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Interview

with Henning Arnøy, Managing Director, FORCE Technology Norway

09.06.2009 / Energyboardroom

There have been some ups and downs in the market recently, although mainly ups since 2003 here at FORCE Technology in Norway. To begin would you bring us up to speed on some of those main milestones and achievements?

FORCE Technology is a Danish company that is a trust, in this respect similar to SINTEF and DNV, which means we are very strong on Research & Development. Being a trust has some benefits, among the most important that all the money earned goes back into technology development; having no shareholders allows us to truly be on the technological leading edge. Two and a half years ago, FORCE Technology decided to triple turnover for the following three to five years, and since that time has doubled the figure, and fortunately the company has been able to remain profitable during this time of quite significant growth. Over this time, FORCE Technology has become more visible in the public – which is to say the broader oil and gas industry, because we hardly have any articles or services provided directly to the public.

There are two highlights to be particularly proud of. The first is when it comes to subsea, and I do mention that as a stronghold in Norway. The focus on subsea and the possibility to perform inspection on subsea equipment is rising strongly at FORCE Technology. The complexity of what lies on the seabed is increasing considerably, from simple manifolds with a BOP valve, to all of a sudden full process equipment where much more can go wrong, involving separations, etc., and if it’s not possible to inspect some of the equipment, then there can be costly surprises. FORCE Technology has been able to manoeuvre into a position of being basically #1 in the industry when it comes to Non-Destructive Testing (NDT), which is a niche competency not found in many companies. For example, if you want to test the strength of a chain, obviously one way to know its strength is to pull it until it breaks, but that’s destructive testing. However, if you want to know the wall thickness of a pipe, you don’t apply pressure until it breaks, that would be idiotic and very costly. Instead, you perform measurements on the wall thickness and calculate the strength. To measure the wall thickness, you use NDT methods which can be ultrasonic or via eddy current.

FORCE Technology is one of the leading companies in the world when it comes to NDT techniques, and when it comes to adapting that technology to subsea inspection, is among the best in the world. We also count as customers the leaders in their respective fields, such as FMC in subsea equipment, which represents yet another quality stamp on our services.

The second highlight is around technical integrity. To know the technical status of the equipment on the field, whether onshore or offshore – although we mainly work offshore – is highly important. In doing so, one way is to have some instrumentation indicating about the flow, how much water is in the flow, or statistics related to corrosion and so forth. Another way is via inspection with NDT methods. In old times, the fabricator required that a particular piece of equipment be inspected every year, regardless of circumstance. Looking back to the mid-1980s, there was the same focus on the pipes from showers in the living quarters as it was on those transporting hydrocarbons on separator #1. It’s absurd, because the instance of failure on the shower pipe is inconsequential compared to a leak in the pipeline from the first stage separator. Subsequently, a method of Risk-based Inspection (RBI) was developed, with the focus on the possibility to have a fault and the consequences thereof. In that field, FORCE Technology is also among the leaders, having developed that technology quite significantly during the last three to five years. We now perform these services for a number of companies, mainly in Norway, because without physical locations outside of Norway, the service element is harder to export compared to products.

Looking at FORCE Technology’s annual report figures from the whole group show that on that timescale from 2000, the environment and energy segment moved from 18 to 26% of total turnover, while and oil and gas moved from 12 to 30%. What’s the importance of these segments to the Norwegian operations?

It’s in the region of 80% – the operations here are totally dependent on the oil and gas industry. We’re an oil and gas company, not a producer but a service provider, and while FORCE Technology has some activity for other industries, it accounts for the minority.

Given this concentration, what has been the impact of volatile energy prices on your business?

Actually, not too much. It’s quite a philosophical question, because we have been wondering what will be the consequence: will there be a resulting sharp downturn in the number of jobs we are getting, reduced possibilities for requests for tender and what have you? Will it be a focus on the price and therefore a reduction of prices? So far, FORCE Technology has not seen a reduction in activity. Basically, the company has seen an increase in activity, even comparing 2009 to 2008. What we have seen however, and this is across the board, is a tremendous focus on costs. Cost is an issue, with overall volume not equally high.

Having partnerships with a wide array of companies is important, although here in Norway we have StatoilHydro as the country’s flagship. You mention FORCE Technology’s cooperation with companies like FMC; how fundamental is your relationship with StatoilHydro?

Speaking specifically to the relationship with StatoilHydro, unfortunately, we don’t have the same interaction and cooperation as we have, for instance, with BP. Why that is so depends on whom you ask. However, now there is a change of philosophy occurring in StatoilHydro which will benefit companies like FORCE Technology. We are not depending on them to maintain our activity level of today, but recognizing that StatoilHydro represents some 80% of production in Norway, obviously it’s important for us to have a close cooperation, or more correctly to be a preferred supplier within our fields for StatoilHydro – it’s perhaps overkill to necessitate an alliance with them for a company like ours.

Over the last decade in particular, many Norwegian service providers have used not only StatoilHydro but other majors to expand abroad. Why is FORCE Technology a preferred partner for such players?

