum into 2007 where we ended with £54 million in turnover and profits of £5 million. For 2008 we are expecting to reach revenue of £80 million, and surpass the £100 million mark in 2009. There is a continued challenge to maintain profitability levels especially considering market cost increase of labour and materials worldwide and the current economic climate out with the oil & gas sector.

How do you see the subsea decommissioning market developing in the UKCS now and in the near future?

Decommissioning in the North Sea has long been an ever-moving target. There a lot are changing plays and decommissioning liabilities going on, as a result of the majors selling many of their old assets to smaller independents. So the decommissioning work identified 5 years ago is not going to happen today, and it’s not necessarily easier now to forecast what the next 5 years will look like. Nonetheless, we are looking into subsea decommissioning contracts in the UKCS with a number of clients and are actually already doing work also for ConocoPhillips in Australia. The scope of our decommissioning capabilities is within subsea well and infrastructure facilities, not platform or topside.

How is TSMarine faring at a time of skill shortages affecting all parts of the value chain in the offshore industry?

We face the same problems as anyone else in this regard, but on the other hand we are quite successful in attracting and retaining talent. People like working in an organization that is not only new and growing, but also in which they can play a key role and their input counts. Unfortunately this element is sometimes lost among the bigger players in the industry.

One of the key challenges is to get a right mix of experience with youth within the staff. TSMarine has the experienced people, and is also bringing in many graduates and trainees which we are investing heavily in so that they can quickly become a part of the system. And it’s not just in engineering; functions like administration and finance are also essential to make a company work.

You are expanding your offices in Aberdeen to match your growing activity. Where can we expect to see TSMarine further expanding its presence?

Aberdeen is the corporate headquarters, and it is going to be a central point of technical and administrative support for global operations. However, we will probably expand through satellite offices in other regions of operations. As an international company, we will have to be present and create jobs locally where the business is happening.

What are you expecting for the oil and gas industry over the next 5 years?

Normally this is a cyclical business, but I can’t honestly see the price of a barrel dropping under $100 for the foreseeable future, energy is in demand. We may be entering a new phase in which energy becomes the number one priority and area of investment worldwide.

For the subsea sector in particular, the panorama looks even more favourable. Operators know that subsea field development are effective, efficient and cost effective. The subsea industry will continue to grow, and probably go through an inevitable phase of consolidation at some point. There is very little chance over the next 5 years of a downturn of the 1999 magnitude, at worst it would be a plateau in our sector as we see the impact of supply and demand, geo-political reference and global economy take possible effect in our sector.

Which are the main challenges you see for TSMarine on its path towards becoming number one in its field?

There is still a long road to go and challenges to be met. Difficulties will be overcome, such as the current credit crunch, which currently would make impossible the type of debt facilities we secured over the last couple of years. The financial markets may have got too carried away over the past three years with lending so the markets are going through a clean-up phase now and I expect for things to improve in 2009. Access to people resources will continue to effect the continued growth and success of our sector; securing a competent and engaged work force globally is of prime importance to TSMarine’s future.

How do you see Aberdeen evolving in the current context, between economic slowdown and record-high oil and gas prices and activity?

Aberdeen is definitely going through a boom time, quite sustained actually. The city is changing in a positive way, but there needs to be improvement in terms of infrastructure and facilities. There is a lot of human capital and innovation, but also a good deal of conservatism which unfortunately characterizes much of the oil and gas industry. Besides this industry, Aberdeen needs to focus on areas like renewables and on services for the energy sector. If Aberdeen doesn’t innovate and look far ahead into its future post North Sea oil and gas, it could eventually just become another provincial city in the UK.



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