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Norway Oil & Gas report Part 4 Oslo - the new old city November 2013
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CONTENTS 7 OSLO THE NEW OLD CITY 8 OIL AS FINANCIAL MUSCLE 10 OSLO’S HERITAGE 11 PUSHING OUT EXPORTS 12 THE NORDIC INVESTMENT POWERHOUSE 13 NORDIC PLAYING FIELD 16 365 DAYS AT THE HELM OF LUNDIN 16 SENERGY: EXPANDING ITS REACH 17 BUILDING A NEW SONGA 17 ADAPTING STRATEGIES 20 NAVIGATING A HIGH-COST ENVIRONMENT INTERVIEWS
24 INTERVIEW WITH Per Gunnar Ølstad, Senior Adviser of Oslo Stock Exchange 26 INTERVIEW WITH Eivind Reiten, former CEO Norsk Hydro, current Chairman Norske Skog 28 INTERVIEW WITH Jan Arve Haugan, CEO - Kvaerner 30 INTERVIEW WITH Jon Edvard Sundnes, CEO – Tschudi Shipping 32 INTERVIEW WITH Knut Brundtland, CEO – ABG Sundal Collier 34 INTERVIEW WITH Paul Bellamy and Amund B. Tørum, Schjødt 36 INTERVIEW WITH Torstein Sanness, Managing Director – Lundin Norway 38 INTERVIEW WITH Wenche Nistad, Chief Executive Officer - GIEK 40 INTERVIEW WITH Thomas Fjell and Erik Sandøy, InterOil 42 INTERVIEW WITH Roy Norum, Chief Executive Officer -PG Marine Group
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Opportunities in Oil & Gas Consulting
McKinsey & Company is the leading global management consultancy, and our Oil & Gas Practice is the world’s largest. Our Oil & Gas consultants advise the world’s energy companies, service providers and public institutions on their most important strategic, operational, organizational and technical challenges. To strenghten our fast growing practice we are now looking for outstanding candidates with Oil & Gas experience. Your background can be within capital The new old city projects, operations (upstream and downstream), as well as gas and energy OSLO trading. We seek candidates with a diverse set of experience from Oil & Gas ” he generation living at the time of hydrocarbon extraction is by no means the sole operators, service providers, or professional services firms. Doctoral and ‘owner’ of its value, and is therefore not entitled to spend it,” explains Sigbjørn John- advanced degree candidates in energy policy, geology, geophysics, engineering, Tsen, former Minister of Finance, which effectively encapsulates the ideological basis for the economic and financial model that Norway follows in order to preserve and grow its and related disciplines are also encouraged to apply. oil wealth for future generations. To hedge the economy against fluctuating revenues and to Should you be interested in joining our McKinsey Oslo Office with the Oil & Gas maintain competitiveness in other sectors of the economy, petroleum revenues are invested abroad through the Government Pension Fund Global (GPFG), referred to in the country Practice as your main focus, please visit http://www.mckinsey.com/client_service/ as the ‘oil fund.’ The profits from this fund are then reinvested back into the economy, build- oil_and_gas for more information. You can also contact: Anders Brun at ing infrastructure and public works that will benefit Norwegians for generations to come, all +47 98 20 40 10 or Christopher Forr-Rydgren at +47 93 83 51 13. while continuing to grow the size of the oil fund. Application via www.mckinsey.com/careers/apply, referring to the Oil & Gas Financial Journal in your application.
FocMck_OGFJ_1311 1 10/28/13 10:45 AM w 7
OSLOThe new old city ” he generation living at the time of hydrocarbon extraction is by no means the sole ‘owner’ of its value, and is therefore not entitled to spend it,” explains Sigbjørn John- Tsen, former Minister of Finance, which effectively encapsulates the ideological basis for the economic and financial model that Norway follows in order to preserve and grow its
oil wealth for future generations. To hedge the economy against fluctuating revenues and to maintain competitiveness in other sectors of the economy, petroleum revenues are invested
abroad through the Government Pension Fund Global (GPFG), referred to in the country as the ‘oil fund.’ The profits from this fund are then reinvested back into the economy, build- ing infrastructure and public works that will benefit Norwegians for generations to come, all while continuing to grow the size of the oil fund.
8 Norway Oil & Gas report part 4 November 2013
However, the current strategy of the oil fund may now change, revolutionized life in Norway. “For more than 40 years, petroleum following the election of a Conservatives-led coalition in Norway in production on the shelf has created considerable wealth for the coun-
September 2013, which is considering a number of different changes try. The Norwegian government and regulatory bodies have done an to the structure of the fund. Proposals from the various groups in extremely good job in getting the most out of the resources on the the coalition include splitting the fund into two or three competing shelf. In fact, other hydrocarbon-rich governments now implement funds, investing in foreign private equity and infrastructure, or even the Norwegian model.” using the fund for direct investment into domestic infrastructure proj- While it may seem that Norway is benefiting from its attempts to ects. The fund currently contains around USD 755 billion, with the diversify its economic base, the problem of over-dependency on oil
Norwegian Ministry of Finance forecasting that the fund will reach may be more deeply entrenched than the government likes to admit.
USD 1 trillion by the end of 2019. Despite the recent change of gov- As the Pareto Group, a Norwegian holding company, wrote in its ernment, Norway knows that its oil and gas will not last forever, and 2012 annual report: “The Norwegian economy was solid to the core plans to ensure that for as long as possible, its citizens will be able to – but was probably more oil-fueled than most people realize.” Svein benefit from this all-too-temporary good fortune. Støle, CEO of the holding company, explains that with a continued
high oil price, “the oil sector will remain extremely profitable and as
a result will attract the best people, thus increasing labor costs. At
the same time the public sector will continue to grow, while many
ordinary businesses are feeling the pressure between a lucrative and
profitable oil industry and the public sector increasing its wages.”
Sigbjørn Johnsen, Christer Tryggestad, Eivind Reiten, Despite the attempts of the government to preserve oil wealth for Former Minister Director, McKinsey former CEO of of Finance &Company Norsk Hydro future generations, it is clear that Norwegian citizens today do feel
the results of the oil boom in their everyday lives. On The Economist’s
OIL AS FINANCIAL MUSCLE 2013 ‘Big Mac Index’, which aims to show the purchasing power of
The GPFG is open about its investment strategy, its annual results, citizens in countries around the world, Norway comes in at the top of and the size of the fund. With investments of the GPFG in over 7,500 the list, at USD 7.51 for a Big Mac, against USD 4.66 in the EU area companies around the world, in both stocks, bonds and real estate, and USD 4.56 in the US: in raw terms, the Big Mac is overvalued in the fund's risk is quite mixed. And just because the fund has the Norway by 64.7% when compared to the exchange rate between intention of diversifying investments away from Norway, this does the NOK and the USD. There is a danger that Norway’s oil sector will not mean that energy is left out: the fund is currently invested in 147 leave other industries out in the cold because of the salaries on offer of the world’s 200 largest companies in terms of reserves of coal, oil for skilled workers. and gas. However, this situation is not a new one, and despite the challenge
The fiscal guidelines for the fund state that only the profits from of rising wages and increased living costs, the Norwegians remain investment can be reinvested into the Norwegian economy. How- generally stoical, as is their wont. Eivind Reiten, former Minister of ever, with the fund returning 13.4 percent on its investments in 2012, Petroleum and Energy and former CEO of Norsk Hydro, sums up the the second best performance in its history, this strategy appears to situation by saying: “It has been a consistent issue, albeit a small one, be no barrier to investment. In the Nordic region, Norway is com- ever since we found oil in the country. However, Norwegians have monly referred to as the ‘rich cousin’ for a very good reason. not broken a single window in any shop over the last 40 years despite
As Christer Tryggestad, director at McKinsey & Company explains, some challenging decisions. Norwegians citizens are extremely the discovery of oil on the Norwegian Continental Shelf (NCS) has disciplined.”
64 ENERGY.FOCUSREPORTS.NET | WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL NOVEMBER 2013 9
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While economically, the country might be heavily influenced by the Among the firms that decided to establish in Oslo is Lundin Petro- Even though Statoil is headquartered in Stavan- in 1972 that was acquired by Norsk Hydro in 1999. After the merger oil and gas sector, in power generation at least, Norway has estab- leum, a Swedish independent oil and gas exploration and production ger, the company has now opened a new 67,000m2 between Norsk Hydro’s oil and gas division and Statoil it became a lished real independence: today, over 99% of Norway’s electricity company with core operations in Norway and Southeast Asia. “That non-headquarters office in the Oslo area for 2,600 part of the latter. “As a result of the merger in 2007, former Statoil, production comes from hydropower plants. Around 850 small hydro- we remained in Oslo was something new,” says Torstein Sanness, employees, which has corporate functions and Saga and Hydro people are dominating many of these newly estab- electric plants situated all over the country generate almost all of the Lundin’s Managing Director. Lundin, with its main offices in Lysaker heads the NOC’s international operations. The Amund Bjøranger lished companies in Oslo,” Tørum adds. He acknowledges that it is a Tørum, Partner, country’s electricity. As a result, all of Norway’s produced gas and in the Oslo area, is involved in one of the largest oil discoveries ever noteworthy structure, costing the company around Schjødt relatively new trend for oil and gas companies to establish themselves most of its oil is exported. made on the Norwegian shelf, Johan Sverdrup, together with Statoil USD 313 million and comprised of nine-floor build- in the Oslo area rather than Stavanger. “The most obvious explana-
and Det Norske Oljeselskap. ing blocks stacked vertically and horizontally, has enabled Statoil tion is the availability of human resources, which is rather challenging
OSLO’S HERITAGE “In Oslo we take advantage of a larger talent pool. We have seen to consolidate its activities and strengthen its position in the Oslo in the booming Stavanger,” he says.
Until today, the Stavanger area has seen most of the effects of the quite a few companies wanting to participate on the NCS setting up region.
Norwegian oil boom; the city is widely referred to as the oil capi- their offices in Stavanger. As a result these companies are facing chal- Amund B Tørum, Partner at law firm Schjødt, explains that the PUSHING OUT EXPORTS tal of Norway, despite being a town with a population of just under lenges, as people stay for only two years then leave. For that reason, heritage of Statoil derives from three major Norwegian petroleum The shipping and offshore drilling industries present unique chal-
125,000. The largest company in Stavanger, alongside a number of companies are starting to move from Stavanger to Oslo. Naturally, if companies: Statoil, Norsk Hydro and Saga Petroleum, which were all lenges anywhere in the world: high capital requirements, frequently large E&P players working and operating on the Norwegian Conti- you change out your crew every two years there is no continuity; it is originally based in the Oslo area. “After the merger between these volatile markets and mobile assets that require special financing nental Shelf (NCS), is Norway’s national oil company (NOC) Statoil, expensive and makes it impossible to establish a company culture,” companies, a number of excellent people in Oslo became available. structures. Swedish bank Nordea expects capital expenditure for off- which has its headquarters located just outside town. Nevertheless, Sanness explains. Among other companies that have recently moved This explains the little boom of small to medium-sized oil companies shore drilling and support vessels to rise to USD 22.3 billion in 2013 an increasing number of oil-related firms are now setting up head to the Oslo region is also the French oil company Technip, which establishing in Oslo.” from USD 14.4 billion in 2012 before falling back to USD 14.6 billion offices in Oslo. hired an additional 100 staff in 2012. Saga Petroleum was a Norwegian upstream company established in 2014. "There is not enough money in the banks to fund the capital
ABG UNDAL CS OLLIER
Lundin Petroleum AB Dansk Oljeog Naturgas AS Pertra AS ABG Sundal Collier - A USD 165m USD 1,200m USD 155m Acquisition of certain NOK 500m Sale to Talisman leading Nordic Investment assets from DNO Bond ABG Sundal Collier ABG Sundal Collier ABG Sundal Collier Advisor to Ludin Petroleum Joint Lead Manager Advisor to PGS bank with strong E&P 2004 2004 2005 track record and long
term focus Petrobank Energy Corp PetroBakken Energy Ltd DNO International AS Weíre listening USD 250m USD 750m USD 240m ABGSC is recognised as a leading distributor Convertible bond Unsecured convertible Senior unsecured bond bond Partnership based on a close With over 700 people bringing an of Nordic equities and derivatives to Nordic ABG Sundal Collier ABG Sundal Collier ABG Sundal Collier working relationship. unrivalled breadth and depth of and international investors. Our global rela- Sole bookrunner Sole bookrunner Joint Lead Manager expertise together to challenge 2007 2010 2011 Senergy continues to grow tionships, coupled with our unique under- convention, Senergy gives you its energy business, delivering the right assets, the right team, integrated project and asset the right solution ñ and the right development services to the energy results. deliver unique local insight, investor views Wentworth Resources Ltd Petrominerales Ltd IGas Energy Plc industry worldwide. NOK 77m USD 400m USD 165m From concept and design through www.senergyworld.com Private placement Unsecured convertible Senior Secured Bond bond to implementation, we add Oslo Stockholm Copenhagen London value and ultimately enhance T: + 44 1224 213440 ABG Sundal Collier ABG Sundal Collier ABG Sundal Collier performance and productivity. E: [email protected] Joint Lead Manager Joint Lead Manager Sole bookrunner New York Frankfurt Gothenburg 2011 2012 2013
www.abgsc.no
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FocSen_OGFJ_1311 1 10/28/13 11:45 AM 11
Even though Statoil is headquartered in Stavan- in 1972 that was acquired by Norsk Hydro in 1999. After the merger
ger, the company has now opened a new 67,000m2 between Norsk Hydro’s oil and gas division and Statoil it became a
non-headquarters office in the Oslo area for 2,600 part of the latter. “As a result of the merger in 2007, former Statoil,
employees, which has corporate functions and Saga and Hydro people are dominating many of these newly estab-
heads the NOC’s international operations. The Amund Bjøranger lished companies in Oslo,” Tørum adds. He acknowledges that it is a Tørum, Partner, noteworthy structure, costing the company around Schjødt relatively new trend for oil and gas companies to establish themselves
USD 313 million and comprised of nine-floor build- in the Oslo area rather than Stavanger. “The most obvious explana-
ing blocks stacked vertically and horizontally, has enabled Statoil tion is the availability of human resources, which is rather challenging
to consolidate its activities and strengthen its position in the Oslo in the booming Stavanger,” he says.
region.
