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Interview

with Lars Torbensen, Managing Director, Halliburton

12.04.2013 / Energyboardroom

Minister Lidegaard expects USD 7 billion of investment into the Danish oil & gas industry over the next five years, but the Danish political climate currently does not seem to favor further development of the Danish continental shelf. Could you share your level of optimism for this market on behalf of one of the key service providers to the industry?

First of all we noticed a downturn in activity in the Danish sector of the North Sea in the period up to July 7th 2012. This was the date on which the North Sea Fund (the state-owned oil company that holds 20 percent of all new licenses) took over 20 percent of ownership of the fields of the Danish Underground Consortium (DUC) consisting of Maersk Oil, Shell, and Chevron, which is responsible for well over 50 percent of production in the Danish North Sea.

As July 2012 came closer DUC adjusted their investments and spending in the Danish sector to accommodate the upcoming change in ownership. The North Sea Fund did not only take 20 percent ownership of future revenue but also future investments and cost.

Since the Halliburton contracts in the Danish North Sea are mainly in the establishment of new wells, our revenue has gone down based on that. Just because North Sea Fund comes in does not necessarily mean that activity levels are 20 percent higher than they used to be. It is a long process to get things started again.

Luckily rigs are coming in again though and activity is changing from well maintenance and overhauling old wells to more forward looking activity.

Could you give us an insight how this influences Halliburton’s relationships with the E&P players in the Danish North Sea?

It does not change that much for us. Some players, like Bayerngas, have announced that they might pull out of Denmark. But Bayerngas is only one player, and if they pull out, the other players in the consortium will fill the void, or another party will take over – if it is still financially beneficial to be here.

If it is not, the bigger part of activity on the Danish North Sea will be shutting down, just like happened years ago in the UK when taxation was changed. It is very important that we have a reliable and stable regime for investments.

The raise in taxation rates for E&P players has not yet been approved, it is only a proposal and a lot can still happen before it turns into law. It is not the first time that we have seen the Danish government jumping out of the cage like a lion and fall to the ground like a mouse.

Because of the type of government we have in Denmark, it is very difficult for them to come with a solution that benefits all. The Socialist Folkeparti is the minor party in government and is squeezed in Danish political opinion. They have to show some victories, and the change in taxation in the North Sea gives them something.

Could you share with our readership the key contributions that Halliburton has delivered to the development of the Danish Continental Shelf (DCS)?

In the 1990s Halliburton Denmark was a cementing and a pumping company focusing on pumping water injection and platform-based stimulation.

The stimulation vessel Skandi Fjord was brought up here in 1993 from Delfzijl in the Netherlands. As well as being a premier stimulation vessel, the Skandi Fjord has become an accomplished well-kill vessel. The capacity of the vessel enabled us to apply the largest fracking jobs and stimulation jobs.

Over the years other Product Service Lines (PSLs) were brought in as a result of acquisitions of the Halliburton group. In 1998 we added intervention services following the acquisition of PES, and in 1998 the acquisition of Dresser enabled us to expand our drilling services.

While the mergers and acquisitions brought in more services, reorganizations in Europe and Scandinavia also enabled us to apply more services. Today we can deliver about any service our customer might need.

Just last week we did a job for Maersk, for which we brought in one of our guys from Skandi Fjord and one from the intervention department. Together they could provide a service to the customer that we would not have been able to offer ten years ago.

Today we are one Halliburton, rather than different Product Service Lines (PSLs). We do a lot of integrated operations for which we have to work together. We have broken the barriers between the PSLs.

How far do you believe that the extraction rates in the Danish North Sea can go up?

To optimize production, we provide cost-effective approaches to activities such as fracturing, pinpoint stimulation, acidizing or near-wellbore cleanout, conductivity endurance and water management.

These solutions have definitely raised the amount of oil we can get from the mature chalk. When DUC started their oil production in 1972 the extraction rate stood at around ten percent; today we are looking at 30+ percent for the new wells.

Maersk have tried to further raise extraction rates using CO2, but this program has been stopped. With applying new technologies in the future, I believe it could be possible to raise extraction rates to 50 percent.

Of course it also demands that the operator is willing to try technologies that have not yet been tried 2000 times elsewhere in the world. If you are going to push it, you have to take a calculated risk.

Some of our key partners in the Danish North Sea such as Maersk have definitely become more open than they used to be. Instead of coming to us and telling us to perform certain tasks, they now come to us and ask what solutions we can provide or suggest.

How do you distinguish yourself from your key competitors such Schlumberger, Baker Hughes, and Weatherford in a smaller market like the Danish one?

There has been room for all four of us so far. Whether that will continue will depend on what market is out there. We sharpen our pens and make our customers offers they cannot refuse.

In the past, Schlumberger would perform one task; Baker Hughes another; and Halliburton a third. That is now changing and competition is becoming tougher on these product lines. From time to time the contracts change between the different players; this has been the case with drilling contracts, cementing contracts, etc.

If the operators put all their eggs in one basket, they end up in a monopoly situation and that could be very expensive.

Looking purely at our prices we might not be the cheapest, but we do what we have to do right the first time and do not have to come back, and this might make us the cheapest in the long run. Of course another reason is that we do invest a lot in new technology.

For close to 20 years you have been leading one of the most successful OFS in the Danish North Sea. What are your key ambitions in coming years?

We would like to see many more new PSLs come to Denmark and turn Halliburton into a true multi-PSL operation. We are discussing partnerships with customers for which we have to bring most of the service lines in. We already bring multi-PSL operations in on a regular basis, but we would like to have them fixed here.

Although the Denmark operations are of a modest size, we have the advantage of huge outside support. Halliburton worked with Hess on their South Arne development for instance. Hess had special requirements for the supply underbalanced applications. We could bring in resources from the outside and won the contract. This means that we suddenly brought in a new PSL.

In that light, we are capable of much more, and as opportunities develop we will help our partners develop them.

What would be your final message on behalf of the oldest OFS in Denmark?

Our ambition has been and is to be a reliable and trustworthy business partner to the operators on the Danish North Sea. The biggest asset we have is our customers’ belief in our reliability to do what we say, and not promise them the world when we can only deliver half.

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