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Interview

with Ian Nickerson, CEO, BIS Salamis

15.08.2008 / Energyboardroom

What was the main reason behind BIS’ acquisition of Salamis, and how does it fit into the Group today?

Bilfinger Berger Industrial Services (BIS) is a major German company specializing in industrial services, which has been expanding across Europe for the last several years. BIS acquired Salamis on the strategic basis of gaining a presence in the UK, as it had no previous business in the country.

By integrating Salamis’ UK offshore business BIS consolidated a pan-North Sea operation, which already included offshore business in Norway, Denmark and the Netherlands. This has uniquely positioned BIS within its range of services – access, coatings, insulation, inspection, etc. – as the only company to offer this comprehensive North Sea presence.

The second thing that BIS were looking for was a company that had an onshore business as well as an offshore one. Salamis have a growing presence in the UK onshore market, covering petrochemicals and power generation which is well positioned for considerable further growth.

On the back of the acquisition, BIS also gained the Salamis businesses in the US Gulf of Mexico and Eastern Canada. Those were not necessarily locations that BIS were looking into entering at that point, but through Salamis they got the opportunity to establish a presence in North America.

BIS has subsequently made further acquisitions in this market, leveraging and expanding on Salamis’ presence and track record.

What has the main benefit for the Salamis part of the business been following the acquisition?

Prior to joining BIS, Salamis had been a part of the Maersk Group for over 20 years. It is a fantastic global company, but as a contractor Salamis was always a little to the side of Maersk’s core businesses which are in oil, shipping and logistics.

As a part of BIS we are working within a major contractor, so we all speak the same language and share similar backgrounds. It is also very important for us that the company is interested in growing BIS as a whole.

At a corporate level we now think more in terms of BIS than Salamis, and this where we are tending to focus in terms of branding on a global scale.

How significant is oil and gas for BIS Salamis, and how does it see this sector within its broad portfolio of activities across different industries?

Oil and gas now represents an important sector for BIS, in terms of adding another leg to the wide portfolio of business it carries out. BIS was not a major player in offshore oil and gas before acquiring Salamis. The timing of the acquisition in July 2006 was significant as we currently in a period of high activity. The oil and gas business allows BIS to further diversify and balance its portfolio, while offering interesting opportunities for growth.

Over the years Salamis has earned an excellent reputation in the UK, continental Europe and in North America, and this leverage is being used by BIS to expand its operations in oil and gas.

To what extent is the company maintaining its traditional business model and strategy for growth now that it is a part of a much larger organization?

Over the years, Salamis continually diversified beyond its initial core painting activity.

Now, as a part of BIS, one of our key objectives remains to keep growing our portfolio of services to clients. We are doing this through horizontal integration of services, which has taken us to focus on new areas like Inspection over the last couple of years.

At the same time we are conscious of our areas of expertise and we do not compete with the major Engineering companies such as Wood Group, AMEC, and PSN, with whom Salamis has developed excellent working relationships. Our focus is on delivering in our areas of expertise and working alongside other specialists to deliver overall best value to our clients.

The feedback that we get from clients is that they appreciate the specialized package of services that we provide, and see it as unique. Salamis’ long track record of repeat business with all the major North Sea operators, shows that, without appearing complacent, we have got it right more often than we have got it wrong over the past 35 years..

What is your assessment of the business environment in the UKCS currently and your expectations for the coming years?

Right now the market is very buoyant in terms of volumes, though margins are still very tight due to the competitive environment. The high oil price has been the trigger, and as a consequence the oil companies’ decision to extend the life span of assets in the North Sea. Many of these assets were built in the early seventies with an expected life of 25 to 30 years, but are being revamped in order to capitalize on the high oil price. With the barrel of oil being forecast to remain over 100 dollars for the foreseeable future, it is an obvious strategy to keep assets working to extract as much as possible from the reservoirs.

This also requires a great deal of investment in terms of general maintenance, in order to keep the ageing infrastructure in good shape much longer than originally estimated. Assets that are already nearing the end of their estimated lifespan are being both upgraded and more rigorously inspected and maintained with the aim of remaining operational for another 10 or even 20 years. So there is an increasing demand for Salamis’s range of services.

How has this booming market translated in terms of growth for BIS Salamis?

BIS Salamis has experienced an average growth rate of about 15% annually since 2005, and we are expecting a similar performance for 2008. It is not phenomenally high, but it is a steady and healthy rate for us to be growing at. The growth stems from a mix of existing clients, either spending more or choosing us for extra services, and new clients we are picking up.

Many of the most active oil and gas companies in the UKCS now are smaller, independent players. What makes BIS Salamis a partner of choice for this group of companies?

I believe that one of our main strengths is that we are part of a large international group, which gives us full support and financial strength yet, at the same time allows us to be locally focused. Although the overall strategy is agreed with Munich, the UK business has its own Board of which I am CEO. This effectively allows us to run our own local business.

We understand very well the cost drivers of the new players in the North Sea, and are ready to customize our services according to their specific needs. We believe that they value the wide range of services and flexibility that we can offer.

How much has the generalized skill shortage facing the oil and gas industry affected BIS Salamis, and how are you overcoming this difficulty?

The single biggest challenge all of us in the industry are currently facing is related to having the necessary manpower and skilled labour. This goes from positions in senior management to the site workforce. This is a maturing industry, particularly in the UK, where many of us entered as young adults in the late sixties and early seventies. As an industry, we have not been clever enough in getting young people in. This has a lot to do with the cyclical nature of the industry, which is even more acute on the fabric maintenance side. When the oil price was very low, companies would close the tap on activities like painting before anything else.

As for the company, we are making big efforts in order to get new people into the industry. BIS Salamis has made a significant investment in setting up training centres in Aberdeen and Norwich. We are also doing a lot of recruitment outside of Aberdeen and among people coming from industries other than oil and gas. We are encouraging new people to join us, while at the same time transferring skills from other sectors. It is important to send a message that the oil and gas industry still has many decades to look forward to.

In addition, people see that BIS Salamis is not only about oil and gas, as we are ideally placed to support other sectors such as renewable energies. We are experts in getting equipment and people safely to difficult or remote environments, all while offering our wide range of maintenance services. BIS Salamis is also very active onshore in the power sector. So the opportunities include both offshore and onshore, in the broader energy industry.

What is the main thing that motivates you about working in the oil and gas industry?

By nature I am a positive and optimistic person. I came to Aberdeen from Edinburgh in 1976, had a first look at the oil industry and ended up staying all these years. It is a very exciting sector, full of ups and downs which can be difficult, but always dynamic and offering a unique atmosphere. I also enjoy that there always seems to be something even bigger to go after.

Which are your main ambitions for BIS Salamis in the coming years?

Our goal is to be the number one service provider in our field, though we could actually say that we are already in that position in the North Sea.

With a clear focus on the Inspection, Repair and Maintenance side, we have developed long-term relationship with our clients. Our key driver is to continually communicate with and understand our client’s needs, and to offer innovative solutions to help overcome their challenges.

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