Amund B Tørum, Partner at law firm Schjødt, explains that the PUSHING OUT EXPORTS
heritage of Statoil derives from three major Norwegian petroleum The shipping and offshore drilling industries present unique chal-
companies: Statoil, Norsk Hydro and Saga Petroleum, which were all lenges anywhere in the world: high capital requirements, frequently
originally based in the Oslo area. “After the merger between these volatile markets and mobile assets that require special financing
companies, a number of excellent people in Oslo became available. structures. Swedish bank Nordea expects capital expenditure for off-
This explains the little boom of small to medium-sized oil companies shore drilling and support vessels to rise to USD 22.3 billion in 2013
establishing in Oslo.” from USD 14.4 billion in 2012 before falling back to USD 14.6 billion
Saga Petroleum was a Norwegian upstream company established in 2014. "There is not enough money in the banks to fund the capital
Weíre listening
Partnership based on a close With over 700 people bringing an working relationship. unrivalled breadth and depth of expertise together to challenge Senergy continues to grow convention, Senergy gives you its energy business, delivering the right assets, the right team, integrated project and asset the right solution ñ and the right development services to the energy results. industry worldwide. From concept and design through www.senergyworld.com to implementation, we add value and ultimately enhance T: + 44 1224 213440 performance and productivity. E: [email protected]
Oil & Gas Survey & GeoEngineering Alternative Energy Software Training NOVEMBER 2013 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM | ENERGY.FOCUSREPORTS.NET 67
FocSen_OGFJ_1311 1 10/28/13 11:45 AM 12 Norway Oil & Gas report part 4 November 2013
THE NORDIC INVESTMENT POWERHOUSE
ABG Sundal Collier (ABGSC) is the result of a out of the four ‘grand slam’ titles: best sales team, best sales 2001 merger between ABG Securities and Sun- trading team, and best Nordic research team. dal Collier & Co. The company has become an Looking back at ABGSC’s 2012 achievements, what are you most important force in the Nordic investment banking proud of? sector. Knut Brundtland, Chief Executive Officer of ABGSC, discusses ABGSC’s positioning and We are proud of our leading position as a lead manager for IPOs achievements since he took the reins in 2010. and our unique position within convertible bonds. Last year ABGSC Knut Brundtland, CEO, ABG Sundal was sole lead manager for two IPOs in Oslo. These transactions in What is ABGSC’s added value in the Norwegian Collier combination with last year’s USD 400 million Petrominerales convert- and international markets? ible bond illustrates the strength of our distribution platform and our global reach. ABGSC is a Nordic-based investment bank focused on three main To illustrate our strengths with an example: if a large oil areas: research, sales and distribution, and corporate finance. The company has the desire to sell one of its branches on the company has a large footprint in Norway, Sweden, and Denmark, stock exchange, we will advise the client from our corporate providing a wide range of investment banking services. Moreover, we finance team and execute through our sales and sales trad- are present in financial centers of London, New York and Frankfurt. ing arm, all backed by independent research. Subsequently We provide superior distribution of Nordic securities to we will follow the client for our investors through regular local and international investors. The combination of global research updates, roadshows and other events. reach, top-ranked research and high quality corporate fi- nance advisory services has established us as a preferred sup- You were appointed Chief Executive Officer in 2010. What made plier in the markets where we compete. Our slogan is ‘Nordic you the right person to take charge of the company? companies, global money.’ Additionally, we serve the international investment com- It is my background, which is a combination of business and law. As munity with top-ranked equity research, sales, and seamless a lawyer, I advised on M&As, transactions, and IPOs, thus having a execution. ABGSC has been voted ‘best Nordic broker’ in great deal of experience with the products that ABGSC offers to its the annual Thomson Reuters Extel survey, in which both local clients. This allows me to make quick judgments and not to involve and international investors compete. ABGSC has won three many external parties or follow long procedures.
expenditure requirements in the offshore explora- of capital goods and services. After the EU and tion and production sector," says Magnus Piene, the US, Brazil is the country where Norway has its global head of offshore at Norway's DNB bank. largest investment abroad: currently, a quarter of
"Since the banks cannot perform the role they the offshore vessels operating in Brazilian waters used to, we are looking for alternatives, and we Wenche Nistad, Per Gunnar Ølstad, have Norwegian owners. The first agreement with CEO, GIEK Listing Manager, hope that pension funds will join us and help Oslo Børs Petrobras in 2010 provided guarantees from GIEK finance the Norwegian oil and gas export industry," Wenche Nistad, totaling USD 1 billion. “Under the existing agree-
CEO at the Norwegian Guarantee Institute for Export Credits (GIEK) ment, several Norwegian companies within the oil and gas industry, said. GIEK, established in 1994 as a public sector enterprise, pro- including their sub-suppliers, have entered into business contracts motes investment and the export of Norwegian goods and services with Petrobras,” says Wenche Nistad, CEO of GIEK. by helping companies to secure competitive loans and by taking on Critical in the capitalization and financing of the Norwegian oil sec- some of the investment risk. GIEK makes it simpler for a company to tor from the early phases to today has been the Oslo Stock Exchange obtain sound funding and secure key export agreements. The agency (Oslo Børs). Many of the companies listed in Oslo are considered is currently targeting pension funds for investment in the offshore industry leaders, and a listing in the same market as Statoil, Seadrill oil and gas export sector, as the Eurozone debt crisis and tighter and Subsea 7 will always be attractive for new international energy financial regulation mean that banks are not able to provide enough companies. Per Gunnar, Listing Manager, Oslo Børs explains the role funding. that Norway’s global investment banks play in bringing investment to
In January 2013, GIEK and the Brazilian NOC Petrobras signed a Norway: “Norwegian investment banks have also built up top notch cooperation agreement with the aim of financing Norwegian exports competences in the oil and gas sector in terms of research capacity
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GIEK: A REFLECTION OF THE NORWEGIAN EXPORT INDUSTRY NORDIC PLAYING FIELD Key gures year-end 2012 Guarantees by industry In June 2013, the Norwegian Government
awarded 24 production licenses in the coun-
try’s 22nd licensing round: 20 in the Barents
Sea and four in the Norwegian Sea. 29 com- 65 panies were offered participating interests,
while 14 companies were offered operator-
6,2 ships. Among the winners is Lukoil Overseas 4,5 NOK 77,5 billion
Total guarantees: Total North Shelf, a part of the Russian Lukoil 1 0.2 0.2 group. Lukoil participated in the 22nd licens- Oil/gas Energy Maritime Other Environment ICT/Tele supply industry ing round in alliances with Lundin Petroleum industry and North Energy, and was awarded two
production licenses in the Barents Sea. The and have a well proven ability to raise capital in the market on behalf of energy companies, company will bring its knowledge and exper- which is very important for such a capital intensive industry. In addition, many of the Norwe- tise gained over decades of exploration and gian investments banks have offices around the world in cities such as Rio de Janeiro, London, production in the Russian Federation and
New York, Houston and Singapore, and we are confident that Oslo Børs is high on the agenda abroad. when international oil and gas companies are considering going public.” In the words of Leonid Surguchev, Man-
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mations in the Barents Sea.” The Norwegian affiliate will also use Lukoil Overseas deepwater
exploration drilling experience from its West African projects, according to Surguchev.
Surguchev goes on to say that the long-term objective in Norway is to become a full-cycle
upstream company with projects in different stages of the upstream process: exploration,
development and production. “Over the years,” Surguchev explains, “we aim to have Lukoil
activities on a level comparable to major international oil companies operating in Norway.”
Repsol, active in exploration on the NCS since 2005, decided to open a permanent office in
Oslo in 2009. The company has since acquired participation rights in 17 production licenses
Leonid M. Surguchev, Managing Director of LUKOIL in the North Sea, Norwegian Sea and Barents Sea areas of the NCS. In the 22nd licensing Overseas North Shelf AS and the Mayor of Oslo, Fabian Stang round the company was awarded four licenses, two as operators. “We have been active on aging Director of Lukoil Overseas North the NCS in recent years and we are now getting closer to the level we intend to reach. Our
Shelf: “In Timan Pechora and in the Caspian objective is in the range of 20 to 25 licenses and drilling two or three wells a year in order to region, the company has been producing make at least one discovery annually,” says Jaime Suarez Alba, General Manager of Repsol fractured carbonate and low permeable het- Exploration Norge. erogeneous reservoirs with new well and IOR The Spanish company spudded its first operated exploration well in March 2013. The well technologies. This experience of our geosci- targeted the Darwin prospect, which is located in the Western Barents Sea. Currently, Repsol entists and reservoir engineers will be useful is participating in another well in the Barents Sea and will spud its second operated well in for exploring and developing Permian for- the North Sea later this year.
STRONG ARCTIC PARTNERSHP
Combining 25 years of Arctic experience and close to 1,000 engineering consultants, Ramboll Oil & Gas creates long-term sustainable solutions that build bridges between business, nature and society.
Image: Danclimb Image: WWW.RAMBOLL.COM/OIL-GAS
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Alba explains that the two operated blocks Statoil, one of the company’s largest customers, awarded in the last licensing round have been a awarded Ramboll Oil & Gas the Polarled pipeline milestone for Repsol in Norway. “This has made project in January 2013. “This challenging project us a serious player in operational activities on the will involve pipeline installation at water depths
NCS and it is definitely recognition of the Norwe- Jaime Suarez Gro Baade- reaching 4,150 ft, setting a world record for deep- Alba, General Mathiesen, gian authorities. Now it is up to us to fulfill expecta- Manager of Repsol Managing water installation of a 36” pipeline,” says Baade- Exploration Norge Director, Ramboll tions,” he says. Oil & Gas Norway Mathiesen. “Furthermore, the job encompasses
For engineering consultancies, the growth of the Norwegian installation assessment for the large diameter, energy market represents immense opportunities. Ramboll Oil & deepwater pipeline and mechanical design including wall thickness
Gas, headquartered in Denmark, holds offices in Norway, Qatar, Abu optimization and buckle arrestor design.”
Dhabi, Russia and India, and ranks among the top five consultancies John Sørensen, Ramboll’s global Managing Director of Ramboll, in Norway. The company expects to grow its Norwegian operations describes the company’s key strengths: “we have trained ourselves significantly in the coming years. to be cost-efficient and very innovative engineering partners to the
In 2010, Ramboll published a strategy for its global oil and gas divi- industry.” sion, which set the bar high: in 2010, the division employed 500 staff.
