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Interview

with Graham Horn, General Manager, FMC Technologies Netherlands

10.02.2010 / Energyboardroom

FMC technologies is a world leader in a number of important niche services towards the Oil and Gas industry and has a very well established position in the North Sea. Given the specificities of the Dutch market, how did you tailor your service portfolio to the local needs?

FMC’s activities in the Netherlands are quite different from those in other North Sea areas such as Aberdeen or Stavanger as we are primarily focused on the onshore and platform market and since there is no deep subsea demand. Having said that, we have been doing more and more work towards shallow-water subsea developments.

The growth of this new niche market is a result of limits set on the number of platforms that can be installed in the Dutch sector – limitations due to shipping activities and aviation control for example. Hence, there is a distinct push for operators to move towards shallow-water subsea solutions.

Furthermore the size of reservoirs has decreased, making it less economical to put a platform in place, whether manned or unmanned. So they went to pylon-type arrangements, and now operators are moving away from that and searching for even smaller and lowercost solutions.

Last but not least, subsea installations are a lot less expensive to remove when they reach the end of their useful life, an issue that operators haven’t had to worry about previously; now they are starting to be increasingly concerned over the decommissioning aspects.

For a long time, FMC has been a supplier of equipment to the Netherlands with a family-owned local partner called VOS Wellhead Services and other local players. Five years ago I was approached by Vos’ owner who wanted FMC to take over the activities since they were trying to focus their activities in other directions away from the Oil and Gas sector. FMC was interested since we had been working with VOS for more than eighteen year. A deal was concluded providing job security for the valuable staff in Schoonebeek.

Schoonebeek is a strategic location since it lies in the heart of the largest onshore oilfield in Northern Europe, which is something people forget about. It was developed straight after the Second World War and was effectively closed down in the early 1990s by NAM with the crash in the oil price. It produces very heavy oil, which is technically challenging since it requires the injection of a lot of steam in order to get the oil out. With the new technologies available and the increased oil prices NAM decided to redevelop this field. There are traditionally a lot of oilfield services in this area; many of these were becoming stagnant with the shut down of the field, but have been energized since the fields’ redevelopment.

What edge did the acquisition of a traditional family-owned local player give to such a large corporation as FMC?

FMC Technologies has tried to capture the family business approach with a large and well-recognized corporation behind it. We have remained loyal to our model to use local nationals, in the country of operation rather than parachute in a the ex-pay “help”; our business has doubled since we took over VOS and we now have built up our staff from 18 to 50 people working in Schoonebeek primarily in support for the offshore business. From there FMC carries out service and maintenance activities and we do a lot of hotshot supply for companies who need pieces and equipments in a hurry – onshore, offshore and now in shallow-water subsea.

Our recent success on the shallow water subsea was the Wintershall P9 project. We were the supplier in the project which we have been working on together for some time to find a technical solution that was adequate for them. We were able to provide the maximum level of support for their project from the Netherlands. The project manager was located in the Netherlands, we have investments and equipment to support the project there and we ran it from Schoonebeek. This project was a great success for which we are very proud. FMC Netherlands achieved what we set out to achieve, which is to be a Dutch family company with the support of the American corporation.

Which of the sectors that you’ve mentioned – decommissioning, maintenance, shallow fields and onshore fields – have been the most promising sectors and the main growth drivers of FMC in the Dutch market?

The Dutch market has some peculiarities, if you focus on one market alone you will fail. You have to be everything to everybody which fits our family business model – you come to us with a problem, we solve it.

For instance, a technical solution we developed in the Netherlands was the integral tubing rotator needed for the NAM Schoonebeek redevelopment project. . This was a piece of equipment which didn’t exist in the market, so we agreed to develop it in the Netherlands as part of the project, helping NAM meet their safety criteria . This was an interesting small project that demonstrates our willingness to work with our clients and to find a real solution for their concerns.

We are very happy to say that we have the supply and the service on the Schoonebeek redevelopment, which is a fairly large project with approximately 80 wellheads. Roughly half of those are steam injectors and the other half are producers. It is exciting for us because our facilities sit right in the middle, so we always laugh and joke that we can go and service the job on a bicycle, which is perfect for the Netherlands.

