Dan Bravo Maintenance deep dive

OCTOBER 2014
MAERSK OIL
Dan Bravo
Maintenance
deep dive
18
Going for
growth
4
Financial
forces
8
Decades of
delivery
Engaging
to win
11
14
4 CAPITAL MARKETS DAY
New strategy update from leadership
8 FINANCIAL FORCES
Interview with new CFO Graham Talbot
11 DECADES OF DELIVERY
20 years of oil from Al Shaheen
4
14 ENGAGING TO WIN
UK government introduces new allowance
to support uHPHT investment
17NEWS IN BRIEF
New rig in Denmark; Angola ministerial visit
18
DAN BRAVO
Maintenance deep dive
8
20SIMPLIFICATION IN PRACTICE
How Maersk Oil can get simply better
22GLOBAL BUSINESS UPDATE
Exploration, production and development news
24A DAY IN THE LIFE OF...
Meet Johannes Botha from Angola
OCTOBER 2014
MAERSK OIL
11
Dan Bravo
Maintenance
deep dive
14
Going for
growth
4
Financial
forces
8
Decades of
delivery
Engaging
to win
11
14
14
Cover: Diving work in the Danish North Sea
Content Editors: Daniel Canty & Charlotte Holst
e-publication: Tina Hentley/Papermint
Brand Manager: Susanne Gylstorff
Layout: Maersk Oil Design Team
Printed on Claro Silk paper.
Please send any comments and feedback to:
[email protected] or
[email protected]
October 2014
17
The Source 3
Foreword
While the second quarter will be
remembered for disappointment in Brazil,
a look at the underlying performance of
the business results show that our focus
on sharper prioritisation and business
improvement is having an effect.
Our earnings continued to rise on the back
of stronger production performance and
while we know we will have to battle for
every barrel in the journey ahead, we are
making headway with our production
excellence programme in the core portfolio.
I would like to take the opportunity to
recognise the hard work and dedication
of those many hundreds of colleagues
in Denmark, the UK and Qatar and
Kazakhstan who have helped deliver an
extensive programme of maintenance
and asset optimisation over the summer
period. They have helped to ensure the
continued safe operation of some of our
older, but critical assets.
Despite the fact that we had no big upsets
during the summer shutdowns, the level
of high potential incidents and lost time
accidents remains too high in our operations.
There is nothing inevitable about the safety
incidents in our business. We showed, after
many months of hard work, that we can
deliver with regards to safety, if we place it
top of mind in every single task we do – no
matter how small or seemingly hazard-free.
Incident-Free is not optional or occasional,
it’s an imperative that falls on each of us to
do the right thing – every time!
recent strategy review. When we updated
the markets in September, two years on
from our inaugural Capital Markets Day
presentation, we reflected on a period of
significant change in our industry.
Although these changes may challenge
Maersk Oil, they also present opportunities.
I believe we have built a healthy portfolio
of diverse world class assets. They include
mature assets with untapped future value
and major new projects. Sustaining that
position in the longer term will require
successful exploration, which remains
the most cost effective way to build our
reserves base. We are currently reloading
the exploration portfolio after a period of
challenging performance. Combined, these
elements will create a strong platform for the
business to 2020 and beyond.
I would like to explain the important changes
to the Maersk Oil Executive Team that
have been announced recently. We have
reorganised ourselves to be more sharply
focused and to accelerate executive decision
making behind critical business priorities
– namely improving the safety and
reliability of our operations; deliver
the projects that are fundamental
to our medium term growth; and to
underpin a successful long term
growth strategy in exploration and
new business.
Good luck for the next few
months of the journey. Think
safety and act safely in
everything you do.
I am looking to the leadership to take
accountability to make the next step
changes towards Incident-Free.
Looking forward to the rest of 2014, we
will start to bring forward aspects of our
Jakob Thomasen
CEO
4 The Source
Going
for
growth
BY DANIEL CANTY
In September Maersk Oil took to the
stage to explain its strategy to the
international investor and energy
analyst community at the Maersk
Group Capital Markets Day.
The presentation was anchored by
CEO Jakob Thomasen, who kicked off
proceedings with the headline: “Delivery
today, growth tomorrow”.
That theme was captured clearly in
Thomasen’s assessment of near term
critical business priorities:
•Continuing to safely improve
operational effectiveness to maximise
value and production from current
assets
•Execute the major project portfolio
to deliver growth to the end of the
decade
•Build the foundations of a long-term
growth strategy by resetting and
reloading the exploration portfolio
and considering targeted acquisition
opportunities
Summarising current performance
Thomasen outlined: “There are three
main take-aways in the presentation;
number one is that, in line with our
expectations our production bottomed
out in 2013, and we are a growing
business again – not an enormous
Image: Thorbjørn Hansen
The Source 5
increase so far, but as I’ve said before, we
are engaged in a battle for every barrel,
so the 6% production increase delivered
wasn’t inevitable, it is an achievement
we’re pleased with,” he said. Thomasen
then highlighted the maturation of Maersk
Oil’s mission critical projects which will
deliver growth – and substantial reserves
additions – once they are sanctioned in
the coming period.
Costs have gone up
as projects become
more complex and
expensive to deliver,
but also because
the supply side has
been overheating
for a number of
years.
The final message to the market was that
the target of 400,000 boepd by 2020
remains, though it was stressed that value
matters more than volume and producing
barrels at any price.
“We have an intensive few years of project
delivery and execution, and even during
this time we insist on double digit returns
through the cycle. We are prepared
to sacrifice the production target if it
doesn’t generate a satisfactory return on
investment,” explained Thomasen.
INDUSTRY OUTLOOK
Contextualising the strategy update
in the external market, Thomasen
explained that an unsteady couple of
years for upstream players had seen
costs continue to rise and forecasts on
oil prices, by consensus, softening in the
coming years.
Moreover, a more volatile geopolitical
environment made accurate predictions
about the future even less certain than
usual. “Costs have gone up as projects
become more complex and expensive
to deliver, but also because the supply
side has been overheating for a number
of years. Projects have seen a lot of
value eroded, causing oil and gas
companies to rationalise their portfolios
by mothballing and halting projects and
retrenching to their home markets.”
