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Interview

with Johan Pfeiffer, General Manager, FMC Technologies

15.06.2009 / Energyboardroom

Speaking to the general operating environment on the NCS, as the head of FMC Technologies here in Norway how do you assess the region in terms of attracting investment and operating activities?

There are two elements at play. One is the government activity in promotion and support of the area and second is the strength of the local operators and especially StatoilHydro. The Norwegian Government has always been, through SINTEF and other organizations, very active in trying to promote R&D, we now hope that this will continue and that they will encourage investments through access to new areas. Much more important than direct support from the state, especially for FMC Technologies, is the second element of support through StatoilHydro, especially when it comes to developing new technologies. You have to remember that the company is the giant on the NCS and is very keen to promote new technology.

Exactly, the giant controlling about 80% of NCS production, and representing a number of important contracts for FMC Technologies – how fundamental is FMC’s relationship with the company, not only in Norway but abroad?

StatoilHydro is and has been for many years our largest customer in the NCS. We hope that we can follow StatoilHydro as they invest overseas. We will actually supply equipment to their Peregrino field in Brazil, in addition to some work in the Gulf of Mexico. For the time being at least 95% of the business FMC Technologies does with StatoilHydro is on the NCS, with them as an operator, where the company simply dwarfs any other player.

For FMC Technologies, subsea is the core business, and for Norway, it could be said that subsea and offshore expertise is their core business as well. How have the developments begun here for FMC Technologies been exported to other parts of the international corporate infrastructure?

FMC Technologies is a global company, so we apply internationally, technology developed here. It’s important to note that oil companies are also global, and many are partners in the fields where our technology is being developed, so they’re often very well aware of the technology as it’s in progress. One example is the first all-electric subsea system, which we’re developing for StatoilHydro on the Tyrihans field, in which Total is also a partner. There was a lot of excitement around the Tordis separation project as the world’s first subsea commercial separator, and FMC Technologies had many foreign operators come to look at what the company did. Although perhaps not a direct result, both Sonangol and Total visited that project during its completion, and FMC Technologies was subsequently awarded the Pazflor contract in Angola, the world’s largest subsea development. That’s the type of technology transfer I’m talking about, and StatoilHydro’s competitive advantage is technology. That’s where they can sell themselves to foreign countries as an attractive partner, and why they are very driven by technology development.

Besides an impressive figure of over 350 installed subsea systems, what is the importance of Norway for FMC Technologies as a whole, and how has this importance evolved in recent years?

Norway represents approximately 20% of the revenue of the entire FMC Technologies global group. Norway’s portion has always been a very large part of the overall. It will eventually become, in terms of new project installation, a smaller part, because of growth in West Africa and the emergence of North Africa and Russia alongside other regions. So new project sales in the NCS may decline, but we expect strong growth in the field maintenance area over the coming years.

Some of your counterparts, despite managing local branches of international companies, also manage internationally from Norway. What are your responsibilities in this regard out of the Norway arm of FMC Technologies, and what are the most exciting projects outside Norwegian waters managed from the Norwegian office?

Africa, Russia, and Europe comprise what FMC Technologies calls the Eastern Region. Houston runs Brazil and Gulf of Mexico, Norway the rest except Asia Pacific which is managed out of Singapore. In terms of projects, Pazflor is certainly among the biggest, and although still in the early phases with very little currently delivered, total expectation are for 47 subsea trees and three subsea separators, amounting to an award exceeding $1bn, which for subsea is very large.

After securing the world’s largest subsea development, what would be your ideal project?

Looking geographically, there are many large opportunities. Eni’s Goliat project, for example, will be awarded any day, and is a very important strategic project for the North. There are some large projects in West Africa coming up, Total’s Clov project in Block 17 in Angola, Egina in Nigeria, and Shtokman, the latter being the big prize, where we will propose technology similar to Ormen Lange. There’s debate whether it can be done, but I think it can – it’s just going to be a very costly project for all parties.
What’s important in Norway is the shift for operators in the NCS, where prior to this year the focus was very much on developing new, giant fields. Now, the trend is very much toward minimizing capex by going back and tying back to existing fields, utilizing existing FPSOs and platform infrastructure. Where we may have seen postponement of new projects, they’ve been replaced for FMC Technologies by tie-ins to new existing projects, which results in that revenue-wise, we’re flat, but it’s just a different mix of business than we’ve had before.

