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with Ian Donald, Vice President, DES Operations

01.08.2008 / Energyboardroom

As one of the founders for the company, what was the vision behind the creation of DES Operations?

Around 1999, the two other co-founders and I were looking at opportunities in the North Sea to extend the life of some of the subsea fields in the area. It became clear to us that access to production optimization and subsea processing was relatively difficult, so we focused on innovating and eventually came up with several patents for a ‘USB-type port’ which could be retrofitted to the underwater christmas tree.

The patent for our Multiple Application Reinjection System – MARS – was filed in 1999, and for a couple of years we pursued it to ensure that it would remain unchallenged. We then set up DES Operations as a company aimed at exploiting and commercializing the patents. This was mainly focused on the areas of production optimization and subsea processing, but we also saw our technology’s potential to contribute in certain aspects of well intervention.

The business was set up with the aim of lifting reserves for subsea wells to the same level that can be attained through platform wells. We found that the potential upside recovery that could be achieved through the application of MARS in subsea processing was, in certain cases, up to 20%. Needless to say, the economic gains of such an improvement on a field of, for example, 100 million barrels is enormous.

In addition, the ability given to companies through MARS to carry out well intervention without the need for a new drilling operation is a long term benefit throughout the life of any field. Indeed the key to MARS’ success is in its different possible applications and the flexibility that it offers companies.

How was the process from patent to market for DES Operations and its MARS technology?

Since 2001, DES Operations began work with various companies and the local authorities in order to produce the first MARS prototype. In particular, we received the backing of Subsea 7 and of the venture capital firm 3i, as well as the government. With their support, DES Operations was able to move from concept to production of hardware, giving us the opportunity to actually sell it to the oil companies.

To complete our initial prototype, we were able to apply it on a real tree, using Shell and BP equipment. Early adopters also included Total and Amerada Hess, but it was BP and Shell who were first to move forward with our technology. While BP decided to use MARS for multiphase pumping in the Gulf of Mexico, Shell focused it on well stimulation in the North Sea.

In which ways has DES Operations benefited from its acquisition by Cameron?

Indeed, one of the key moments for DES Operations came in 2007 when we became a part of Cameron Group. As a significant systems provider worldwide, Cameron has allowed us to truly globalize our offer to the industry. From a customer’s point of view, it was difficult to seriously consider an SME like DES Operations for major field developments around the world. Now we are able to support clients in all of their international markets, all while retaining a distinct identity within the Cameron Group. Their global footprint gives us the opportunity to move from the pilot projects phase to full scale implementation capability.

How successful do you consider DES Operations’ efforts to date to become a global player?

We believe that our current strategy is proving successful in positioning us for global distribution of our technology. It is relatively easy to cross borders when it comes to offering solutions for subsea fields. Already DES is supplying hardware to operations in the North Sea, West Africa, the Gulf of Mexico, and soon Brazil. Our solutions are making big progress in achieving the industry’s adoption on global level. Besides our early adopters BP and Shell, we are starting to work with other major oil companies such as Chevron and Total, particularly in the booming Angolan subsea market.

To what extent has this new dimension impacted DES Operations performance in terms of growth?

DES Operations has been doubling its size consistently over the last several years. Now as a part of Cameron Group, we are experiencing a significant increase in the scale of our bookings which should allow us to maintain that momentum. We just recently moved into new offices in Aberdeen, but once again we seem to be outgrowing ourselves.

How has the original team of people that developed the patent and created the company evolved with DES Operations?

DES has always been very much a team effort since the moment we put together the MARS patent. We worked together on everything from the design to the development of the market. Of the core team of three people involved with DES since the beginning – Tom Bryce, John Reid, and myself – John and I have remained involved throughout the process of taking it commercial and joining Cameron. Tom is not in the company full time, but he does some marketing work occasionally for us. Many of the other people involved since the early stages have grown into different roles within the company.

Recently, we have made an effort to strengthen our marketing team considerably, taking in people with backgrounds with operators and major contractors.

What are the main concrete advantages of DES Operations’ technology for oil companies with new or existing fields to develop?