The impact of the remarkable growth
of oil and gas supply delivered by the US
unconventionals has also had an important
impact on why the oil price outlook is
predicted to soften in the medium-term.
“Maersk Oil’s response to the changing
market conditions is illustrated by refocusing
the portfolio which has already seen us
reduce deepwater exposure in the US Gulf
Maersk Oil is engaged in exploration activities in the Kurdistan Region of Iraq (pictured).
300 million
This is the number of barrels of oil equivalent
which will transfer from resources to reserves
as Maersk Oil’s major projects are sanctioned
of Mexico to balance our portfolio a little more
towards lower costs and risks, and a growing
focus on capital discipline and efficiency for
projects about to enter the execution phase.”
Thomasen conceded that Maersk Oil could
not be entirely immune to rising supply side
costs. “However, we come from a good starting
point in that regard. We have a steady financial
performance, better than our peer group,
combined with a substantial low-cost barrel
portfolio, a strong project book, spread across a
broad range of geographies and geologies, and
a really strong demographic in our workforce.”
CAPITAL DISCIPLINE
Chief Financial Officer (CFO) Graham Talbot
used his section of the presentation to
explain how the next few years will see the
company focus on taking its robust resource
base through to reserves, and ultimately
through to production.
“Approximately 300 million barrels of
resources will progress through to reserves
as we work our way through delivering our
existing project portfolio. Culzean in the UK,
Chissonga in Angola and Johan Sverdrup in
Norway will all come on stream towards >>
6 The Source
the 2020 mark, so there is a line of sight,
albeit with a pretty major kick up towards
the back end of the decade, towards the
400,000 boepd target,” Talbot said.
The CFO took the opportunity to assert
that Maersk Oil has delivered, and will
continue to deliver, substantial financial
contributions to the Maersk Group.
“On an underlying basis Maersk Oil has
contributed about USD 7.5 billion to the
Maersk Group over the past five years, and
we aim to deliver consistently at that level
in the coming years. “
He added that maintaining double
digit returns will be challenged by the
magnitude of the investment program
through to 2020. “Peak capital expenditure
will occur when both Chissonga and Johan
Sverdrup are in their execution phase. In
simple terms we will make significant
investments in our portfolio over the next
few years, in the range of USD 3 - 5 billion
annually, but will only see the revenues
from those investments towards the end
of the decade.”
OPERATIONAL EXCELLENCE
Gretchen Watkins, Chief Operating Officer,
highlighted the three key foundation
pieces of Maersk Oil’s business strategy.
“They are built firstly on safety and
Incident-Free. Secondly, on technology,
where Maersk Oil has an industry leading
position in deploying technology to unlock
complex resources. And thirdly our people,”
she said.
Watkins spoke of a diverse portfolio,
across eleven different countries, and said
that whilst the company has many mature
assets, there remains a lot productive
life left in them. She also highlighted
particular efforts in the Danish North Sea
where a dedicated production programme
continues to make a significant impact on
a declining production profile – at relatively
low investment cost per barrel.
Golden Eagle (left) in the UK is preparing for first oil towards the end of 2014 and Chissonga,
in Angola (right) is approaching sanction.
Low cost barrels
Speaking at the Capital Markets Day, Chief Operations Officer Gretchen
Watkins explained how, by focusing on production excellence, Maersk
Oil has seen an improvement in production of around 30% in some
Danish North Sea assets. “This is a great example of adding what are
very low-cost barrels to production and of how natural decline in mature
fields can be softened to produce great value for Maersk Oil. We are
well under way with Operations Excellence but there is more we can do
to improve our performance, and this will be a key area of focus in the
next three to five years. "Adding production through enhancements is a
really effective way of enhancing value – typically at costs below USD 10
per barrel of oil."
Maersk Oil’s
portfolio
priorities
The Source 7
“We are more exposed to oil than gas right
now, but you will see that, towards the end
of the decade, that we will have more gas
in our portfolio, and that’s primarily the
high pressure, high temperature Culzean
project in the UK coming onstream. This
is just one example of where we are in the
process of pulling projects through the
development portfolio, as well as in Iraqi
Kurdistan, Kazakhstan, and others.”
Three projects in execute, namely Golden
Eagle (UK) Jack (US) and Tyra Southeast
(Denmark), represent a net CAPEX for Maersk
Oil of over USD 2 billion and will all deliver
first hydrocarbons in 2014 or 2015. Projects
which are approaching sanction stage of
their lifecycle in 2014 and next year include
Culzean, Johan Sverdrup, and Chissonga.
“These projects represent a significant
chunk of the CAPEX out to 2020, but also
the lion’s share of the 300 million barrels
of oil equivalent we’ll add to the resource
base in that time too," she said.
"Overall, we will remain faithful to our
areas of expertise, while continuing to
improve our skills and competencies in
some step out areas like deep-water and
high pressure – high temperature gas,"
concluded Watkins.
Maersk Oil entitlement production in 2013 and 2020
Hydrocarbon pe (%)
Oil
Gas
Location (%)
Deepwater
Shallow water
Operatorship (%)
Onshore
OECD/non-OECD (%)
OECD
Non-OECD
Operated
Operated by others
100
100
100%
100%
80
80
80%
80%
60
60
60%
60%
40
40
40%
40%
20
20
20%
20%
0
2013
2020
0%
0%
0
2013
2020
Gretchen Watkins
described the portfolio
journey as an evolution, not a
revolution
2013
2020
2013
2020
Note: Future production excludes contributions from Exploration portfolio
MAXIMISE VALUE FROM
HERITAGE ASSETS
• Denmark
• Qatar
• UK
• Algeria
STRENGTHEN EXISTING
POSITIONS
• Norway
• Kazakhstan
• Iraqi Kurdistan
• Angola
MANAGE FOR VALUE
• Brazil
• US Gulf of Mexico
• Greenland
8 The Source
Financial
forces
BY SAM CAGE & DANIEL CANTY
Unprecedented times in
the oil industry bring unique
opportunities.
And Maersk Oil is in a good place to
potentially take advantage of some of
these, according to its new CFO Graham
Talbot. “We have set out clear expansion
plans, with a target to grow production
within our capability skill set, as long as
we generate returns in excess of 10% on
invested capital”.
