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Interview

with Henrik Bach & Lars Ørsted, Vice Presidents, West Baltic and North Atlantic, Det Norske Veritas

10.05.2013 / Energyboardroom

Henrik Bach: I am regional manager of DNV West Baltic and North Atlantic. I hold a Master of Science from the Danish Technical University on structures and have been in DNV’s maritime business for many years.

DNV is organized in geographic regions in maritime and oil & gas. This region is covering both maritime and oil & gas activities and includes Denmark, Sweden, Poland, the Czech Republic, Faroe Islands, Iceland and Greenland. The latter is the biggest in terms of area and definitely not the least exciting part of our future operations.

In Poland we have mainly traditional maritime and back office activities, but we also recently started with oil & gas activities with Lotos and others. The activity related to shalegas is promising in Poland. In Sweden our focus is mainly on maritime, whereas in Denmark our focus is both on maritime and oil & gas.

DNV has a main unit for Wind Turbine certification located in Copenhagen. The unit employs about 45 people, dealing with type certification of the turbines and certification of offshore projects.

With the latest applicant, DNV Denmark employs 18 different nationalities on a total of 220 employees.

Lars Ørsted: I am in charge of DNV’s Oil & Gas activities offshore but also onshore in Denmark and Greenland, offshore and onshore. DNV’s oil & gas unit is based out of Esbjerg – the oil & gas capital of Denmark.

Today DNV Oil & Gas employs 90 employees in Denmark, of whom 25 located in Copenhagen. Last year we recruited app. 30% (66 to 87) engineers working with offshore structures mainly, but some pipeline and risk engineers are located in Copenhagen (the 25).

What role has DNV played in the development of Denmark’s shipping and offshore HSE standards?

Henrik Bach: In shipping we are operating to international standards, and we support international standards rather than local ones. For many years we have been cooperating intensively with the Danish Maritime Authority (DMA) to discuss the way ahead and how to bring across our interests to the International Maritime Organization (IMO), the UN organization setting the international shipping conventions.

It is the governments that are represented in IMO – the classification societies are also there but we do not have a vote, so we need friends that support high quality and safety standards. That is why we work together with both the DMA and the Norwegian Maritime Directorate (NMD), and successfully so in many of the developments in IMO.

We have had very good cooperation on the new environmental regulations, which are on the top of people’s minds at the moment. At the same time we have to make sure that we do not forget about quality and safety.

And how is your cooperation with the Danish Energy Agency?

Lars Ørsted: We also work with international regulation and standards. Our role is to verify compliance with a set of standards defined by the operator. The operator is responsible for selecting the standards to follow according to Danish legislation.

The independent verification service is by far the most in demand today and is generally what we provide to our customers. We have to be recognized by the Danish Energy Agency (DEA) to conduct independent verification. We have formal recognition based on our record, history and experience by which this recognition is issued.

The legislation also says that the operator is responsible for performing the independent verification, and they can use classification societies that are recognized by the authorities. That is where DNV comes in, via the operators. Our main cooperation is directly with them, and they handle the formal line of communication with the authorities.

How do you see Danish standards compare on international level?

Lars Orsted: The safety standards are good in Denmark, and the records on major accidents show that.

That criticism might relate to the fact that in 2006 new offshore legislation was put in place in Denmark, and the industry still seeks guidance in how to apply the standards. Before that we had a guideline on how to comply with offshore standards, and the industry is waiting for a new set to be published.

The operators on the Danish shelf are basically using the same international standards as elsewhere in the North Sea and in most other offshore countries around the world. DNV is verifying the compliance. In the North Sea European standards apply, whereas outside Europe, American (ASME/API) standards are often applied in the oil & gas industry. API standards have actually also been used and are still used in Denmark today, some are replaced by EU standards, some are implemented into EU standards.

One of the most exciting developments in the Danish North Sea is Dong E&P’s challenging Hejre HPHT field. What kind of challenge does Hejre represent and what is its significance generating HSE standards for the Danish oil & gas industry?

Lars Ørsted: On the technology-side it is a driver towards more challenging field development on HPHT, which is likely to be applicable to some of the future fields as the industry might move out to harsher and more difficult reservoirs to enter. The Hejre-field is the first of its kind in Denmark.

There are new standards to be applied when moving into HPHT and more exotic materials. We also provide technology qualification that might apply to some of these challenging conditions, to simply qualify equipment for these service conditions.

Henrik Bach: These are large, exciting projects for DNV. Basically, as long as you use the same standards and the same level of safety, the risks on the installations would not be any different. happening We do not experience signs of a more relaxed attitude from the industry at all!

What is the key project which made the Danish authorities and Danish companies look up and take notice of DNV?

Lars Ørsted: We have been involved in many great projects on the Danish Continental Shelf. It started with our involvement in the gas projects in the mid-1980s, which involved expansion of pipeline infrastructure to shore.

In the mid-1990s, DNV was also involved in the expansion of Maersk Oil’s Tyra-installations. And of course exciting projects come up each time when a new operator comes into Denmark. Hess and Statoil in the late 1990s, and later, after Statoil sold off the Siri platform to Dong, we welcomed Dong E&P as operator. And as mentioned the Hejre development, being one of the first HPHT projects is a great and challenging project.

What has driven the almost major growth of the DNV Oil & Gas business in 2012?