FMC’s solutions are suitable for a region with depleting fields and cost sensitive activities. However, with many majors leaving the country, what potential do you see in this market?

It’s safe to say that we will have good E&P activities in the Netherlands for at least another 20 years. I don’t believe it will go away any time soon. You also have to be aware that when we install a wellhead our expectation is that it will be there for another 20 years as well, we cannot abandon it; it will be supported by FMC throughout its lifetime. This is one of the reasons why local and small companies keep coming back to FMC, not only because we are able to give them local support with Dutch-speaking people and are the only wellhead company who can offer that, but also because they trust us to be here in 20 years and we need to be there because they’ll do work covers and interventions in these wells and will need our support throughout all these processes, right down to the decommissioning of the wells. FMC has an ongoing responsibility in that sense.

Many of OGFJ interviewees in the Netherlands highlighted that the potential of decommissioning in the short and medium term was quite limited since companies tend to postpone it in order to avoid the costs involved. Taking that into account, how relevant is this market for FMC?

The decommissioning is not our direct business; we only support the activities by providing technical advice on the appropriated action around the wellhead. FMC also supports them with service people offshore during the process. However, it is a growing business in the North Sea and it is going to grow; there is no doubt. Everybody is trying to find alternative use for platforms, in order to avoid decommissioning, such as CO2 injection and offshore Gas Storage, but one day it will have to come and in many cases it will be soon.

Another area that is not big at the moment but that holds a good potential for the future is gas storage, in which FMC actively participates in the Netherlands and also in Germany. There are a number of gas storage projects taking place in Germany. However, the gas storage market is seeing a peak in gas storage activity now and I think we will see it for the next 3 to 4 years as we build up strategic reserves for Europe. Once Europe has got the strategic reserves, they won’t need any new gas storage projects – there’s only a need for so much capacity. Once you’ve cleaned a caven it will work for 30 to 40 years. So there is some activity but it’s marginal and not promising in the long run.

When OGFJ interviewed Mr. Johan Pfeiffer from FMC Norway he said that one of the main particularities that FMC faced in the country was the market’s concentration around one major player – Statoilhydro – FMC’s main client. What is the situation in the Dutch market – more fragmented but where NAM still concentrates 54% of the national assets?

The Dutch market is a very diversified indeed; NAM owns 54% of the assets but they also developed a lot of those assets a long time ago. Most of what they are doing now is exploiting these assets and maintaining production levels. They have a limited drilling program and a limited amount of activity. FMC does work with NAM, but we are not their main supplier. Our focus is really on the independents such as Total, Wintershall, Cirrus, GDF, PetroCanada.

Don’t forget, FMC is the only Dutch wellhead company there is; we are the only people who can supply the services on the doorstep, you don’t have to wait from someone to come from Aberdeen. We can supply people who speak Dutch and understand the local needs. The truth is that the Dutch Oil and Gas industry is small, everybody knows everybody, thus the fact that we make the effort to reinvest in Holland is quite respected by the local players.

Looking towards the future, what are your main expectations and ambitions for the Dutch market, not only for FMC but also for the Oil and Gas sector as a whole?

The overall market will probably stay flat. The Dutch market is where we work from, and in terms of business FMC is trying to leverage our resources from the Netherlands into neighboring countries, including the UK. The southern sector of the UK is a lot closer to Holland than it is to Aberdeen, but the southern UK assets which are gas-related tend to work somehow differently from Dutch standards. Thus, if you draw an imaginary divide across the North Sea, on one side they are working with Dutch standards and on the other with British North Sea standards.

There are different opinions about the way things are done on each side. The Dutch piece, because it is more mature, has evolved to better cost-effectiveness and we are trying to exploit some of that and take it into the UK sector. Mobilizing equipment and people out of Den Helder to support the UK is possible and effective.

Holland is a good place from which to support the southern sector activities. I like the loyalty that we get from the Dutch employees and the experience that they bring. My expectations for FMC’s activities in the country are not limited by the activity in Holland, but by the expertise and commitment that we have built locally and are now capable of sharing with other markets.

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