That number is 1,000 today, with aims to reach 4,000 staff by 2020. 365 DAYS AT THE HELM OF LUNDIN
“In Norway we are betting big on the early phase and conceptual The Johan Sverdrup oil field was the largest oil discovery in the studies and Front End Engineering Design (FEED). We have contracts world in 2011, with reserves estimated at between 1.7 and 3.3 billion with major operators, including Statoil, ENI, ConocoPhillips, RWE barrels of recoverable oil. Johan Sverdrup was initially believed to
Dea and Petoro. In the longer term we will also focus on detail design consist of two fields, four miles apart: Avaldnes, discovered by Lundin and smaller EPC projects,” explains Gro Baade-Mathiesen, Managing in 2010, and Aldous, discovered by Statoil in 2011. Further explora-
Director of Ramboll Oil & Gas Norway. tion activities revealed that they actually constitute one giant field,
SENERGY: EXPANDING ITS REACH
“What fascinates me in the service sector is of experience with Shell, which took him to work in the Neth- that you have to earn the right to grow. You erlands, Brunei, the UK, Nigeria, United Arab Emirates, Oman have to make money today in order to invest and Russia. With his extensive background in the oil and gas in tomorrow,” said Frode Linge, Regional industry, having worked in technical, planning, commercial, Manager Scandinavia at Senergy. A global general management and business development, Linge has organization built around 750 people, the an impressive breadth of expertise. “Having worked on both company has a network of locations around sides of the equation, both E&P and consulting, I felt that I Frode Linge, RM the world including the UK, Scandinavia, the Scandinavia, had something to offer,” Linge says. Middle East, Australia, Southeast Asia and Senergy Ranked the UK’s tenth fastest growing international busi- the Americas, and worked on 1,460 projects ness, Senergy is rapidly expanding its capabilities and service in 84 countries throughout 2012. offering in Norway. In August 2013, the consultancy secured Founded in 2005, Senergy delivers services and solutions its first major business agreement with Statoil for its projects to all segments of the energy sector. These services span the on the NCS. “Although Senergy has operated in Norway suc- full project lifecycle of any energy development, from initial cessfully for a number of years, the agreement with Statoil, an evaluation of the opportunity, its associated risks, challenges NOC and the major resource holder in Norway, represents a and outputs, through to full delivery and operation. significant development for us as we seek to internationalize The organization reinforced its growing Norwegian foot- and grow the business,” Linge explains. The company aims to print by opening new business premises in Oslo in 2011. Sen- double its Norwegian operations over the next three to four ergy appointed highly regarded industry figure Frode Linge to years strengthen the company’s position in Oslo. Linge has 25 years .
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BUILDING A NEW SONGA.
Drilling costs in Norway are much higher order to achieve this. Iversen was appointed Chief Executive than in other North Sea nations. Øystein Mi- Officer of Songa, effective June 1, 2013. His mission is to build chelson, EVP of Development & Production a new Songa. at Statoil, said recently that the NOC was The company currently owns and operates five semi-sub- pushing for a different ownership model of mersible mid-water rigs. Three rigs are operating in the North drilling rigs on the NCS and targeting more Sea on contracts with Statoil, the other two in Southeast Asia. ‘fit-for-purpose’ rigs to reduce the high cost Songa is currently building four identical drilling units that Bjørnar Iversen, of drilling. CEO, Songa Statoil has developed together with the industry. Bjørnar Iversen, Chief Executive Officer of Offshore “This will materialize into operational excellence and sub- Songa Offshore, one of the leading mobile stantial synergies on equipment, personnel and logistics which drilling players on the NCS, explains that Statoil currently has will give us a competitive advantage compared to other com- eight rigs under construction, all of them through suppliers. panies that have a mixed bag of equipment,” Iversen explains. Out of these eight are four jackup rigs and four semi-submers- “Songa’s objective is to become a leading mid-water rig op- ible rigs. The latter four are Songa’s and in line with Statoil’s erator in harsh environments. With seven rigs operating in the strategy, Songa is bringing in assets with higher efficiency and North Sea on contracts with Statoil, we are in a position to more tailored to the conditions of the NCS. achieve that goal.” Due to its unique relationship with Statoil, After some turbulent years, Songa has started to imple- Iversen believes that Songa is well placed to become one of ment important steps to streamline the group and restore li- the flagship rig companies on the NCS. quidity, and has strengthened both board and management in .
which was renamed Johan Sverdrup in 2012. for capital expenditure for the Johan Sverdrup, Edvard Grieg and
Discussing the progress of the exploration activi- Luno fields, and the other half for exploration and appraisal wells. ties, Torstein Sanness, Managing Director of Lundin Full speed ahead!”
Norway says: “Since 2012, a total of 15 wells have been drilled at the Johan Sverdrup field. During Torstein Sanness, ADAPTING STRATEGIES Managing the first quarter of 2013, two wells and one side- Director, Lundin Energy is a major part of the makeup of the Oslo Børs exchange: Petroleum track were completed and one additional appraisal when Statoil, the largest company in Norway by market capitaliza- well has commenced drilling. We will probably need to drill another tion, listed in 2001, energy became the dominant sector. However, two or three additional wells within the license area PL501, where the Oslo Børs used to be known primarily for listing companies in the
Lundin Norway is the operator with a 40 percent stake.” maritime industry. Oslo is an important center of maritime knowledge
Sanness explains that the Swedish company is looking to gather in Europe. as much quality data as possible before making a decision on field Oslo is home to approximately 980 companies and 8,500 employ- development. “The reserve figure is so large that even a minor ees within the maritime sector. Shipping companies represent the change in the recovery factor could have a significant impact, as we largest segment of the Norwegian maritime industry, and shipping are looking at half a million barrels a day,” he says. is Norway’s largest export industry after oil and gas. Traditionally,
Fortunately, Lundin has both the financial muscle and the experi- Norwegian shipyards have focused on four main areas: offshore ves- ence to handle such a demanding project. “In 2013, Statoil will drill sels, small specialist vessels, fishing vessels and passenger ferries.
25 appraisal and exploration wells, while Lundin will drill 18. As a However, this is changing thanks to global demand for Norwegian result, Statoil and Lundin will be the two largest explorers on the vessels in the global oil and gas sector: in 2012, 95 percent of the ves-
NCS,” says Sanness. “After Statoil and ConocoPhillips, Lundin has sels ordered at Norwegian shipyards were offshore vessels tailored the largest capital expenditure budget on the NCS. Almost all of the for supply to oil and gas related companies. In the words of Eivind company’s budgeted development expenditure for 2013 is focused Reiten: “the only way a society can benefit from oil and gas income on development projects in Norway. Half of our budget is allocated is to bring it into the economy. As a result, Norwegian society as a
NOVEMBER 2013 OIL & GAS FINANCIAL JOURNAL | WWW.OGFJ.COM | ENERGY.FOCUSREPORTS.NET 73 18 Norway Oil & Gas report part 4 November 2013
Fig. 1: THE ENERGY SECTOR AT OSLO BØRS capacity away from commercial shipbuilding
to offshore. Industrial group Kvaerner, which Equipment and services: Drilling: 32 companies 12 companies builds heavy offshore equipment including 55% 21% oil platforms, recently warned of fierce com-
petition, particularly from Asian firms. In the
last year, Kvaerner lost a significant number
of engineering, procurement and construc-
tion (EPC) contracts to South East Asian Integrated oil & competitors. All of these contracts have gas and E&P: 15 companies been awarded for projects off the coast of 25% As per July 2013 Norway.
® Based on Global Industry Classi cation Standards GICS The listing of the new Kvaerner on the Oslo
Børs in July 2011 marked a revitalization of
whole has benefitted from the oil and gas industry.” an almost 160 year old brand: once part of
With few signs of recovery in the global shipbuilding sector, Chinese and South Korean the Aker group, the company was once again
yards are also eager to win contracts in the offshore construction markets, including rigs, to spun off as a separate business with a spe-
compensate for the dip in new ship orders. On the NCS, South Korean shipyards are coop- cific focus on the delivery of platforms and
erating with Western European engineering companies, and are turning their manufacturing onshore plants.
Lundin Norway - Ambitious Exploration
10-15 exploration Johan wells per year Sverdrup Other contingent resources not included 2012-2020 in production forecast +100% 2010 increase in production 2007 Edvard 2005 Grieg B¯yla +100% 2004 Brynhild increase in production boeod
35,700 33-38,000
2012 2013 2014 2015 2015 2016 2017 2018 2019 2020
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FocLun_OGFJ_1311 1 10/28/13 10:39 AM 19
Fig. 1: THE ENERGY SECTOR AT OSLO BØRS capacity away from commercial shipbuilding According to Jan Arve Haugan, CEO of Kvaerner, on the other.” to offshore. Industrial group Kvaerner, which the demerger and establishment of the new Kvaerner This also applies to Interoil Exploration & Produc- Equipment and services: Drilling: 32 companies 12 companies builds heavy offshore equipment including in 2011 was a response to customers’ requests for tion, a Norwegian junior with a strategic focus on 55% 21% oil platforms, recently warned of fierce com- more flexible and specialized EPC contractors. onshore exploration and oil production in Colombia petition, particularly from Asian firms. In the “More flexible, in the sense that Kvaerner would be Jan Arve Haugan, Thomas Fjell, CEO and Peru. The company went through a period of President and CEO, Interoil last year, Kvaerner lost a significant number able to meet low cost requirements through strategic Kvaerner comprehensive restructuring in 2013; the company of engineering, procurement and construc- partnerships, and local content requirements through was on the verge of bankruptcy when Erik Sandøy and Thomas Fjell took tion (EPC) contracts to South East Asian regional partnerships. More specialized, in the sense that increased over in January 2013 as CFO and CEO respectively. The company is Integrated oil & competitors. All of these contracts have attention to cost and risk efficiency is a prerequisite for a global EPC reducing operating expenses by minimizing corporate overheads, termi- gas and E&P: 15 companies been awarded for projects off the coast of player and requires a dedicated management focus on project execu- nating related-party consultancy agreements and optimizing the operat- 25% As per July 2013 Norway. tion and risk management.” ing structure of the group.
® Based on Global Industry Classi cation Standards GICS The listing of the new Kvaerner on the Oslo When asked about where his company sees the biggest demand for Fjell, today the CEO of Interoil, explains that in order to salvage share-
Børs in July 2011 marked a revitalization of oil and gas services in Oslo, Christer Tryggestad, Director at McKin- holder value, Interoil needed to increase production and fund invest- whole has benefitted from the oil and gas industry.” an almost 160 year old brand: once part of sey & Company, confirms the trend that companies like Kvaerner have ments through equity. “In March this year [2013], we completed an
With few signs of recovery in the global shipbuilding sector, Chinese and South Korean the Aker group, the company was once again adapted to: “We increasingly help our clients crafting global strategies equity issue of USD 35 million,” he explains. “This enabled us to fund an yards are also eager to win contracts in the offshore construction markets, including rigs, to spun off as a separate business with a spe- and setting up global organizations: striking the right balance between expansive drilling program in Colombia of approximately 65 wells. As of compensate for the dip in new ship orders. On the NCS, South Korean shipyards are coop- cific focus on the delivery of platforms and the centralization to benefit from economies of scale, skills, and tech- today, we are in the process of executing the first phase of this drilling erating with Western European engineering companies, and are turning their manufacturing onshore plants. nologies on the one hand side, and local autonomy and specialization program and have so far completed seven wells in the first phase.”
Lundin Norway - Ambitious Exploration
10-1510-15 explorationexploration JohanJohan wells per year Sverdrup Other contingent resourcesresources notnot includedincluded 2012-2020 inin productionproduction forecastforecast +100%+100% 2010 increaseincrease inin productionproduction 2007 Edvard 2005 Grieg B¯yla +100%+100% 2004 Brynhild increaseincrease inin productionproduction boeod
35,700 35,700 33-38,000 33-38,000
2012 2013 2014 2015 2015 2016 2017 2018 2019 2020
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FocLun_OGFJ_1311 1 10/28/13 10:39 AM 20 Norway Oil & Gas report part 4 November 2013
In Peru, the company’s licenses were due to expire in March 2013. tive and high quality technologies that are growing in demand as oil
However, Interoil was awarded an injunction to continue operating companies start drilling in deeper and deeper waters. Around the these licenses due to force majeure caused by El Nino (1998-99 world, the average rate of recovery of oil in place is approximately and 2002-03) until October 2014 in the case of Block III, and until 35 percent. Statoil however, plans to increase the average oil recov-
March 2016 in the case of Block IV. “We are currently in arbitration ery rate from its fields on the NCS to 60 percent. proceedings with licensing agency PeruPetro”, says Fjell, “to deter- “The North Sea has a wonderful history of innovation, and of the mine whether Interoil has the right to extend the term of its origi- innovative use of technology. New and more advanced technology nal licenses in Peru until October 2014 (Block IV) and March 2016 for improved recovery is no exception. New technology to develop
(Block III).” The work towards a long-term extension will recom- methods to improve reservoir monitoring and thus improve recov- mence if the arbitration case is won, unlocking 18 million barrels of ery has always been high on the agenda in Norway,” says Jarle Tau-
2P reserves. tra, Managing Director of Eureka Pumps.