Is this as sustainable on the NCS, once those tie-ins have been exhausted and perhaps the search for new fields has slowed down as well?

There’s a push from government and industry as well to get more out of the reservoirs. Strategically, that is one area where we clearly lead here in the NCS, in subsea intervention. Is it sustainable? You can not replace Pazflor with tie-in projects, because the revenues are different, but we are confident the new finds will result in the market coming back.

FMC Technologies is regularly ranked among Forbes’ most admired companies in America, being #1 in 2005, 2006, and 2008. What is the situation here in Norway?

This is an area the company is really trying to push, and the reason is to make it more attractive to young engineers. FMC Technologies has had a little bit of a brand name recognition issue, in that we were called Kongsberg Offshore Systems (KOS), and were part of Kongsberg, then known as FMC Kongsberg, and we still kept the Kongsberg. When the brand changed to FMC Technologies globally, many people who were familiar with Kongsberg didn’t know who we were, so we’re working very hard on re-establishing our brand name via different campaigns, and promoting the brand name of FMC Technologies as meaning a strong technology foundation and a stable, quality employer attractive for new employees.

In cultivating an attractive working environment, what is your personal management style and philosophy?

I’m a very open person. I believe in taking a strategic, forward-thinking, and international view on business. That’s the tone we have to have in our corporation. FMC Technologies has to be creative, international, forward-thinking, and close to the customer. The customer really makes us, because we work so closely to them in projects and in developing technology.
Speaking to the general operating environment on the NCS, as the head of FMC Technologies here in Norway how do you assess the region in terms of attracting investment and operating activities?

There are two elements at play. One is the government activity in promotion and support of the area and second is the strength of the local operators and especially StatoilHydro. The Norwegian Government has always been, through SINTEF and other organizations, very active in trying to promote R&D, we now hope that this will continue and that they will encourage investments through access to new areas. Much more important than direct support from the state, especially for FMC Technologies, is the second element of support through StatoilHydro, especially when it comes to developing new technologies. You have to remember that the company is the giant on the NCS and is very keen to promote new technology.

Exactly, the giant controlling about 80% of NCS production, and representing a number of important contracts for FMC Technologies – how fundamental is FMC’s relationship with the company, not only in Norway but abroad?

StatoilHydro is and has been for many years our largest customer in the NCS. We hope that we can follow StatoilHydro as they invest overseas. We will actually supply equipment to their Peregrino field in Brazil, in addition to some work in the Gulf of Mexico. For the time being at least 95% of the business FMC Technologies does with StatoilHydro is on the NCS, with them as an operator, where the company simply dwarfs any other player.

For FMC Technologies, subsea is the core business, and for Norway, it could be said that subsea and offshore expertise is their core business as well. How have the developments begun here for FMC Technologies been exported to other parts of the international corporate infrastructure?

FMC Technologies is a global company, so we apply internationally, technology developed here. It’s important to note that oil companies are also global, and many are partners in the fields where our technology is being developed, so they’re often very well aware of the technology as it’s in progress. One example is the first all-electric subsea system, which we’re developing for StatoilHydro on the Tyrihans field, in which Total is also a partner. There was a lot of excitement around the Tordis separation project as the world’s first subsea commercial separator, and FMC Technologies had many foreign operators come to look at what the company did. Although perhaps not a direct result, both Sonangol and Total visited that project during its completion, and FMC Technologies was subsequently awarded the Pazflor contract in Angola, the world’s largest subsea development. That’s the type of technology transfer I’m talking about, and StatoilHydro’s competitive advantage is technology. That’s where they can sell themselves to foreign countries as an attractive partner, and why they are very driven by technology development.