“I don’t think I’ve ever seen this amount
of portfolio restructuring in the industry
in my career, it’s something that’s quite
exceptional and unique at this scale,”
says Talbot, who started in the role
earlier this year, having previously held
senior roles at Shell and BG Group.
The statistics reflect this sentiment.
The aggregate value of oil and gas
assets and companies up for sale
in Wood Mackenzie’s mergers and
acquisitions deal pipeline stood
at a staggering US$331 billion in
mid-September.
“With that comes opportunity, given
that we are part of a conglomerate
with a longer-term shareholder value
focus than many other oil and gas
companies.”
SQUEEZED MARGINS
One of the major themes in the oil
industry over the last 12-18 months has
been diminishing returns, resulting in
companies streamlining their portfolios
and more assets coming up for sale. The
difficulty of getting oil out of the ground
now – whether due to deeper water,
or reservoir type, and the techniques
needed for extraction – means the
process is proving to be a lot more
complex, expensive and difficult to
forecast. For companies, the technology
now required is often new and that
means more surprises, and generally
more negative than positive.
hyper-sensitive, as break even points are
much higher. In short, there is a lot of
change on the cards.
CYCLICAL BY NATURE
Talbot who has travelled the world in the oil
industry, including stints in London, Dubai,
the Netherlands and Kazakhstan – and
running multi-billion infrastructure projects
in his native Australia thinks differently and
that the industry remains in its usual cycle,
but with a broader time spread between
supply and demand adjustments and more
moving parts influencing both elements.
"Needless to say, companies need to adjust
to these uncertainties, and basics such as
reducing portfolio risk and cutting back on
capital commitments to reduce financial
risk and return funds to shareholders are all
valid responses. The other valid response is
cost management. If you cannot materially
influence your revenue line then you must
focus on cost to ensure that you maximise
That has led some industry executives
and commentators to speculate that the margins and remain competitive both in
terms of value delivery and as a partner of
industry will change fundamentally, due
choice by resource holders," he says.
to the cost pressures and difficulty
of extraction, with the oil price becoming
The Source 9
“I don’t think what we are seeing is a
completely new reality, but certainly the
range of economic pressures combined
with the level of political and technical
challenges point to something a bit more
complex than we have perhaps seen in
the past. Do I think it means the end of
cyclicality we are used to - no. Are there
new risks or opportunities inherent in
not reading the signs and making tough
choices – absolutely yes.”
$331 billion
Wood Mackenzie’s global
mergers and acquisitions
deal pipeline in midSeptember 2014
10%
Maersk Oil is committed to
generate at least a 10% return
on capital invested over the cycle
“There is a reason people want to sell
these assets. If we keep our eyes wide
open to what those reasons are, and we
can find a competitive advantage in how
to manage those assets differently and
extract additional value then great.”
VALUE DRIVEN
Whether the industry is changing forever or
not, the current state of the market is still
something Maersk Oil can take advantage
of. There is also an adjustment to the oil and
gas industry’s traditional model of holding
assets for the full chain of discovering assets,
extracting then decommissioning. For Talbot,
it is time to start looking at things differently.
He believes the focus should be clearly on the
economics – rather than simply extracting
as much oil and gas as possible, look at the
bottom line of how much money is made on
the barrels produced. This can mean buying
into and selling out of operations rather than
holding them for their full lifecycle, as well as
looking at opportunities as an investor and
putting faith in another company to run the
operation.
“Many companies are looking to more
“active portfolio management” as a
response to the changes in the industry.
This is often easier said than done, we
often build an emotional attachment
to the assets in our portfolio, this is
understandable but can sometimes
make it hard for people to make the tough
decisions to either shut them down >>
Many companies
are looking to more
“active portfolio
management” as
a response to the
changes in the
industry
The Jack - St Malo FPU moored in location in the U.S. Gulf of Mexico. Image: Chevron.
10 The Source
or sell them if this delivers the best value
for the company. Personally my primary
interest is... Can we make money out
of it – safely and responsibly - that’s
the question,” Talbot says. “We’re in
the business of making money and
therefore, getting barrels out of the
ground is pretty important, but you have
to be able to get them out profitably. “
A mid-sized company like Maersk Oil
has to take carefully calculated risks to
grow and this can mean working as an
investor in fields which others operate,
or getting involved at a point when
others are hesitant.
“As an industry we’ve never really learnt
that if everyone invests at the same
time when commodity prices are high
it pushes up costs. This in turn reduces
returns and then when commodity
prices soften everyone stops investing
and costs come back down. That then
leads to improved returns on projects
and investment returns to the market
and the cycle starts over again. As an
industry we seem to do it year after
year," Talbot says.,” Talbot says.
PORTFOLIO PLAYER
“That’s an area where we are uniquely
positioned – we can be somewhat
countercyclical and contrarian in the
market in terms of our portfolio,” he
adds. “We are a valid player in the market
and we have a good balance sheet
through the Group. We have money to
invest. We have very clear intentions
around growth.
“So, it’s a matter of finding the
right things at the right price which
strategically match up with what we
want to do and how we want to grow.”
Climbing the summit
Talbot draws a parallel between
process and outcomes away from
number crunching:
“A while ago I climbed Mount Aconcagua
in the Andes. It’s the highest mountain in
the western and southern hemispheres
and the summit sits just under 7000m.
Many people, especially on the first
attempt, fail to reach the summit. By
planning everything rigorously and to
the finest detail, and training for a year in
advance, I was able to achieve my goal.
In that sense, the implementation of the
optimum process directly influenced the
outcome - making it to the summit and
back alive! It should involve less physical
stress, but that’s what getting SAP right is
all about. Embrace the process now and
the desired outcome will follow.
The three letters S-A-P generally attract
strong responses from people. As a
newcomer in Maersk Oil CFO Graham
Talbot recognises the considerable
distance travelled on the business
improvement journey but sees scope for
further change.
SAP is an Enterprise Resource Planning
(ERP) system and the real value comes
from the integration of processes across
the business. Although SAP does have
several pure finance modules it also
has a lot of other functionality which
needs to be owned and developed by the
respective business areas.
Successful implementation of SAP can be
extremely difficult, I have been involved in
several implimentations, some good and
some not so good. The big lessons I have
learnt are (1) Minimise customisation,
and (2) Do not under invest in change
management.
So in the context of my climb, create a plan
and stick to it and invest heavily in training.