Eureka Pumps, a market leader among companies servicing oper-
NAVIGATING A HIGH-COST ENVIRONMENT ators on the NCS, has recently strengthened its presence in Hous-
A report published in 2012 by Swiss bank UBS crowned Oslo as ton, Texas. Tautra explains that the company is in the process of the world's most expensive city. Meanwhile, according the study, expanding its business both internationally and in Norway, in order workers in Oslo enjoy the fourth highest wages on the planet. While to build close customer relationships and win customer confidence. figures confirm that executive pay in Norway is modest, even low, Eureka Pumps has served customers for more than 100 years, and is compared to other countries, the average oil worker makes USD a leading manufacturer of various types of pumping systems for the
180,300 a year, the highest salary anywhere in the world, recruit- offshore oil and gas industry, including firewater pumps, seawater ing firm Hays said in a 2012 report: USD 93,000 more than a UK lift pumps and cargo pumps. oil worker makes and above the USD 177,000 pay for the average The best solution to deal with Norway’s high-cost environment is
US CEO. efficiency. Statoil leads by example: at the end of 2012, Statoil had
Asked about this high cost operating environment, Jarle Tautra, only 23,028 employees: a tiny figure for a company characterized
Managing Director of Eureka Pumps responds: “In order to survive as being among the most profitable and geographically developed in a high cost country like Norway, you need talented and moti- in the world. This low employee count has enabled Statoil to have vated people, state of the art technology, top-notch facilities and the highest rate of production per employee in the industry, at an efficient execution. In other words, the fundamentals must be in average of 78.4 bpd/employee in 2012. place.” Looking at the company’s progress in recent years, he con- Providing solutions that offer this type of effi- tinues: “Over the course of the last year, Eureka Pumps has invested ciency is key for companies like PG Marine Group. significant amounts into our people, systems and facilities. Reve- Roy Norum, CEO of PG, explains that the com- nues from international new-built pumps last year were around 30% pany’s aim is to manufacture smart solutions that of our total business. This is expected to increase to 50% over the will provide high value and diversification to its Roy Norum, CEO, PG Marine Group next two to three years. However, as we continue to expand inter- customers. “Frankly, PG has an impressive track nationally we have to consider moving our assembly operations to record in efficiency over the last ten years, and at the same time, other locations to get closer to customers and cut cost,” he adds. the majority of PG’s solutions are logic-engineered, object-specific
A decrease in production from North Sea oil fields over the last and customized,” he says. decade has led the government to encourage technological innova- PG, a technology-focused company specialized in liquid han- tion as a new means of competing internationally in the oil sector. dling solutions, established a pump engineering division in order to
Over the years, Norwegian firms have built a reputation for innova- increase its focus on solutions for customers. The company adjusts
76 ENERGY.FOCUSREPORTS.NET | WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL NOVEMBER 2013 21 PG Marine Group
PG is a specialized manufacturer / supplier of highly efficient, safe and most intelligent solutions for liquids handling on rigs, ships and subsea
PG-MACS - the next generation below deck cargo handling solution - has proven its performance in the toughest environment
Drill Cuttings and Rig Slop transported below deck, were triggers for PG-MACSÆ development, but the full flexibility of all bulk material dry- or wet- have proven its performance in the North Sea, and now even in Brasil and other regions.
Drill Cutting transportation below deck, athmospheric, flexible tank clusters for wet and dry bulk, and extremely high VARD 06 MACS PSV capacities for Recovered Oil are hallmarks of this novel, w.w. patented solution
PG-Hyde Ballast Water Treatment Systems have proven exceptionally well suited for OSVs, during numerous installations
Through its modular design, and flexible lay-out options PG-Hyde GUARDIAN BWTS offer competitive solutions in combination with PGs vast experience with maritime PG-HYDE HG 150 Skid installations.
Among the first IMO Type Approved systems, and based on the most efficient technologies, the Hyde modules have won market shares at high pace in International as well as Domestic markets. More than 100 installations secured, and first fleet agreements signed confirm competitiveness and trust to products and partners
Skidded units, or modularized to fit the most space-limited footprints at retrofitting ships
OSV's are supposed to deliver to the rig, the same mud as they receive on shore - this is often challenged
PG-Submix 60/80 is the solution, when high yield drilling mud shall be kept in suspension over extended time - typically for deep water fields, far ashore as many of the current, major oil & gas fields are developed.
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FocPGM_OGFJ_1311 1 10/28/13 11:43 AM 22 Norway Oil & Gas report part 4 November 2013
existing products and brings new innovations to the table, and has depends mainly on the daily rate of the drilling
presented many novel, smart solutions to the market over years. rig, which is around half a million USD per day.
“This makes our products significantly more challenging to copy For that reason efficiency and quality is critical for
than commodity-oriented products,” he adds. operators. The service AGR provides is less than
In August 2013, PG inaugurated a new 8,750m2 factory, and a Age Landro, CEO, 5% of total project costs. This does not make a AGR Group new unit known as PG Fabrication. This is a brand new, tailor-made significant difference for our client. What does
facility will present the PG Group with unprecedented possibilities make a substantial difference is the access to our experienced
for future business, including subsea-pump tests pits with up to team.”
1.4MW fixed power capacity. The day-to-day work in other sectors has changed as a result of
Norum has taken PG to a new level in international markets, Norway’s oil expansion. Consultancy firms such as Boston Con-
bringing its annual export turnover from USD 13.5 million to more sulting Group and McKinsey & Company have set up their global
than USD 108 million in 2013: more than 70 percent of the com- centers of competence in Oslo. McKinsey & Company’s oil and
pany’s current revenues. “Today, we see demand for our products gas group in Oslo is one of three global clusters, together with
in Korea, China and Singapore, but also North and South America: Houston and Amsterdam. Christer Tryggestad, Director at McKin-
we have had a significant market share since 2000 in Brazil, a critical sey, acknowledges that Norwegian companies are seen as techni-
market for the oil and gas industry,” he says. cally highly competent. “My impression is that their competence is
Discussing the high-cost environment related to offshore opera- sought after internationally. Many of our clients are in the midst of
tions, Åge Landro, Group CEO at AGR, stresses: “The cost of a well significant global expansion.”
FocEur_OGFJ_1311 1 10/28/13 11:41 AM 78 ENERGY.FOCUSREPORTS.NET | WWW.OGFJ.COM | OIL & GAS FINANCIAL JOURNAL NOVEMBER 2013 23
For exclusive ITVs and more insights, log on to energyboardroom.com 24 Interview with: Per Gunnar Ølstad, Senior Adviser of Oslo Stock Exchange
Per Gunnar Ølstad, Senior Adviser of Oslo Stock Exchange
Focus Reports: Would you start by giving us better place than most to raise equity capital an idea of the importance of oil and gas for the energy industry or through bond for the Oslo Stock Exchange? funding. This is also because Norway has PER GUNNAR ØLSTAD: Both the Oslo Børs and some strong investment banks within the the Oslo Axcess are heavily weighted towards energy sectors, though a very large portion the energy sector in Norway. Indeed the of investment actually comes from non-Nor- energy sector represents around 40-50 per- wegian investors. More than two thirds of cent of the market capitalization and within trading is non-Norwegian investors, so this the energy sector, we have identified three is a truly international exchange. main segments: drilling, equipment and ser- We have also introduced new fast-track vices and the traditional E&P sector. Today listing processes, which are more efficient, we have major representatives from all three allowing companies to list faster. We feel that sub-sectors. this could be especially interesting for new- Energy has been a major feature of the comers to the Norwegian market. The listing Oslo Stock Exchange for many years, although process now only takes four weeks on the we used to be known primarily for the mari- fast-track scheme and our normal listing pro- time industry. Ever since Statoil, which is our cess is only six weeks, making it much faster largest company by market capitalization, than global averages. listed in 2001, energy became the dominant Another strong attribute to the Norwe- group within the exchange. In recent years, gian exchange is the strong tradition of doing there has also been a large growth of new- private placements. A typical transaction in comer E&P companies entering this market. the Norwegian is to announce an IPO at the Norway also has a very large oil service sector, close of the market in the afternoon and raise present on the exchange. the funds throughout the evening and night Our success is based on choosing to focus and then announce the private placement the our attention on key sectors. Therefore following morning. This is a very fast way to although the energy sector is already a very raise equity capital. large portion of the business today, we will still be looking to further expand in this area. FR: To what extent is the energy sector We eventually hope to be a preferred exchange sucking up most of the interest on the for the energy market. exchange relative to fishing or maritime industries? FR: How good is access to capital for energy PER GUNNAR ØLSTAD: I do not believe that there companies listed on the Oslo Exchange? is a general preference for one sector over PER GUNNAR ØLSTAD: Good companies will another. The three sectors on which the Oslo always attract capital, however in 2012 the Exchange focuses its attention are all per- equity markets were challenging in Norway forming well in attracting interest. Moreover and worldwide. Over this period, Oslo was a the attention that one sector gains on the
Per Gunnar Ølstad, SENIOR ADVISER OF OSLO STOCK EXCHANGE 25
exchange positively affects the interest in focus sectors for the Oslo Stock Exchange and other parts of the exchange. All companies many of the companies that have utilized the listed in Oslo therefore benefit from the high- bond market are in the three sectors that we level visibility of the oil and gas industry on have highlighted. Second, there are strong this exchange. I would also mention that of analysts that are dedicated to these three sec- the four IPOs launched since the start of tors and they provide valuable insights on the 2013, only one has been an energy company. Norwegian market. Third we also have effi- cient documentation packages in relation to FR: Hans Christian Kjelsrud of Nordea bond issuing in Norway. These attributes highlighted the growth of the bond mar- allow us to generate a heavy international ket in Norway. How significant is this interest in the Oslo Exchange’s bond market. trend towards bond financing? PER GUNNAR ØLSTAD: The bond market has FR: How do you see the Oslo Stock indeed become a major aspect of Norwegian Exchange’s role in raising capital over the financing. Interest in bond financing is pri- coming years? marily generated as a result of the stringent PER GUNNAR ØLSTAD: We currently hold an financial requirements with respect to Basel important role and given the new finds on III regulations. The global effect of these reg- the Norwegian Continental Shelf, new invest- ulations is to shrink the balance sheet of ments are flowing into Norway. This enhances banks and this pushes players seeking to the need for raising equity and debt capital access capital into the bond market. We are and given the position that we already hold, seeing many new companies entering the we believe strongly that we will play an inte- bond market that have never taken this gral role in the development of the energy option before. industry in Norway. The oil and gas industry is extremely cap- The traditional oil service and equipment ital intensive and the bond market provides sector is our largest in the energy portfolio a useful alternative to traditional bank debt and this sector will benefit a lot our work. We financing. We see that companies are increas- want to be a preferred listing destination for ing supporting their operations on three legs: international companies. We have no ambi- equity funding, bank funding and bond tions to rival the New York Stock exchange, financing. but in our focus areas we expect to take a The Norwegian bond market has attracted global leadership position. Increasingly we are many internationally recognizable compa- seeing international companies choosing to nies over the last year. We even see companies establish themselves in Oslo and recent rat- with shares listed on the London AIM market ings now show that Oslo is the strongest seeking to raise debt capital on the Norwe- financial market in the Nordic region. Oslo is gian bond market. Investors increasingly gathering greater international attention and want the bonds that they are investing in to it is respected for the quality and good regu- be listed as this guarantees transparency of lation of the equity market. trading. It should be noted that we also run the Oslo ABM market, which is actually more FR: Why did Norway emerge as a cham- popular than the traditional markets with pion of the bond market? around 1,000 listings at the moment. It is well PER GUNNAR ØLSTAD: I think that there are three regulated like the main markets but there is reasons. First, there are some very strong no requirement for a prospectus or IFRS Norwegian investment banks in the three reporting.
