Thomas Thune Andersen, Global Chairman, Lloyd’s Register, Denmark
Denmark applied to host the World Petroleum Council (WPC) in 2017. Renato Bertani, the president of the WPC, recently stated that “we need to be better at communicating the importance of the oil & gas sector, which has never failed to deliver a reliable and affordable source of energy for global development.” Why would a country like Denmark, which has a fairly modest position on the world energy map, be a right host for the WPC?
Denmark is the right host because, even though on a global scale its production is although significant, not huge, you can find world class players in Denmark across several segments.
It is also a society that is at the forefront of discussions about energy self-sufficiency and energy preservation. It is not a one-angled energy debate about exploration or oil & gas; the debate covers the totality of the energy market, including the environmental point of view, and also transport. On top of that Denmark still has strong links with Greenland, and as such offers a line to the Arctic debate.
Denmark actually covers a microcosm of the macrocosm, and for those reasons it is a very good place to host the WPC.
What does your appointment as chairman of Lloyd’s Register two years ago say about the company’s ambitions for the future?
I knew Lloyds’ Register well from my previous job as CEO of Maersk Oil. I have always had a lot of respect for the organization as the first, and today one of the leading, companies in its area. Lloyd’s Register, through the many different industries and industry developments it is involved in, cuts across transitions of different kinds. We are going through a very exciting time with a lot of change, and that is always a good opportunity for those who are active and looking for ways to develop.
Lloyd’s Register has been building on the strength of its maritime expertise. Through this experience the company has naturally involved itself in harsh environments and maritime structures and borings. It has a very natural focus onto the energy side. This goes for upstream as well as power plants, nuclear plants, railways; all critical infrastructure.
Both upstream and downstream become natural parts of Lloyd’s Register’s perception of itself as having an essential role in critical infrastructure. The organization has spent a number of years on positioning itself there, and we have respect for a number of very good competitors in this area, but at the same time we have grown considerably over the past years.
On the energy side Lloyd’s Register has chosen to focus on a number of specific areas to grow its world class expertise. We have acquired several companies, most recently Houston-based WEST Engineering Services, which secured our position as the premier independent risk management organization supporting the global offshore drilling industry. Combining that with the acquisition of ModuSpec we are able to be involved in asset integrity and assurance both at subsea and topside levels through the combined Lloyd’s Register Energy drilling offering.
How do you want Lloyd’s Register to be perceived by the industry?
Lloyd’s Register sees itself as an impartial partner to the industry; our role is to give impartial advice rather than being an in-depth consultant. But there are many situations in which the right level of impartiality can be combined with consulting on specific subjects. We see ourselves as having one predominant drive, which is also on our tag line: ‘Life Matters.’ We are involved in issues that help make the energy and maritime industries, and the critical infrastructure surrounding them, inherently safer.
But it also differs across the board. The shipping industry has a need for classification of vessels, whereas the energy side is focused on certification. For Lloyd’s Register it is very important to take and understand the differences of what our clients and the authorities need, yet at the same time take a uniform, quality approach to what is being done. This should ensure that standards between industries do not differentiate.
When heading Maersk Oil you contributed heavily to the internationalization of the company and you almost doubled its size. How much can Lloyd’s Register still grow?
Growth is very important but it should be sustainable and profitable. One has to be careful to not be carried away by growth at all cost – it has to be the right kind of growth.
Besides that, I can certainly compliment my colleagues in Lloyd’s Register and also the previous chairman in significantly growing the company in many ways and starting the expansion into other business streams.
Lloyd’s Register is driven largely by the mission to save lives in critical infrastructure. We have expectations and certainly ambitions to continue to grow both in absolute and in relative terms in this market. In the maritime market we are one of the key players, and of course there is a chance to further grow there.
We also see major growth potential in other areas. Energy ranks high and is a major focus and driver. We have gained certain areas of expertise through our acquisitions. We are also seeing a significant expansion in downstream, and nuclear has been a big growth area for us lately. We see rail as important too.
The different segments tie in because, although sectors such as upstream oil and rail are not the same, we are still talking about the same disciplines in terms of construction and safety cases, and how to approach daily operations.
We also have a focus and an interest in other critical infrastructure: waste and water. We see both a geographical and a business stream expansion there.
One of the key differences between shipping and the oil & gas industry is the pace at which technology moves – in the oil & gas industry things are moving at high speed as the industry moves into ever more challenging conditions. How can Lloyd’s Register bring clarity to uncertain policy and regulatory environments in developing areas such as the Arctic and Shale Gas?
I would like to go back to what I said about impartiality. There are different drivers here. One of them is sheer technology development. This is about being in the forefront of technology development and about being involved in reviewing these technology developments.
Lloyd’s Register is fundamentally a business for the benefit of society. We are profitable and are earning money but, contrary to our competition, we are a charity and aim to benefit society. We wish to give free access to some of the IP material, because we think it promotes saving lives. There is a whole area around defining and testing technology. We do that among others by moving some of our activities alongside universities, as we did in Southampton and Singapore, where we place our own people together there. Technology is one arm.