“My challenge to people is: don’t get down
on SAP, in fact don’t even focus on SAP –
focus on the value that comes out of the
process. What is the most efficient way
of executing a process and what tools do I
need to execute it? SAP will most likely be
part of that toolkit,” Talbot says.
“I want people to be a bit more proactive
around this and work towards a culture
of continuous improvement in Maersk
Oil. I want people to feel that they own
the process, not SAP is the process and
it’s driving them. We need to change that
around. We are experiencing growing
pains. We are past the point where we
can do everything ad hoc. You need to be
able to allocate capital, execute projects,
measure performance and manage staff,
consistently across the organisation
that’s not optional.”
The Source 11
Decades of
delivery
Oil first flowed from the Al Shaheen Field in 1994 and this
important 20 year anniversary has given Maersk Oil good
reason to celebrate more than two decades of partnership
and collaboration with Qatar Petroleum.
ABOVE LEFT
Saad Sherida Al-Kaabi, Managing Director of Qatar
Petroleum, joined Jakob Thomasen at a commemorative
town hall meeting to celebrate the 20th anniversary
since first oil flowed at Al Sheen in Doha in early October.
ABOVE RIGHT
H.E. Dr Mohammed bin Saleh Al-Sada, Minister of
Energy and Industry and Chairman of the Board of Qatar
Petroleum experiences the first class facilities at Maersk
Training in Svendborg.
RIGHT
The Minister and his accompanying delegation were
received by Ane Mærsk Mc-Kinney Uggla, Chairman
of The A. P. Møller and Chastine Mc-Kinney Møller
Foundation, Nils Smedegaard Andersen, Chief Executive
of the Maersk Group and Jakob Thomasen, CEO of
Maersk Oil in Copenhagen.
BY DANIEL CANTY
photo
special
1
12 The Source
To mark the 20th anniversary since first
oil was extracted from the Al Shaheen
field, offshore Qatar, in May Maersk Group
kicked off a series of celebratory events
taking place this year, hosting a senior
energy delegation from Qatar.
The delegation visited Esplanaden and
Maersk Training’s facilities at Svendborg
and was led by H.E. Dr Mohammed bin
Saleh Al-Sada, Minister of Energy and
Industry and Chairman of the Board of
Qatar Petroleum.
»The achievements of
the past are considerable,
but we were keen to show
we are better prepared to
face the future than ever
before«
“We were honoured to receive the Minister
and his accompanying delegation, and
I was particularly delighted that the
Corporate Technology and Projects (CTP)
team here in Copenhagen were able to
present some of their work on Al Shaheen
to our guests. It was good to see positive
and engaging conversations,” Thomasen
added.
In addition to the Ministerial visit, a Lego
model of the Al Shaheen A-Location was
commissioned earlier this year and has
been distributed to Qatar Petroleum and
relevant stakeholders. A commemorative
book, in Arabic and English, celebrating
the 20 years of partnership and
success between Maersk Oil and Qatar
Petroleum has also been produced,
featuring exclusive interviews and archive
photography (and the Guinness World
Record certificate for the world’s longest
horizontal well in 2010).
“The achievements of the past are
considerable, but we were keen to show
we are better prepared to face the future
than ever before,” concluded Thomasen.
6
Jakob Thomasen
Maersk Oil CEO
Maersk Oil and Qatar Petroleum joined
together in 1992 to unlock the hidden
potential of the Al Shaheen field. Transferring
knowledge and experience from the Danish
sector of the North Sea and, just over two
decades later, the field has produced more
than 1.4 billion barrels of oil and contributes
over one third of Qatar’s daily oil production.
“Al Shaheen is a very large offshore oil field
that stretches over a 2000 square kilometre
area. Its size and varying geology and oil
make it a highly complex field, one that was
originally considered too difficult to develop,”
says Jakob Thomasen, CEO Maersk Oil.
Leadership meeting
Dr. Al-Sada was received by Ane Mærsk McKinney Uggla, Chairman of The A. P. Møller
and Chastine Mc-Kinney Møller Foundation,
Nils Smedegaard Andersen, Chief Executive
of the Maersk Group and Jakob Thomasen,
CEO of Maersk Oil in Copenhagen.
3
Maersk Oil
and Qatar
Petroleum
joined
together in
1992
1) Maersk Oil Qatar’s brand new facilities glisten in front of an
Arabian Sunset in 2009.
2) Inauguration ceremony of the Al Shaheen offshore facilities
in 1998. Attended by H.E. Abdulla Al Attiyah, Qatar’s then
Minister of Energy and Industry.
3) Ane Mærsk Mc-Kinney Uggla, Chairman of The A. P. Møller
and Chastine Mc- Kinney Møller Foundation meets H.H.
Sheikh Tamim bin Hamad al-Thani, Emir of Qatar.
4) Maersk Oil’s CEO Jakob Thomasen (2nd left) pictured with
Qatar’s former energy minister (4th from left) H.E. Abdulla
Al Attiyah at the facilities inauguration in 1998.
5) Maersk Oil Qatar employees in Doha, 1999.
2
4
5
7
8
6) Mærsk Mc-Kinney Møller (front left), the last of the family dynasty Maersk Group
CEO’s touring the Al Shaheen facilities.
7) H.E. Dr Mohammed bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry
with Maersk Oil CEO Jakob Thomasen at the Digital Core Lab inauguration in
January 2014.
8) Maersk Oil CEO Jakob Thomasen peers through as microscope on a Maersk Oil
offshore platform.
9) Maersk Group CEO Nils Smedegaard Andersen receiving a commemorative
gift from H.E. Dr Mohammed bin Saleh Al-Sada, Qatar’s Minister of Energy and
Industry during his visit to Copenhagen.
9
14 The Source
Engaging to win
BY JONATHAN MILNE
The Source 15
2008
Discovery of the
Culzean uHPHT field
After months of dialogue
between the industry and HM
Treasury in the UK, on 19 March,
the Chancellor George Osborne
announced a consultation
that would allow significant
allowances for uHPHT fields in
the UK North Sea, like Maersk
Oil’s Culzean gas project.
Maersk Oil stands to benefit from the
new allowance introduced by the UK
Government, to support investment in
ultra high pressure/high temperature
fields. The proposed change to the
UK’s fiscal landscape evolved over
time and Maersk Oil played a leading
role for the industry in securing this
longer term opportunity through
smart stakeholder management.