Never before have we seen all three operators – Maersk Oil, Hess, and Dong E&P – be so active at the same time. All three of them have new building projects going on, all have extensive modification projects ongoing on the existing installations to adapt to changing environmental and reservoir conditions, ageing of the installations and technical development.

Also outside Denmark do we see a high activity level in Oil & Gas exploration and production and our services are requested also from Denmark. The activities are extensive and we are a partner providing independent verification for the industry.

With such exciting developments in the oil & gas industry and a shipping industry that is going through a rough time, how is the balance between oil & gas and maritime shifting in the DNV Denmark portfolio?

Henrik Bach: I do not know whether we have been lucky or clever, or a combination of both, but we have a very high degree of involvement in the oil & gas industry. This involves everything on the oil & gas side – if it is permanently on the bottom of the sea, it is an oil & gas platform; if it is floating from time to time, it is mobile offshore units; and if it is floating all the time, it is a ship. No matter the shape or form, DNV is involved.

These days the global shipping markets are suffering and many owners are fighting for their future on the big areas like tank, bulk and container. When saying tank, bulk and container, you count about 85 percent of the ships in the world on volume.

Then we have segments such as offshore supply, chasers, seismic vessels, jack-ups, semi-subs, drill ships and so on. We have a big involvement and a big market share there. This is extremely positive to our business at the moment, because of the lack of newbuildings in the other segments.

For DNV in Europe the beauty is that there is a tendency to a higher degree of both shipbuilding and also delivery and sub-supplies from the European industry. We used to see everything disappear to Asia, but now some of it is coming back.

Many of the drill ships, FPSOs, and jack-ups are built in Singapore, China, and South Korea, but a lot of the equipment is European. That is different compared to e.g. bulk carriers, where everything is produced in Asia.

What is the relative importance of Denmark within the wider DNV group?

Henrik Bach: There are two things that make Denmark special for DNV. The Danish operations almost represent DNV’s global operations in a nutshell.

DNV Denmark unites all the business areas: KEMA, Maritime and Oil & Gas, and we have Management System Certification. In some shipping areas we have a particularly strong presence, such as the Copenhagen cluster.

Most of the customers that we handle from Copenhagen are trading internationally. The ships are built in Asia and trades all over the world and only seldom in Denmark. You may say that we never see the ships unless off course on a photograph. We do see some increasing trade through the Danish straits to Russia, but it is rather limited.

On the oil & gas side, and especially on what we call the independent verification part, we are second only after Norway in the DNV groupThat makes Denmark a very important competence base for DNV.We have to run a very efficient operation here in Denmark, because the Danish offshore industry is very efficient and demanding. It needs to be, because of the resources and the quantities that can be utilized are modest compared to the investments needed. We have good customers that help us improving our services. The fact that our market share is almost 100 percent indicates that we are supporting our customers well.

Lars Ørsted: One of the reasons behind that remarkable success is that we do independent verification of what we call in-service: independent verification of the operation phase.

Danish legislation states that independent verification shall be documented by a certificate, issued by the classification society. That certificate has a validation period, and within that period we have certain requirements for involvement on what is going on inside an installation for our certificate to be valid. That is quite a unique way to do things in Denmark.

Greenland is one of the exciting stories to tell with drilling campaigns ongoing among others by Cairn. Could you outline the scope of your operations there?

Lars Ørsted: We have had an office in Greenland for thirty years. In recent years indeed DNV Denmark and DNV as a whole has a very strong focus on Greenland and the Arctic. DNV is a strong driver behind the development of standards in Arctic operations. We have attended several conferences in Greenland in dialogue with the authorities as well as some of the operators.

Henrik Bach: Oil exploration in Greenland will eventually increase. Our role is to verify that the safety level of the operation is at the same level as more conventional operations.. Some people would say, even safer.

There are a lot of additional risks that have to be taken into account to make Arctic operation as safe as in other places. There are a lot of issues to address, and it is not as easy and on top of that very expensive.

There are also essential lessons to take away from the Macondo incident. We will soon see how this will be implemented in the EU regime.

How is the discussion between DNV as a standard provider, the government which represents the population, and then the financial investors to determine what is a reasonable degree of risk?

Henrik Bach: We have a very strong dialogue with the authorities in Greenland. They are the ones setting the standards. If Class Societies set standards without the backing of the authorities, it will only be a guidance, not mandatory requirements.

All oil companies will try very hard to avoid another Macondo in Arctic waters and will be very careful. But standards are needed to keep a level playing field and to ensure the standards of possible new operators.,

How will you measure success in coming three to five years?

Henrik Bach: First of all, DNV will continue to keep the quality and safety standards of the Danish maritime and oil & gas industries at a high level. That is and will always be our number one priority.

We furthermore strive to keep our customers happy, and we will ensure that we have the right people to continue to add value to the customers.

We aim to be more than a certificate on the wall and a lot of disturbance. DNV wants to contribute to the actual operation or project in a positive way within our frames. Being able to contribute basically means being competent; if we say ‘no’ we must be able to explain why and suggest different ways to do things.

We actively engage and consult our customers on discussing what they see as the key developments going forward.

Lars Ørsted: In oil & gas we will maintain our position as the absolute leader in the Danish market. We have been successful so far, and we work hard to keep it that way.

With 90 very experienced and highly skilled people to support the oil & gas industry and take on big projects as they come we have a very strong position.

For DNV Denmark it is about contributing to the development of standards in the future and doing things in the most efficient way without losing the star of quality and safety. We will add value for our customers to support them achieving their business objectives.

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