Jørgen Hallundbæk, Founder and Chief Executive Officer, Welltec, Denmark
Could you begin by introducing Welltec to those of our readers that are not yet familiar with your impressive success story?
It all started with the idea of the Well Tractor®, which I developed while I was a graduate student at the Technical University of Denmark.
The Well Tractor® enabled operators to reach the horizontal part of oil and gas wells and getting past the deviated sections using standard electric line, and it could thus eliminate the large and expensive amounts of equipment needed for conveying tools and performing interventions in oil and gas wells.
Today I think it is fair to say that Welltec® is globally recognized as the leading provider of precision robotics for conveyance services and interventions in vertical, horizontal and deviated oil and gas wells. We perform our services around the world in offshore and onshore wells including in hostile environment such as deepwater, subsea, Arctic conditions, extended reach wells, heavy oil and unconventional gas environments. We also provide services across the evaluation, drilling & completion and intervention phases, and also provides a Coiled Tubing Well Tractor® to extend the reach of coiled tubing in horizontal wells.
We continued to expand the portfolio with mechanical downhole services, then clean-out and milling services and more recently have introduced a series of Well Completion Products. All Welltec’s equipment ensures optimization of the intervention technique chosen while providing a value-creating solution to protect the total investment in the well.
Statoil was one of your earliest customers and is today your signature reference. Why did you choose to build your success in Norway rather than Denmark? Given challenges in increasing extraction rates from mature chalk on the Danish Continental Shelf, and that you are a Danish company?
We decided from day one to be an international company. Even on our website you have to look carefully before you will find anything Danish and that is fully intentional; why consider to be tied to one market when you have the entire world to play with?
Our first trade show was actually in Houston, we simply decided to start our sales in one of the largest, easily accessible oil markets in the world, and there we also had the highest chances to find someone with a keen interest. It was very simple and very pragmatic.
And indeed, our first orders came in first from the United States, then Germany and Norway.
Today you work with the majority of the world’s biggest 25 oil companies, and with all of the super majors…
We started working with ExxonMobil in the development of Norway’s Statfjord field. Our partnership with ExxonMobil was our step-over to Canada. Operators at Statfjord worked with massive concrete platforms in an Arctic environment.
With ExxonMobil we went across the Atlantic to the U.S. coast, slightly closer to shore than where the Titanic went down, but with the same challenges and water temperatures [icebergs and freezing waters]. It is very difficult to get the production shipped out of there, and the challenges are similar to the ones faced in Norway. It hence was a fairly natural step for ExxonMobil to apply the same Welltec® technologies that they used in the North Sea.
With ExxonMobil we also entered Sakhalin Island in Russia, which was again more or less the same story with regards to the environment.
Throughout our development we have always looked at projects that are closer to what we have done before from a technical and exploration standpoint, and from there we grow. We follow the super majors around the world on the big projects. The map depicting Welltec’s presence around the world is today linked to the presence of the major companies and oil provinces.
Today, we have subsidiaries in 25 countries, and 52 operating bases. A lot of them are lean and skinny, which is part of our philosophy. We are focusing currently on West Africa, Asia-Pacific and Brazil.
Russia presents a great opportunity for us, as there is a knowledge gap, caused by the fact that coiled tubing was never there. Usually when we enter markets, there are hundreds of sales people on the streets; there are not in Russia.
How would you rate the focus on enhanced oil recovery in Norway compared to the rest of the North Sea countries?
Norway has been incredibly fortunate in the past years, with enormous discoveries, which has provided a bit of a surprise. It was thought that the Norwegian market would diminish in size, but it is clear that it will continue to improve
Norway has been focusing on enhancing recovery rates for more than 20 years and still today is the global benchmark for enhanced oil recovery. The rest of the world is not there yet. Denmark is still at an average point in terms of recovery factors, and the UK is nowhere near the levels of Norway. Although the UK is so close and even shares fields with Norway, there is a completely decoupled, disconnected way in which they approach the issue.
Whether it is through tax regimes or government bodies, for us it is difficult to understand why efforts in the UK are lagging. Looking at the UK from a reservoir standpoint, it is not that different from Norway.
Norway has caught up to the fact that there is so much more oil in the ground, and that it is just a matter of extracting it. The UK is focusing on the direct costs involved, whereas Norwegians realize that investments will lead to tremendous returns.