Per Gunnar Ølstad, SENIOR ADVISER OF OSLO STOCK EXCHANGE 26 Interview with: Eivind Reiten, former CEO Norsk Hydro, current Chairman Norske Skog Eivind Reiten, former CEO Norsk Hydro, current Chairman Norske Skog Focus Reports: Mr Reiten, you are well What we did not see at that time are the known throughout the industry as the fortunate findings on the Norwegian Shelf former Chief Executive Officer of Norsk over the last years. This has come to a positive Hydro. The company had a significant surprise to all of us. Nevertheless, the new presence in the oil and gas industry until discoveries do not change the fact that the October 2007 when the oil business Norwegian Shelf is being emptied in a pretty merged with Statoil. Prime Minister Stol- high speed when it comes to oil. There is a tenberg said at the time: “the merger is steep decline in production. the start of a new era”. To which extent does the reality today stroke with the FR: Earlier this year you gave a presenta- vision you had at the time of the merger? tion at RWE Dea where you said that: EIVIND REITEN: The most obvious reason to “Rapidly increasing costs associated with merge was that both parties realized that we drilling could, despite recent new discov- had been successful in developing the Norwe- eries, have significant and negative con- gian Continental Shelf for the last 30 years. sequences for the industry as a whole”. Do Hence, the focus of the next 30 years would you believe that the “Dutch disease” might be more towards expanding internationally become a treat to Norway? and managing a more mature Norwegian EIVIND REITEN: Costs that come with offshore Shell in a productive and efficient way. operations have significantly increased com- Norsk Hydro and Statoil found their selves pared to 2005 in West Africa, Golf of Mexico increasingly competing for international and even more so in Norway. My concern is assets. Naturally it was not by accident that that the industry has not sufficiently fought we ended up competing for similar assets as the cost side of their operations. we came out with equal competences and leg- The Norwegian oil industry is sort of living acy. As a result both companies fell in love in a bubble regarding its cost level, salary level with assets in places such as Brazil, Angola and working conditions. However these costs and the Gulf of Mexico where we could deliver are not affordable for other parts of the Nor- most value. wegian society. On behalf of our shareholders and Norwe- The oil industry is creating a tremendous gian society as a whole it became clear to take challenge for itself because costs to drill a advantage of these unique competences and standard production well to increase or main- join forces instead of fighting each other inter- tain production are becoming almost too nationally. In that respect the merger has expensive. We run the risk of leaving too worked out very well—Statoil is internation- many resources undeveloped. ally very successful with operations in more Cost pressures have already begun to have than 30 countries. serious consequences for the entire industry,
Eivind Reiten, FORMER CEO NORSK HYDRO, CURRENT CHAIRMAN NORSKE SKOG 27
which will undermine profitability. As a result However politically it is not easy because we of these booming costs we simply cannot need to start discuss issues that have been afford to drill sufficiently to maintain produc- negotiated between employer and trade orga- tion. That is today a serious problem because nizations. This is not only to blame the workers so many of the big oil fields of the North Sea association but also the industry that has grad- are coming to a life end. ually given in on those things—it is a shared responsibility. FR: Drilling costs in Norway have been dou- My main concern on behalf of the next gen- bled between 2000 and 2010 and are about eration is that we leave too much oil and gas 40 to 45 percent higher than in the U.K., undeveloped. It is not about the sexy new finds. how do you explain this? Prospects will eventually be drilled, either EIVIND REITEN: In fact, enhanced oil recovery tomorrow or in ten years but if the oil is there was the main theme of an expert committee it is there. However if we do not take out the appointed by the Minister of Petroleum and last millions barrels in mature fields, it will Energy. In the report from the committee pre- never be taken out and we will lose them for- sented in 2010, one of the key recommenda- ever. This is really a loss of value! tions was to establish an expert committee to review how to increase drilling and well activ- FR: Naturally Norway is fortunate with its ities. This committee, which I chaired, was resources. However on the other side we established by the Norwegian government at see ordinary businesses suffering from ris- the end of 2011 with the mandate to identify ing costs in the oil and gas industry and possible obstacles that may reduce the capacity increasing wages in the public sector. for drilling and well operations on the Norwe- Where is the end? gian continental shelf and to recommend mea- EIVIND REITEN: It is not something that is start- sures that may minimize or even eliminate ing to hurt—it has been affecting our economy these obstacles. since the mid-eighties. At that time I was in The government must consider regulations the government where we discussed the suc- on working hours for offshore personnel. cessful development of the oil and gas industry Under current rules, oil service workers in Nor- without squeezing out the traditional indus- way can legally work 1,582 hours a year before tries. overtime, compared with 2,160 in the U.K. The The government has always been conscious pay each receives per hour, the salary level as about the situation but has been unsuccessful such is not that much higher than in the U.K. in preventing other industries to be squeezed but if we include the 2/4 (2 weeks on, 4 weeks out. Looking at the statistics you will see that off) arrangement and overtime the salary cost the numbers of workers and activity in tradi- level is about 60% to 70% above the U.K. sal- tional industries – except for fish farming – has ary level. declined since the eighties. Frankly, we did not deliver any great news That being said, the only way a society can from our analysis as we basically confirmed benefit from oil and gas income is to bring it what we already knew. Nevertheless, the into the economy. As a result the society as a report was received very well by those who are whole has benefitted from the oil and gas concerned by the cost level. I wrote an article industry. For that reason, we should not be in the Norwegian financial newspaper elabo- sorry about a certain level of squeeze out—it rating on the outcome of the report. The CEO is a result of macroeconomics. of Statoil was happy about the analysis as the outcome goes hand in hand with his view.
Eivind Reiten, FORMER CEO NORSK HYDRO, CURRENT CHAIRMAN NORSKE SKOG 28 Interview with: Jan Arve Haugan, CEO - Kvaerner Jan Arve Haugan, CEO - Kvaerner
Focus Reports: Kvaerner’s history goes back turnkey solutions to its customers, who to 1853. In 2011 Kvaerner re-emerged include some of the world’s major oil and gas and got listed on the Oslo stock exchange. companies. Could you start by giving an introduction Kvaerner possesses the full value chain of of Kvaerner today and explain the ratio- EPC service offerings, providing project man- nale behind the demerger? agement, engineering, procurement and con- JAN ARVE HAUGAN: The demerger from Aker struction expertise. In addition to its own Solutions and the establishment of the new resources and two fully-owned fabrication Kvaerner in 2011 was a response to custom- yards in Norway, the company ensures flex- ers’ requests for more flexible and specialised ibility and capacity through a wide range of EPC contractors. More flexible, in the sense partnerships and subcontractors within engi- that Kvaerner would be able to meet low cost neering and fabrication. requirements through strategic partnerships Our project execution model (PEM) is and local content requirements through developed based on best practice from many regional partnerships. More specialised, in of the industry’s most challenging projects. the sense that increased attention to cost and This ensures safe and efficient project execu- risk efficiency is a prerequisite for a global tion and risk management. That being said, EPC player and requires a dedicated manage- PEM is our product—based on that we can ment focus on project execution and risk deliver power plants in the United States and management. a concrete substructure in Newfoundland. The listing of the new Kvaerner on Oslo Jackets is typically a regional business as Børs in July 2011 is a revitalisation of an you do not transport them over large dis- almost 160 years old brand and is a result of tances. We have developed and continuously a process where the previous Aker Solutions’ refined our Jacket PEM for execution of EPC activities for delivery of platforms and contracts fully integrated with our in-house onshore plants were established as a separate design office and in continuous and close corporation - the new Kvaerner. Kvaerner cooperation with the supply chain including leverages the previous organisations’ com- steel manufacturing, rolling of tubulars and bined offshore experience and expertise built provision of cast nodes. up over more than 40 years. The issue related to onshore and offshore Today, Kvaerner is a specialised engineer- production facilities is the inherent complex- ing, procurement and construction (EPC) ity. Looking at a drilling rig for example, they company focusing on executing demanding are built according a known standard and are projects for oil and gas operators, industrial moveable. However, the offshore topsides are companies and other engineering and fabri- built for a specific reservoir. If a drilling rig is cation providers. It is an international com- late, someone else can drill the first well. If pany headquartered in Oslo, with offices and the topside is late there will be delay in the operations in nine countries which deliver production. Time is extremely important for
Jan Arve Haugan, CEO - KVAERNER 29
those who are investing in offshore field devel- is what we consider to be our drivers of growth. opments which are big investments executed Naturally maintaining our market share is under strict weather conditions. All compo- also a growth driver. If we would do a quick nents have to be delivered and installed on cross reference I would say that looking at time, and therefore we say that on-time-deliv- everything that has been built in the North ery is so essential. Sea, close to 75% has been built by Kvaerner. Based on the competence that we have built We see a huge upside in the industry as a result over the last 40 years in the North Sea, our aim of the discoveries over the last couple of years. is to conduct complex jobs in harsh environ- Companies such as ENI and Statoil are moving ments within a certain time window. In order further North. How is Kvaerner adapting to to deliver in time you need to manage concur- this trend? rent project activities. The critical path in such We do already have a track record of designing an execution is what we monitor: we handle and delivering solutions into the Arctic harsh the risk, control the delays and know to accel- environment. erate. Over these 40 years, project manage- The concrete substructures we provide are ment has become one of our core competences. an important product in this respect. Harsh environment challenges as we have in the Arc- FR: What have been Kvaerner’s main tic region require technical solutions that with- growth drivers? stand weather challenges. In the Caspian Sea JAN ARVE HAUGAN: The demand for EPC products region, where we have had substantial business and services is driven by the global demand through the Kashagan hook-up project, we are and consumption of oil and gas for transporta- coping with Arctic weather during the winter tion, industrial activities and energy produc- and a tropical climate during summer. In this tion. It is estimated that global energy demand region we built a technical design that can will rise by one-third by 2035, with the major- withstand 40 plus and 30 minus degrees Cel- ity of this increase coming from the Middle sius. East, India and China ). This demand is a key Technically, we do have experience in meet- driver for increased capital spending in the ing requirements of harsh environments due development of oil and gas fields. to our 40 years of experience in the North Sea. Several new fields have been discovered, particularly in Kvaerner’s home markets on the FR: As a final question, could you give our Norwegian and UK continental shelves. The readers two reasons why they should by accumulated growth in EPC spending between shares of Kvaerner? 2012 and 2020 is expected to be approximately JAN ARVE HAUGAN: The market is prosperous USD 75 billion1). This represents an increase and the regions we are focusing on are very of almost 20 percent compared to the market robust. forecast made when Kvaerner was stock listed Moreover I believe that the value of the in July 2011. company is driven by our ability to deliver. We Our growth drivers are also related to the are aiming to deliver on our commitments and oil and gas price. History shows that when the that is what we are communicating to the mar- financial crisis hit such as in 2008, companies ket. We are not promising glory days but pre- put their brakes on. For that reason, I believe dictability. that the market drivers will be the oil and gas The more predictability we demonstrate, price—trending from crude to LNG and prob- the more it will reflect on the price of the com- ably heading to floating LNG. Thus having the pany in the long term. right technical solutions to meet market trends
Jan Arve Haugan, CEO - KVAERNER 30 Interview with: Jon Edvard Sundnes, CEO - Tschudi Shipping Jon Edvard Sundnes, CEO – Tschudi Shipping
Focus Reports: Mr Sundness, could you signed a treaty that will allow for new oil start by giving an introduction to and gas exploration in the Arctic region. Tschudi Shipping? This development is a confirmation that we JON EDVARD SUNDNES: Tschudi Shipping Com- are on the right track. pany AS’s history dates back to 1883 when It is fair to say that Tschudi Group has the shipping company Tschudi & Eitzen AS been focussing on logistics in the Northern was established. The founders of Tschudi & seas between Norway and Russia—east Eitzen AS were both Captains on board the west movement of cargo’s. The Tschudi world’s first sailing tankers. Tschudi Ship- Group subsidiary, Tschudi Arctic Transit ping Company AS was established on its AS, develops and implements transport and transhipment solutions for oil products own in 2003 when Tschudi & Eitzen AS was to and from Russia using Kirkenes and demerged and the company is now owned Honningsvåg as deep water and ice-free by the fourth generation of the Tschudi transit ports. Due to the shallow waters family. and ice conditions in many Russian ports, What put Tschudi stronger on the map it is more economical to tranship oil car- in Norway as well as Russia was the pur- goes to conventional vessels in ice free, chase of Norwegian mining company Syd- deep waters for further transportation. varanger AS located in Kirkenes in 2006. The Tschudi Group currently owns a We saw this opportunity and grabbed it fleet of multipurpose container vessels, within a short timeframe. We believed this tugs and offshore vessels in addition to basis located in the far north of Norway to operating container lines between north- be a vital potential for future activities in ern European ports in the Baltic and North the Barents Sea Sea. In fact we operate the biggest door to Naturally Tschudi is not a mining com- door container carrier into the Oslo area. pany but we acquired Sydvanger in order to Globally we are operating through obtain good access to the port. At the time Tschudi Offshore & Towage—this has been we had no concrete plans for reopening the in fact always been one of our core activi- mine but we evaluated the possibility and ties. Tschudi Offshore & Towage was previ- in 2009 it was reopened. For this we needed ously called ITC. ITC was started in 1973 external investors and the mine was listed and since 2003, has been a wholly owned in Australia. More than NOK 2 billion has subsidiary in the Tschudi Group. been invested. The quays and industrial areas that also can be used for new business FR: Arctic Bulk AG, a venture between are still owned by Tschudi through the Prominvest SA and Tschudi Arctic Tran- company Tschudi Kirkenes AS. sit AS, promotes and facilitates North- In 2010 Russia and Norway ended a dis- ern Sea Route shipments. How impor- pute over their maritime borders and tant has this direction been for the
Jon Edvard Sundnes, CEO - TSCHUDI SHIPPING 31
growth of the company over the last tioned for the oil and gas development in years and will be for the years to come? the Northern region. With energy and min- JON EDVARD SUNDNES: Frankly, the Northern eral resource development now accelerat- Sea Route has not been that important with ing, this is an area where transportation regards to volumes yet. The opening has so and logistical solutions will be of increasing far not represented any large cargo trans- importance. We see for example an increas- ports, but it is getting increasing interest. ing demand for oil export solutions within We seized the initiative in 2008 when, Russia and through our subsidiary Tschudi in collaboration with the Norwegian Ship Arctic Transit we are in the advantageous Owners Association and supported by the position to offer Russian clients a wider Norwegian Ministry of Foreign Affairs, we range of competitive services for ship to established the international and indepen- ship transfers. dent non-profit Centre for High North Logistics as the preferred knowledge net- FR: What for you is the main project you work for creating efficient and sustainable would like to launch over the next few logistical solutions in the High North years? through research projects between busi- JON EDVARD SUNDNES: Personally, I would like ness, academic institutions, organisations to see Kirkenes offering a fully integrated and public authorities. logistic base area. At the moment we have What was unique was that in 2010 due an area covering 1 million square meters to a strong partnership between Tschudi and could potentially grow to the biggest Shipping, Nordic Bulk Carriers, Promin- port in Norway. It is situated close to the vest, Sydvaranger Gruve and Rosatomflot Russian/Norwegian border and offers good we initiated the first truly international deep water quays, sheltered location, effi- transit shipment through the Northern Sea cient customs handling and predictability Route – a non-Russian cargo carried on a and will also offer good indoor and outdoor non-Russian flag ship between two non- storage possibilities when completed. The Russian ports. This proved that the NSR development of this area is something we was a commercially viable alternative avail- can either do on our own or together with able to the whole shipping community. The users or partners, Northern Sea Route from Europe to Asia Further ahead it is also interesting to see shortens the distance of traditional ship- that the Finnish authorities now look ping links through the Suez Canal signifi- towards the North for the country’s rapidly cantly depending on destination. developing, and increasingly landlocked, mining industry. There is currently a dis- FR: What does the oil and gas industry cussion in Finland about the possibility to represents within your portfolio? construct a railway line to the Arctic coast. JON EDVARD SUNDNES: Tschudi Offshore & If built, the new railway line would connect Towage based in the Netherlands has a the Barents Sea and Kirkenes with the strong presence in the offshore support ves- Northern part of Finland. This could sel industry. Moreover we have logistics become an important gateway for Finnish activities related to oil and gas, much of export and for import of energy. There will this is done through Tschudi Project Trans- most likely be much “stranded gas” in the ports AS. high North in the future. Finland is a More important is that we are well posi- potential user.
