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Interview

with Tor Henning Ramfjord , Managing Director & VP Operation Norway, National Oilwell Varco Norway AS

08.04.2013 / Energyboardroom

Aker Solutions and National Oilwell Varco (NOV) have both enjoyed phenomenal success in Kristiansand turning it into what has become known in Norway as the ‘drilling bay’. Would you begin by outlining this region’s importance for NOV?

Kristiansand is very important for NOV on both a local and a global level. Kristiansand is the headquarters of our Norwegian operations and roughly half of NOV’s Norwegian employees — around 2,000 people – are employed at these facilities. NOV has other offices in Florø, Molde, Kristiansund, Trondheim, Bergen, Stavanger, Arendal, Tønsberg and Asker. However, for historical reasons, Kristiansand emerged as the global heart of our drilling equipment technology. This is due to the work of Bjarne Skeie, who founded Hydralift along with two other companies, which NOV subsequently acquired in 2002. Regarding drilling equipment from pipe handling to the drilling machine to the handling equipment, this has been the main center for this technology on a global level.

NOV’s office in Kristiansand is also responsible for the majority of the major drilling packages for delivery worldwide. In fact, around 75 percent of NOV’s global drilling packages are delivered out of these facilities. We are responsible for delivering all of the equipment on these contracts to the customers. We therefore take deliveries of equipment from the US, Canada, China, and Korea to build into these packages.

Kristiansand is several hours’ drive from Norway’s oil capital Stavanger and its real capital Oslo. Why have the headquarters remained here?

Our employees represent our biggest asset and these were historically based in Kristiansand. Even though Stavanger is the oil capital of Norway, our Stavanger office only has a thousand 650?employees whereas we have two thousand here in Kristiansand and we are aware of the difficulty of finding large numbers of highly skilled engineers in Norway’s oil capital. Kristiansand actually presents better opportunities to find the talent needed, even though the three strongest companies in this area fight over the same human resources. At NOV, we have not experienced any significant human resource challenges yet.

What impact would you say NOV has had on the economic growth of Kristiansand?

The confederation of Norwegian Enterprises (NHO), conducted a study last year looking into the value creation stemming from NOV in the region. The results of the study showed that from NOV’s 2,000? employees, 6,600 man-years were generated among suppliers within the private industry and 10,000 man-year for the government. NOV has therefore been very important for the town and the greater regional development.

The NODE cluster, which groups NOV together with other service companies in the area, has gone from 1,800 people around six years ago to more than 10,000 employees today. NOV has acted as one of the chief locomotives within this cluster and in 2010, NOV was the fifth largest export company in Norway; today, we are still among the 10 biggest export companies in Norway.

How do you see the role of NOV in working with other companies in the cluster, given the difficulties of working with strong competitors like Aker Solutions?

Competition is fierce and this is how it should be. However, that does not exclude cooperation and I believe there are grounds to cooperate with them in some areas of the market. It is in our commercial interests to maintain some secrets but we have successfully worked as partners on technological development projects and we are currently joining forces to develop the town’s infrastructure. In particular, we felt the need to set up a regular cargo flight out of Kristiansand.

How important was the cluster in the technological advancement of NOV?

Where the cluster has been particularly successful is in driving other business into this area and this is always positive for us, as there are interesting technologies being developed. In terms of our role within the cluster, we are involved in many different projects in partnership with small and medium-sized companies.

The cluster has established a mechatronics course (a combination of basic mechanical problem-solving engineering and design studies) with the local university and we have also created a course focusing on business and supply chain management. These are initiatives that we undertake as a complete cluster.

From a logistics standpoint, how well placed is Kristiansand to deliver to the world’s key drilling markets?

NOV can deliver to the whole world out of these offices. In fact, we just sent off a delivery today to Korea, to one of the world’s biggest shipyards. We do the same in China and Singapore. At the same time, drilling contractors and oil companies are worldwide organizations, building rigs in Korea and China, etc. and we have aimed to position our fabrication closer to the customer. NOV therefore has a huge workshop in Korea, in Ulsan, nearby the shipyards, where we produce heavy duty cranes, drilling towers, steel trolleys etc. We also have fabrication in China, Vietnam, Malaysia and Singapore. However, ownership of the products and control of the projects is based in Norway.
In addition, from Norway we manage a chartering department dealing with all of our transportation worldwide. Last year, NOV’s worldwide steel transportation accounted for 70,000 tons, from which 20,000 came from Norway. The rest was shared between the USA, Canada, China and Korea to serve their closest customers. In the end, our worldwide presence and network allows us to manage any project regardless of our location, but the operational center is in Kristiansand.

How important has the international shift in construction to the major Korean yards been in your work?

The whole business model of constructing for the oil and gas industry has changed from drilling contractors being at the center of the value chain, managing vendors and shipyards, to them only establishing the specifications and negotiating frame contracts. The rest of the responsibility has been transferred to the shipyards for a turnkey delivery of a rig or drillship. NOV now delivers to all the shipyards in the world, which is in stark contrast to 10 years ago where we only delivered equipment to drilling contractors. This change has been well received, since shipyards and vendors are focused on building the rig with cost effective, quality, timely techniques.

NOV is highly focused on interface management to manage all the different parts of the fabrication process and the shipyards are excellent at managing the different vendors, procuring the equipment and delivering a rig. We have an extremely successful track record working with these yards. Between 2007 and 2011, 38 deepwater rigs have been delivered on time from Korea using NOV’s complete packages. 10 years ago the situation was very different.

The whole production process is taken care of by the shipyard. NOV works with them and has a large number of people stationed in Korea dealing with the installation of drilling equipment on rigs.

Safety requirements are definitely moving towards a higher level with global standards. However, this process will take time, and some companies are far ahead in terms of safety requirements.

On our side, our added valued is the know-how with our extensive experience in the oil and gas industry, delivering a wide variety of drilling packages. We define ourselves as system integrators and not just providers of standalone machinery. When we deliver machinery to the rigs we make sure our machines become part of the whole system. China for example, has been good at delivering single pieces of equipment but not complete systems. We feel that this systems focus will provide us with an edge even in price-dominated markets.

Given the greater standardization of production at NOV, what would you say is your ambition for NOV in the coming years?

With regard to standardization, this has been a focus within the organization and we have advanced a long way in this direction. However, we are not interested in just having a production line of standardized solutions. We also need to maintain our ability to innovate. Our success will depend on a combination of standardized products and tailor-made equipment. In the past, Norway may have favoured tailor-made equipment too much.

Looking ahead, we wish to expand and push through even greater volumes and create more innovations. Another priority will be to bring down the costs in our supply chain.

As it stands, we are currently the biggest supplier of drilling and handling equipment and in addition, we have a huge FPSO market within our reach. Our growth prospects are therefore very promising. All of our employees and their know-how will give us what we need to fuel NOV’s success.

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