with Bjorn Inge Bakken, CEO, Scandpower AS
In 2009 Scandpower joined the ranks of the Lloyd’s Register Group. What did this merger bring to your position in the Norwegian market as well as your international presence?
Scandpower had around 250 people and was based out of four offices in Norway with a few other offices in Sweden, China and one in Houston. Since joining the Lloyd’s Register Group, Scandpower has taken on the mantel for Lloyd’s Register’s risk management business. It was a detailed process as we had to identify the existing capabilities globally and across all business areas of the Lloyd’s Register Group and decide which were compatible with risk and safety management. This capability was incorporated throughout Scandpower through a process of reverse integration. Scandpower therefore gained a lot more manpower and financial capability to expand its international presence thanks to the existing infrastructure, experience and resources of the Lloyd’s Register Group.
From having around 10 offices globally in 2009, today we have doubled the employee number to 500 professionals and have 32 offices in the Scandpower division of Lloyd’s Register. The company has four offices in the UK, six in Norway; we have expanded in Sweden and China; we have entered Japan, Korea, Malaysia, Australia; we also acquired a business in India and recently we took over ODS, the engineering dynamics business across Denmark, France and UAE. Scandpower is also planning to enter the Canadian market and Brazil. The expansion of our international presence has been extremely fast.
What was your strategy for managing the reverse integration process and to what extent did they retain their Lloyd’s Register culture?
The integration process occurred at different levels within the Group. Back in 2009, Scandpower operated as an international company Certainly the extent to which we have internationalized our operations since joining Lloyd’s Register has forced us to think differently and adapt as a company.
To take Korea as an example, Scandpower has been servicing the Korean market out of Norway since the early 1990s. In 2009 Scandpower took over a small team of four people based in Korea. When they joined Scandpower they became part of a group of 300-400 people offering similar services. The office has grown to 15 people and the office is no longer isolated.
Another aspect of our work is that we apply extensive cross-manning of projects across international geographical borders. The purpose of this is to optimize the utilization of resources and share the relevant experiences of different offices. Our recent Korea project involved people from Norway, China and several other offices and this has has been important for the development of the company and its subsidiaries.
Our clients are global players and Scandpower is now able to say to its clients that it is present in all parts of their value chain. We are have experience and knowledge in regulatory competence, cultural competence and through the expertise we bring from other international hubs.
When we established our China office in 2001 in Beijing, we helped our local teams to get started with the right support. Now there are around 30 people and one of the centers of excellence for the Scandpower Group is based in Beijing. If we receive a project on dynamic positioning, then we will bring our colleagues in from Beijing. This is testament to how we have been able to leverage our international subsidiaries for the good of the company on a global level. The company’s internationalization has also improved our ability to recruit truly talented people.
To what extent therefore has your R&D moved outside of Norway?
Looking at the development engine for the oil and gas business within our organisation, the biggest driver is still Norway. However ten years ago the Norwegian staff represented around 75 percent of our employees whereas today they represent around 30 percent. In addition, we have global centers of excellence such as Lloyd’s Register’s Global Technology Center in Singapore and in Southampton.
Lloyd’s Register is a charity and operates without shareholders, and profits are entirely reinvested in R&D within the company across its global centers of excellence. There is also the Lloyd’s Register Educational Trust fund, and the money from this fund is reinvested in research institutions globally through PhD and R&D programs at various levels. This initiative has, as an example, been funding the national university of Pusan in Korea, which is very advanced in the research of material technology and responses to accidental loads. One of the key areas of focus for our R&D is Arctic environments and we intend to use our funds for investment in this area.
Given the country’s strategic positioning in the Arctic circle, Norway is still our focus in technology development for Arctic environments. Our ability to work in the Barents Sea pushes our technology forward. However, even here the R&D for Arctic environments is shared across Russia, Alaska, Canada and Norway. These different research environments can be leveraged to benefit our work in Norway.
Deepwater drilling, reliability of equipment and blow out preventers has grown in importance following the Macondo incident. We are working extensively with the contractors and oil companies in this area on the reliability of their subsea equipment. This is another area where Norway has an important part to play.