Jon Edvard Sundnes, CEO - TSCHUDI SHIPPING 32 Interview with: Knut Brundtland, CEO – ABG Sundal Collier Knut Brundtland, CEO – ABG Sundal Collier
Focus Reports: ABG Sundal Collier KNUT BRUNDTLAND: ABGSC has upheld and (ABGSC) is the result of the merger even strengthened the quality of its ser- between ABG Securities and Sundal vices in a tough business environment. Collier & Co in 2001. The company has Quality is a value that is deeply rooted in become an important force in the Nor- our company`s culture and we have man- dic investment banking sector. Can you aged to ensure quality of our services all start by giving a brief introduction to the way through the value chain in all sec- the company and why the company is tors. interesting for the market? Being an independent Investment Bank KNUT BRUNDTLAND: We are a true Nordic makes us depend and rely on the quality based investment bank focusing on three and network of our staff. Relative to the main areas: research, sales and distribu- larger integrated banks, we cannot depend tion and corporate finance. ABGSC has a on the balance sheet doing any work on strong footprint in Norway, Sweden, and our behalf, and we must at any time put Denmark, providing a wide range of in all efforts and hard work required to investment banking services. ensure successful transactions. We focus We provide superior distribution of on market transactions and advisory Nordic securities to local and interna- backed by strong research. ABGSC is well tional investors. The combination of global known for its extensive and consistent reach, top ranked research and high qual- track record of market capital transactions ity corporate finance advisory services has such as IPO’s. established us as a preferred supplier in To illustrate our strengths with an the markets where we compete. Our slo- example: if a large oil company has the gan is: Nordic companies, global money. desire to sell one of its branches on the Additionally, we serve the international stock exchange we will advise the client investment community with top ranked from our corporate finance team and exe- equity research, sales and seamless execu- cute through our sales and sales trading tion. As an example, ABGSC has been – all backed by independent research. Sub- voted “Best Nordic broker” in the annual sequently we will follow the client for our Thomson Reuters Extel survey, in which investors through regular research both local and international investors par- updates, road shows and other events. ticipate. ABGSC has won three out of the We provide the full range of services: four ‘grand slam’ titles; Best Sales team, the presentation to the market, the execu- Best Sales Trading team and Best Nordic tional transaction and the follow up of the research team. transaction. It is here where ABGSC’s strengths are obvious. FR: What have been the key drivers for ABGSC’s growth? FR: You were appointed Chief Executive
Knut Brundtland, CEO – ABG SUNDAL COLLIER 33
Officer in 2010. What made you the ABGSC has been voted “Best Nordic right person to take over the reins of the company? broker” in the annual Thomson KNUT BRUNDTLAND: I believe it is my back- ground, which is a combination of a busi- Reuters Extel survey, in which both ness man and a lawyer. As a lawyer I advised local and international investors on M&A’s transactions and IPO’s thus hav- ing a great deal of experience with the prod- participate. ucts that ABGSC offers to its clients. This allows me to make quick judgments and not to involve many external parties or follow ible bonds market, acting as a book runner long procedures. for several major convertible bond offerings I have managed and overseen many kind in the Nordic market but also in Canada. of business which is helpful when accessing FR: ABGSC has an impressive brand name opportunities on the market. and leading market position regarding Moreover, it has been tough times for the placing Nordic companies on the inter- industry looking at low trading volumes and national stage. Could you illustrate this pressure from the regulators on best prac- tice. We are cautious regarding costs and with an example that you are most proud have taken down costs significantly. It is my of? task to protect the business and to protect KNUT BRUNDTLAND: We are proud of our lead- the brand in the shareholders, partners and ing position as a lead manager for IPO’s and employees best interests. our unique position within convertible bonds. Last year only ABGSC has been sole FR: Looking at your client portfolio, how lead manager for two IPO’s in Oslo: one com- is the balance between international and pany active in the chemical industry and the domestic companies? other a real estate developer. These transac- KNUT BRUNDTLAND: On the investor side 80% tions in combination with last year’s USD of our clients are non-Norwegian in terms 400m Petrominerales convertible bond all of volumes as well as revenues. That is illustrates the strength of our distribution because we serve the international markets platform and the importance of a global with a presence in: Oslo, Stockholm, Gothen- reach. Furthermore, it illustrates that we can burg, Copenhagen, Frankfurt, London and compete across instrument classes, sectors New York. and borders. On the corporate side it is the other way We are recognized as a leading distribu- around with a majority of Norwegian cli- tor of Nordic securities to Nordic and inter- ents. national investors. Our global relationships, UK listed IGas Energy plc recently coupled with our unique understanding of announced the arrangement of a five year, the Nordic region’s economy, industries and USD 165 million senior secured bond issue culture, help us to consistently deliver listed on the Oslo stock exchange. ABGSC unique local insight, investor views and mar- acted as sole arranger and bookrunner for ket intelligence. We have a strong presence the bond issue. in the major financial centres such as Lon- Furthermore, ABGSC has over years don, New York and Frankfurt. This broad become a significant player in the convert- international presence differentiates us from most domestic competitors.
Knut Brundtland, CEO – ABG SUNDAL COLLIER 34 Interview with: Paul Bellamy and Amund B. Tørum, Schjødt
Paul Bellamy: Managing Director, Amund B. Tørum: Partner Focus Reports: Can you start by giving a the middle of the eighties the Norwegian brief introduction to the firm and governmental oil company, Statoil, was explain why Schjødt is interesting for capable of being operator of major offshore the market? development projects. The Norwegian oil PAUL BELLAMY: Schjødt has an extremely era has also contributed to the develop- long and successful history. The firm was ment of a number of world leading oil ser- established in 1936 and developed to be vice companies. one of the leading law firms in the country, The Norwegian petroleum model has at first renowned for their leading position been very successful and contributed to the in litigation. This was quite unique as the fact that Norway has been able to extract, other major firms primarily focused on cor- export and benefit so much from our oil porate matters. and gas reserves. Norway has been able to Over the years we have aggressively capture a lot of income, even from certain built up our corporate practice, which has minor/marginal fields. Norway’s oil indus- become the largest in the country. We have try has been a huge success in generating advised on more M&A transactions than per capita wealth. any other Norwegian firm in recent years An interesting dimension is that Nor- and we have an unparalleled track record way’s concession system has been a model in litigation and arbitration. for other countries. As an example several countries in Africa have implemented ele- FR: Mr. Tørum, you are a co-author of ments of our system to ensure that their the standard textbook on Norwegian petroleum resources benefit the society as petroleum law. In your view, how has a whole. The Norwegian Agency for Devel- the Norwegian legal system changed opment Cooperation (Norad), a specialised over the course of Norway’s petroleum directorate under the Ministry of Foreign history? Affairs, has launched a program to support AMUND B. TØRUM: The Norwegian oil and gas developing countries in managing petro- era started in the 1960s. After years of leum resources in a sustainable way. exploration the first large discovery was I would add that Norwegian petroleum made in the 1969 (Ekofisk, that time being law has from the very beginning been a the largest oil field offshore in the world). very stable and predictable system. Despite In contrast to many other oil countries, relatively heavy taxes it has been very Norway implemented a strong concession attractive to invest in the oil and gas indus- system—the state took control of the try since the beginning. The last years the resources from the very beginning. As Nor- fiscal system has been changed to facilitate way did not have any experience from off- exploration activities. shore development projects, the Norwegian Government the first years had to rely FR: How would you describe Schjødt’s heavily upon the experience and financial presence and positioning in the Oil and strength of international oil majors. From Gas sector in Norway today?
Paul Bellamy and Amund B. Tørum, SCHJØDT 35
AMUND B. TØRUM: We have unquestionably a is still doing quite well compared to sur- leading position within dispute resolution rounding countries. The private equity mar- and transactions in the oil & gas industry. ket remains strong. Among the Norwegian “magic circle” of AMUND B. TØRUM: However, for the oil and firms in Norway, we are the only firm with gas sector, it is very good. One of the rea- an office in Stavanger. Our Stavanger office sons is Statoil, whose divestments have provides advice daily on regulatory issues triggered quite some movement. The pur- and transactions. Dispute resolutions and chase of producing assets in Norway is con- other financial issues are mainly handled sidered to be extremely attractive. For that from our Oslo office. Schjødt has managed reason many newcomers, such as Centrica to recruit excellent and talented lawyers for and Wintershall, have come to Norway and its Oslo as well as its Stavanger office. purchased producing assets. In contrast to our main competitors we In order to ensure predictability and have been a leading provider of legal advice simplify the process for being qualified to within the oil and gas sector from the very be a player on the Norwegian Continental start of the Norwegian oil adventure in the Shelf, a system for prequalification of oil 1970’s. companies was introduced in 2000. This system has attracted many new players to FR: Would you agree that newcomers in the NCS over the past thirteen years, sub- the oil and gas industry rather establish sequently triggering M&A activity on the in the Oslo area? NCS. AMUND B. TØRUM: We do see a trend here. The most obvious explanation is availability of FR: Schjødt has been one the leading human resources, which is rather challeng- firms in Norway. It won the award for ing in the booming Stavanger. best law firm in the Nordic Region in The heritage of Statoil derives from the 2012. What is your strategy to main- three major Norwegian petroleum compa- tain this position in the coming five nies Statoil, Norsk Hydro and Saga Petro- years? leum that were all based in the Oslo area. PAUL BELLAMY: As far as going forward is After the merger between these companies, concerned, recruitment and specialization a number of excellent people in Oslo is essential. Over the past three years we became available. This explains the little have grown 67%. This growth will con- boom of small to medium sized oil compa- tinue; however, beyond a certain stage, nies establishing in Oslo. As a result of the such strong growth is not necessarily advis- merger, former Statoil, Saga and Hydro able if we want to ensure continued focus people are dominating many of these newly on specialist skills and quality client ser- established companies. vices. What differentiates us as well is our FR: How has the transaction market 24/7 attitude. Availability and response been shaping up in Norway the first half time is absolutely key. of 2013? AMUND B. TØRUM: We must simply continue PAUL BELLAMY: In general it has been a little to recruit the most talented lawyers and slower. We have seen few listings and that, further develop our performance culture. of course, influences the market. There is certainly not a downturn, because Norway
Paul Bellamy and Amund B. Tørum, SCHJØDT 36 Interview with: Torstein Sanness, Managing Director – Lundin Norway
Torstein Sanness, Managing Director – Lundin Norway
Focus Reports: When we met you last Lundin has been awarded seven explo- year you stated that 2012 would be the ration license interests in the 2012 final proof that Johan Sverdrup is as Norwegian Licensing Round. Can you large as you hoped. This would become elaborate on the key targets and apparent over the next five wells expected results? drilled over the next six months. One TORSTEIN SANNESS: It is fair to say that we year later where do we stand? are happy with the result of the 2012 TORSTEIN SANNESS: We are still within the licensing round. In fact since we started ban that we set two years ago. A total of our operations in 2004, Lundin Norway 15 wells have now been drilled on the has been content with all licenses we have Johan Sverdrup field. During the first participated in. quarter of 2013 two wells and one side In 2013, Statoil will drill 25 appraisal track were completed and one additional and explorations wells and we will drill appraisal well has commenced drilling. 18. That being said, Statoil and Lundin We will probably need to drill another two are definitely the two largest explorers on or three additional wells within the the NCS. Moreover we have the third larg- license area PL501 were Lundin Norway est – after Statoil and ConocoPhillips – is the operator with a 40 percent interest. capital expenditure budget on the NCS. All parties in license areas PL501 and Substantially all of the 2013 budgeted PL265 (Statoil is operator) have agreed a development expenditure relates to ongo- timetable for the Johan Sverdrup field ing development projects in Norway. Half with development concept selection to be of our budget is allocated for capital made by the fourth quarter of 2013, a expenditure for the Johan Sverdrup, plan of development is scheduled to be Edvard Grieg and Luno fields and the submitted by the fourth quarter of 2014. other half for exploration and appraisal The current forecast remains for Johan wells. Full speed ahead! Sverdrup first oil by the end of 2018 with FR: To prepare itself for activity in the full production in 2019 or 2020. Currently we are looking to set the Barents Sea Lundin has taken its own data as good as possible before making a rig up North and opened an office in decision on field development. That being Harstad. In June Lundin has won one said, the reserve figure will to such an license during the 22nd licensing extent that a minor change in the recov- round in the South Eastern Barents ery factor could have a significant impact Sea. Is the outcome in line with your as we are looking at half a million barrels expectations? a day. TORSTEIN SANNESS: Frankly we are not happy with getting merely one block. If FR: 2013 has begun with positive news: we are going to sustain the amount of
Torstein Sanness, MANAGING DIRECTOR – LUNDIN NORWAY 37
drilling we require more than one license when applying for a licensing round. In 2013, Statoil will drill 25 appraisal Therefore we definitely take up the and explorations wells and we will opportunity to discuss the outcome with the Norwegian Petroleum Directorate and drill 18. That being said, Statoil and the Ministry of Petroleum & Energy. In line with our discussions we conduct with Lundin are definitely the two largest aforementioned parties we will prepare explorers on the NCS. ourselves for the upcoming licensing round. TORSTEIN SANNESS: Lundin has made the FR: As discussed Lundin has won 7 decision to stay in Oslo and not to divide licenses in mature areas while being the company. There is ample competence one licence awarded in the Barents Sea in Oslo. People have been on the train where the potential for petroleum is back and forth and finally there was a less explored and where fewer infra- company that moved to Oslo. In fact, structures are built. What does this Statoil has quite a few people in Oslo too. mean in terms of investment and tech- But again, that we remained in Oslo was nology? something new. We have been lucky being able to TORSTEIN SANNESS: We have put together a attract the right people. Actually in Oslo good acreage block before the discovery we take advantage of a wider screen of of oil in the Barents Sea at Skrugard and people. We have seen quite a few compa- Havis, now renamed Johan Castberg. nies wanting to participate on the NCS Lundin has a significant part of the neigh- subsequently setting up their tents in bouring acreage towards the East of those Stavanger. As a result these companies are discoveries. That area will be drilled over facing challenges as people are staying the next coming years. Our aim is to drill two years and leave. For that reason play- two wells annually as an operator in the ers are moving from Stavanger to Oslo. Barents Sea. In 2013 we will drill two Naturally if you change out your crew exploration wells on the Gohta and Lan- every two years there is no continuity, it glitinden prospects. is expensive and unable to establish a In fact the drilling of one exploration company culture. well has commenced in July. The well will target the Gohta prospect, which is FR: Do you still consider Lundin Nor- located some 150 km northwest of the way to be a junior? Norwegian coast and 65 km south of the TORSTEIN SANNESS: Naturally we are a Johan Castberg discovery. The well will young company as we started in 2004. be drilled using the drilling rig Trans- However the average age of our employees ocean Arctic. is 51 years. Our crew has the experience FR: Lundin has its operations on the and that is way we have been able to grow NCS, however its HQ is based in Oslo. significantly over a relatively short period In your opinion, what role does Oslo of time. It is the experience of our people play in the Norwegian Oil and Gas that counts. industry?
