with Stig Christiansen, CEO, Add Energy
Since 2009 Add Energy has worked on the Montara, Macondo, and most recently Elgin incidents, which helped to propel the company onto the international stage. How do you see the company’s recent progress in internationalization?
Add Energy has made enormous progress in recent years; the company has moved into a completely new phase in its life cycle. In the summer of 2009, we had not yet seen the bottom of the global financial crisis and much of the industry was still riding on the tail winds of the previous growth cycle. While the company did projects internationally on an ad hoc basis, Add Energy was still predominantly Norwegian in its operational focus. All operations but 4 colleagues in Oslo where based in Stavanger.
However, in 2009, we worked heavily with the board to develop an international strategy for the company for the coming years. Since that strategy was developed, Add Energy has developed tremendously overseas, beginning in late 2009. The business first stepped out by merging with a company in Aberdeen, which is a natural extension of the home market within the North Sea. It also brought us additional international experience as that company had conducted projects for Shell in Nigeria and PDO in Oman.
Add Energy then decided to focus on a few core regions, one being North America. We believe that you cannot be in oil and gas with international ambitions without establishing yourself in Houston and the Gulf of Mexico. The other area of focus was Asia Pacific, specifically Australia; this is for the fact that the region has a booming industry, both offshore and onshore, in conventional and unconventional hydrocarbons, with a varied client base of major clients as well as many smaller independents. The regulatory environment and culture in Australia is also quite similar to that of Norway, making it less risky for us to operate. From a regulatory point of view there are strong similarities in ambitions in both safety and sustainability. We saw that with Add Energy’s competence in well integrity, risk management, contingency planning, blowout support, environmental management combined with growth opportunities and client base, meant that this region was the place to be.
Today Add Energy generates more than 40% of its revenues outside Norway, compared to early 2009 when practically all revenue was domestic. That is the concrete result of Add Energy’s internationalization strategy; today there are 12 offices in eight countries in the key regions of Asia-Pacific (Australia, New Zealand, Singapore and Yangon), North America, Europe, and the Middle East.
As you mentioned, over the last two years, Add Energy was also involved in three high-profile blow out incidents which helped build our reputation internationally: Montara, Macondo and Elgin. Our involvement in Montara helped the company establish stronger bonds in Australia, although it is a project Add Energy would have been working on in any event given the experience of our employees in dealing with blow-outs. PTTEP as the operating company and a fire fighting and well engineering company from Singapore, Alert Disaster Control, invited us to join. Our specialists from Oslo were therefore sent out to assist on controlling the situation and stopping the blowout.
Montara was a challenging case in that it fell under the Australian authority although it was in the Timor Sea and the incident generated a great deal of publicity even being followed closely by Norwegian media; Add Energy’s high-profile involvement was therefore important.
Our work on Macondo was based on having experience on from more than 50 well control incidents and blowouts globally over the last two decades including Montara. Add Energy was contacted by two parties: Boots & Coots, the Houston-based fire fighting company, and BP. Add Energy was called in to assist as two teams: one working on the relief well and well kill planning and the other involved in the investigation of the root causes of the incident. We are still involved as expert witnesses in the case. Add Energy already had a global service agreement with BP in this area prior to the incident and that has recently been renewed for well risk management and blowout support.
Every incident has a unique nature in terms of the parties involved and the nature of the incident, what are the complementarities that you can apply from one project to the next?
I gave a presentation on this in New Zealand recently at the New Zealand Petroleum Summit discussing lessons learned from blowouts over the last two decades. Each is unique but there are similarities when you look at causes and the sequence of events that leads to a blowout, combining human, technical, operational, and some times external factors.
What matters is the experience of the team working on the incident and as mentioned our experts have been working on over 50 blowouts over the last two decades around the world. You can try to imagine how it is to be on-site, whether onshore or offshore, in the heat of the moment. When you have a blowout encompassing a multitude of safety and environmental risks, an intense media focus on the event, and all the organizational stresses this generates, it is important to have experienced and professional personnel and advisors alongside you.
Our competence and experience is combined with the tool Add Energy has developed, the Olga® Well Kill, powered by SPT – nor part of Schlumberger – technology. Add Energy therefore brings a unique combination of of expertise, experience and a solid experience based analytical tool. Add Energy’s job in a well incident or blowout situation is primarily to monitor and analyse what is happening in the well and create scenarios (diagnostics) and solutions to prepare for how to gain control of the blowout once you get access to it. Our analysis are then key both for understanding and managing risks in the operation as well as operationally what equipment is needed in terms of pumping equipment, mud composition and thus vessels, rigs to control the blowout.
There are alternative ways of killing a well; the relief well is often talked about, but that is actually the last resort. Methods of gaining control of a well range from installing a capping stack, which is essentially another BOP on top of a malfunctioning BOP to intersecting the well with a relief well. You cannot install a shut-in BOP because that would ruin the well and could cause an underground blowout which is much worse. You therefore have to install the capping stack while open, you then need to know what is coming out so that you can shut in the well by the capping stack in a controlled and safe manner.
