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Michael Topp,Managing Director, Kongsberg Oil and Gas Technologies

15.05.2014 / Energyboardroom

Mike Topp, Managing Director of Kongsberg Oil and Gas Technologies gives his opinions on policy overseeing the UK continental shelf at the moment as well as illustrating how his business is coping with the challenges of ageing assets and falling production by delivering innovative, ground breaking technologies such as software and riser management systems.

In 2011, you wrote an article in a Kongsberg newsletter critical of government tax policy with regard to the oil and gas industry. Following the Wood Review, and the recently launched budget, what would your stance on current policy be at the moment?

The Wood Review will provide the opportunity for sustained production in the UKCS, along with increased export opportunities for the UK supply chain. The holistic doctrine proposed in the Review in the shape of the tri-partite relationship between government, the treasury and the department of energy and climate change (DECC) are all positive steps forward and allude to parallels between the UKCS and the NCS. Norway has operated successfully with this stewardship approach for some time, albeit with the advantages of a National Oil Company in Statoil the equivalent of which is absent in the UK.

The March budget was in general supportive to the industry, especially with regard to the proposed new allowance for u-HPHT clusters, but to support maximised economic recovery from our mature basin more needs to be done to encourage increased exploration. So in summary, if I wrote another piece it would fully support the implementation of recommendations made in the Wood Report, including the appointment of a new regulator to work closely with the Treasury to ensure amongst other priorities that taxation policy is aligned with the needs of the maximising recovery from the UKCS.

How would you describe the state of infrastructure in the North Sea at the moment; do you think some previous business models for procuring infrastructure have led to deficiencies in integrity today? Also should the industry attack cost inflation or prioritize greater efficiency ?

It is wholly understandable that previous business models have been dominated by the needs of the owner who is charged with producing a return on the investment in that infrastructure. Going forward however, there will be an increasing need to utilise the current infrastructure to process and transport well streams from smaller third party operators to improve marginal field economics. Therefore a well maintained infrastructure in the UKCS is advantageous to maximising economic recovery, if the commercial relationship between owner and new operator can be mutually beneficial. If the new regulator can encourage the establishment of such relationships then this will help secure investment and maximise production.

As to whether the industry should attack cost inflation or prioritize greater efficiency; it has to be a two-pronged approach. Costs associated with development of marginal fields must be reduced, but also innovation must drive improvements in exploration and production efficiency. This is where I believe that Kongsberg can add real value.

Last year Kongsberg brought its MENA headquarter to Guildford in the UK. What opportunities did this offer to connect Kongsberg’s wider geographical clientele with skills the company has access to in the centre of excellence here in the UKCS?

We established the Guildford office last May for several reasons; a larger location for our rapidly expanding Production Assurance business in the UK and also to provide a hub for our MENA sales teams. The move has placed us firmly in the catchment area for the skills we require, located us closer to some of our key clients and provided much improved facilities and transport links for our staff and customers.

In terms of the opportunities with Kongsberg’s wider geographical clientele, the Guildford operation is fast developing into a centre of excellence for real time production assurance systems serving markets in the UKCS, in Europe and the Middle East.

In Kongsberg’s 2013 annual report, it is stated that the company is eager to expand its business through increasing innovation and through acquisition. Could you tell us how innovation is driving this growth?

Enabling maximised economic recovery is a fundamental driver in our innovation strategy and addressing the technical challenges presented is essential to achieving our growth ambitions. We are operating in a mature basin with ageing infrastructure, combined with challenging frontier opportunities. The need for reduced costs and increased production efficiency, in a safe and environmentally sensitive way underpin our innovation and technology development. Some specific MER factors influencing our development programme are;

  • the increasing importance of subsea engineering as we move towards the ‘subsea factory’ concept for frontier developments in remote, deep-water, harsh environments
  • a flexible approach to field development to allow ease of tie-ins, to enable cluster field development and to ensure the utilisation of infrastructure long into the future
  • cost inflation and its adverse impact upon project economies, especially for marginal fields, dictate higher levels of production efficiency, with the potential for unmanned production using floating platforms and buoys
  • the skills shortage within the sector requires systems that can maximise the availability and readiness of a limited experienced resource pool, providing them with manageable, real time data for enhanced decision making

Maximising economic recovery means collaborating with the entire supply chain to deliver innovative and more integrated solutions to reduce both CAPEX and OPEX whilst increasing safety and lowering environmental risk. In KONGSBERG we have the advantage of being able to draw upon our expertise in harsh environments. We are able to realise advanced, but mature solutions, to address the technological challenges required to maximise economic recovery.