Torstein Sanness, MANAGING DIRECTOR – LUNDIN NORWAY 38 Interview with: Wenche Nistad, Chief Executive Officer - GIEK Wenche Nistad, Chief Executive Officer - GIEK
Focus Reports: Norwegian Guarantee Insti- Kredittforsikring AS as a separate subsidiary, tute for Export Credits (GIEK) is a Norwe- in order to look after the needs of SMBs and gian government agency that has been ensure the provision of credit insurance. The established in 1960? What was the ratio- company’s capital came from its own funds nale behind establishing GIEK and how and from the repayment of capital that in pre- have the services evolved over time? vious years was used to pay compensation for long-term credit facilities. This company sup- WENCHE NISTAD: GIEK is the export credit ports short term business such as the export agency of Norway. We are there to help all of fish. Norwegian exporters reaching out for new Between 2004 and 2012 our operations markets. By providing guarantees on behalf have grown significantly. On April 30th this of the Norwegian government, we make it year GIEK has a 117 billion NOK in total guar- simpler for a company to obtain sound fund- antees. 82 billion NOK in guarantees and 35 ing and secure key export agreements. billion NOK in offers (promise of guarantee). What is special about Norway is that equip- This represents an overall increase of 13 bil- ment for the oil and gas industry and offshore lion NOK from year-end. In addition 10 billion services has grown to be a very important NOK in new applications, 59 billion NOK in business in the country. For that reason the total applications per April 30th. oil and gas and maritime sectors dominate The key factors of our growth have been a our portfolio. In fact, approximately a 100 bil- challenging financial market, the offshore lion NOK or 85% of our portfolio is repre- boom, the Euro crisis and as a result the higher sented by oil and gas and 5,5 billion NOK or capital requirements of banks. 5% by maritime. By providing guarantees on behalf of the FR: What is a typical profile of a company Norwegian government to foreign buyers, we that knocks on your door? make it simpler for Norwegian companies to WENCHE NISTAD: It is shipowners, Norwegian obtain sound financing and secure export con- shipyards, or drilling companies that need tracts. This is how we help enable Norwegian drilling equipment when they construct a companies to compete for contracts with for- drilling vessel for example. Or any other com- eign buyers in other markets and countries. pany that is active in the offshore service. In this way GIEK creates growth for Norwe- It is the large companies such as Petrobras, gian companies, their employees and commu- PMX, Reliance but also drilling companies nities in Norway. such as Seadrill and other offshore companies GIEK’s activities have contributed to his- that are operating internationally. toric growth for Norwegian export industries, which has created growth for Norwegian com- FR: What influence does Norwegian flag- panies, their employees and local communi- ship player Statoil have on suppliers mov- ties in Norway. ing abroad? In 2000 it was decided to establish GIEK WENCHE NISTAD: Important in Norway is that
Wenche Nistad, CHIEF EXECUTIVE OFFICER - GIEK 39
we have a demanding environment. The North Furthermore, there are always several Sea is demanding and challenging but Norwe- banks involved covering risks. Norwegian DNB gian companies have worked there for decades. is one of the banks often contributing to This has given us experience and has stimu- financing. Hence, DNB was hosting the signing lated a healthy technological development. In of the agreement between Kexim and GIEK. this way we have found new solutions and Nor- We are trying to do the same with The Bra- way is considered in the forefront from a tech- zilian Development Bank (BNDES). We have nological point of view. Naturally companies not conducted a first transaction yet but aim like Statoil have been important in that respect to do so this year. but I believe that also other international oil companies have been important for our indus- FR: What is a project that you are most try. proud of and represents GIEK at his best? WENCHE NISTAD: This question is too hard to FR: To what extent is your financial agenda answer. We have participated in many projects. linked to a more political agenda? We are particularly proud of how we have been WENCHE NISTAD: GIEK operates on a commercial able to promote and assist the Norwegian off- basis—Norway’s politicians do not get involved shore oil- and gas related shipping industry in our operations. GIEK even have an indepen- through our financial guarantee schemes. Nor- dent board of Directors, appointed by the min- wegian shipyards have succeeded in being at istry of trade and finance. forefront of the highly demanding interna- We conduct our business with a commercial tional offshore service industry. In addition a evaluation. If Norwegian exporters aim to wide range of subcontractors have expanded export to Brazil for example we will support their business through technological innova- them when we find the risk good enough. tion and development. We are proud to play our part in financial issues, adding to our FR: Earlier this year an agreement between exporters’ competitiveness. The cost of a PSV Kexim, a Korean Export-Import Bank, and is typically 300-400 million NOK, where GIEK was concluded for expansion of the GIEK’s guarantee covers 70 % of the total loan co-operation regarding financing and of the shipowner). I should certainly mention export guarantees. How would you define the industry around drilling and rig equipment Norway’s relationship with Korea? for the oil and gas industry, which has grown WENCHE NISTAD: Historically, Norway and Korea considerably over the last years. We are there have been doing a lot together. Drilling rigs and for them as well, and all together most of our vessels manufactured in Korea are full of Nor- portfolio is related to the various parts of off- wegian equipment. Norway and Korea work shore oil and gas related activities. An excep- together on a significant amount of projects tion to be proud is the renewable energy sector, not only drilling units but also many other rigs where we have paid particular attention for a built in Korea. couple of years now. Scatec Solar will supply For many years, GIEK has been co-operating and take partly ownership of solar power with Kexim, in the same way GIEK has co-oper- plants Dreunberg (75 MW) and Linde (40 MW) ated with other Export Credit Agencies. The in South Africa. The company has developed co-operation, which is now being strengthened solar power plants with a total of 270 MW, first through the agreement, deals with the in Europe and now in South Africa. According exchange of information, experience and com- to the company, guarantees from GIEK are cru- petence related to the financing of large proj- cial for securing financing and implementation ects where Korean and Norwegian suppliers of projects. are involved.
