with Geir Lunde, Managing Director, Concedo ASA
Before founding Concedo four years ago, you were at Fortum for a long stretch, and in between Geysir petroleum and Altinex. What really excited you about the Concedo idea when you first started?
Part of the ambition when founding Concedo was to bring together colleagues I had worked with previously and had good relationships with, who had strong experience of the NCS and exploration. Creating a fantastic work environment was especially important, and being able to define the strategy and goals for an organization was very exciting. Most of the super majors are quite lazy in terms of exploration, and the authorities help with organizing data so it could be obtained very cheaply and released very quickly, providing a big help for companies like Concedo.
In addition to this excitement, securing Olav Fjell as Chairman as the Board added an extra dimension. Concedo raised starting capital of around 115 million NOK very quickly, completed in one day in London and two meetings in Oslo. We were the beneficiaries of good timing, at the outset just some people and an idea, and for people to invest in that there needs to be something to show and people to believe in you. We are very fortunate that this worked out for Concedo.
Following that, Concedo had to be accepted by the authorities, in order to be considered in concession rounds. We also had to be accepted by the companies we wanted to work with, really good operators with access to drilling capacity. We have had success in every important element in the start up phase, and making a commercial discovery in the first well dug, even if it not particularly large, was also very important.
Concedo’s mission is “create value for society and investors through commitment to quality, knowledge and creativity”. What happens here in the office on a daily basis to achieve those aims?
You have seen our offices, which are open plan and friendly. One visitor recently remarked that it’s a strange environment, because people sit very quietly, and then suddenly they get together and there’s a lot of discussion, and then they go back to their desks and are completely quiet again. We have a bell in the office we ring when something exciting happens. It doesn’t need to be a new discovery; it could just be an observation on some seismic data we have made. That’s part of a normal day, and then we have meetings, and it’s traditional that at every opportunity, whether looking at data or a concession round, to have everybody around the table. People contribute with questions, and that leads to a very democratic total evaluation. I tend to save my opinion until last, because I know as a leader you tend to influence others. I try to hold back, but sometimes I’m so enthusiastic that I can’t! If everybody feels more or less equal, that’s the best environment for creativity. I think a lot of laughter is important as well.
Besides creativity, observation is a key skill. Some of the people here are very clever and observant. Perhaps it’s because they’ve worked in the industry for so long that they have observed a lot, to the point where it now comes to them intuitively.
The next step is logical reasoning, and turning crazy ideas into workable ones, which can often be quite tough. This is very helpful, and something that is lost in a more hierarchical organization, where people don’t stick their necks out and risk disapproval. That attitude is completely gone here, and we say exactly what we mean about ideas.
Judging by the way the process occurs in the office, would you say that you are now at your optimum size, or is there room for expansion?
There’s room for expansion, but Concedo will always expand according to what we have in the portfolio. The company will not expand to show how big and important it is, unlike other companies moving in that direction. Time after time we come to a decision, and find that the sensible decision fits exactly with our company strategy. One such decision was to be partner, not operator, which allows us to have a large amount of flexibility, and to keep the organization focused on exploration and not on operations. Companies that expand become slower moving, and keeping everyone up to speed and involved takes a lot more time. Now at Concedo, we’re all more informed: we hear what’s going on, have a meeting, and it’s done very quickly. We are at the point now where we feel at our optimum size. With more work, there could be another optimum size, but we think it’s sensible to stay below 20. When I was Exploration and Business Development Manager in Neste (now Fortum), 40 was the target not to move above. This number was found to be advantageous with regards to communications: people knew what was going on and were not getting segregated into smaller groups, and thus not talking and knowing all that was going on. For our business, Concedo is in very good shape now.
It’s interesting you mention the fact that you are mainly going to be focused on exploration rather than operation. Some of your counterparts have emphasized that, contrary to popular wisdom, perhaps not all of the 70 E&Ps in Norway should be pushing to become operators. What’s your perspective?
A lot of those that have already qualified as operators should just forget it! We need some good operators, and the key for exploration is having a lot of rig capacity available. Maybe 2-3 rigs, so there is some flexibility, and experience working with a rig contractor. It’s not optimum for an operator to work one well one year and another the next, and Concedo prefers operators planning to operate many wells. StatoilHydro was chosen as the most efficient driller last year, and when they have so many rigs and qualified people, it’s hardly surprising. The rest of the operators have to compete with that.
