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Interview

with Søren Nørgaard Thomsen , Managing Director & Commercial Director, Ib Larsen, Esvagt, Denmark

10.05.2013 / Energyboardroom

ESVAGT is considered one of the key success stories in the Danish offshore sector. Could you introduce ESVAGT, the scope of your operations in Denmark, and recent key milestones & achievements?

Ib-Hansen,COOWhen the Danish offshore oil & gas industry started to develop in the 1960s with the discovery of the Dan-field, British vessels came in to do stand-by duty jobs.

The founders of ESVAGT, three gentlemen from the Esbjerg region, felt that they could do a better job than their British competitors. They purchased several fishing vessels and had those rebuilt into standby duty vessels. Initially the company was fighting fiercely to get contracts, but it soon built a solid reputation.

Later, SVITZER, an A.P. Møller – Mærsk owned company, got involved in the same field as ESVAGT. After several years competing for the few contracts in the Danish North Sea, the two companies decided to join forces. Initially this was on a 50-50 basis: later it was turned into a 75-25 divide, with SVITZER representing the larger share.

In 2012, A.P. Møller – Mærsk looked at ESVAGT and its current shape and size, and the question was raised whether SVITZER was still the most logical company in the group to house ESVAGT. This led ESVAGT to switch from SVITZER to Mærsk Supply Group, with whom we have more in common in terms of customer segment.

The owner-share is still the same and the founders of the company are still part of ESVAGT. The company is still completely self-sustainable. We are owned by Mærsk Supply Group but are not an integral part of the Mærsk operations.

Today ESVAGT has one office, in Esbjerg, the birth place of the company. We did have an office in Aberdeen, but found that we could just as easily run the business from here. It is also more efficient to have everybody in one location.

We started with rebuilt fishing trawlers, but that quickly changed to a fleet of purpose-built vessels. We also started buying and building vessels that can perform other tasks such as AHTS and oil spill preparedness, but the core is still in Emergency Rescue and Response.

Over the past ten years the company has seen constant rapid growth. Between 1998 and 2013, ESVAGT grew from 11 vessels to 36. We recently took delivery of vessel number 36. On top of that, we have another three ships on order: one will arrive in a month, and another two in 2014. We received three ships in the second half of 2012, so within 8 months’ time we are taking delivery of five new ships.

Last year we received the “Esvagt Aurora”, the biggest and most advanced ERRV in our fleet. The ship is 87 meters long and 17 meters wide and headed towards northern Norway for a contract with Eni. We had the name giving take place just outside the A.P. Møller – Mærsk office in Copenhagen.

The ship was built for a long-term contract and was delivered on time and within budget. This was a relief, after we had encountered some challenges with delayed delivery of two vessels due to financial difficulties at the Spanish shipyard from which we ordered the ships.

This led to concerns from the customer, Statoil in Norway. It was crucial to us and the customer that we were in the end able to deliver the vessels, albeit two and three years late respectively. The customer was in the end pleased that we continued to fight for delivery of the ships.

How challenging is it for you to manage such growth?

I would say it is actually becoming less complicated, because we are coming from a bigger base. When we receive a new ship, we want to have experienced people on it, so we try to take people from existing ships. It is not a brand new crew taking over on a new ship; we take different people from different ships. The bigger the base, the easier it is to get experienced people.

That said we are constantly recruiting people. We believe that we have a special spirit and a special culture at ESVAGT, and it can be challenging to guarantee this mindset with many new people coming in.

What are ESVAGT’s main markets today?

ESVAGT started in the Danish sector, and we today have a very strong position here. Then we grew and expanded internationally, initially to the UK and, since our first vessels capable of working outside the Danish sector entered in 2003, we have developed into a significant player in Norway as well. That is where today the main share, about 60 percent, of our revenue comes from.

What will be the significance of the Danish market for ESVAGT?

The Danish area is mature as an oil & gas production area, but having said that, this year is the busiest we have had in many years in the Danish sector.

Never before have we seen all three operators – Maersk Oil, Hess, and Dong E&P – be so active at the same time. All three of them have new building projects going on, and all have extensive modification projects on their installations to cope with age. On top of that we see significant new drilling activity. So it is a combination of more maintenance of the structures out there and good exploration activity.

Traditionally we see that the Danes are dominating shipping while the Norwegians are particularly strong in offshore. Are they allowing a Danish player in their midst?

They do, but only if you adhere to the highest standards. You really have to deliver in terms of safety; and it is safety at the highest possible level.

ESVAGT lives safety. It is not something that we only expect our crew to live; everyone in the company needs to have the same mindset; from the second mate on board of the ERRV to the manager onshore. It is about walking the talk; not just about sending people on a course.

