Nick Dancer – General Manager, Petrogas E&P Netherlands
The general manager of Petrogas E&P Netherlands details how the company is building its competencies in offshore exploration in the Netherlands and how this European base will serve as the example for the company’s further international expansion. He demonstrates how the Netherlands’s continental shelf is not simply characterized by declining fields, but rather of companies developing new innovations and implementing under-developed plays, especially in the case of Petrogas E&P, a focus on shallow gas.
Given your longstanding experience in the industry, please describe what your main priorities have been since assuming the position of general manager in January 2015.
My priorities since becoming the GM of Petrogas E&P Netherlands (PEPN) have revolved around three initiatives. First, build the basis to establish the company as a safe, reliable operator in the Dutch offshore industry. From a European perspective, we’re an unknown company that recently arrived in the Netherlands having taken over Chevron’s Netherlands Exploration and Production company in November 2014, and while we have inherited the legacy operating philosophy and high standards of Chevron, we’re working towards establishing our own distinguished presence as PEPN. The second initiative focuses on the construction of a new platform that will be installed later this year and used to develop the A18 gas field. This will be the first installation of an offshore platform for Petrogas E&P—we are traditionally an onshore operator. The last initiative involves integrating EU Directive 2013/30/EU on the safety of offshore oil and gas operations into our own management systems. We’re using this opportunity to redefine the legacy policies and procedures that we inherited and develop a new and more fit for purpose basis for operating, while wholly encompassing the core principles of Petrogas E&P.
In a climate where many players are divesting non-core assets and implementing aggressive cost-reduction programs, Petrogas E&P has purchased all outstanding shares of Chevron’s E&P and transportation business here in the Netherlands. What were the company’s underlying motivations behind such a transaction?
Petrogas E&P has been a very successful Oman-based onshore oil producer—growing production from a couple thousand barrels in 1999 to surpassing 30,000 barrels a day net prior to the acquisition. But the company was looking to start building capabilities as an offshore production operator, as previously its exposure had been limited to offshore exploration. As such, when the company was evaluating prospective asset bases with strong growth potential, Chevron’s Dutch E&P operations made the most sense as a relatively self-contained entity with years of capabilities and offshore experience in exploration, field development, and production. We also valued the fact that instead of replicating Petrogas E&P’s existing set of capabilities, this acquisition would further enhance the breadth of our competencies. Moving forward, the Dutch operations will not only be used to develop the reserves here in the Netherlands, but also to serve as a basis for more future production activity in Europe.
How would you evaluate the continued vitality for E&P production in the Dutch continental shelf?
One of the primary assets that we purchased from Chevron is the Dutch A&B shallow gas fields. We are now the leading producer of shallow gas in Northwest Europe. This is a capability and expertise that not many companies have. It’s still a relatively new play, so we see significant running room here in the Netherlands, and potentially other areas in the North Sea.
In general, tough resources such as shallow or shale gas, are relatively under exploited at the moment due to the technically challenging nature of extracting these hydrocarbons—escalating the recovery costs when compared to traditional reservoirs. So, we’re constantly evaluating the benefits of employing more specialized equipment to increase recovery rates against the added costs associated with such innovative technologies.
In what way should regulatory or incentive schemes be altered to encourage more activity in the Dutch E&P market?
The Netherlands marginal gas field initiative, which applies to the offshore sector, is vital for us with our exploitation of shallow gas fields in blocks A & B. Considering the marginal nature of the fields with limited fields, low productivity, and remote locations, tax allowances and investment incentives are fundamental for profitable operations. An area where more incentives may be considered is with legacy oil fields. If managed poorly, the effects of declining production and low oil prices may very well create too stringent of an operating environment in which PEPN, and other E&P companies like us, would have to shut down and decommission the infrastructure, which can otherwise be used for many more years. Any subsequent upstream company who finds small oil fields will probably not be able to develop them, producing rather unfavourable circumstances for maximizing recovery rates of domestic resources. To this end, the government may find incentives for maintaining or helping with the maintenance of old fields quite relevant to its current agenda.
Now with an average daily production of 2,400 barrels, blocks P/Q have been producing oil for more than 30 years under the operatorship of Unocal, Chevron, and now Petrogas E&P. How will you go about tackling these mature blocks? Any changes from the legacy production strategies?
Historically, Unocal was one of the pioneers of offshore horizontal drilling in Europe. So, the fields that we’ve inherited have already been exploited with relatively advanced techniques, and the methods are still relevant today. The key to success in recent years has been maintaining the uptime of the wells. They’re all ESP (electric submersible pump) supported production. We have our own work over unit with a dedicated crew, which is not typically common. They’re kept quite busy over the year, but that’s how we’ve minimized production downtimes. Although we’re struggling with bringing new oil into production, from a production efficiency standpoint, we focus on maintaining high uptime facilities with respect to our wells, power generation, and the associated equipment on the platform. Our longest run time for our ESPs is 16 years, which might very well be a record for Europe.