It’s fairly simple. StatoilHydro is an extremely skilled company with a huge engineer base, which isn’t much different from the BPs or Shells, but in Norway at least there is a slightly different organization, where a foreign company tends to be organizationally slimmer, lacking a significant R&D department and the local knowledge which we can cater to some of the services FORCE Technology would otherwise provide. Now, we see that with an increased focus on, for instance, subsea inspection and planning of technical integrity, many companies have changed their philosophy towards external purchases or contracts, and all of a sudden a company like FORCE Technology is in a better position. Also, with inspection planning and inspection traditionally being a component of huge V&M contracts, we have not been in a position to take any of those contracts which belong to Aibel, Aker, and other such companies. Now, with inspection planning and NDT inspection being increasingly lifted out into separate contracts, all of a sudden, FORCE Technology is basically in the lead in Norway.

We’ve seen a number of companies which, although headquartered abroad, use Norway as an important base for subsea and offshore expertise and exports. For FORCE Technology, to what degree is it a priority to create such a centre of excellence in Norway?

FORCE Technology is basically a service-providing company. It’s easier to export products than services – you need to be closer to the clients when you have a service activity. Why should a company in Houston buy a service in Norway when they could buy it down the road in Houston? For that to happen, you’d need to have something quite unique. It is true that FORCE Technology uses Norway as a hub and base for exports in some of the services we provide, but when it comes to the buzzwords of integrity management, inspection planning, and subsea inspection, Norway is the hub within the centre of excellence in FORCE Technology. We are the vehicle for expansion in the world, sitting on the back of some of the major players like Subsea 7, Acergy, and Technip, and all of a sudden the world market opens up – not because we are present in the Gulf of Mexico or West Africa, but because those companies are. FORCE Technology benefits from having cooperation / frame agreeements with global companies like Acergy and Subsea 7 in exactly the same way as other companies have benefitted from cooperation with oil majors like StatoilHydro, BP, Exxon etc. as a “vehicle” to export.

How has the reception been thus far to FORCE Technology’s expansion agenda?

The reception has been extremely good, and FORCE Technology has already been performing work in the Gulf of Mexico on the Mexico side for BV Gas, a formerly Norwegian company. The feedback from this and other international projects is that the work performed is excellent and will result in repeat business, not only in the same foreign markets but with the companies’ businesses elsewhere.

There are certainly many directions to go and lots to do in achieving that revenue tripling you mentioned earlier. What are your biggest priorities right now as FORCE Technology’s Managing Director in Norway?

Today, priority number one is to ensure we have the growth with the profit, and making certain the company is, when the turmoil ends, stronger rather than weaker. Everyone recognizes the situation since the second half of 2008 up to now has been unique. I’ve been in the business for 25 years without ever seeing anything like it with respect to the change in focus, costs, and discussion about the financial crisis moving into the real economy and so forth. Any growth we’re going to have must be based on sound basic economics.

Over the next three to five years, what are your hopes and expectations for FORCE Technology?

I would expect to see a company which has, at minimum, reached or exceeded what we call the X3, the tripling of the company’s size that will happen for certain within that time. We will of course see an increase in the turnover from the NCS, but some 80% of the turnover increase shall come from outside the province, where there will be a significant increase on the export market, situated basically in three focus areas of West Africa, Brazil and the Gulf of Mexico. In the latter, FORCE has already made a huge delivery to an oil field for a major oil company which consist of a steel catinery riser in 2,500m water depth, with the riser bending and touching the seabed. Calculations show that within the lifetime of the field, it might possibly have some challanges, depending on the accuracy of the numerical model. FORCE Technology provided instrumentation to collect real data for the numerical calculation, to see if the current model is too conservative. The company will be stronger in the Gulf of Mexico, Brazil and West Africa in the time to come. FORCE Technology have made an acquisition in the north of Norway as to be positioned for the expected development in the Barents Sea and, hopefully, in the Russian market. With a continuation of the positive development following the acquisition of a company having a presence in Harstad and Hammerfest near StatoilHydro’s Snøhvit LNG field, from which we will also have some activity in Russia, we expect to further increase the activity in those regions.

Speaking of Russia, many of your counterparts have Shtokman in their sights as a dream project. What would be yours here at FORCE Technology?

Not necessarily the Shtokman, because everyone is vying for it. Looking to the onshore pipeline market in Russia, it is simply enormous, absolutely huge. According to information publicly known, quite a number of incidents have happened regarding leaks, internal and external corrosion and so forth, and it is clearly a potential for improvements. My dream position is that FORCE Technology shall be number one when it comes to pipeline integrity management in Russia. Obviously we also want to be part of projects like Shtokman, but everybody talks about it, while few people talk about the big onshore pipeline market that we want to be part of.

What is your final message to OGFJ readers from Houston and the Gulf of Mexico to West Africa or even Russia about FORCE Technology and why you are their preferred partner?

I know for a fact that FORCE Technology is a technology-driven company, we deliver on time without complaints; failure is not an issue. We provide value for our customers, and we know the technology is state of the art when it comes to inspection planning, subsea inspection, or structural design. Being a fairly small company numbering 1,200 employees means we turn around quickly and manoeuvre easily, to deliver this value in a timely manner in Norway and throughout the world.

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