Alasdair Buchanan, COO/Managing Director of Energy Services, Senergy UK
Alasdair Buchanan, COO/Managing Director of Energy Services at Senergy talks indepth about the company’s international projects, the diversification of its services over recent years, how exactly Senergy was involved in the Ethical Energy Consortium, and the potential of unconventional oil play in the UKCS.
Last year Senergy became a member of the Lloyd’s Register Group. What was the idea behind this deal and what does this bring to your international standing?
Lloyds Register (LR) has made a significant investment in Senergy and within three years, will fully own the organisation. At this point in time, Senergy is still an independent company, but we are making significant headway in jointly marketing ourselves with LR on potential projects and getting the benefits of working together.
The investment made by Lloyd’s Register (LR) in Senergy was announced on the first day of Offshore Europe in September last year. In fact, Senergy had been looking for investors, since the company had seen significant growth since our foundation in 2005. Being privately held, additional investment would enable the company to continue with its aggressive growth strategy. An investment partner was needed to provide the resources and infrastructure necessary for our continued international expansion and which shared our values, ideas, and corporate social responsibilities.
After two years of reviewing candidates, LR actually approached us. LR made sense as an investor because of the very compelling reasons by which they do business and the information they provided about why they wanted to invest in us and their vision for LR Senergy in the future. Lloyd’s Register provides the perfect fit for our business.
LR wants to support us in moving forward and this investment will allow us to expand on our already strong growth plans, especially because LR is present in markets in which we currently do not have a presence. We strongly support LR’s mission to uphold the safety of life, property and the environment, and see a strong alignment in terms of objectives, culture, excellence and management style. LR and Senergy share an ambition to make a difference and make the industry safer and more reliable.
How would you define the company’s positioning within the value chain and what is the rationale behind so much diversification?
When Senergy was founded in 2005, we brought together a subsurface consultancy and a wells project management business. To maximize the efficiency of extracting O&G, you need to begin with the reservoir. As such, we had the idea of merging the subsurface consultancy and the wells project management aspects into one company.
Obviously, on the well side, we only provide very high-end technology. We are not a contract driller and we do not do turnkey work. We are providing expertise, management systems, onsite supervision, and design capabilities for complex deep water, high pressure and high temperature environments where we can add value. We have significant experience in complex deep water, high pressure and high temperature wells.
The idea of expanding our services not only into O&G but also into the unconventional sector was to make ourselves become more attractive to our customer base by being able to provide solutions across the whole of the energy spectrum. We invested heavily in survey and geo-engineering, acquiring two complementary businesses and are now a key player in shallow, subsurface, and survey work, and have a significant market share in the UK on this side. We are also expanding in this area in Norway, with the Statoil contract for example.
What are the company’s current operations in the UK, and what is the strategic importance of the region?
The UKCS is still a very strategic zone for Senergy and our largest market, although the UKCS percentage in our overall revenue is diminishing every year because of our strong international growth. However, the UK is also a growth region. Our London office, which supports operations in West Africa, has recently expanded. Our Aberdeen offices support many global operations and offer much technical support, while we also have offices in Abu Dhabi, Dubai, Houston, Jakarta, Melbourne, Norway, Perth and Kuala Lumpur.
The Americas is a key area of focus for us with regards to geographical expansion. We have had an office in Houston for a while now, but it has historically been more devoted to software. We also acquired a renewables business in Maine, SGC Engineering LLC, focused on power engineering and survey. The Maine business is doing very well and complements our power engineering offices in Newcastle (UK) and Melbourne. In conjunction, we are involved in a pilot project with the University of Maine sanctioned by the US Government to develop an offshore floating wind program. It is fair to say that the US is currently behind in the area of offshore wind, and this is a significant project that is in the running to receive significant government funding.
How are you reaching out to the small and medium operators that are struggling to access finance?
Finance and capital are a bit different. When we were a standalone company, we would not have had unlimited access to capital to invest in an equity position in any asset. This was not the model we were set up on. Instead, we were created to act almost as an oil company for hire since we have all the skill sets and capabilities to help small independent operators who do not have all the resources needed to develop their asset.
