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Interview

with Jim Milne, Chairman and Managing Director, Balmoral Group

22.08.2008 / Energyboardroom

Balmoral Group made a comeback to the offshore industry in 2006 after an absence of several years. What was the vision behind this return?

Balmoral’s track record in the offshore industry goes back more than 25 years. However, the last downturn in the industry seriously affected our business; we had invested in a large capacity manufacturing plant which made a lot of money when busy, but was unsustainable during the tough times. Eventually, I agreed to set up a joint venture with a main competitor. But, despite bringing the two dominant players in our market together, the companies and the cultures were very different and the joint venture did not work out.

I remained the largest private shareholder throughout the joint venture and when we decided to bring the JV to a close it was fully understood that I may start up again in the future.
And this is exactly what happened in 2006 when we, as a team at Balmoral, decided it was time to start afresh in the offshore sector.
We moved quickly to design, build, install and commission our state-of-the-art plant which includes thermoplastic syntactic, aliphatic amine cold cure and anhydride hot cure capabilities as well as elastomer processing and macrosphere manufacturing facilities. Our fully equipped hydrostatic test centre is capable of carrying out tests to simulated depths of almost 7000msw.

How has this ‘rebirth’ played out for Balmoral Offshore Engineering after two years back in business?

Initially we assumed that we would have to start with small jobs and gradually work our way up again. But very early on we were surprised and humbled by the sizeable contracts awarded, showing the very high opinion the industry had of the company and its people. Quite unexpectedly, we secured deepwater contracts for multi-billion dollar offshore projects in Brazil, India, the Gulf of Mexico and the China Sea.

Balmoral Offshore Engineering is doing very well and we keep ourselves extremely busy. We have built a ‘hungry beast’ which has considerable production capacity. However, the challenges are greater each time and we will not become complacent. The company is often working in uncharted territory on projects that operate in depths exceeding 3000msw. We can be the last link on jobs that are worth many billions of dollars, so it is a big responsibility. For some in the industry this is downright frightening, but at Balmoral we have people with the experience and confidence to face the challenges.

What is the key to responding with the right products and solutions for such demanding projects?

Balmoral is by no means new to big projects. In 2000 we received the then largest-ever contract in our field, worth some $55 million, for the Girassol development offshore Angola. It was an extremely challenging technical undertaking, dealing with the deepest water levels at the time and also the hottest oil. It turned out to be very expensive for Balmoral as we invested approximately $20 million in materials and process R&D. It was tough and ended up costing us a lot but the important thing is that we developed cutting-edge technology for the industry and gained a lot of valuable experience.

Continuing with our tradition of thinking big, Balmoral is now developing the world’s largest bend restrictor which is set to break the existing record also set by us. Its weight comes in at a whopping 1350 kilos per pair. While many people in the industry are frankly scared by such massive undertakings, these are the types of projects that excite me and my team. It can certainly be nerve-racking to be going somewhere nobody else has gone before, but it is also extremely rewarding. It is amazing and encouraging to see how the Balmoral team, at all levels, performs on such challenging demands.

It is often said that Balmoral will not hesitate to go places where others fear. Those who say this are right, because it is not really money that excites me. My personal drivers are technologically led; I’m at my happiest when involved with innovative and revolutionary materials, processes and products.

How significant is the UK market for Balmoral Offshore Engineering today?

The reality is that Balmoral Offshore Engineering, like many of the other companies based in Aberdeen working in deepwater, has a very small part of its business in the UKCS. There are not many projects of this type in the North Sea, so we are actually working primarily on projects spread around the globe. Nonetheless, Aberdeen remains our base and it is from here that we do everything from R&D and product design to project management for those far off places.

Prior to the joint venture we had a direct presence in hot-spots such as Houston, Norway and Rio de Janeiro. Today’s Balmoral Offshore Engineering is also an international player and our people travel around the world but all R&D, marketing and manufacturing activities are concentrated in Aberdeen.

In your view, what gives Balmoral its main competitive edge in the oil and gas industry?

Our strongest point is definitely the quality of the products and services that we offer our clients. We see ourselves as more than just a supplier; we are partners with a technology-led approach. We have developed a strong reputation because our solutions are tried, tested and trusted in the marketplace.

There is so much at stake in the projects we are involved in that you have to offer much more than a good price to be competitive. It is about being reliable and providing peace of mind to the client. What is ultimately most important is not how we perceive ourselves, but how the client sees us. We get very positive feedback from our clients and the industry in general regarding Balmoral’s name and reputation. It is a global brand that is well recognized and valued for the quality of its products, people and service. We are very proud of this, but also realize that we cannot be complacent. Balmoral will continue to push the limits, because we work with passion and belief in what we do.

As someone who has experienced first-hand the different cycles of the oil and gas industry, what is your view on the current sustained boom in both price and E&P activity?

I have lived through many of the industry’s ups and downs but I honestly believe those days are gone. Now there is a clear picture emerging, showing that the world is using more oil than it can produce. The only significant reserves for the future are to be found in deep and ultra deep waters.

Oil companies have little choice but to make the major investments necessary to tap into these resources. Enormous opportunities exist for companies such as Balmoral that specialise in helping the industry develop those difficult areas effectively.

How is Balmoral Offshore Engineering faring at a time of skill shortages throughout the oil and gas industry?

That is a great challenge for everyone, including Balmoral, but we are managing it. Balmoral has a unique corporate culture, so it is a real team effort. The doors are always open, and people constantly communicate and get involved with what is going on. It is a company that remains privately owned, so people actually do make the difference. That said, Balmoral is not a company for the faint-hearted. But for those who identify and find a fit with our distinctive spirit there are high chances they will stay for a long time.

Do you believe that today’s generation of entrepreneurs in Aberdeen have the same spirit and motivation as the likes of Sir Ian Wood, Richard Marsh and yourself?

There are a lot of young up-and-coming guys in Aberdeen’s oil and gas community but, unfortunately, there doesn’t seem to be many characters like there were in my generation. Life is short so, in the face of adversity, my approach is to crack a joke and have a good laugh. People seem so serious these days and I have no time for corporate politics.

There was also more passion and self-belief in the past, but times are different now, apparently because we are not talking about multi-million but multi-billion dollar contracts.
There are many small companies, with some characters leading them, but before you even get to know them they end up being snatched up by the big players.

What is your ambition for Balmoral Offshore Engineering five years down the road?

My only goal is to become better and better in what we do, providing the industry with what it needs. We strive to stay ahead of the pack in terms of product and material development and to become the industry’s partner of choice. This can only be achieved by earning trust and a reputation for knowing your stuff and delivering. And it’s not just about saying it, you have to demonstrate continually that you can deliver; otherwise customers will see right through you.

Ultimately, it’s not what we think of ourselves, but what the customer thinks that counts.

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