It takes decades for our conservative industry to adopt a new philosophy. Historically, the philosophy has been to drain it for a while, and then you move on and find new reserves. Of course a lot of reserves were left and recovery rates were low.
It is outright impressive that you manage to come up with solutions that a company like Schlumberger – which invested 1.2 billion USD in research last year – about 4 times as much as Welltec’s total revenue in 2012 – cannot. What is the secret behind Welltec’s success?
We are simply more focused. Remember that funding is spread around a much wider number of products. We have a strong relationship with Schlumberger and we use their bases around the world. A number of major operators actually strongly encourage Schlumberger to work with Welltec, because they have the footprint and we have the technology. We thus worked for quite a number of years as a subcontractor to Schlumberger.
We are still working with them, of course, but sometimes now they are our subcontractor. They decided to develop similar technologies, but are still in the phase of catching up.
I was introduced to the industry through Schlumberger. They organized recruitment sessions at the Danish Technical University where they tried to encourage young people to join their company. It was through one of these sessions that I realized how interesting the oil & gas industry is. Up until then, I had been focusing my efforts on the shipbuilding industry.
I went to Houston before writing my thesis to investigate whether anybody had actually invented the “gadget” I had in mind. I did as much research as possible, and then went back to ask my professor if it was acceptable that I make such a “gadget”. I was 23 years old at the time. This is an ideal age to start building up a company if you have an idea, because you are still too young to listen to people telling you that it is a bad idea or that you should not take the risk!
Every person is unique, and companies are founded by people and started from different standpoints and different directions. It is the basic ideas behind the engineering and the approach that actually makes the difference.
The essence of Welltec’s philosophy is to challenge existing practices and think laterally in order to develop products and services which increase oil and gas recovery, while improving the economic, environmental and safety aspects of our industry. In practice we develop, test and manufacture state- of-the-art technology to enhance oil recovery and production rates for our clients, thereby improving their profitability through a longer term revenue stream.
How do you ensure that you maintain this culture as the company goes through such rapid growth?
I have to admit that it is a challenge to maintain the right culture as we grow bigger. Welltec’s headquarter in Denmark is located right around the corner to the Danish Technical University, and this area actually has a centuries-long tradition of producing weapons, so we have good 8toolmakers. Denmark is also very good at building electronics and has been part of the European space agency, so we get inspiration from a lot of different areas. We need different kinds of skill sets, and here we have access to that. If we want to make sure that we do not become another ‘me-too’ company, a copy-cat company, we have to be very aware at all times.
How do you then attract the best talent to ensure this, also taking into account that you compete with companies much bigger than Welltec?
People are key in this regard. We have a large influx of people from the industry. Schlumberger is perhaps the biggest schooling entity in the industry, a bit like the McKinsey & Co. of the oil & gas industry. They take in a lot of extremely talented young people. We pick up the ones that have survived in the system for a number of years and are looking for a change. From a statistical standpoint, if you are able to survive in their system for a decade or more, you are probably quite clever.
Once we are in contact, I think they are surprised by our portfolio. Welltec® is considered to be one of the technological drivers of the industry. It is like being in a company that is runner-up to the industry’s top OFS companies, but actually has some technology to beat these companies. Many see it as a great challenge to join Welltec and try to beat former colleagues.
Where will you take Welltec in the coming five years?
We have every ambition to continue accelerating our growth and to remain second to none in terms of the provision of e-line intervention services. We will continue our dominance in the niches where Welltec® has pioneered and we will remain a market leader in well intervention services. We are also looking at the opportunity to provide a step change in well integrity through our products for lower completions.
That position is well maintained by having a high spirit of innovation. We sometimes refer to Welltec® as being powered by innovation. It is in our DNA and it is extremely strong across the company. It is something that Welltec® is admired for in the industry by our peers in the service sector and our clients. We accept challenges that most others would refuse.
We are very thankful for the recognition that we have had from Statoil. Our awards and partnership with them have resonated throughout the industry, so much so that we have received congratulations from many, including competitors in the service industry. Our recent award of a “4+2+2 contract” with Statoil gives us a strong, majority position with respect to downhole tractoring and intervention. It is recognition that Welltec® has the scope to continue to deliver value, which is one of the key performance indicators that Statoil always maintain with respect to its contracting.
The years ahead of us are at the same time challenging and full of opportunities. We wish to remain as focused as we have been in the past, conveying confidence and quality throughout our operations and above all being the best partner for our clients and prospects to come.
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