There are two main advantages to our subsea solutions. The first, which is quite obvious but sometimes overlooked, is that we offer companies the ability to considerably increase the level of oil production in their fields. The second is the reliability of our proven equipment. We have already demonstrated the value of deploying the MARS platform with major operators in different contexts.

We feel that there is still great growth potential from the stock of several thousand installed wells throughout the world’s seabed. DES offers companies the opportunity to increase recoverable reserves by 5 to 20 percent, which is enormous.

On the other hand, the modularity and flexibility of MARS technology also creates many opportunities for greenfield applications. We offer a solution which allows life of field access to the reservoir, requiring relatively little in terms of CAPEX. The biggest risk in any greenfield development tends to be the reservoir risk, so the ability to plug in and react to changes truly adds value to a company. We are helping subsea wells finally move towards similar rates of recovery as platform wells.

The current context in the oil and gas industry is very different from the one in which DES was created back in 1999. How have the main changes such as the rise of new players and record-high oil prices affected your strategy?

In buoyant times, the greatest difficulty is always resource allocation, and that is also the case today for most companies in the industry. Additionally, national oil companies have grown in just a decade to become major players alongside the international oil companies, reversing a long trend and actually coming to control 70 to 80 percent of the world’s reserves.

So the market is changing, but in the end if you are able to increase the recoverable reserves from a reservoir, as DES offers, there will always be a big interest regardless of the final stakeholder. We are ideally placed to work both with the NOCs who are interested in long-term production gains, and with the IOCs which are facing limited access to reserves and thus a need to maximize existing field production.

What potential do you see particularly among the NOCs, and in which regions?

Together with Cameron, DES is developing a particular strategy for NOCs in three key regions: South America, West Africa and Asia. We have identified particular oil basins where we believe that our technology can help add significant reserves, and are currently defining the most adequate approach to allocate efforts and resources towards particular NOCs.

As an Aberdeen-based company but with a global reach, what does the UK represent today for DES Operations?

Companies tend to take their home market for granted, but we still see a lot of potential in the North Sea. We see a lot of near and long term opportunities for our business, both in the Norwegian and UK markets, including West of Shetlands. So far we have received a lot of support from the majors operating in the area, but we are also succeeding with the independents which are heavily investing in the UKCS. Based on our proven technology, DES should be able to further grow its business with the independents which are very flexible and dynamic companies to work with.

To what extent has the generalized skill shortage throughout the oil and gas industry affected DES Operations? What are you doing to overcome this challenge?

It is a challenging situation for everyone in the industry, and we are no exception. One way in which we are responding is by broadening our employee base from Aberdeen and Houston with the local talent in Angola, Brazil and the Far East. As we diversify our areas of operations, we are doing the same in terms of our workforce. Cameron is a big support in this regard, helping us access human resources and allocate them in areas where there is work to be done and not enough people.

DES also makes a big effort to bring in young engineers to the company. It is not easy, given the huge drain on resources affecting the oil and gas industry, but we still manage to attract very good people to the company. They are particularly excited to be a part of a company which is at the front line of the next generation of subsea systems.

How confident are you about DES Operations’ technological edge vis-à-vis possible competitors in your field?

On the brownfield side, our technology has a distinct advantage in that it offers a high degree of flexibility, unmatched by other systems. In terms of greenfield, DES is expanding its offer beyond christmas tree applications. We give the opportunity for a whole gateway to the well once the USB port is in place. We are actively pursuing development opportunities with Cameron, to work with both their standard trees and a broader range of tools to utilize the gateway.

What is the next major step for DES Operations and its patented MARS technology in the coming years?

Our objective towards the future is to apply the MARS technology throughout major fields, not only in terms of the USB port but also a fully deployed set of tools. In this way we can help companies attain 5 to 20 percent increase in recoverable reserves.

What is your final message to the readers of Oil & Gas Financial Journal – top management at the NOCs, IOCs and independents – about DES Operations?

Our technology is capable of adding recoverable reserves to your portfolio, and we are keen to explore any opportunities in that area.



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