Your long-term goals are quite different from many other companies operating in Norway. Your medium term aims are to make 2-3 commercial discoveries within the next 6-7 years. What is the bigger picture? You mentioned that you might expand to 20, but are there any other plans?
Concedo’s strategy is to be one of Norway’s best exploration companies. We hope to mature discoveries and sell them out before development. This is a machine that could run forever without significant changes. Our investors talk about the beauty of our plan: quite often, companies start up doing what they’re good at, but by growing in size and ambition, they become mediocre. It’s always tempting when there’s money to be made, but Concedo will stick to its strategy.
Do you feel as though government is encouraging you to pursue this path? You’ve mentioned the fact that the governmental stance has really helped you, in terms of the reimbursement scheme, and the access to subsurface data. Do you think they’re pushing the smaller companies in the same direction that Concedo is going?
They are supportive, and it’s not without reason because it’s connected to the big challenge as authorities see it, of discovering new resources. Government also faces the second challenge of getting more out of existing fields, but that long-term work for the major operators of the NCS, namely companies like StatoilHydro and ConocoPhillips. If they target those two then they have done 90% of the work. In terms of what else there is to be done, I look at what’s critical. Is it money? Not really. A sufficient amount of financial strength is just necessary, but not sufficient, for success. This ability to discover new resources is really the only competitive factor, and that’s where Concedo has its strengths, and where the authorities have a need. They really don’t need energy companies in Norway, because we can easily sell the products to Europe. Rather, the need comes from the energy companies who have to get into Norway. What’s needed in Norway at this point is good exploration.
This could change if many discoveries are developed, because at that point we will need good project companies like StatoilHydro, Shell, and ConocoPhillips. But before there is the situation of new discoveries just sitting there waiting to be developed, it’s not critical at all. Norway needs good exploration companies operating at this point in time. If they don’t exist, there’s nothing for the operational companies, and nothing for the state. Concedo’s role at this point is critical.
We see you’re participating in the GeoCap Project. Could you tell us a little about that?
It’s run by an independent R & D company, and I used to work with the programme developer in NorskHydro, who developed the mapping system at the company for many years. His work was the foundation for Petrel, now owned by Schlumberger, which was developed in Norway. The Oslo area is a centre of excellence for developing survey and mapping tools. Maybe at some point this company will sell out to one of the majors, but at the moment, they are turning a profit developing new technology, and Concedo is one of the companies using this technology and giving feedback from the user side. We are very happy with this cooperation. Petrel used to listen to user feedback at the start to develop. Now the situation is different, and Concedo prefers to work with these smaller, more innovative companies. One of our employees has been very closely connected to the programme, and he’s in an excellent position to give feedback.
You’ve got some exciting projects coming up. On Friday, you begin drilling at Gygrid prospect on PL348. What are your expectations for the prospect, and what do you hope to find?
I’m certain of a discovery. I’m certain of finding some gas – this is something we can see from the seismic scans. The uncertainty is whether there is also oil below the gas, or oil and gas in some shallower reserves that we are also going to penetrate.
StatoilHydro is the operator, and it will be quite an advanced exploration well. First they will drill vertically, then to an almost horizontal 70°, drilling through many potential targets on the way down to the final target, where we are certain of a discovery. StatoilHydro is the best company on the NCS for drilling this type of well. It’s fairly shallow well, and therefore not the most costly, and Concedo has a 5% stake.
The big plan, if the volumes are satisfactory, is to tie the prospect into Njord. Both oil and gas can be tied in, since Njord started as an oil producer, and has now started producing gas. By 2012-2013, there will be room in the facility for additional gas. The timing of this is good. It’s also gas without CO2 so far, which is conveniently compatible with the transport system requirements.
When was the last time that you rang the bell, and when do you expect to ring it again?
It was yesterday – we had a meeting here with two other companies connected to the next concession round, which went very well, both technically and with the people, so after the meeting we rang the bell. Of course, we could ring the bell when we start the drilling on Friday, but it’s more important to ring when the drilling’s done. So that will be at the end of May!
What is your final message to the readers of Oil and Gas Financial Journal, with regards to your exploration expertise and hopes for the future?
We still have the same opinion as we did when starting Concedo: that Norway is an excellent place for making new major discoveries, and we are sure to be a part of some of them.