49.99%
Maersk Oil’s interest
in Culzean
the UK’s gas demand by 2020/21.
The next steps were to deliver
on that potential by overcoming
the technical and economic
challenges of the project.
WIN-WIN SITUATION
The UK Government had already
introduced an allowance for high
pressure/high temperature fields,
recognising that operators needed to
be incentivised to explore ‘new plays’
as more conventional opportunities
in the basin became rarer. The original
allowance was capped at a fixed
sum – but no operator had taken
advantage of this, suggesting that the
incentive failed to meet the needs of
the industry.
When it was discovered in 2008, the
ultra high pressure/high temperature
(uHPHT) Culzean gas field, in the UK
North Sea, caused a lot of excitement.
“We knew pretty much straight away
that this could be a very significant
discovery. We also knew that it
would be very technically challenging
to develop. That would inevitably
mean high costs,” says Martin Rune
Pedersen, Managing Director of
Maersk Oil UK.
In the following years further
appraisal work was undertaken
on the discovery, confirming
that Culzean was a strong
development prospect, with the
potential to meet around 5% of
»There’s no doubt
that the new
allowance is a
strong example
of UK government
commitment to the
UK North Sea«
Martin Rune Pedersen,
Maersk Oil UK
Managing Director
Culzean presented an opportunity for
a win-win for both government and
industry. A large gas discovery could
enhance UK energy security and develop
expertise in the emerging play of uHPHT.
For Maersk Oil and other operators to
follow, a new uHPHT allowance could
enhance project economics and enable
a successful development.
Effective engagement to drive change
would be critical to delivering this winwin. “We first met with HM Treasury
officials in April 2013 through the
Fiscal Forum, which brings together
operators and government,” says Tom
Tildesley, Finance Director, Maersk Oil
UK. “We had a good initial meeting
which established that an enhanced
allowance would be good for UK plc
and the wider industry. It was also
clear that they wanted to create an
allowance that would provide the
proper incentive for development.
From then on, Maersk Oil, together
with Oil & Gas UK (the UK’s industry
representative body) steered an
industry-wide response to the type
of allowance that would work. This
consensual approach worked well and
was appreciated by HM Treasury.”
IDEAL TIMING
The timing of discussion over the
uHPHT allowance also chimed
with a wider piece of work being
undertaken by Sir Ian Wood (founder
of Wood Group) on behalf of the
UK Government, examining how to
maximise economic recovery on the
UK Continental Shelf. Some of the >>
16 The Source
Increased focus on
external relations
BY IDA CHRISTINE BRUN
Meetings with industry partners
and government have always
been immensely important.
Maersk Oil has, in recent years,
revitalised the attention and
resources focused on external
stakeholders. One of the key
architects of further embedding
this is Matthew Wilks, Chief
Commercial Officer. Wilks
highlights that stakeholder
influence is a critical business
enabler and provides Maersk
Oil with a major competitive
advantage.
“In the industry, 73% of all
project delays have been due to
‘above ground’ or non-technical
risks. With the increasing
complexity of our operated
and operated-by-others (OBO)
business, we need to understand
and respond to the changing
needs of our partners, regulators
and host governments.
Enhancing our external
orientation and successfully
influencing our stakeholders is
essential to achieve our business
objectives,” says Wilks.
DEVELOPING COMMERCIAL
MINDSETS
Stakeholder engagement is a
mandatory part of successful
project development and
execution for Maersk Oil as an
operator. An example of timely
stakeholder engagement is from
the UK, where Maersk Oil, as
operator of the Culzean project,
engaged with the government
while it was working on a new
HPHT allowance.
However, it is equally, if not
more, important to ensure
good relationships and mutual
understanding with partners
for projects operated-by-others
as this is one of the ways to
influence the project’s direction.
“Improved stakeholder
understanding leads to a deeper
relationship, which leads to
increased influence. Increased
influence amplifies the power
to deliver our operational
objectives, and ultimately, this
is what will create value for our
company,” says Wilks.
Wilks has sponsored leadership
courses that provide leaders in
Maersk Oil with the opportunity to
develop and test their commercial
mindset, as well as their
understanding of how stakeholder
engagement can enable
business. Going forward Maersk
Oil will address the minimum
requirements for how we work
with our external relations and aim
for a best-practise approach in
proactively planning interactions
with stakeholders.
Matthew Wilks
Chief Commercial Officer
5% of UK
gas by
2021
key themes in Sir Ian’s final report aligned
well - better cooperation between HM
Treasury, the Department of Energy and
the industry; and the need to develop new
and emerging plays.
“There’s no doubt that the new allowance
is a strong example of UK government
commitment to the UK North Sea in
general, but also to Sir Ian’s report in
particular," says Martin Rune Pedersen.
"It’s one proof point that they are taking
action to stimulate investment and
work more closely with the industry.
From that point of view, the timing of
the discussions about the allowance
was excellent, as it gave the government
a great platform to illustrate their
commitment,” he adds.
Maersk Oil is currently actively engaged
in the consultation process, working with
industry peers and government to deliver a
fiscal outcome that can meet the needs of
the UK, the industry and further the aim of
maximising economic recovery in the UK
North Sea.
(Left to right) Danny Alexander, the Chief Secretary to
the Treasury, Martin Rune Pedersen, Managing Director,
Maersk Oil UK, with Sir Ian Wood.
The Source 17
NEWS
IN
BRIEF
Investing in the Danish North Sea
Sam Turner
drilling rig
Rig type
Jack-Up
Build
2014
A rig worker shows visitors around the Noble Sam
Turner while docked in Esbjerg.
The Noble workers have been through Maersk Oil’s
Incident-Free training to further strengthen their safety
awareness.
Water
depth
122 m
Maersk Oil’s Danish Business Unit has
contracted a new advanced drilling rig,
aimed at finding and recovering reserves
in one of its key business areas. The Noble
Sam Turner drilling rig, named after an
employee of Noble, can accommodate
some 150 workers - nearly double the
capacity of a regular facility - drill more
complex wells and manage under highpressure and high-temperature conditions.