Besides an impressive figure of over 350 installed subsea systems, what is the importance of Norway for FMC Technologies as a whole, and how has this importance evolved in recent years?

Norway represents approximately 20% of the revenue of the entire FMC Technologies global group. Norway’s portion has always been a very large part of the overall. It will eventually become, in terms of new project installation, a smaller part, because of growth in West Africa and the emergence of North Africa and Russia alongside other regions. So new project sales in the NCS may decline, but we expect strong growth in the field maintenance area over the coming years.

Some of your counterparts, despite managing local branches of international companies, also manage internationally from Norway. What are your responsibilities in this regard out of the Norway arm of FMC Technologies, and what are the most exciting projects outside Norwegian waters managed from the Norwegian office?

Africa, Russia, and Europe comprise what FMC Technologies calls the Eastern Region. Houston runs Brazil and Gulf of Mexico, Norway the rest except Asia Pacific which is managed out of Singapore. In terms of projects, Pazflor is certainly among the biggest, and although still in the early phases with very little currently delivered, total expectation are for 47 subsea trees and three subsea separators, amounting to an award exceeding $1bn, which for subsea is very large.

After securing the world’s largest subsea development, what would be your ideal project?

Looking geographically, there are many large opportunities. Eni’s Goliat project, for example, will be awarded any day, and is a very important strategic project for the North. There are some large projects in West Africa coming up, Total’s Clov project in Block 17 in Angola, Egina in Nigeria, and Shtokman, the latter being the big prize, where we will propose technology similar to Ormen Lange. There’s debate whether it can be done, but I think it can – it’s just going to be a very costly project for all parties.
What’s important in Norway is the shift for operators in the NCS, where prior to this year the focus was very much on developing new, giant fields. Now, the trend is very much toward minimizing capex by going back and tying back to existing fields, utilizing existing FPSOs and platform infrastructure. Where we may have seen postponement of new projects, they’ve been replaced for FMC Technologies by tie-ins to new existing projects, which results in that revenue-wise, we’re flat, but it’s just a different mix of business than we’ve had before.

Is this as sustainable on the NCS, once those tie-ins have been exhausted and perhaps the search for new fields has slowed down as well?

There’s a push from government and industry as well to get more out of the reservoirs. Strategically, that is one area where we clearly lead here in the NCS, in subsea intervention. Is it sustainable? You can not replace Pazflor with tie-in projects, because the revenues are different, but we are confident the new finds will result in the market coming back.

FMC Technologies is regularly ranked among Forbes’ most admired companies in America, being #1 in 2005, 2006, and 2008. What is the situation here in Norway?

This is an area the company is really trying to push, and the reason is to make it more attractive to young engineers. FMC Technologies has had a little bit of a brand name recognition issue, in that we were called Kongsberg Offshore Systems (KOS), and were part of Kongsberg, then known as FMC Kongsberg, and we still kept the Kongsberg. When the brand changed to FMC Technologies globally, many people who were familiar with Kongsberg didn’t know who we were, so we’re working very hard on re-establishing our brand name via different campaigns, and promoting the brand name of FMC Technologies as meaning a strong technology foundation and a stable, quality employer attractive for new employees.

In cultivating an attractive working environment, what is your personal management style and philosophy?

I’m a very open person. I believe in taking a strategic, forward-thinking, and international view on business. That’s the tone we have to have in our corporation. FMC Technologies has to be creative, international, forward-thinking, and close to the customer. The customer really makes us, because we work so closely to them in projects and in developing technology.

What’s at the top of your priority list right now?

Today, it’s to understand what’s going to happen to the market in 2010. The train is rolling in 2009 – there’s no issue in the current year – we just need to have a clear vision of how to handle 2010.
We’re at an inclination point, and I’m not sure what will happen.

I’m not yet optimistic, because many projects have been postponed. Just recently StatoilHydro had plans to develop an area called Sleipner, which was partly cancelled. StatoilHydro and their partners decided not to develop for the time being. The concern is around just how many of those we are going to have. We will manage through a slow-down but many of our local subcontractors could be severely impacted.