We can provide a lot of support in helping them access capital, and we have a team that specifically carries out reservoir asset evaluation services. In fact, the majority of customers for this group are investment banking and finance houses that want to value assets. A number of individuals in our company are certified auditors, who are accredited to provide and sign off on competent person’s reports (CPR). For banks and financial houses, they can thus estimate the value of an asset, which is essential before any investment can be completed.
We provide such services in financial hubs like London, and we recently established a presence in Singapore with economists able to value these assets. Half of this work is comprised of CPR reports for our traditional clients and the other half is comprised of valuations done for banks. We are thus supporting smaller companies’ independence in trying to access capital.
A rapidly expanding business footprint across Africa, Europe and Asia Pacific has led to new London and Jakarta offices. What lies ahead for the internationalization strategy of Senergy?
Our global growth strategy has, to date, been organic in nature and we will continue to grow in this way as part of a much larger group of companies in LR. Another way we see ourselves increasing our geographical footprint is by providing services to national oil companies looking to take their investments overseas. When companies move into frontier areas, they potentially have no experience and do not have the staff required to be able to expand. We are a natural fit as partners for them since we are essentially an oil company for hire and are easy to access.
Traditionally, such companies would have gone to a major operator and signed a production-sharing contract, whereas we can come as an independent provider of service to give them all the skill sets they need to explore and develop an asset outside sovereign borders. They would have all the abilities within their own country, but wouldn’t necessarily have these when they move overseas.
As I said before, the Americas is a big growth area for us coming up, primarily Latin America. We have great opportunities to take the services we already provide and deliver them via our US office, which was traditionally focused on software. If we can offer subsea consultancy, survey and geo-engineering, wells and project management services, we can deliver the same product offering in a new market. Currently, we are a software provider to Petrobras, PDVSA, and PEMEX.
Can you tell us about an international corporate social responsibility initiative that Senergy has recently undertaken?
At the end of 2013, Senergy was involved in the launch of the Ethical Energy Consortium (EEC), which aims to deliver a framework for ethical and inclusive energy development for developing and emerging resource nations. The EEC will help guide emerging companies that currently do not have an O&G sector focus but are hoping to develop one.
The project will provide recommendations to the World Bank and the United Nations, which are going to provide much of the investment for these O&G projects. Issues to be addressed include protecting marine habitats, tourism, transparency, and preventing corruption. We are really excited about it from a CSR perspective. The EEC has been formed in partnership with organisational transformational management specialist, Miascape, and leading international Government advisory firm, Adam Smith International.
To what extent do you expect the production of unconventional hydrocarbons to contribute to the UK’s overall production in the medium term?
The UK Prime Minister, David Cameron, has already mentioned the potential presented by shale oil and gas for repatriating business that had gone overseas, because if you can produce a low enough energy cost, business operations become more profitable again in the UK. Thanks to the lower energy prices in the US resulting from the shale gas revolution, many companies are now moving operations back to the US from Southeast Asia, where manpower costs are rising substantially and energy costs are very high.
Is Senergy well positioned to go into this unconventional direction?
Senergy is very well positioned, and we have carved out a team to focus in on unconventional opportunities. This is one of the potential growth areas we share with LR as they see the same possibilities. Shale opportunities are going to happen, but there is a lot of rhetoric about potential harm. Things have to be done properly, which means establishing good industry standards and practices that have to be audited again and need to be followed. Currently there are no standards or regulations in place to develop shale resources, not even in the US.
As such, Senergy and LR will push forward to develop guidelines and regulations for a regulator, which should mitigate any potential issues that could occur. I am excited to see the outcome, since combining LR’s safety and risk management expertise and integrity and our upstream knowledge makes for a perfect partnership. For the past six years, we have been the only technical advisors to DECC (Department of Energy and Climate Change), and it is a natural fit that we would work with LR on this type of project.