To illustrate some areas where innovation and subsequent technology can work to maximise economic recovery, we are continually developing our range of horizontal, vertical and customised tie-in solutions. These include both pre-installed and retrofit hot tap tee’s, which enable the tie-in of marginal fields to existing pipelines without interrupting production. This provides the flexibility to enable cluster field development and to ensure the utilisation of existing and new subsea infrastructure.

We are also developing a gravity based storage solution that differs from conventional systems by using a collapsible bag for oil / fluid storage. This eliminates contact issues between sea-water and the stored fluid. The bag is covered by a protective structure that accommodates the volume of the stored fluid, providing a complete dual barrier storage system. The unit can be installed at any water depth as there is free flow of seawater into the base of the structure and therefore no requirement to design against the water pressure. Multiple units will be able to be incorporated during the lifetime of a field, and moved to other areas when production falls off. It will form an integral part of a subsea factory system and will contribute significantly to the commercialisation of new marginal oil fields or tail end production.

Software was a big driver of Kongsberg Oil and Gas Technologies revenue increase 2012-13. What do you see as the appetite for new software ?

From our experience, the appetite for new decision support software within the UKCS is increasing with the complexity of projects. For example, being able to effectively manage reservoir resources underpins the success of every exploration and production project, and is particularly relevant with marginal field developments. With some 300 fields operating in the UKCS (with ever increasing levels of inter-dependency) the quantity of field data is growing year-on-year. Having access to reliable software tools that enable us to integrate operations through effective data management is critical to achieving improved oil recovery and therefore maximising return on investment. At the same time operations are becoming more disparate, as oil companies seek resources in ever more remote and diverse environments. The scarcity of experienced resources available to utilise the information makes global collaboration a necessity, as this expertise may be distributed around an international organisation, its partners and its supply chain.

In order to make better-informed decisions, access to data must be timely, simple and secure. We are working with clients in developing software and systems to enable operators to gain access to the myriad of data, reports and other field information, making real-time calculations and ultimately enabling real-time decision-making. These principles are also being applied to the development of our integrated environmental monitoring system which will enable real-time decision-making based on numerous sensor inputs.

Another example of the increased appetite for software tools, is the success we have had in the UKCS with our life cycle simulators provided for design, verification, operator training and real-time decision support throughout the well-to-export process, ensuring efficient production and enhanced safety. Our software solutions in the production assurance area are developing rapidly to include; equipment integrity condition based monitoring using simulation comparison with real time data, providing equipment performance indicators and informing intelligent preventative maintenance regimes. Other software developments are enabling us to replace costly subsea instruments with virtual flow metering to realise significant CAPEX reduction and associated OPEX savings through reduced maintenance.

What differentiates Kongsberg Oil and Gas Technologies from its competitors?

We are an integral part of the wider KONGBERG Group, which provides engineering capabilities from the deepest oceans to outer space. This differentiates us from many of our competitors in that we are able to offer some unique and innovative solutions based on mature technologies within the whole Group. We also live by our Corporate Values which enable us to maintain long term, highly collaborative relationships with our clients. Our determination to succeed and reliable performance underpin the KONGBSRG brand.

Around a quarter of Kongsberg’s revenue last year came from Europe. What proportion of Kongsberg’s revenue comes from the UK?

The UK makes up a significant proportion of the KOGT’s European revenue and this has grown considerably over the last two or three years. Of the four major new projects within the UKCS, we are pleased to be engaged with BP on Clair Ridge, with TOTAL on Laggan Tormore and with Statoil on Mariner.

What do you think Kongsberg Oil and Gas Technologies management needs to do over the next five years to achieve its goals?

By bringing innovative subsea hardware and engineering services together with our software and management tools, we can create a truly integrated solution for our clients that maximises production and equipment integrity, whilst minimising operational costs. We call this THE INTEGRATED EDGE, and it defines the method by which we will collaborate with our clients to maximise economic recovery.

KONGSBERG is 200 years old this year. Kongsberg Oil and Gas Technologies, whilst relatively new to KONGSBERG, is fast evolving. Since our formation in 2010, we have grown to some 750 employees operating in 8 countries and whilst doing so have expanded our portfolio of subsea products, software and services, and management solutions. We currently service all major oilfield operators, key drilling service providers and other EPC & SURF contractors. Over the next five years we intend to grow the business further via acquisition and innovative product and service development.

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