Life-cyclist rings the changes
  from: Offshore Engineer
  by: Darius Snieckus
  Tuesday, April 29, 2008

A year on from its ‘demerger’ with Vetco Gray, Aibel – to judge by its diverse contract backlog – is making the most of its newfound independence. Darius Snieckus speaks with chief executive Rasmus Sunde about the changing identity of a company that has gone through three names in three years.

Business as usual is how Rasmus Sunde described life in the immediate aftermath of the $1.9 billion sale of the Vetco piece of Vetco Aibel to GE Oil & Gas early last year.

Since then, the Aibel chief executive has been proved right – and wrong – and all to the good. Right, because the contractor has kept its shoulder to the wheel on its legacy projects – including the just-completed $800 million job to supply topsides for Marathon’s Alvheim FPSO conversion, the $150 million/yr modifications assignment on the Greater Ekofisk Area for ConocoPhillips, and the 2005 topsides modification plum of transforming StatoilHydro’s Statfjord A platform from an oil into a gas installation. And wrong because 2007 has been a year of great change within Aibel as the company reorganised itself from five to three business units and further expanded its campaign into markets outside the Norwegian continental shelf.

‘When our former shareholders, 3i, JP Morgan and Candover, took the decision to sell Vetco Gray last year, the name went with it,’ recounts Sunde. ‘But when we were sold by ABB in 2004 [as Vetco Gray and ABB Offshore Systems] and we established the name Aibel within Vetco Aibel we were of a mind that it was a name that had to stand on its own two feet – it just so happened that time came sooner rather than later.’

‘We feel we are in a very exciting part of the business at a very exciting time in the industry, a life-cycle company doing everything from front-end engineering to field development to maintenance and modifications. In addition we continue to develop a state-of-the-art technology portfolio in oil, gas, water separation, gas in general, as well as drilling controls. With Vetco Gray there weren’t that many synergies and now as Aibel we engineer, we build, we modify, and we operate independently,’ he continues.

To look back over the company’s contract wins of the last 12 months, there is every indication that Aibel is enjoying life in its latest incarnation, ‘continuing to grow the business on the NCS while steadily and cautiously building presence in those international markets where the company’s knowledge base is fit for purpose’ – and perhaps all the more so following its acquisition last June by Ferd Private Equity Fund II for $900 million, in the largest-ever buy-out by a Norwegianbased venture capitalist.

Central to the ‘business as usual’ stability that Aibel feels presently is its share of the NCS maintenance and modifications market, a revenue stream that account for approximately 60% of the company’s income – and one that has been kept flowing by a trio of deals for StatoilHydro worth more than $250 million.

Last October, Aibel signed on to revamp the produced water re-injection system on the operator’s Veslefrikk platform, a $45 million emissions minimisation project that is part of the Veslefrikk 2020 field life extension scheme. Completion of the job, which encompasses engineering, procurement, fabrication, onshore testing, offshore hook-up, commissioning and start up assistance to StatoilHydro, is scheduled for the end of December 2008.

In January, the Norwegian oil company tapped Aibel for a $180 million assignment covering area preparation, installation and integration of new living quarters modules on the Troll A platform, boosting bed capacity on the platform by 150 in line with its Troll Further Development project. For the contractor, which has been present on the installation for most of the last decade – if sporting different corporate logos – under a series of maintenance contracts, the latest job is seen as an ‘endorsement of the company’s qualifications for complex installation and modification commissions of this kind’. The new modules, being fabricated under a separate EPC contract with Leirvik Module Technology, are slated to be ready for operation in 2011.

Most recently, StatoilHydro last month selected Aibel for its Kvitebjørn Capacity Upgrading project. The $37 million ‘standalone’ assignment, which will be carried out under the contractor’s existing Troll-Sleipner maintenance and modifications deal, follows on from a study carried out by Aibel that took into account 13 tie-ins for a planned shutdown in August 2008. The KCU project is to be finalised next January.

‘Our focus in M&M continues to be adding value to our customers’ operations through high production levels – and costeffective production – we feel we can protect our position on the NCS, where we retain a solid market share,’ says Sunde.

Elsewhere on its home patch, Aibel last year received further votes of confidence in its vessel internal electrostatic coalescer (VIEC) technology, with contract awards for installation of two VIEC walls in the first stage separator of the new production and accommodation platform at BP’s Valhall field, and an order for StatoilHydro for a VIEC unit to be built into the semisubmersible production platform destined for the operator’s Gjøa development.

With these latest orders, Aibel now has ‘more than ten’ VIECs offshore, including units on StatoilHydro’s Heidrun platform as well as on the Mærsk Inspirer jackup rig being used – uniquely – to produce the operator’s Volve field.

