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with Tor Øyvind Oftedal, Country Manager Norway, Rowan Drilling Norway AS

10.06.2013 / Energyboardroom

Norway is not a traditional jack-up market with only 10 rigs in operation. So why is Rowan bringing 4 new jack-ups to Norway and what has changed to make this an attractive market?

The market for jack-up rigs has grown substantially in Norway over the last couple of years with a large number of projects in the pipeline. Rowan Drilling is primarily targeting the southern part of the North Sea, which includes many of Norway’s mature fields as well as some recent discoveries. On the mature fields, including Ekofisk, Valhall, Varg and several others, rigs are needed for intervention, side-tracking and permanent plugging and abandonment (P&A) work. The scope of this work is one reason why we have chosen to invest in this market.

There are hundreds of wells in the southern North Sea, which need to be permanently plugged and abandoned. Originally these wells were drilled with Oil Companies’ own drilling packages, but these have been removed and the most common way for the company to perform the sidetracking and P&A work is through cantilever jack-up rigs. This work cannot be done with semi-subs because the work has to be done thru the platform. Some of the P&A work can be extremely challenging and time consuming and should provide many opportunities for work for Rowan.

The second reason for our investment in Norway is that the existing jack-up rig fleet is relatively old and needs replacing. Rowan will be bringing some of the newest and most high-spec rigs to this market. This has been recognized by the operating companies, which appreciate new technologies and rigs. I believe that the increased bifurcation in the jack-up markets, with the higher spec rigs in great demand, is a direct consequence of types of wells being drilled and in part reaction to customer demand.. We expect the take up of our rigs to be strong.

The third reason would be the prevalence of high-pressure, high temperature (HP/HT) wells on the Norwegian continental shelf (NCS). For this type of well, jack-up rigs are the preferred option for the industry and Rowan has successfully drilled many demanding HP/HT wells over the years. Just recently we have been drilling a well in the Gulf of Mexico using 25,000-psi equipment. Last year we completed a well on the UK Continental Shelf (UKCS), at 15,000-psi, but we tested the well by experiences the highest pressure ever recorded in the North Sea — around 14,500 psi. Rowan is experienced in these types of challenging wells and we see potential to apply this knowledge to the demanding Norwegian market with our young, high-spec fleet.

Our mission statement is to be recognized by our customers as the most efficient and capable provider of demanding contract drilling services – and Norway is one of the most demanding environments, perfect for our equipment and experienced personnel.

In addition to our work on the mature fields, there are a growing number of new developments due to the strong growth in exploration drilling over the last few years. Lundin’s Edvard Grieg field is an example of one of the new development projects that we are working on. Given the high oil price, there are many new operators concentrating on marginal fields close to existing infrastructure in the North Sea. These marginal fields are often left by the majors, but are very attractive to smaller players, which are further incentivized by the attractive exploration tax regime in Norway. Moreover, if you compare the well density in the UK side of the North Sea, it becomes even more apparent that there is great potential left in Norway. Rowan has a key role to play in these developments because many of them are in jack-up territory. We therefore believe the new development portfolio of our business will grow within our company’s operations.

Asbjorn Olsen of Transocean said that the return on asset in Norway was not much greater than other international markets. How attractive is Norway within Rowan’s overall portfolio?

Norway is an extremely attractive market for Rowan because of the opportunities discussed already and the stable commercial and political environment. Whatever the results of the upcoming elections in September, the rules and regulations will not change much. This predictability and stability creates the possibility of having more long-term contracts, which are becoming much more frequent today than ten years ago.
An additional factor is that the regulations and standards in the Norwegian market are very high compared to the international norms. The equipment here is very sophisticated. Therefore our exposure to these higher standards provides a valuable contribution to the company internationally in terms of its operational standards.

What are some of the projects that Rowan is involved in today?

At the moment, we have one rig working with ConocoPhilips on Ekofisk, with a cantilever over a mature platform, which used to have its own rigs. On this field, we are performing a sidetrack operation to rejuvenate the well. Following this project, we expect that this rig will be engaged in drilling new wells or sidetrack wells to enhance production.

We have a second rig, due to work with ConocoPhilips next year and will perform permanent P&A work. Beyond this the rig could potentially move to development wells.

With Lundin, Rowan is providing a jack-up for the new development of the Edvard Grieg field. The Edvard Grieg platform will be a steel jacket with processing and living quarters on top, but there is no drilling package. Once the jacket is in place we will perform some pre-drilling and then pull out until the topsides are installed. We will then come back to finish the drilling work. It is a brand new field, so we are fortunate to have a contract with Lundin on this basis.

The fourth rig has been working with Talisman in Norway for around a year, working on the Varg field, doing slot recovery and sidetracks to take new wells into production.

Looking at your existing capacity in Norway, how do you view the human resources challenge?

The shortage of people industrywide is a major challenge. Activity levels are high with many more rigs coming to this market and they all have to be staffed. The labor market in Norway is very tight and not just in the oil and gas industry but across the board. The onshore industry is suffering as much as the offshore industry in finding people. This is why there are many foreigners now working in Norway.

There might language barriers, as most landbased industries recruites from East Europe. This is not so significant for the onshore industries, but it is a major challenge for the offshore industry. In our case, our biggest asset is having the UK next door to Norway. It makes a sense for Rowan to use UK offshore workers to our rigs in Norway, given that Norwegians speak English almost universally. However, moving a rig staffed for UK across to Norway is not enough to cover the human resources required because of the differences in the work schedules of the two markets. UK offshore workers have three weeks on and three weeks off, whereas Norwegians have two weeks on and four weeks off. Therefore to bring a rig from the UK into Norway requires around 70-80 extra people. We are filling these positions with Norwegians, or those who have lived a long time in Norway. We find that this mix works well

How do you see Rowan’s value proposition in attracting staff within a tight labor market?

We are able to attract top talent for a few reasons, including our 90 year history in this business. Another advantage is our young fleet with N-Class jack-up with state-of-the-art technology, built to the high specifications of the Norwegian market. This opportunity alone is enough to attract many offshore workers. Rowan is also working with recognized customers in Norway on long-term contracts providing a lot of stability. We operate in the Southern part of the North Sea and can fly people in and out from Stavanger very easily, after all this is where most of the oil and gas industry is located. Lastly, Rowan has a fantastic reputation for knowledgeable and long-tenured operational personnel. This is one of our biggest selling points as new employees learn from very experienced hands.

At the same time as Rowan is expanding in the Norwegian jack-up market, it is also pushing into deep-water drilling, with four new drillships. How is the overall strategy balanced?

Our strategy is to eventually have a balanced fleet in terms of earnings from our jack up and ultra deepwater fleets. Participating in both portions of the market means great opportunities for our employees, with expanding global opportunities Norway is not a market for drillships because it does not have a deep-water shelf. Our initial areas of focus for the drillships will are the U.S. Gulf of Mexico and East and West Africa. Our four ships will be delivered between late 2013 and through 2015; we have a contract for the first deliver and are actively marketing the others.. The vessels have huge capacity and the ability to drill at 12,000 feet of water depth. They have two BOPsoffering major efficiency savings.

How do you see your ambition for Rowan in the coming years?

I want Rowan to be extremely active in exploration drilling because there are many undrilled prospects in the North Sea inside jack-up territory. Some of these will hopefully turn into developments. Our strategy will involve working with both the established players and the newcomers.

Rowan will also be seeking a greater role in demanding drilling operations. We have a strong track record in HPHT wells internationally and I want Rowan to be more engaged in this type of well in Norway’s mature basins.



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