BW Offshore

Source: Supply Chain Digital

Date :03/01/2008 16:19:50

77 percent of global oil and gas reserves are held by state owned oil companies. BW Offshore is an oil services company building and operating floating production systems

Written by Lucy Mowat and Produced by Alex Smith

When Bergesen Worldwide Group was restructured in 2005, BW Offshore evolved as an independent company specialising in the construction and operation of floating production systems (FPSOs) and related offshore equipment. More recently, the company has also been developing new technology and equipment with the potential to change the market.

Although the company is now publically traded on the Oslo Stock Exchange, BW Group still holds about 62 percent of its shares. There are numerous benefits for BW Offshore to be associated with the BW Group; Svein Moxnes Harfjeld, CEO, explains, “We purchase insurance as a group, alongside our sister companies.

We also share our training centres in the Baltic States, Russia, India and the Philippines. That would be expensive for us to do alone, but sharing across the group makes a lot of sense. Lastly, we also bulk purchase some consumables.”

The company has an international supplier base, and its purchasing processes can be positively influenced by being part of a larger group. “We have several hundred suppliers from every corner of the globe. We want to encourage repeat business with these companies and to build loyalty. However, in the market there is a fight for resources, so we need to constantly lookout for new suppliers.”

A global company

The company is leading the market in the Gulf of Mexico. It commenced operations here with its latest FPSO, constructed for Pemex. This is, to date, the largest converted FPSO, handling up to 600,000 barrels of oil per day. It also signed a contract with Petrobras in October 2007 to construct and operate what will be the first FPSO in the US Gulf. This FPSO will be installed in a water depth of 2,600 meters, the deepest to date, and will be operational in 2010.

The company also has equipment operating in Nigeria, Mauritania, Russia and Malaysia, which are accompanied by local support offices. Past experience includes operations in Angola, the North Sea, the Middle East and China. There are a number of factors behind the creation of a support network as Mr Harfjeld explains: “We need to understand the culture of the companies that we work with and the local environments that we’re operating in, so local employees and offices are an important part of our business.”

BW Offshore works with a number of other large, state owned companies around the world, including Petrobras, Pemex, Petronas, Rosneft, Statoil and CNOOC. The company prefers to conduct R&D activities within its projects by improving and developing new systems and technologies. The company’s CEO explains why this is the case: “Every project offers new challenges, and that is the perfect way to develop and engage new technology.”

One of the new concepts developed by the company is its new floating LNG system, which will be available to the market in 2008. Investments in the equipment are expected be in the region of between USD 600 million and USD 1 billion. BW expects to engage in a project in 2008 that will be operational some 3 years after. “The world is in possession of substantial amounts of stranded gas reserves which are not being commercialised.

Alongside this, there is an increasing focus on using gas as a fuel as the world is concerned about depleting oil reserves as well the environmental aspects. We have seen this as an opportunity to develop new equipment,” Svein Moxnes Harfjeld states. The company is one of few looking to capitalise on these resources. He goes on to explain product development: “We’ve been working on the system for about two years and we’re almost ready to go commercial.”

The company has built and installed two LNG terminals in the US as well; one is just off the coast of Boston, and the other is in Louisiana. Furthermore, it recently signed a contract to install a third, also outside of Boston.

Acquiring business

“The traditional core competencies of BW Offshore have been project management and operations,” Mr Harfjeld states. “In growing, the company has been working with larger clients and on more complex projects, so we wanted to develop a technology division too.” As such, BW Offshore acquired the company APL in 2007. This gives BW Offshore the opportunity to give customers a more comprehensive service.

With these large contracts and the acquisition of APL, market analysts predict that BW Offshore’s $452 million revenue for 2006 will grow by the end of the financial year. Estimates by market analysts are in the region of $680 and $690 million for 2007. This success can also be attributed to the company’s dedicated workforce of approximately 1000 people.

The company’s CEO explains that BW Offshore has to remain competitive in order to ensure that skilled employees and engineers stay with the company. “We focus on having exciting projects and that will normally attract very competent people. We also have an open and friendly environment which is not very bureaucratic, enabling staff to focus on their core activities.”

Training is also encouraged by the company, although Mr Harfjeld explains that the best training occurs on-the-job. “We encourage people to move onto bigger challenges continuously; that’s how they grow and mature. Motivation is also stimulated by the offer of stockholding programs, pension schemes and insurance plans.

Quality controls

Employee health and safety is imperative in the offshore industry too. As such, BW Offshore holds the ISO 18001 occupational health and safety certificate, which states that the company does everything it can to offer the safest possible working environment. It also holds the International Safety Management certificate.

BW’s employees also ensure that all of the company’s output meets customer expectations in terms of quality. As such, BW Offshore is audited by Det Norske Veritas for ISO 9001. Svein Moxnes Harfjeld elaborates on how the company ensures that all products are up to standard. He says, “The beginning of the process comes from having the best people, appropriate working procedures and also from working with reliable contractors who meet our quality standards.”

BW Offshore holds the ISO 14001 environmental controls certificate too. The company attempts to minimise its impact on its surroundings as much as possible. It often works in remote areas, where waste handling is difficult; hence disposal must be done in a responsible way. He goes on to say, “We also seek to promote ways of reducing chemical and equipment usage as well as the release of emissions into the air to our customers, so that they can lower their impact on the environment.”

Mr Harfjeld explains that the company’s plans for the future mainly focus on organic growth and expansion. BW Offshore wants to tackle bigger contracts for bigger companies and demonstrate its abilities. The new floating LNG systems open up new market opportunities for the company.