Considering the recently acquired A15 and B17 licenses, in addition to the current productions in A12 and B13, to what extent will Dutch shallow gas development drive the company’s primary strategic objectives moving forward?
The area for significant growth will come from the shallow gas area A/B. It takes a lot of resources to manage P/Q, but the growth will come specifically from A/B and that’s why the, following the A18 installation, the company is also pleased to have the extra interest in A15 and B17, in addition to B10 and B16, for the next phase of our shallow gas productions. Although they’re marginal fields, we believe with good project planning and the synergies of executing two projects simultaneously with respect to early engagement and relationship building, we can turn these seemingly non-commercial discoveries into profitable fields.
When we met with Mr. Hendrik Muilerman of BP Netherlands, he stated that energy revolves around three crucial elements: containment, storage, and transportation. With that said, how will the company leverage Chevron’s legacy handling and transportation infrastructure to streamline operations and bolster PEPN’s competitive positioning?
We have one of the few beach crossings in The Netherlands for an oil pipeline. Despite the fact that the infrastructure was built approximately 30 years ago, the infrastructure is well maintained; the pipeline has been inspected with 2015 criteria and will be certified for another five years of continuing operations. We also have the A12 central processing platform, which at the moment will serve as a vital hub for further shallow gas production. Our transportation system serves as a cornerstone service for not only PEPN, but also other companies operating in the Dutch continental shelf. There are oil field developments that are currently trying to move forward, and we naturally offer our services for that. If an operator brought some shallow gas around A12, then we would happily accommodate their resources within our system. Collectively, we see the oil and gas transportation/treatment assets as a valid and crucial part of our business as well.
Speaking to the government’s energy agreement for sustainable growth, the country is now experiencing an energy transition that enforces the ideas of eco-friendly production, clean consumption, and cost-efficient supply security. In what way is PEPN contributing to these green initiatives?
We certainly look to minimize our energy consumption in producing hydrocarbons in all aspects of our operations. To produce from our fields we either use ESPs for our oil assets and compressors for our shallow gas fields. More efficient burning means lower emissions, and ultimately lower operating costs. So, we’re continually looking to bring in the next generation of equipment, whether it’s low NOx turbines, gas engines or micro turbines, to optimise fuel efficiency and reduce the company’s carbon footprint.
With increasingly complex production methods, comes an increasing emphasis on safety precautions. What policies or procedures have you implemented to reflect that conviction?
The Chevron E&P Netherlands organization had the full policies and procedures of the global organization with a real emphasis on incident and injury free operations. That’s the mantra for our operations here as well, but we can’t be complacent and we are looking to better ways to maintain the integrity of our facilities and keep people safe. Historically, Chevron has maintained the facilities well, but we’re looking to enhance visibility by dovetailing the injury-free approach with a more transparent integrity program. As with many operators, we’ve taken on the idea of stop-work authority, which empowers employees to stop working if they feel it’s unsafe, and physically going out to the platforms to reinforce that message.
We also believe that a fresh set of eyes brings a fresh set of perspective, which is why we value programs such as hazard hunts, which are a great way for people to become aware of their surroundings. This program has equipped personnel with the proper training and guidance on how to effectively spot for hazards. This is all part of building a new safety culture to satisfy not only the EU directive, but also the company’s desire to be recognized as a safe and reliable operator. If we want to move forward with offshore operations in other countries, the reference for regulators will be our operations here in the Netherlands, where we’ve established our first offshore presence. I think in a way, the expectation on Petrogas E&P is higher because we’re unknown here, but actually we are building on an existing Petrogas strong operational achievement in terms of safe man-hours and our established continuous improvement culture in QHSE. It’s good that the authorities were comfortable with bringing in a new player from a different part of the world, and we have to reward that faith by showing we do things as good or better than previous incumbents.
In terms of reputation, capabilities, and performance, what do you want the company to be known for in future?
We want to be known for as a safe and reliable producer that fully leveraged its competitive advantages to push the envelope on exploration and production in the Dutch continental shelf—specifically in regard to shallow gas, or even shallow oil. I’m an explorer by background, so I’m always looking to develop new plays. There is still a relative abundance of under explored blocks and stranded discoveries in the Netherlands, even after all these years. We’ve got a plan to re-evaluate these and move them forward with exploration into production, adding to our current production portfolio. Ultimately, I look forward to creating a culture that fosters the spirit of innovation, guided by a structured process.
What are your own personal philosophies in chartering long-term success for a company like PEPN?
Firstly, the people in the office have to have a clear direction of the company’s trajectory for this year, as well as the next five. From my perspective, I try and give people the space to work and develop trust, both within teams and with Management. I would describe it as confident excellence, which is not about bragging or conceit, but making people feel they have capabilities and confidence to use their capabilities and share it. Success invariably revolves around teamwork, but it’s also about individuals. It’s trying to make sure that when we have our reviews, we follow a robust process that constructively challenges our people, without stifling innovation and value-creation.