“The Danish North Sea contains substantial
volumes of oil and gas. However, some
of the remaining reserves are trapped in
complex reservoirs, which make drilling more
challenging. With the new drilling rig, we get
advanced technology, which is necessary
to safely get to the more challenging oil and
gas,” said Mark Wallace, Managing Director
of Maersk Oil’s Danish Business Unit.
The rig is part of a wider investment
programme aimed at finding and recovering
more reserves of oil and gas in the Danish
part of the North Sea.
Angolan minister Drills
to Win with Maersk Oil
Maersk Oil’s stand at FILDA, the
largest exhibition in Angola,
received a prominent visitor
during the six day-exhibition.
The Angolan Minister of Petroleum,
José Maria Botelho de Vasconcelos
is pictured (Left) challenging
Maersk Oil’s Managing Director
for Angola, Anders Damgaard, in a
drilling game called ‘drill to win’.
A record number people
participated in FILDA, which made
the exhibition an excellent place for
Maersk Oil to show its commitment
to Angola, attract potential new
talents and build awareness of its
activities in the country.
Length
70 m
Drilling
depth
10,600 m
Breadth
84 m
18 The Source
Dan
Bravo
Substantial volumes of oil and gas
remain in the subsurface of the
Danish North Sea, but recovering
them is technically complex and
requires work above and below
water.
Dan Bravo Rationalisation - a challenging
three-year project that has reached its
midway point – is an example of the
complex subsurface and diving work
regularly carried out by Maersk Oil’s
Danish Business Unit. The project, which
will rebuild Maersk Oil’s first-producing
platform, Dan Bravo, also involves the
conversion of the manned platform into
an unmanned platform and is the first of
its kind in the Danish North Sea.
The diving work with its challenging
subsea removal and installation is an
important part of the project.
BY KIS SØEGAARD
“It is an example of the technically
complex work that Maersk Oil, as the
mature field operator in the Danish North
Sea, is taking on to chase the barrels,”
says Mark Wallace, Managing Director of
Maersk Oil Danish Business Unit.
“When it is finished in 2015, it will have
rejuvenated a complex that dates from
1972. The overall aim of the project is to
extend the life of an already old platform
to 2042. Giving it a lifetime of 70 years
would be an achievement we can be proud
of,” he adds.
SIZING UP THE JOB
When it is finished
in 2015, it will have
rejuvenated a complex
that dates from 1972.
Mark Wallace, Maersk Oil DBU
Managing Director
Subsea work on the Dan Bravo
Rationalisation began in 2013 with
divers using photogrammetry – the
process of obtaining measurements from
photographs – to get accurate data on
the dimensions for reinforcement clamps
and a new conductor level for the Dan A
platform.
“The structure is very complex, not least
because it has been extended over the
years as more oil and gas were discovered.
We needed detailed information in
order to fabricate to the most stringent
requirements and photogrammetry was
the ideal technology for this,” explains
Project Manager Jakob Knudsen.
The Source 19
FAST FACTS:
DanBravo
• Th
e Dan Bravo platform, from
which production began in
1972, is Maersk Oil’s first.
All parties involved
have outperformed
expectations,
especially given we
are doing work that
has not been done
before and up to 40
metres below sea.
•Maersk Oil originally ordered
the Dan Bravo complex from
the US for the Kraka Field in the
Danish North Sea, but it was
installed in the more promising
Dan Field instead.
•Four platforms – A, B, C and D –
make up the complex. The Dan
B platform is the production
hub, while Dan A is a wellhead
platform.
Fitted aboard a remote operating
vehicle – which the team refers to
as an “underwater flying saucer” – a
special camera took thousands of
images of the platform’s structure.
These photos were then converted,
using a software program, into 3D
images. In turn, the images were used
to develop detailed designs for the
conductor level and clamps, ready for
installation this summer.
from a diving support vessel. Using
oxy arc and diamond wire cutting
equipment, they have been removing
Platform A’s existing conductor guide
levels. They will then install clamps to
preserve the structural integrity of the
platform and the new conductor level.
In total, 110 tonnes of reinforced
metal will be used to reinforce the
platform. Finally, the divers will fit a
new boat landing to Dan B.
This year’s diving work began in midApril and the first of two stages was
completed in July.
“The majority of the work has been
on the Dan A platform, which has
challenges with respect to fatigue. Back
in the 1970s when it was built, people
were not as familiar with fatigue as
they are now and as our knowledge has
grown we have developed innovative
technical solutions to extend the
lifetime of production from the field,”
explains Knudsen.
The second stage of the 2014
campaign began at the end of July with
divers working at greater depths of up
to 40 metres.
WORKING BELOW THE WAVES
Divers have been working to a depth
of some 20 metres, two at a time,
“We are more than half way through
the diving work on the Dan Bravo
Rationalisation and all parties involved
– designer, fabricator, diving contractors
and the project team - have outperformed expectations, especially
given we are doing work that has not
been done before and up to 40 metres
below the surface,” says Knudsen.
DEEP DIVE:
Diving work in Maersk Oil’s
Danish operation
•
The diving work in connection
with Dan Bravo Rationalisation
is one example of the extensive
underwater activity required in a
mature field operation.
•Maersk Oil carries out diving
inspection on platform jackets
bi-annually.
•81 days are expected to be spent
on diving in 2014.
20 The Source
Managing complexity
and embracing
simplification
Sixty of Maersk Oil’s top leaders met in June for the annual
two day extended leadership team offsite. The 2014 theme
was Simply Better. But what does that mean in Maersk Oil?
We asked six members of the ELT...
MARK FOTHERINGHAM
Director Engineering and Projects in
Maersk Oil UK
What does simplification in practice
mean to you/your function?
Simplicity is complex to deliver whilst
complexity is simple to achieve. What I
mean by that is through the process of
growing, expanding, learning and improving
we strive for oversight, assurance,
repeatability and best practice and in doing
so, with good intent, we create complexity,
erode simplicity and stifle agility. The
unintended consequence is mediocre
performance in aspects of our business.
What simplification opportunity
excites you the most?
What excites me right now is the
opportunity here in Maersk Oil UK to drive
the attributes of simplicity and agility
STEVE HADEN
Head of Corporate Drilling in Maersk Oil
through the Facilities and Projects
department. We have the opportunity,
whilst maintaining company and industry
standards, to simplify our execution
plan, simplify our contracting strategy
and simplify our organisation. This is
absolutely in the mind-set of "simply
better" and firmly in the interests of the
UK Continental Shelf as a whole, which
risks becoming uncompetitive in a global
market.