Wenche Nistad, CHIEF EXECUTIVE OFFICER - GIEK 40 Interview with: Thomas Fjell and Erik Sandøy, InterOil Thomas Fjell and Erik Sandøy, InterOil
Focus Reports: Looking at a subsidiary fully selected low risk well locations that level in Peru and Colombia, could you would commercial. We note with satisfac- elaborate on your current portfolio? tion that so far all wells have been in line THOMAS FJELL: The challenge for Interoil with our expectations. was that due to its high overhead cost and The next phase of the drilling program highly leveraged financial structure, the will be initiated in December / January. company had very little left for CAPEX. This will consist of approximately 20 wells. The main reason for this was that in 2010 In addition to securing cash flows the the company obtained USD 90 million main objective of this phase is to acquire through bank facilities in Colombia and new data on reservoir distribution, quality Peru and a USD 50 million bond in Nor- and productivity in the vicinity of existing way. Due to the licence situation in Peru, producers and new areas. The results of which is about to expire shortly, the banks this drilling campaign will be crucial to required steep amortization profiles and the value of our Puli-C license in Colom- the bond had a very high interest rate of bia. 15%. This caused a severe drain on cash Interoil also has an exploration license and the company did not have sufficient in Colombia – LLA-47, which we believe funds to mitigate the natural declination can contribute substantially to our share- of our fields. As a consequence production holder value. However, in line with what decreased from 10,000 to 4,000 barrels of we have communicated to the market we oil per day. As a consequence the compa- are aiming to reduce the operational risk ny’s cash flows became so low in January in Interoil and we are therefore seeking to 2013 that the company was unable to meet farm out a portion of this license. We its commitments. expect to initiate this farm down process We realized that in order to salvage once we have the results from the 3D seis- some of the shareholder values we needed mic to increase production and that the invest- In Peru Interoil operates two produc- ments that this required would have to be tion licenses. According to the initial term funded through equity. So in March this our license expired in March this year. year we completed an equity issue of USD However, Interoil was awarded an injunc- 35 million. This enabled us to fund an tion to continue operating the licenses in expansive drilling program in Colombia Peru due to force majeure caused by El of approximately 65 wells. As of today we Nino (1998-99 and 2002-03) until Octo- are in the process of executing the first ber 2014 in the case of Block III and until phase of this drilling program and have so March 2016 in the case of Block IV. We are far completed 7 of the first phase. The currently in arbitration proceedings with main objective of these wells was to licensing agency PeruPetro to determine increase cash flows, and therefore we care- whether Interoil has the right to extend
Thomas Fjell and Erik Sandøy, INTEROIL 41
the term of its original licenses in Peru lem in Peru is perhaps not that there is a until October 2014 (Block IV) and March lack of licenses but not enough competen- 2016 (Block III). A final decision on these cies within the oil and services industry. proceedings is expected within the first Interoil has the strength that many other half of 2014. We feel quite comfortable companies do not have and we intend to with our case so will continue to operate utilize that strength by acquiring addi- these licenses until the aforementioned tional acreage and growing the asset port- periods. Given the uncertainty of the folio. license situation, all investments carried out will have a short payback time. FR: Could you each give one good reason We are seeking for long term extension to buy shares of Interoil? for our licenses as we believe that these ERIK SANDØY: Unlike large E&P companies, have a significant upside potential—18 where significant events often have little million barrels of 2P reserves that can be impact on their share price, Interoil offers developed. We have already developed a many more triggers and volatility in its Field Development Program for this field share price. This makes it a more risky and according to this we would be able to share but is more based on company spe- increase production to 7000 barrels of oil cific issues rather than macroeconomics. per day by 2015. Our new shareholders Interoil has a troubled background but have clearly stated that they are willing to has changed significantly with a clear contribute in funding this development strategy going forward. Colombia in itself program. It is also clear that Interoil is the is a strong value case and little value is only company that would be able to attributed to Peru. We will have to dem- increase production rapidly on blocks III onstrate success before the market recog- and IV as other operators would need to nizes this, but if we can deliver what we qualify and obtain the required permits say, the Interoil share could perform well. which will take a significant amount of THOMAS FJELL: I do not believe that the time. stock market has fully recognized all the changes we have made yet. Our strategy FR: For the investors who like to take going forward is low cost, production ori- risk, is this not the right time to buy ented and therefore represents a low risk. shares of Interoil? It is all about continuing producing on the THOMAS FJELL: Definitely it is. I do like to assets we have in Colombia. stress that a license extension will be a The opportunity we have by being in significant value contributor to Interoil. Peru is quite unique. Interoil has a good Hence, we are working very hard on dif- local organization and has been there for ferent routes to obtain that extension, and many years. Many opportunities are open- we are getting positive feedback from ing up in the country. I view the oil and senior officers within Peruvian govern- gas industry in Peru to be where Colombia mental agencies related to this issue, was 10 to 20 years ago. The companies that although there is still work to be done in were in Colombia and acquired attractive order to achieve said extension. acreage at that time have created signifi- The fundament that is value creating in cant value for their shareholders. Peru is the organization we have there. That represents a significant value to the company and its shareholders. The prob-
Thomas Fjell and Erik Sandøy, INTEROIL 42 Interview with: Roy Norum, Chief Executive Officer -PG Marine Group Roy Norum, Chief Executive Officer -PG Marine Group
PG Marine Group - Ing Per Gjerdrum PG’s philosophy is based on insourcing ASWhat were the priorities you set rather than outsourcing, as we build in- when you took over the reins at PG house competence and capacity. PG main- Marine Group? tains partnership agreements around the ROY NORUM: PG has historically been a tech- world with leading maritime product pro- nology-focused company; our engineers viders for local sales and distribution. have set the parameters for development. However when markets become saturated The company established a pump engineer- it is harder to obtain capacity and quality. ing division in order to increase its focus For that reason we established business on solutions for customers. We adjust units such as PG Automation, which builds existing products but are always excited to control and automation systems in-house. bring new innovations to the table, and This strategy enabled us to increase the have presented many novel, smart solu- depth of both our competence and our tions to the market over years. capacity. Now, we can sign broader con- Today, clients are looking for fewer sup- tracts with bigger customers. pliers that take more responsibility and Ultra-deepwater developments and the offer larger packages, all through a single move away from platforms have also point of contact. The advantage we have in changed the way clients are selecting this industry is that we have been working equipment. Our research and experience closely with offshore infrastructure for has placed us at the forefront of developing many years, and have seen many pumping- new solutions for this evolving market. functions migrate from rigs to vessels, and One of these is the PG-MACS (Multi Appli- now to the seafloor. Our understanding of cation Cargo Solution), which was devel- the market is what we have based the busi- oped in 2006-2007. PG-MACS is a flexible ness on, and this has reaped rewards for under-deck cargo handling system for liq- us. uid and dry bulk offshore cargo – including Under my leadership, we have taken PG drill cuttings and rig slop, available for to a new level in international markets: both vessels and rigs, which can signifi- from 4 percent to in excess of 70 percent cantly enhance the vessels cargo facilities of our revenues coming from the export – not least flexibility of cargo carried market, bringing our annual export turn- Another example is PG-MAPS, a com- over from €10 million to more than €80 pact, lightweight and cost-effective pump- million in 2013. Today, we see demand for ing system for a range of subsea and top- our products in Korea, China and Singa- side applications, including subsea mud pore, but also North- and South America: and drill cuttings handling for managed we have a significant market share since pressure drilling, tophole drilling, subsea 2000 in Brazil, a critical market for the oil or topside high pressure injection of water and gas industry. or chemicals, subsea liquid boosting, and
Roy Norum, CHIEF EXECUTIVE OFFICER -PG MARINE GROUP 43
well intervention and fracking. PG-MAPS Under my leadership, we have taken boasts several technical and cost-efficient advantages, including improved energy PG to a new level in international efficiency. Both the PG-MACS cargo solutions and markets: from 4 percent to in excess PG-MAPS subsea pumps are products that were developed, manufactured and pat- of 70 percent of our revenues coming ented in-house by PG. Together with our from the export market, bringing our Ballast Water Treatment systems for the offshore service vessels segment, these annual export turnover from €10 ground breaking solutions will be the main drivers of PG’s future expected very strong million to more than €80 million in organic growth. 2013 As a company focused on innovation, how difficult is it to convince your cli- abroad, or be extremely efficient. ents to accept new technologies, in an I’ll give you an example: At the end of industry that is considered to be 2012, Statoil had only 23,028 employees extremely conservative? – a tiny figure for a company characterized ROY NORUM: Our products are generally well as being among the most profitable and received by the industry, but as you men- geographically developed in the world. This tion, the oil and gas industry remains a low employee count has enabled Statoil to conservative business. For an innovative have the highest rate of production to company like PG this is quite a challenge employees in the industry, at an average of because everybody loves our new ideas and 78.4 bpd/employee in 2012. novel products, but people are always wait- This type of efficiency is also the key for ing for someone else to go first. PG. Our aim is to manufacture smart solu- This leads to a ‘chicken and egg’ situa- tions that will provide high value, and tion. We have to find that one company diversification to our customers. Frankly, that is open to pioneer with us. But once PG has an impressive track record in effi- you are recognized as a trusted partner, it ciency over the last ten years, and at the is possible to have a very favorable position same time, the majority of PG’s solutions in the market chain. In fact, last week are logic-engineered, object-specific and (August 2013), PG inaugurated a new customized, which makes our products sig- 8,750m2 factory, and a new unit known as nificantly more challenging to copy than PG Fabrication. This is a brand new, tailor- commodity-oriented products. made facility that will present the PG PG holds and builds competencies Group with unprecedented possibilities for within the company but occasionally buys future business, including subsea-pump capacity from external sources, for exam- tests pits with up to 1,4MW fixed power ple by purchasing simple steel structures capacity. in countries such as Lithuania, Vietnam or Poland. In addition we have a partnership How is PG dealing with challenges in with a well-known Indian company that Norway’s high-cost environment? provides us with high capacity of skilled ROY NORUM: There are only two solutions to engineers if necessary. this challenge: either move operations
Roy Norum, CHIEF EXECUTIVE OFFICER -PG MARINE GROUP 44 Interview with: Leonid M. Surguchev, Managing Director of LUKOIL Overseas North Shelf AS Leonid M. Surguchev, Managing Director of LUKOIL Overseas North Shelf AS Focus Reports: How do you translate State owned companies ROSNEFT and GAZ- LUKOIL expertise gained in Russia to PROM may develop offshore fields. How do the Barents Sea? the latest developments in Norway fit within LEONID M. SURGUCHEV: LUKOIL has several LUKOIL’s strategy to move towards the Rus- decades of exploration and production expe- sian Arctic? rience in Russia and abroad. In Timan LUKOIL Overseas Company in Norway Pechora and in the Caspian region LUKOIL is focused on the Norwegian Continental has been producing fractured carbonate and Shelf. Recently new offshore licenses in Rus- low permeable heterogeneous reservoirs sia have been awarded to ROSNEFT and with new well and IOR technologies. This GAZPROM, some of them in cooperation experience of our geoscientists and reservoir with foreign companies. Last year the Rus- engineers can be useful for exploring and sian government also invited Russian pri- developing Permian formations in the Bar- vate companies to consider possible coop- ents Sea. We will also use LUKOIL Overseas eration with the State companies on the deep water exploration drilling experience terms similar to their cooperation with for- from the West Africa projects. eign companies. I think, taking into the account the size and resources of the Rus- FR: LUKOIL Overseas North Shelf builds sian Continental Shelf, such cooperation its business platform as an active license between State and Russian private compa- partner, when will we see the transfor- nies in the Arctic will take place in the mation into operatorship? future. LEONID M. SURGUCHEV: In our first license round in Norway our main goal was to FR: The Barents Sea is a very sensitive obtain participation in the prospective region from an HSE and environmental licenses and enter in the joint ventures with perspective. Would you tell us a little our partners. The long term objective in Nor- about the work LUKOIL is doing on envi- way is to become a full cycle upstream com- ronmental protection and HSE? pany having projects in different stages: LEONID M. SURGUCHEV: LUKOIL understands exploration, development and production. the importance of preserving fragile marine Over the years we aim to have LUKOIL activ- environment in the Northern Seas in Nor- ities on the level comparable with major way. The company is paying significant international oil companies operating in attention to environmental protection in all Norway. its projects complying with national require- In Russia legislation reserves the right to ments and regulations. LUKOIL budget for operate offshore fields to companies owned environmental measures is exceeding 750 at least 50 percent by the state and having million USD per year. As an example LUKOIL at a minimum five years of offshore experi- has been closely monitoring its environmen- ence. These limitations mean that only the tal footprint in the Caspian since it began
Leonid M. Surguchev, MANAGING DIRECTOR OF LUKOIL OVERSEAS NORTH SHELF AS 45
exploring the area in the mid-1990s. LUKOIL strong G&G expertise among geoscientists offshore policy is following a zero harmful graduated from Oslo University and experts discharge program ensuring no waste dis- working with many service, engineering and charge to the sea. In the Baltic Sea LUKOIL seismic companies. is conducting continuous satellite environ- During the preparation for the 22nd mental monitoring program for its offshore licensing round we have actively involved operations. experts from LUKOIL Engineering, where The Northern Caspian area, where many of our G&G colleagues have been LUKOIL is producing Y.Korchagin field and working previously for many years with the now developing V.Filanovsky field, is espe- Russian Barents Sea and Pechora Sea regions cially environmentally sensitive due to shal- in Murmansk and Komi republic in Russia. low waters and unique ecosystem. In the We also plan to involve them in our active same time winter periods in the Northern preparation now for the 23rd license round Caspian can be compared to Arctic harsh in Norway together with our geoscientists weather regions due to strong winds and in LUKOIL Overseas corporate centre and very low continental temperatures plum- geoscience centre in London. meting below -30°C. In Norway LUKOIL will use environmen- FR: In addition to being the Managing tal protection experience from the Baltic and Director of LUKOIL Overseas North Caspian Seas and from deep water West Shelf AS you are also a Member of the Africa operations. Norwegian-Russian Chamber of Com- LUKOIL Overseas QHSE responsible merce. How would you describe the rela- manager in Oslo is a very experienced per- tions between Russia and Norway? son with long term major oil company inter- LEONID M. SURGUCHEV: In my opinion the rela- national experience. tions between our two countries and between our people are very good. One FR: To be successful in the Barents Sea example - the tombs of Soviet soldiers and high quality staff is key. How do you prisoners of the World War II are always cov- attract and retain the best talent? ered with fresh flowers, preserved and taken LEONID M. SURGUCHEV: Finding talent is quite good care of by local Norwegian communes hard these days in Norway as well as inter- in many cities in the country. It shows the nationally. LUKOIL and LUKOIL Overseas attitude, good feelings and respect to the have secured funding programs with leading Soviet soldiers who were fighting against Russian universities, such as Gubkin in Mos- Nazi invasion and died on the Norwegian cow and University in Tyumen and many soil. Important historical fact is that our two others. Also a special management and counties with common border in Europe expert training program is lunched by have not been in war against each other for LUKOIL at Skolkovo Science and Innovation more than one thousand years! City in Moscow. Gubkin University and Regarding the Norwegian-Russian Arkhangelsk Pomor University over several Chamber of Commerce I think the work it is years have been cooperating with universi- performing is professional, done with enthu- ties in Stavanger and Tromso and have joint siasm and brings positive results. According Master programs. Graduates from these to the representatives from the Russian side Russian-Norwegian education programs are the work of this Chamber in promoting now working in Russian and foreign compa- cooperation between our two countries can nies all over the world. In Oslo we see also be an example for other countries in Europe.
Leonid M. Surguchev, MANAGING DIRECTOR OF LUKOIL OVERSEAS NORTH SHELF AS 46
PAST REPORTS 47 Company index
Ministry of Finance...... 1 Ramboll Oil & Gas...... 5
McKinsey & Company...... 1, 8, 11 ENI...... 5
Pareto Group...... 2 ConocoPhilips...... 5 Lundin Petroleum...... 2, 3, 4, 6 RWE DEA...... 5 Statoil...... 2, 3, 5, 10 Petoro...... 5 Det Norske Oljeselkap...... 2
Senergy...... 7 Technip...... 3
Schjødt...... 3 Oslo Børs...... 7, 8
Nordea Bank...... 3 Kvaerner...... 8
DNB Bank...... 3 Interoil Exploration & Production ...... 8, 9
GIEK...... 3, 4 Songa Offshore...... 9 Petrobras...... 4 Eureka Pumps...... 10 ABG Sundal Collier...... 4 PG Marine Group ...... 10, 11 LUKOIL Overseas North Shelf...... 4
North Energy ...... 4 AGR Group...... 11
Repsol...... 4, 5 Boston Consulting Group...... 11 48 Norway Oil & Gas report part 4 November 2013