Another advantage is that we are fully focused on ERRV vessels, rather than it just being something we do aside our core business. ERRV is the core of our business, it is what we do and what we live. When we go to Norway this focus is also a key advantage.

We were also able to firmly establish ourselves in Norway because we had another philosophy than our biggest Norwegian competitors ten to fifteen years back.

Our biggest competitors in Norway believed in big vessels. The main reason was that at that time, there were no more than six or seven E&P players. But at that time the Norwegian continental shelf was considered a sunset production area. The majors did not want to bother about smaller fields anymore and started selling their licenses. This led to a lot of smaller players coming in that just wanted a drilling rig, a stand-by boat and a supply boat. Therefore demand for smaller vessels actually increased, and at that time ESVAGT had decided to purchase smaller purpose-built vessels instead of rebuilt fisher vessels. No Norwegian company did that, and entering the market in such a situation gave us a strong foothold quickly.

A big chunk of ESVAGT’s Norwegian business will come from the Barents Sea. How do you adapt your operations to meet this extremely demanding environment?

Activities are moving up north, and we see it as logical that we as ESVAGT is part of that development, because we do consider ourselves a high-end operator.

The Barents Sea is a new area for us, but we are learning very quickly about specific matters such as the risk of over-icing and a lack of daylight. Those are things that we take very seriously.

In the North Sea we usually talk about the Golden Hour: within an hour, we need to be able to rescue all persons out of the water. In the Barents Sea the water temperatures are even lower and we need to be able to respond even quicker. This makes the focus on our Fast Rescue Boats (FRB) crucial.

The FRB has been designed and manufactured by ourselves; the components are made elsewhere but are put together in our own workshop. We have 32 years of experience built into that boat.

We have executed several rescue actions in the Danish sector of the North Sea, and those provide valuable lessons on how to further fine-tune our equipment. A great example is the hoisting speed of cranes. The hoisting speed of a normal crane does not allow launching a boat before the next wave hits. By increasing the crane speed 2.5 times, we are still able to launch and recover.

Another example is the lighting on our boats. Our biggest rescue action took place in the middle of the night, and by conducting detailed evaluations afterwards we learnt from that experience that we needed to adjust the lighting on our boats.

ESVAGT has developed a strong position in the North Sea. What does your internationalization strategy look like going forward? Can we expect ESVAGT vessels in such offshore hotspots as Brazil or the west coast of Africa?

Currently our strategy is strongly focused on moving further up north, following the move of the industry towards the Barents Sea and the Arctic. So far, all the growth that we have achieved has been accommodated in the markets close to Denmark and that will also be the main focus in the future.

Does it mean that we will not look for activities outside this area? No, we are always interested in new opportunities. Opening up an office in such offshore hotspots as Brazil or the African west coast could happen, but it is not part of our current planning.

You also venture into wind and offer the offshore windfarm concept – could you outline the significance of the wind energy sector for ESVAGT?

Wind energy is moving offshore and there is a requirement for maintenance. As the wind turbines are placed further from shore, travelling from shore to the turbines for maintenance takes too much time. We can provide vessels that can act as service ships, where we have technicians on board with a workshop and a warehouse for spare parts. They will go across and then we take care of taking them to the wind turbine.

We currently have one ship fully deployed in this segment. ESVAGT has a lot of experience transferring people offshore, using our fast rescue boats. That is what we do in the Danish North Sea today; there are a lot of installations that are unmanned, and they do not have a helicopter platform. This means that the only way to get to them is to sail across. This experience we can apply to offshore wind. No other Danish player has such experience.

In addition to the ESVAGT Fast Rescue Boat (FRB), we developed a Save Transfer Boat (STB) that we use in offshore wind parks. The FRB is manufactured and designed to rescue people in rough weather conditions, but we have taken our experience in developing this boat and applied it for the development of the STB.

As you mentioned, ESVAGT grew from 11 to 36 vessels in less than two decades. What are your key ambitions for ESVAGT under your tenure?
The ships that ESVAGT uses today are much bigger and require a much bigger investment than they used to. We will continue to focus on bigger and more advanced ships in our fleet renewal, also because up in the Barents Sea a different kind of vessel is needed. A bigger investment also requires bigger revenue from that ship.

The increase that we will see in ESVAGT will be in revenue rather than number of ships. We aim to double revenue in the coming five years. Beyond the numbers, safeguarding ESVAGT’s unique innovative safety culture is the biggest challenge and the biggest ambition going forward.

To read more articles and interviews on Denmark, and to download the latest free report on the country, click here.

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