What does simplification in practice
mean to you/your function?
For me, simplification is about putting
the clarity into an organisation that
drives prioritisation and focus. What
simplification is not, is making things
simple. It is a complex business and
we need to ensure that our processes
and practices are well understood by
the workforce and that they effectively
improve our ability to deliver safely,
consistently, and reliably.
NICOLA MCINTOSH
Corporate controller in Maersk Oil
Corporate Finance
What does simplification in
practice mean to you?
The fundamentals of the Finance
function are to have one global way
of working so that we can deliver
value adding reporting, which
enables effective decision making.
We aim for globally applicable
processes and standards which
facilitates consistency across the
business units.
Where you I seen concrete
examples of that in Maersk Oil
SAP allows for each business unit
to be compared against another,
we can then drive improvements
so that together, we can strive for
best practice behaviour. The Global
Process Owners in SAP are a key
player in delivering and driving the
global template, it is their role to
ensure that each location will work
towards the same goal of having
one SAP. We have many examples
of global teams coming together
to seek the common and best
solution, these people come from
each business unit with the drive
and determination to take Maersk
Oil and SAP forward.
Where have you seen concrete
examples of that in Maersk Oil?
The effort in Qatar, within the wells
teams, to drive an incident-free culture
across the four drilling rigs now operating
for us. The team has developed a very
clear and engaging message and ran
several key workshops to ensure our
contractors understood our commitment
to safety and our expectations of them.
The message has been continuously
reinforced during the drilling campaign
through various leaders, during field visits.
that to the outside world creates the
illusion of grandeur and uniqueness.
Simplification to me is the ability to
KISS (keep it simple stupid) through the
ability to first understand complexity
then create clarity and transparency
for the things that really matter in our
endeavours.
GLENN BROWN
Head of Corporate Subsurface
in Maersk Oil
What does simplication in practice
mean to you/your function?
Simple comes to me in many forms,
the common aspect is that “I know it
when I see it”. We work in an industry
that spends big money, looks for mega
solutions to many of the problems we
face, often resulting in grand designs,
millions of consulting dollars and missing
the small stuff that makes it all work.
We over complicate our business with
language, and three letter acronyms,
Where have you seen concrete
examples of that in Maersk Oil?
The UK Flyndre field was discovered
in 1974 and straddles the UK/Norway
median line and Cawdor was discovered
in 2008. The complexity arises in
bringing forward a business solution
for what were marginal stranded
discoveries. Whilst the subsurface and
water depth environment are relatively
benign the discoveries straddled two
regulatory governments (Norway and
the UK) across three licence blocks in
three separate reservoirs. Added to this
is a stakeholder environment including
seven co-venture owners which do not
always have aligned business priorities.
The role of the UK development team is to
bring technical solutions to the table with
countless permutations of commercial
options tabled and evaluated. This has
been simplified into a single acceptable
development solution, consisting of a
co-developed subsea tie-back to the
Talisman Sinopec Energy UK Limited
operated Clyde platform. Flyndre will
be developed with a single production
well. The Cawdor field will be developed
initially with a single production well, with
potential development of two further
wells based on field performance.
NOËL LENEHAN
Head of Global HR Operations
ALAN MCINALLY
Head of Subsurface in Maersk Oil Qatar
Where have you seen concrete
examples of that in Maersk Oil?
The formation of the new Production
Optimisation team, which integrates
surface and subsurface engineers, has
greatly simplified the interface between
the reservoirs and wells to the surface
facilities, improving communications
and breaking down some old silos. The
new setup now allows much faster
optimisation of oil production and water
and gas injection across the full production
system from reservoir to the floating,
storgae and offloading (FSO) system. We
see gains in production and injection on a
daily basis from this approach.
Where have you seen examples
outside Maersk Oil that has
impressed you?
In terms of other sectors, one company
that sticks out in my mind is IKEA. I was
in the Qatar store the other day and,
with the exception of some signage in
Arabic, and Shawarma on the menu in
the cafeteria, I could have been in any
other IKEA in the world. As a customer
they automatically guide you through the
entire store in one flow. When you buy a
piece of furniture in flat-pack the assembly
methods are standardised and simple. I
think the assembly instructions are the
best examples for us in the oil industry.
The simple pictorial instructions mean
that pretty much anyone in the world could
safely assemble a piece of IKEA furniture.
What simplification opportunity
excites you the most?
I think the simplification opportunity that
excites me most is the remote operation,
automation and control of facilities
offshore from onshore. In conjunction
with our new collaborative working
environment, this has the potential to
further improve and optimise production
and injection through greatly speeding up
changes to our operational settings.
What does simplication in practice
mean to you/your function?
Simplification for both HR and the
business, means having fit for purpose
processes and ways of working together
that are intuitive and transparent.
Where have you seen concrete
examples of that in Maersk Oil?
While I am still relatively new to Maersk
Oil, my impression is that the Maersk Oil
intranet site is quite straight forward and
easy to navigate. Once you are shown
where some of the information is kept
there, it’s not hard to find your way around
the information you need.
What simplification opportunity
excites you the most?
I think by becoming clearer, more
systematic and transparent in the
decision making process around people
deployment, we will overcome a source
of frustration that exists in Maersk Oil
today, and that would be a really useful
accomplishment.
FOR MORE: Go to the e-publication and see
the full answers from the six managers.
GLOBAL
BUSINESS
UPDATE
PRODUCTION AND DEVELOPMENT
The operated production in Q2 2014 was 523,000 barrels of oil equivalent per day, 3%
lower than in Q2 2013 mainly due to maintenance shutdowns. Maersk Oils entitlement
share was on average 235,000 barrels of oil equivalent per day, 4% higher than in Q2
2013. Project development continues to be a top priority for Maersk Oil and progress
in Q2 for all major projects remained in line with expectation. This included Johan
Sverdrup in Norway, the 2012 Development Plan for Al Shaheen in Qatar, Culzean and
Golden Eagle in the UK, Chissonga in Angola and Jack in the US Gulf of Mexico.