The fact that there have been so many blowouts globally does not mean that one can draw hard and fast rules; it is how individuals are able, on the basis of their unique experience, to operate as a cool, rational professional advisor and a team player in the heat of the moment. We have now proved our capabilities over two decades including on Montara, Macondo and Elgin.
We now see the movement towards the Barents Sea, and many new players on the NCS. What is your take on the Norwegian production model and safety environment?
Everybody knows it is tough and expensive to operate here in Norway. However, the NCS has a strong safety record and also exploration success. And so the shelf remains very attractive. This is supported further by tax incentives for exploration drilling as one example. In addition the regime, although strict, is clear and predictable making.
The PSA has worked hard over the years on defining the entire culture of safety on the NCS. The authorities and regulators have, in my mind, done many things right, from simply imposing extremely tough and stringent regulations to placing ultimate responsibility on the shoulders of operating companies (“see to duty”). This may have added to the costs but these regulations have to be perceived not as a cost but as an investment in future profit. That is Magne Ognedal’s view and I fully support it.
This stringent climate is maintained and yet Norway still remains competitive as an E&P area. Everybody wants to be on the NCS right now. The combination of tax incentives for exploration and the good fortune of having a resource-rich shelf are pulling in investors. It is the safest shelf in the world and many emerging countries look to the Norwegian model, curious about the upstream model and additionally how Norway has been so successful in avoiding the Dutch disease, managing its wealth responsibly. For example, New Zealand is now having the same debates that Norway had many years ago. Essentially, New Zealand has the exact same level of concern as Norway for the environment and safety. The Norwegian production model is thus very much looked to from New Zealand.
This rigor in regulation must continue because as operators move north, the environmental challenges and focus will be even tougher. A spill in the Arctic will be even less acceptable than a spill in other parts of the world. These concerns will have an impact on many things like how to design, construct and complete wells and how to conduct risk management, project execution and environmental control. In sum it means we need – as an industry – to prove that we are willing to invest and able to understand and manage risks. The industry is coming under greater scrutiny and interestingly in New Zealand a production license is called a “social license” to operate.
Which new companies will Add Energy be working with in Norway?
Add Energy’s clients are primarily oil and gas companies, all blue chip majors as well as smaller independent companies, NOCs as well as regulators, authorities and industry associations. As an organization housing experts, the company is proud of the fact that global regulators and authorities draw on the expertise and experience of Add Energy’s staff. This knowledge base is a fundament in our business model and that needs to be nurtured.
Add Energy works with a diverse client base and Add Energy plays various roles, from providing specialized competence to studies, reports and project management to software tools within our areas of expertise.
Looking at Australia and New Zealand, how do you see the further diversification of your services in this region?
These countries provide a tremendous opportunity. Add Energy merged with local companies in Perth and Melbourne and then found companies that were complementary to Add Energy’s core strengths primarily within drilling and well engineering and management, production technology and subsurface and safety and risk management. As Add Energy brings these companies together, its goal is cross-fertilization on the basis of cross-marketing. This means that the company’s colleagues in Perth have additional competencies and tools that they did not have before when dealing with local clients. This spawns an opportunity to achieve the “pull-through” of services that Add Energy is increasingly offering today in key markets. This gives the company an additional competitive edge as the various locations have other expert colleagues in house to assure clients about giving them for example the safest and most sustainable exploration wells in the world.
Additionally, Add Energy is beginning to recruit locally. The company’s offices in Perth and Houston now have local experts offering well risk management or well control blowout support. This is Add Energy’s strategy for its core focus areas: start by cross-marketing, and then achieve pull-through using local recruitment and building capacity locally, where the client wants Add Energy to be. That is a global phenomenon – they want local expertise, not just any Add Energy employee, on the other side of the world. It is a growth model that takes time but it works well.
Which markets are you targeting over the following few years?
Add Energy is in the middle of its planning process now; it is always looking five years ahead. The company has grown a lot over the last few years and is doing very well. Now we are in a phase of consolidation. Much of the growth has been through M&A, so Add Energy is now spending the rest of 2012 running strategic consolidation and refinement which is proving successful so far.
Going forward, the strategy is to continue serving oil and gas companies in the oil and gas industry to the best of our abilities. Add Energy’s key markets are the North Sea, Asia-Pacific, North America and the Middle East. Add Energy now has a fairly complete competence base. The company will now focus on building stone-by-stone our capacity by strategic recruitments of the best experts within our fields of expertise to fill up offices in these markets.
This growth will probably be supplemented by some strategic acquisitions as well. We want to be leading in our niches and also offer a unique combination. In order to achieve that, Add Energy has to have the best people, which means being the best at not only attracting employees but also retention. Add Energy’s key asset is people and one of the biggest challenges in the industry is the lack of human resources. This means the business must be competitive, and must build a strong reputation as a unique, professional and strong competence house where people see the benefits. The will be working with interesting clients on the most interesting projects in interesting regions. You need good individuals across the organization, including management, to take care of the people. It is that simple and that hard.
I want Add Energy to be among the most successful companies in the oil service industry, which means delivering on strategy.