‘This technology is good for both brownfield and greenfield projects – particularly where you have high water cuts,’ says Sunde. ‘What is encouraging here is that this is really the first generation of this technology and as with commercialising any new technology the biggest challenge is getting the hours of operation and feedback that comes with it, which we are getting.’

‘Now we have a large number of units with a variety of customers, including Pemex and Petrobras and StatoilHydro of course, so we feel we are building momentum,’ he adds.

Foreign relations

If on the NCS Aibel has been building on established foundations, overseas it has been in ‘new building’ mode.

Last June, it secured a ‘breakthrough’ turnkey facility management contract from Sea Production Management to operate the Front Puffin FPSO on AED Oil’s Puffin field off northwest Australia, in a deal which includes approval as operator from NOPSA (National Offshore Petroleum Safety Authority), preparations and submittal of the safety case, all mobilisation activities, systems and procedures, maintenance planning, subcontracts, providing spares, chemicals and consumables, recruitment and training, commissioning assistance and start-up.

At the end of 2007, putting the seal on another contract from the Vetco Aibel days, Aibel saw off the final module being supplied to Maersk Contractors for installation on its Ngujima-Yin FPSO, the last piece in a design, procurement and construction job for the vessel’s topsides process and facilities modules. The contractor also supported Maersk in the overall integration work on the FPSO, which is soon to be installed on Woodside Energy’s deepwater Vincent field off Western Australia.

More recently, Aibel Thailand was awarded a $10 million contract for the procurement and construction of five topside modules by Prosafe Production Services for Petrobras’ Cidade De Sao Mates FPSO. The project will see Aibel supply two 820t manifold modules, a 365t gas export module, a 215t heating medium equipment module, and a 190t chemical injection module, as well as handling bulk procurement and construction, loadout and transportation. Delivery of the modules, which Sunde calls ‘a showcase of the strengths of the company’s Thai facilities’, is due this month.

While all this has been going on, Aibel has still found the time to press ahead with a corporate reorganisation that has streamlined the company from five business units down to three – process and facilities, maintenance and modifications, and services and products – and removed ‘complication’ from the organisational structure.

‘What we basically have done is remove one level of the organisation and, in reducing the business units from five to three, aligned ourselves with the procurement patterns of our customers,’ explains Sunde. ‘So we will typically have the engineering and project management, the EPC part, covered by one business unit, namely P&F; and then when things are in operation, we have the MMO [maintenance, modifications and operations] business unit taking over.’

‘Our third business unit, services and products, is something of a mix,’ he continues. ‘It is most like an engineering and technology unit, and it deals with what we feel are the value-creators in the process systems we design.’

Along with further development of its VIEC technology, S&P has had a hand in progressing the contractor’s LOWACC (low water content coalescer), a separation enhancing device for oil/water designed to sit downstream of its VIEC ‘polishing the oil’ to remove any remaining water before wellfluids are piped to shore. The company has also been refining a high-accuracy version of the ILMS (inductive levels measurement system) oil-in-water profiler installed on the Troll Pilot subsea separator. Both products are currently installed in the separation and processing technologies test loop at StatoilHydro’s research centre in Porsgrunn, Norway.

‘These are early days for these products but I believe they speak to our belief in being a fully-fledged full lifecycle company,’ says Sunde, ‘because at the heart of an engineering, project management and service company like ours is innovative technology, differentiating technology. Our mission is clearly spelled out: to help our customers achieve greater production, and, again, that, at least in part, comes down to new technology.’

In mid-February, two years after the Odin multipurpose shuttle tanker arrived in Aibel’s Haugesund, Norway yard to begin its transformation into the Alvheim FPSO, the floating production vessel was towed out of harbour kitted out with 8000t topsides made up of 18 modules that included state-of-the-art production separators, gas compression and dehydration, water treatment and power generation systems, on its way for final testing at Åmøyfjord before being installed on the Norwegian North Sea field.With Aibel’s current shareholders committed to building the company into a ‘truly international business’ on a 3-5 year time horizon, the sailaway might have been seen by some as symbolic.

To Sunde, it is a case of steady as she goes. ‘In this industry, long-term used to be next Friday. Now, for the first time, despite the threat of recession in the US and the possible impact on energy demand in India and China, we have contracts for the short-, medium-, and long-term and the oil price would have to be halved before it would really have a negative effect on our business.’

‘And so long as we strike a balance between contracts that are capex-driven and those that are opex-driven,’ he concludes, ‘we have every hope that we will be able to build on what we see as a unique position in the market.’OE

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