A slowdown by StatoilHydro could however, give the chance for smaller operators in smaller fields. Looking at the big developments coming, Goliat is Eni, there are several Total and Shell projects, Lundin is very aggressive, etc., whereas before it was 99% StatoilHydro – things are changing. But StatoilHydro being such a locomotive, it’s going to be challenging if StatoilHydro doesn’t continue to develop larger finds.

You mention 2010 is still a big question mark, but looking a little longer term, what are your ambitions for FMC Technologies over the next three to five years?

Clearly, the company needs to strengthen its position in the intervention, processing, and compression business, which we call the Increased Oil Recovery business. Then, it’s further geographical expansion, with Russia a very important new market, and continued expansion in Africa as well. In Norway we hope that the government will fully open up new areas for exploration and development.

The technology aspect of the business is of course very important, but FMC Technologies is making a change. Whereas before we were mostly focused on technology, there is now a big push to focus on quality and reliability. That is the change in the subsea world for us, that quality and reliability will become as, if not more, important than technology. This is due to the fact that new developments are based around technologies already in use. There are some new twists, but fundamentally the technology has already been invented. Therefore, customer expectations are such that, because the technology has already been developed, if they use it again, it must work first time, on time, every time. FMC Technologies is really going through what we call a quality transformation to step above our competitors and be seen by industry as the undeniable best supplier of quality and reliability.

What is your final message to OGFJ readers?

There is clearly uncertainty in the market right now. However we believe strongly in the future of the subsea business. Our strategy is to work closely with our customers in an open and mutually beneficial manner. We develop strong relationships, alliances and partnerships with our customers, and they usually stick with us – the repeat business concept. You work through difficult times, but if the customer knows you are putting your best people on the task and doing your best effort, that’s what counts in the end, trust and execution.

Today, it’s to understand what’s going to happen to the market in 2010. The train is rolling in 2009 – there’s no issue in the current year – we just need to have a clear vision of how to handle 2010.
We’re at an inclination point, and I’m not sure what will happen.

I’m not yet optimistic, because many projects have been postponed. Just recently StatoilHydro had plans to develop an area called Sleipner, which was partly cancelled. StatoilHydro and their partners decided not to develop for the time being. The concern is around just how many of those we are going to have. We will manage through a slow-down but many of our local subcontractors could be severely impacted.

A slowdown by StatoilHydro could however, give the chance for smaller operators in smaller fields. Looking at the big developments coming, Goliat is Eni, there are several Total and Shell projects, Lundin is very aggressive, etc., whereas before it was 99% StatoilHydro – things are changing. But StatoilHydro being such a locomotive, it’s going to be challenging if StatoilHydro doesn’t continue to develop larger finds.

You mention 2010 is still a big question mark, but looking a little longer term, what are your ambitions for FMC Technologies over the next three to five years?

Clearly, the company needs to strengthen its position in the intervention, processing, and compression business, which we call the Increased Oil Recovery business. Then, it’s further geographical expansion, with Russia a very important new market, and continued expansion in Africa as well. In Norway we hope that the government will fully open up new areas for exploration and development.

The technology aspect of the business is of course very important, but FMC Technologies is making a change. Whereas before we were mostly focused on technology, there is now a big push to focus on quality and reliability. That is the change in the subsea world for us, that quality and reliability will become as, if not more, important than technology. This is due to the fact that new developments are based around technologies already in use. There are some new twists, but fundamentally the technology has already been invented. Therefore, customer expectations are such that, because the technology has already been developed, if they use it again, it must work first time, on time, every time. FMC Technologies is really going through what we call a quality transformation to step above our competitors and be seen by industry as the undeniable best supplier of quality and reliability.

What is your final message to OGFJ readers?

There is clearly uncertainty in the market right now. However we believe strongly in the future of the subsea business. Our strategy is to work closely with our customers in an open and mutually beneficial manner. We develop strong relationships, alliances and partnerships with our customers, and they usually stick with us – the repeat business concept. You work through difficult times, but if the customer knows you are putting your best people on the task and doing your best effort, that’s what counts in the end, trust and execution.

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