ALGERIA
In Q2 2014 Maersk Oil had an average
entitlement production in Algeria of
36,000 boepd (27,000 boepd in Q2
2013). The El Merk fields being onstream more than compensated for the
natural decline in production from the
more mature oil fields.
ANGOLA
In Angola, approval of the development
plan for the Chissonga deepwater
project is expected later in the year. Bids
for the two major construction contracts,
the FPSO and the Tension Leg Wellhead
Platform, were received in Q2 and are
currently being evaluated.
BRAZIL
Following the disappointing
exploration and appraisal results,
Maersk Oil has revised its strategy
and will no longer pursue growth, or
operatorship, for its business in Brazil
and has divested its ownership share
in the small producing Polvo field to
the operator, subject to regulatory
approvals.
DENMARK
In Denmark, entitlement production in
Q2 was 57,000 boepd (69,000 boepd
in Q2 2013). The production was
negatively affected by a major planned
maintenance shutdown of all fields for
12 days in June. The Tyra South East
development project is on track with
installation ongoing at the end of Q2 and
production start-up planned for 2015.
KAZAKHSTAN
In Kazakhstan, drilling and ramping
up of production from the Dunga field
continues. 125 out of 198 wells in
the Dunga Phase 2 project have been
completed with a gradual production
ramp up planned over the next four years.
KURDISTAN
In Iraq, Kurdistan, the Swara Tika
discovery was declared commercial.
An initial plan for development of the
field is expected in 2014. In the light
of the current security situation in
Iraq, Maersk Oil continues to monitor
events closely through contact with
operators, government and security
advisers in the region.
NORWAY
The Johan Sverdrup engineering
and design studies for Phase 1 are
progressing according to schedule, with
submission of the development plan
expected mid-2015.
QATAR
Entitlement production was 92,000
boepd in Q2 (102,000 boepd in Q2 2013).
Total field production in Q2 was 285,000
boepd (300,000 boepd in Q2 2013). The
entitlement production was lower due to
planned maintenance shutdowns. The
FDP2012 project is progressing as per
plan. Four wells have been completed
during the second quarter leading to a
total of 10 completed wells out of 51
planned for the project.
UK
Entitlement production in Q2 was
43,000 boepd (21,000 boepd in Q2
2013), positively impacted by the return
of the Gryphon FPSO during 2013 and
improved operational performance of
the GPIII FPSO and the Janice Field.
The Golden Eagle development project
is progressing towards first oil by the
end of 2014. The development concept
for the high pressure high temperature
(HPHT) Culzean project was selected
in Q1 this year and subsequently
approved by all partners. A five year
drilling contract for a newbuild jack-up
rig was signed in May. The submission
of the Culzean development plan is
expected mid-2015. The Flyndre Cawdor
development project was approved by
the UK and Norwegian authorities in
May and is progressing towards first
production in 2017.
The Source 23
The Blackjack exploration well was
completed and is currently under
evaluation. The Marconi exploration well
is still being drilled, with results expected
later in the year.
US GULF OF MEXICO
The Jack deep-water development
project in continues on track towards
production start-up by the end of
2014. Appraisal drilling continues at
the Buckskin discovery, with results
expected later in the year. A Buckskin
4 well is planned to spud later in 2014.
HEALTH, SAFETY
AND ENVIRONMENT
Lost Time Injuries Frequency
The number of lost time injuries per million exposure hours
1.50
1.25
1.00
0.75
0.50
0.25
0.00
Q2-13
LTIF
1.02
Based on a 12-month rolling average
Q3-13
Q4-13
Q1-14
LTI
11
YTD 2014
PROJECT DELIVERY HIGHLIGHT
Kazakhstan: 125 out of 198 wells in
the Dunga Phase 2 project have been
completed with a gradual production
ramp up planned over the next four years.
A day
in the
life of…
Johannes Botha
Angola
Two metres tall and
as wide as the door
into the office, he is
the walking, talking
manifestation of
the protection and
care that his role as
security and medical
advisor calls for.
Opposite Johannes Botha’s desk
is a stretcher, which gives the
office the distinct air of a doctor’s
clinic. Although he is no doctor, he
has years of experience treating a
wide range of health issues, from
diseases and stress, to victims of
war - even delivering babies.
He has worked all over the world in
a diverse array of areas, including
the Antarctic, Afghanistan, Iraq, and
Jordan and Saudi Arabia.
WHAT ATTRACTED YOU TO
THIS LINE OF WORK?
I joined the military when I was 18 years
old and at some point they sent me to a
basic medical course and this opened my
eyes to my true calling. I find protecting
and sometimes even saving lives an
immensely rewarding experience. Since
then I have done para-medicine, and
specialised in aviation, diving, remote
and wilderness, offshore, and combat
medicine, as well as canine emergency
care and instructor ratings, in numerous
other disciplines, related to emergency
medicine.
WHAT ARE THE SIMILARITIES
BETWEEN BEING A SECURITY AND
MEDICAL ADVISOR IN MAERSK
OIL AND A SECURITY OFFICER IN
AFGHANISTAN?
Within the wide span of experience and
the diversity of locations I have worked
in, I have found that it is always a matter
of treating others as human to human.
It goes from the greeting of each other,
to the respect and friendliness towards
one another.
I make a point of seeing all of my
colleagues in Maersk Oil and Maersk
Drilling every day. I walk the floors. I can see
in the flicker of an eye, if someone needs
to talk and I am always there to listen,
and if they want it, to treat them as well.
The treatment is not always necessary.
Sometimes being listened to is enough.
If someone were in need today, I follow up
tomorrow and the week after. I want to
make sure that people are safe and well
around here.
WHAT IS IT THAT SAVES LIVES?
It is the basics that save lives. Stopbreathe-think-act! That stops the panic
and calms down the nervous system.
I think of myself as a tool - I must make
the situation better for the person in pain.
Sometimes I do it by talking to them, other
times by holding a hand and sometimes
it is a needle with the correct medicine.
Whatever works to stabilise the person,
then we have come far.
HOW DO YOU FIND WORKING IN
MAERSK OIL ANGOLA?
My OHS Medical and Security position in
Maersk Oil Angola is a welcome return to
a context where people don’t want to kill
me. I am here to keep people safe. People
know that - even if the children are scared
of me at first.