with Arne Roland, Regional Director Eastern North Sea, CHC Helikopter Service AS
CHC Helikopter Service (CHC) has just closed a major deal with Statoil worth USD 822 million. What does this represent for the company’s presence in Norway?
CHC is proud to have won all three of the available contracts, especially as we secured them in an environment of intense competition. Moreover Statoil is a key customer for CHC over the coming decade, in Norway and globally.
The deal with Statoil has enabled the consolidation of CHC in Norway and it secures a foundation for our business for a very long time. The three contracts will take effect in 2015 and constitute a five year deal with an optional three year extension. The contracts are therefore are likely to see our delivery for Statoil continue to 2023 and demand eight helicopters. It represents a large segment of our business here. CHC now has financial stability for our further development in Norway.
Norway is experiencing a lot of E&P activity on the back of major discoveries made last year. How is your business oriented around E&P companies?
CHC works with all of the major oil companies in Norway including Exxon Mobil, Shell, and BP as well as many of the newcomers to the market who enter either as consortiums or by coming independently to the market. Statoil is by far our biggest customer and so much. Our focus is on maintaining a high standard of satisfaction with Statoil in our services.
Norway is a really exciting market to be in and we have not yet seen the peak of activity which will arrive some years from now. Interest and activity on the Norwegian Continental Shelf (NCS) is heating up as a result of major discoveries such as the giant oil field, Johan Sverdrup. The interesting aspect of this find was that it was made in an area which has been explored and developed over the past 40 years. This is testament to the ongoing potential of the NCS; it is very exciting for the industry and it fuels optimism.
How do you see your performance figures in 2012 as a result of this activity?
In 2012 we have focused on improving our efficiency, delivering increased customer satisfaction, and creating a solid foundation for the future. Forecasts indicate that 2012 should actually be awill be relatively flat year when it comes to the top line. However, we are winning good contracts which will result in solid growth after 2012. CHC is also working hard on transforming our cost structure in order to improve our profit margins this year.
When trying to maximize profit margins, how easy is it to adapt your services to the different requirements of your different clients?
Fortunately thanks to the Norwegian Oil Association, the OLF, the industry requirements are relatively standardized in the use of equipment. Statoil has done a good job in leading this program to standardize reporting and equipment specifications. Therefore although client companies differ in terms of culture and modes of operation, the market is relatively efficient from a service supplier perspective. The market therefore allows CHC to optimize its cost structures and provide for many different customers at the same time. We meet regularly with the OLF as one body to discuss future trends and this also allows us to prepare our operation for the coming years.
Norway is now pushing into new frontiers of production in the Barents Sea. How are you adapting to these new realities in Norwegian production?
These new frontiers create increasing demands on our equipment and our fleet which must be capable of travelling further from the shore whilst maintaining their payloads. I am pleased to say that CHC is well ahead of this trend and the company’s international fleet renewal program has allowed us to bring in new technology and helicopters capable of dealing with these frontier production zones. CHC is therefore able to meet the challenges of these distances and payloads.
From a logistics standpoint, CHC has expanded its bases and we are now operating from Hammerfest – indeed we are the first helicopter company to move to this city – and have built up our capabilities in the rest of the region. CHC is expert at working in harsh environments so the transition towards Arctic production makes the most of our capabilities.
These are challenging environments, how do you ensure high degrees of safety and differentiate yourselves in this regard from your competitors?
CHC’s safety leadership in the helicopter service industry is widely acknowledged and continues to set the standard for excellence.
Our CHC Integrated Safety Management System (SMS) relies on a clear commitment from every person and department in CHC to achieve its stated aim, which is: No harm to People, Property or the Environment.
Everyone at CHC has a very important role to play – there are no exceptions. With that role comes a very important responsibility which is to lead by example; comply with approved procedures; and play an active and interactive part to ensure the safety of ourselves and of others.
Feedback from customers testifies to the confidence they have in our safety. Aside from having the right equipment and systems CHC maintains strict regulations on operating conditions and will not fly under certain conditions – safety is really within the company’s DNA. Our operations are based on this principle: our purpose is to enable our customers to go further, do more and – most importantly – come home safely.
Looking ahead, why would Norway be a good place to pour the company’s investments in the future?
With recent deepwater discoveries, such as the Johan Sverdrup field, the Norwegian continental shelf and serving our customers in exploration and production is an absolute priority for CHC. The large oil discovery Aldous Major, in a well-established North Sea exploration area, demonstrates how the industry constantly seeks new ways to find new reserves – so we need to be ready to support them. Norway is a very stable region and one where the client base is reliable. With the steady growth now experienced on the NCS it is becoming ever more attractive from a cash flow perspective; Norway is a key region for CHC and a focus for our investment.
How much of a challenge is it to keep up with this growth?
Keeping up is a challenge as is maintaining control over cost. Cost control is a general industry trend on the NCS and to stay competitive you need to work out an efficient cost structure. I would say that Statoil and other upstream companies are becoming ever more cost conscious. Satisfying safety requirements is essential but after that cost is no doubt the dominant differentiator. CHC’s ability to operate a large scale operation with presence across the country in a cost efficient way is a strength and something we can use to differentiate our service offering.
We have also been engaged in a program to renew our support applications and IT. CHC is trying to apply the latest technology in everything that we do when it comes to IT systems and the way that we organize ourselves. We aim to work smartly and effectively, utilizing performance enhancing technologies. CHC was one of the first movers in applying these technologies to our business and we are now in the midst of this program to transform our business. Results such as the Statoil tender win are proof that this restructuring works and CHC is now reaping the rewards of this program.
What would be your 3-5 year ambition for CHC in Norway?
CHC is working with absolute focus to maintain our position as the number one helicopter company operating in Norway. Improved cash generation from operations and efficient use of capital are key. That includes optimizing use of existing aircraft and raising operational excellence. Nothing is more important than improving aircraft availability.
Maintaining market share in a growing market offers the opportunity for good growth. Over the coming years, the major challenge will be gaining access to aircraft and bringing them into the Norwegian continental shelf, competing with Brazil and Australia which are major growth areas. If we are able to achieve this then we will continue to expand in this region.
You used to work for Aker Solutions and Kvaerner, what made you decide to switch to CHC, what is our personal motivation?
I have actually been interested in helicopter services since I was a young boy. Norway’s helicopter services have operated offshore since 1966 and you cannot avoid as a boy looking at the helicopters and thinking that that must be a fun industry to work in. To then be given the opportunity years later to come to CHC with their long established history and with their exciting operations was something I really could not refuse. There are challenges for the company and the offshore logistics industry but I am very proud to be a part of shaping and addressing those challenges within CHC. Being the president of one of the leading companies in an industry is an exciting prospect in itself and I feel able to exert influence within the sector.