Another arm is straightforward certification. In Oil & Gas, after well completion, for instance, somebody has to certify that things have been done in the correct way, matching what has been declared to have been done. The need for this kind of certification will steadily increase. The balance there is to make sure that we help our clients and the authorities in zooming in on what is really relevant, rather than just having this and that certification. We are not there to create more bureaucracy; we want to be there to explain why and how certain matters need to be done.
Then there is an interesting debate going forward around third party verification and second party verification. A lot of companies have higher standards than just the minimum standard set by authorities, and we see a role for Lloyd’s Register to work very closely with some of the leading companies in the world to help certify against their own standards, rather than those of the authorities.
This goes in very close cooperation with the company, and impartiality is again a crucial factor. It has to be, because the board and management of an oil company need to be confident that the certification and verification has been done in such an impartial way that they can rest assured the company standards are upheld.
In that way it is important for us to understand, as Lloyd’s Register, that we are not employees of the company, but rather providing an impartial service. At the same time we have to be close enough to the company to really understand the company’s’ standards, ethics and values.
All in all, we have technology, we have straightforward certification, and the second versus third party debate surrounding the two.
Besides having a Danish Chairman, what is today the relative importance of Denmark to Lloyd’s Register?
Denmark has one of the world’s biggest maritime industries and we are proud to be a partner and supplier to many of the Danish shipping companies. That in its own right makes Denmark – and Scandinavia – very important to Lloyd’s Register. We have our regional office for Scandinavia in Copenhagen, although some of the components of the organization are headquartered in Norway, Sweden or Finland.
We have maritime clients, the energy business, and the renewables business. We are looking at the environmental side, and Denmark is leading in a number of areas.
The challenge here is to do sober prioritization to really find out what makes an environmental difference. An example can be that using more gas will reduce CO2. Other solutions might reduce it even more, but if these other solutions take ten years, and gas can be done in five, the net positive impact of the latter is bigger. We need to put common sense into the debate, or else everyone will just run after solutions that are ambitious and good, but the associated cost of the solution might actually be too expensive compared to the alternative.
Denmark is an interesting market for seeing and experiencing some of these things and for us to be involved, to learn and to contribute.
How much of a challenge was it for you moving from pushing for more barrels of oil production at the helm of Maersk Oil, to securing the industry’s safety standards at Lloyd’s Register?
Saving lives and a good HSE performance is a prerequisite for a license to operate. For all the companies that I am involved in – Lloyd’s Register, but also Scottish & Southern, Petrofac and DeepOcean- health and safety are key priorities.
The goal, the drive, the language and to a certain extent the tools, are the same. It is just a question of who provides those tools, and how you use them.
What do you bring to table at Lloyd’s Register coming from the E&P side of the industry?
Having in the past led an E&P player means I can bring a customer perspective to the table. I understand how to communicate, and what the expectations are from an E&P partner. Having worked for a big, successful organization like the AP Moller Group brings a track record and a level of ambition with which I can hopefully add to the drive of the Lloyd’s Register management.
Furthermore the diversity of being involved in different companies gives a chance to try and look at best performance practices and make sure that you create the highest common denominator.
The UK, Norway, Denmark, and the Netherlands share the North Sea. There are many things that we can learn from each other. Although the business approach is sometimes quite different in the UK compared to Scandinavian countries.
At the end of the day the focus on health, safety, and performance is strong in all of them. Some societies might be slightly more prescriptive, while others are more focused on reporting. We have only just started to open up for learning from each other. It is my hope that it will become easier to look at operations in the North Sea more holistically. We should not have separate Danish, British, or Dutch operations but have the ability to easily move people and assets around.
That way we can get better asset utilization, costs can be decreased and oil & gas extraction increased. It should be easy for an expert from Norway to go to the UK, or for an expert from the UK to come to Denmark. In Esbjerg you should see and hear many different languages.
I have tried to bring this together as a portfolio in my own working life. Lloyd’s Register’s activities cut through a number of these things, as does my involvement in DeepOcean, a company based out of the Netherlands but with its main operations in Norway and the UK. Here too the theme of bringing together expertise from different countries is a day-to-day reality. I find a lot of these different activities complementary; what you learn in one place you can apply in another.
Do you have a final message to the world’s oil & gas community on the mark that Lloyd’s will leave on the world energy map in the future?
Lloyd’s has over 250 years of successful history behind it. My ambition together with that of the management is to lay the foundation for another 250 successful years. In today’s world not that many companies are able to say that they have been able to keep profitable in a sustained way over such a long period of time. When you then deal with matters such as quality, technology, health and safety, safety cases, and so on, it has to be because you have a consistent and robust approach to things. The attitude and the mindset around that is important.
That is my ambition: to create the platform for the next 250 years of growth based on a robust approach to health and safety issues.
The other one is that Lloyd’s Register has made a corporate change and established the Lloyd’s Register Foundation, which is a charity that owns the operating company Lloyd’s Register Group Ltd 100 percent, which has given more clarity and transparency. It is one of the UK’s biggest fee-based charities. It gives money away for research programs and for education in science and engineering.
This is independent from the business, and this makes us different from many of our competitors. Our dividend goes to benefit society rather than to shareholders, so it gives a strong level of independence, which I think is very important.
The Lloyd’s Register Foundation is funding research in areas such as shipping and the Arctic, wind, nuclear energy, and water. These are very diverse themes but what unites them is that they are macro-themes the world deals with today.
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