Swimming with the churn and change
  from: Offshore Engineer
  by: Darius Snieckus
  Monday, April 07, 2008

Having rapidly risen to prominence in the North Sea’s Third Age as the ‘operators’ operator’, Petrofac is now mapping out the next march in its campaign as a global facilities solutions provider intent on making the most of the ‘shifting lateral boundaries’ between service contractors and oil companies – not least the NOCs. Darius Snieckus speaks with Petrofac Facilities Management managing director Gordon East.

Marking its tenth anniversary as duty holder on the Northern Producer floating production semi in September was an arguably bittersweet affair for Petrofac. The facilities service company’s time on the unit producing the UK North Sea Galley field had been an incontrovertible success – a near-doubling of export expectation through the production of some 60 million barrels of oil and maintenance of a better than 98% average uptime for operator Talisman. But its tenure on a 1998 redevelopment project begun as a ‘relatively short-term proposition’ had come to a natural end with the field’s decommissioning, as 60 Petrofac personnel were redeployed on other company assignments and the Northern Producer was brought into Newcastle’s South Shields yard for renovation.

Assessing the significance of the Northern Producer contract requires both a micro and macro perspective. On a historical level, it was the first case of a contractor being entrusted with dutyholdership of an offshore installation whereby Petrofac undertook overall responsibility for the management and safe running of the floater and provision of all offshore crew, onshore support teams, and necessary subcontractors. The job went on to serve as a springboard for the company to further develop its operations model to the point where, at last count, Petrofac had duty holder responsibility on no fewer than 13 developments on the UK continental shelf alone, including six normally unmanned installations.

On the wider pan-industrial level, the duty holder model, pioneered at a time when the oil price was languishing at $10/bbl, has proved a flexible and exportable methodology that has seen take-up by other contractors in oil and gas provinces around the world and earlier this year leveraged Petrofac’s breakthrough deal with the governmentowned Dubai Petroleum to assume full operational responsibility for facilities and well management of Dubai’s offshore oil and gas assets.

‘The success of the Northern Producer from start to finish has played a significant role within Petrofac,’ states Petrofac Facilities Management managing director Gordon East, who after 20-plus years with ConocoPhillips took over the top post at the company from Jim Atack last year. ‘Ownership of the delivery of our services, effective teamwork, a strong and active safety culture, good morale and a genuine atmosphere where personnel wanted to be part of the team and enjoyed the working environment are all key factors in the success story.’

‘As a group, our success lies within the core values that we encourage our people to embrace,’ he continues. ‘Through the duty holder model we have created an innovative and value-adding model that has helped us deliver an operational performance ahead of expectations and is highly regarded by other contracting companies in the North Sea. Ten years on and the success of the model continues to lead the way for the group on a global scale, as can be seen in our contract with Dubai Petroleum.’

Finalisation in April of the contract came out of a six month process during which Dubai Petroleum, Petrofac and outgoing concession-holders Dubai Petroleum Company worked ‘side-by-side to ensure a smooth and safe transition of operatorship and control’ of assets encompassing four offshore oil fields populated by some 70 platforms, more than 400 wells and over 800km of infield pipelines – and, importantly, operated by a staff of 600, presently being absorbed into Petrofac, and further supported by a large number of specialist contractors.

‘Transition on this sort of contract is very important because it addresses the issues of dealing with the people and understanding the asset to ensure safe, optimised operations going forward,’ stresses East. ‘This is a sizeable operation and needed to be approached as such, not least because some of the facilities are over 35 years old.We have already significantly increased the work programme on assets that might be contextualised as Ekofisk-size fields that are not yet at the end of their secondary recovery phase. The Dubai government are looking for two to three decades more production at least.’

Resourcing the nationals

Winning the work off Dubai may be seen as a bellwether at a time in the international oil and gas industry’s history when NOCs are beginning to perceive the line between service contractors and oil companies as increasingly blurred when it comes to contracting-in field development partners, a fact which, for a company such as Petrofac that has long been trading on its role as ‘the operator’s operator’, is either fortuitous or the fruition of a cannily conceived business development strategy. As East notes, the Dubai Petroleum contract has been something of an ice-breaker in that he has had ‘conversations on three continents with different national oil companies that all reference this assignment as an example of how mature assets might be regenerated’.

Underpinning this push into markets where the NOC is ‘not particularly interested in bringing in a major IOC’, he continues, are established corporate values that encourage a ‘clearer relationship’ between operator – or host government – and the contractor. ‘If you look back to the early days of Petrofac you will see a company founded on very firm values – culturally diverse, international, united by shared principles – and as the industry has moved on we have continued to look at what the customer wants and developed Petrofac accordingly, in line with customer needs and market needs. And we have been keenly aware of the need to acquire companies to add to the portfolio as needed. In some way, it has to be said, you do make you own destiny.’

