Dennis Jul Pedersen, Chief Operating Officer, Gulf Marine Services (GMS), UK
Dennis Jul Pedersen, Chief Operating Officer at Gulf Marine Services (GMS), discusses the considerable evolution of the company’s operations in the North Sea, the opening of its Aberdeen offices, and gives his perspective on how the company can continue to build its presence in a bustling offshore region.
What is the strategic role of GMS’ Aberdeen office for the global organization?
GMS was founded in Abu Dhabi, UAE, in 1977 and has become the largest provider of self-propelled, self-elevating accommodation jackup rigs not just in the Middle East, but also worldwide.
Our Aberdeen office, which we opened three years ago, is very important as it’s the ideal base from which to access the UK oil and gas market, where there’s a growing demand for the type of offshore support vessels we provide.
If we’d established our office anywhere else in the UK, we wouldn’t have achieved as much as we have done in a relatively short time. Every oil and gas-related service you can think of can be found in Aberdeen. If you are working on improving safety, for example, the relevant analysts, consultants and experts are right here in the city. Aberdeen is a world-renowned oil and gas industry centre of excellence and is a strategically essential location for GMS.
During 2013, GMS was very successful in securing new contracts and agreements with ABB Group, ConocoPhillips and Siemens, which would seem to suggest an increasing demand for your vessels. With this in mind, is GMS ready to take on more market share in the North Sea?
We are definitely planning to increase our market share in the North Sea. However, the jackup rigs we offer are highly specialised and cannot simply be acquired second hand; they currently don’t exist. For that reason, we are building more rigs in the coming years and tailoring these to North Sea operations. We are always on the lookout for new opportunities; being both builder and operator gives us an important advantage in this competitive market.
GMS supports its clients in two areas for offshore development: brownfield projects and greenfield projects. In which area do you see most demand on the UKCS and for what type of services?
We see most demand in the brownfields where there is a need for accommodation facilities and well services on maintenance projects at older platforms. We are also seeing an increasing requirement in the North Sea from the renewable energy market, although this market tends to be cyclical. For instance, in the next 12 months, many will complete their contracts on renewable projects, which indicates that the market may be paused for a short period. The renewables market is certainly a very interesting one from some perspectives, but it’s not as steady as oil and gas, where spending on operations at mature oil fields reliably increases year after year.
The present asset life extension project we are supporting with the GMS Endurance in the North Sea is exactly what we came here to do. This is a project we are very proud of and is precisely what we built the rigs for; the project demonstrates well that our concept works.
With such an innovative offering, how do you demonstrate value to potential customers?
Once potential clients understand the difference between our offering and conventional jackup rigs, and see examples of how we work, the concept is sold. We do attend trade fairs and use the traditional brokerage channels, but we’ve also found an effective way of explaining that our offering is through white papers. These reports provide case studies that demonstrate how our multi-purpose jackups can move independently, using their own propulsion and without the need for expensive support vessels. They can move faster and more efficiently, requiring smaller weather windows. Consequently, the uptime for the charters of the rigs is improved. All this, and the 300 tonnes crane capacity and large deck area, makes the rigs ideal for brownfield projects.
Twenty-seven operators in the UK sector will spend money on decommissioning in the next ten years with an accumulative expenditure of £10 billion. How is GMS positioned to capitalize on the decommissioning segment?
The decommissioning segment is unpredictable: £10 billion would be a game-changing investment, but the problem with decommissioning is that it doesn’t operate on a fixed schedule, and fundamentally it comes down to costs; decommissioning is very expensive. In many cases, it costs less to keep a mothballed asset maintained than it would to decommission it.
There could be a business opportunity in keeping old platforms maintained to minimum standards until somebody comes along with the technology that can revive production or makes decommissioning more cost efficient. Why would operators spend their capital on decommissioning right now, when these decisions can be easily delayed for five years?
We have positioned ourselves well for any company considering an alternative to decommissioning, by engaging with other service providers and establishing work groups aimed at harnessing our assets for more cost effective solutions. Service providers are very interested in getting this concept working because it would make a major difference to their daily operations. Nevertheless, a combination of different factors needs to materialise for this to happen. First, mature bases need to be ready to carry out brownfield work. Next, we have to build the right assets, and to date there are only four of these in the world. Finally, the relevant companies specialised in brownfield services need to be on board.
In Norway, Basel 3 regulations and the withdrawal of several banks from shipping means that shipping companies will struggle to access capital in the years ahead. How are you financing the development of GMS’s fleet?
Our financing comes from Middle East Islamic banks, an untraditional source of capital for the shipbuilding industry. Our cash flow is healthy and we were able to fund the building of our two large jackups from this, without the need for additional financing.
What are the geographies that GMS is looking at next? And is GMS looking at expansion through partnerships and acquisitions?
Our main market is well services and, looking to the future, the abandonment segment too. Therefore, the geographies that interest us the most are those where there are mature bases such as in the North Sea and South East Asia. Indonesia and Brunei would probably be the next target. West Africa is also a key market, but the competition is rather different over there. We still see requirements coming out of West Africa for similar units to ours, but we believe expansion in South East Asia will be the next priority, after the North Sea.
We are looking at acquisitions where possible, but the plan is to grow organically, simply because there are not that many companies doing what we do. With our build and operational capability, it makes sense to continue to build our own assets and tailor these to global requirement.
When we meet you again three years from now, where will we find GMS?
We hope to have one more rig arriving in the North Sea in the third quarter of 2014. It will be a higher specification than the two we have currently working here, with higher crane capacity and longer legs.
The platforms we have been working on in the North Sea have mostly been located at depths of 40-50 meters. Naturally, the first developments were to the south in shallower waters. There are some in the north, but these are not so far along in their lifecycles. Our existing jackup rigs are capable of covering most of the platforms on the UKCS, but in the future, we will need larger rigs for use in deeper water.
In the meantime, we are building four more smaller rigs, two of which we plan to bring to the UK in 2015. We could really have benefited by having these particular rigs now as there’s considerable demand in the UKCS. There is also a requirement for our services in Denmark, but we have a substantial backlog to fulfil, which of course is a good position to be in, further demonstrating how well our concept has been received in the industry.
You have a strong background in the industry as a master mariner. How do you translate this experience into managing GMS?
Most of my experience is in working with shipping, rig, oil and service companies. This translates into a good understanding of the market, especially here in the UK where GMS is a relative newcomer. I also know how to operate assets as efficiently and as safely as possible and understand the needs of the clients. This has all enabled me to understand where GMS fits in and what is driving the market. According to where you are in the world, the drivers will always be different. In the UK ‘compliance’ is a key driver. Compliance and requirements from HSE are increasingly strict, which represents a cost to businesses, not only in terms of money, but also in time and effort, and represents one of the key barriers to entry in the region. It’s important to be able to recognise where the hurdles are and to know how to get over them, to ensure GMS meets all the necessary requirements for the safe delivery of successful offshore operations.