In Brazil we have been working for a long time and up to now have never had a strong presence on the consultancy side. This is a new major strategic focus within the company.
Where do you see the key points of synergy with the rest of the Lloyd’s Register Group?
We have a key project with ModuSpec. Lloyd’s Register acquired this specialist drilling integrity company around seven years ago. The company has in-depth expertise in drilling equipment and Blow Out Preventer (BOP) control systems. They have inspected around 80 percent of the world’s market of offshore drilling rigs. Scandpower has strong knowledge of safety and reliability for drilling equipment and we have also been working for a long time on nuclear safety. Therefore we decided to seek out synergies between our businesses by approaching drilling safety from a few different directions: drilling expertise, safety and reliability modeling and nuclear safety modeling and software. We then approached the drilling industry, both operators and contractors, to understand the key problems they were facing.
In the drilling environment post-Macondo extra emphasis was placed on the reliability of BOPs. When it comes to safety this equipment is considered the ‘final frontier’ of safety – and they are certainly big pieces of equipment; in some cases 200 tonnes resting on the seabed. Occasionally in the running of a drilling operation there will be a failing of a small solenoid or some other small piece of equipment. Currently, regulatory authorities then say that you need to take up the whole BOP for inspection. However, the cost of pulling up and placing back down one BOP is upward of USD 10 million and there are often significant delays resulting in costly downtime.
Scandpower has developed software over the last 25 years, which we have used to monitor risks at nuclear facilities. We explained to the drilling contractors that we could model their BOPs and create similar software so that when they experience a small failure they can analyze the overall safety status of the BOP to assess what to do next. By working with our sister companies we have modeled a decision tool to analyze whether a small technical failure on a BOP should be left to drill, inspected or pulled up for repair. This software can save one third of pull up operations. This also improves overall safety because there is a better decision tree.
This was just an example. There are many more potential synergies that we will exploit in the coming years.
In devising these solutions, how easy is it to get scientists to think about the business end of safety regulation?
When we speak of safety we have in mind the safety of individuals, the environment and that of the assets or equipment, which are the providers of a company’s cash flow. In most cases the different aspects of safety go hand in hand with economizing on costs.
However in some cases they are not aligned and whilst safety can always be improved, at a point improvement reach a plateau and the key question to ask is where you can generate the maximum safety gains. Safety for people and the environment is always the top priority and the safest solution would be to drill nothing at all. Therefore there is sometimes a balance to be reached between creating a safe operational environment and a company’s commercial objectives. Our employees are experienced in understanding where we can create the biggest impact in improving the safety of operations so that it remains commercially attractive to operators.
Sometimes risk management can just be listing a number of potential risks in a book and doing little about it. To what extent are companies moving towards greater efforts to operate safely?
The entire industry is moving in a positive direction, although with some regions moving faster than others. In some places it can be a “paper-only exercise”, without any real improvements in the overall safety picture. Generally the biggest gaps occur between modern safety-oriented international companies and companies operating in countries with a low level of economic development and weak regulations. In these countries the only real motivation will be cash generation.
However, with an industry that is globalizing and with NOCs bringing in IOCs as partners such as major investors like Shell and Statoil there are positive moves towards greater safety. These international investors impose requirements for safety, because they need to protect their investments and their reputations for shareholders.
For Scandpower as a company what would you say drives your company: safety, business growth or technology?
The major motivation for Scandpower’s staff is the values of the company. Our slogan is life matters and this is a compelling motivation. Safety therefore is the driving motivation. However, these drivers are by no means mutually exclusive. Scandpower has ambitious business targets. Over a five-year perspective, we will double the business with more growth in Asia, China, South America and Canada. A significant portion of our growth will therefore be outside of Scandinavia.
One final point to mention is that Scandpower has been a separate brand within Lloyd’s Register for the past 4 years, but the time has finally come to unite under the same brand. We will become Lloyd’s Register consulting allowing us to enjoy the same level of respect that Lloyd’s Register currently commands in the market. This will further the development of our business.