A key addition to its facility solutions portfolio came through the acquisition in January of a 51% stake in well operations outfit SPD Group. Based in Dubai and Aberdeen, SPD, which specialises in well project management, well engineering optimisation, well engineering studies and consultancy services, has running well operations contracts in Africa, Europe and the Middle East as well as in supporting the operations of national and international oil companies in these regions. Tying the SPD string into the Petrofac bow, East suggests, was instrumental in securing the operations management responsibilities for Dubai’s offshore oil and gas assets.

‘Bringing together the component parts we have meets with what our clients need in the way of a service package,’ he underlines, pointing to the company’s turnkey offering of ‘everything from engineering construction services through operations maintenance to wells and drilling services’ under its Engineering & Construction, Operations Services, and Energy Developments divisions.

To judge from Petrofac’s latest financials, the contractor’s message is being well received. Revenues through to mid-year were up 14% to just over $1 billion, net profits up 47% to $77.2 million, and its first-half order backlog standing at $3.9 billion. These numbers are reflected in East’s remark that the ‘biggest difference [he has] experienced coming into the job is the sheer scale of the opportunity in terms of the market place’.

‘For Petrofac to have reached the stage in its developments it has shows how the strength of our values and our people shine through,’ he notes. ‘From here, well, the travel I do and the conversations I have with representatives from operating companies around the world suggest a vast potential for a company like ours.’

International interests

Variety does look increasingly to be Petrofac’s spice of life. Inside the last six months alone, Petrofac’s Brownfield business unit has secured a new contract in Equatorial Guinea for the provision of project management and engineering support services to ongoing modifications and new projects for Equatorial Guinea LNG Operations at its Punta Europa Plant facility on Bioko Island; its Energy Developments division has negotiated a swap of its 29% interest and operatorship in UK North Sea block 9/28a, containing the Crawford field, for an additional 3.11% of block 211/18a in the soon-to-be developed West Don area with Valiant Petroleum; and its E&C arm has received a letter of award from Karachaganak Petroleum Operating for a front-end engineering and design study for phase three of the development of the Karachaganak Processing Complex in Kazakhstan.

Not that its march on international markets has led Petrofac to neglect its old stomping grounds. Last year saw Petrofac Facilities Management take on dutyholdership for the gas-producing Camelot platform following the transfer of ownership from ExxonMobil to Energy Resource Technology, while its Brownfield business was awarded contract extensions by Lundin for engineering support and construction services on the Heather and Thistle fields and Maersk Oil for offshore operations and maintenance services on Gryphon, Janice and Global Producer III installations. In a groundbreaking £3 million/yr deal with BHP, the contractor also took over duty holder responsibilities for the Irish Sea Pioneer on the Liverpool Bay development in the Irish Sea.

The UK North Sea and offshore Europe at large, in East’s view, needs to keep up the ‘churn and change to keep refreshed’, part to an ongoing evolution that continues to play to Petrofac’s strengths. ‘We have done something in the region of 20 transitions now – from one operator to another – in the North Sea, so it something we are experienced in doing. Asset exchanges have slowed down over the last couple of years but the signals are that this might be picking up soon and this is something that we see as being good for the industry, good for the country and good for the workforce because it allows a new company to come in and put some new energy and investment into a development.

‘Every asset we have taken over has seen improved production and improvements in safety because of the new focus we bring to a field,’ he continues. ‘For me the key thing about the North Sea is to keep the process of change happening, whether the operators are big companies or smaller ones it means more oil and more jobs.’

Petrofac’s faith in the long-term future of the southern North Sea market was made plain with the recent opening of new premises in Great Yarmouth to meet the growing demand for intervention support services for unmanned and manned operations in the region. In October 2003, Petrofac took over management of Tullow Oil’s Hewett/Bacton offshore-onshore gas complex in a landmark agreement that marked the first time that a facilities management company had assumed management of an onshore gas terminal in the UK.

‘Flexibility’ and ‘innovation’ are words East returns to regularly in looking at the history of the company – and doubtless will continue to stand as strategic criteria as Petrofac moves forward. ‘We make a point of never being tied to one way of doing a job – we like to think we can come up with new ways of meeting a client’s needs and new ways of overcoming the challenges an operator may be having on a given project or in a given region,’ he concludes. ‘Sitting down with a client, collaborating, coming up with a solution that fits their needs, that is what we do. It is at the core of our value offering.’OE

The high training ground

September saw Petrofac bring together its safety training specialist subsidiary, RGIT Montrose, and emergency response and crisis management company, Rubicon Response, under the Petrofac Training banner. Designed to ‘simplify the brand structure within its training business’, the move came following extensive research and aims to allow the business to ‘more readily explain its increasing range of solutions for competency development and risk minimisation’ within organisations.

‘This is a significant and extremely positive step for our future development,’ says Petrofac Training managing director Leigh Howarth. ‘Petrofac has been known in the market by several names but its vision to improve safety and competence within the energy industry has never wavered. As a truly integrated business, we plan to build on the attributes that have always set the company apart from its peers.’

Petrofac Training’s offering is segmented into three core areas: the provision of competence-led training services, encompassing safety through to emergency response and production, operations and maintenance training; consultancy; and the provision of outsourced managed solutions for training and competency. OE

Click here to register to receive your own copy of Offshore Engineer each month.