Lundin Petroleum

Source: Energy Digital

Date :17/03/2008 13:40:50

Ashley Heppenstall, CEO at Lundin Petroleum, tells Exec magazine about the company’s explosive growth since it was established and its plans for 2008

Written by Lucy Mowatt and Produced by Alex Smith

Although Lundin Petroleum was only founded in 2001, the company has a strong heritage in the oil and gas industry. When Lundin Oil was bought from the Lundin family and other shareholders by Talisman Energy in 2001, they decided to set up a new company in Sweden. Having worked with companies associated with the Lundin family since 1993, Heppenstall joined Lundin Petroleum as CEO and set about building a new business.

“It’s a dynamic atmosphere and there’s always a lot going on,” Heppenstall says of his decision to join the company. “It’s a very exciting place to work in. I think that’s why we never have any problems with attracting good staff to work for the company.”

In addition, he explains that 30 percent of the business is still owned by the Lundin family, and while the company has grown in recent years it still has a family influence and a very short decision making process, resulting in added flexibility and the ability to respond to market changes.

Rapid growth

When the company was set up, it had no oil & gas reserves to its name and therefore did not have any output. “Over the past few years we have increased our production by 20 percent a year and as such we expect to produce 36,500 barrels of oil a day this year, and we’re expecting that to continue to increase not only because of the reserves that we have, but from the exploration resource portfolio we have,” Heppenstall explains.

In 2008 the company is planning to drill 17 exploration wells around the world, with its main focus in Norway, Russia and Sudan. “We had a big oil discovery in Norway last year, which was a big plus for us and now the key is to do the work to commercialise that and bring delivery on stream as soon as we can,” Heppenstall says.

Lundin Petroleum is expecting to spend $350 million on exploration and the company’s CEO describes this as “the most aggressive work program we’ve had”.

As the company continues to grow, it also has more funds available for the development of its existing fields. “We expect to spend $375 million on development, and the major element of expenditure is in Norway in the Alvheim area and another field called Volund,” Heppenstall explains. There will also be investments in fields around the UK and in the North Sea sector, which will redevelop old fields.

Increased workload

The corporate website clearly outlines Lundin Petroleum’s strategy, which includes the development of its existing assets, the active pursuit of “new exploration acreage round the world”, and the acquisition of “producing assets that are undervalued and fit into the company’s scope of operations”.

In line with these aims, 28 new licenses were awarded to Lundin Petroleum in 2007, which will considerably increase the company’s workload. Significantly, the company is planning to raise its game in Asia and Africa, with new licenses being obtained to extract oil and gas in Vietnam, Indonesia and Cambodia. “We opened an office in Singapore two or three years ago so that we had a regional office to grow our activities from South East Asia,” he states. This is an area where Lundin Petroleum intends to gain more deals and find new opportunities.

In the interests of growth, Lundin Petroleum has a $1 billion bank facility which is available if needed. However, Heppenstall explains that these funds can also be used for acquisitive growth. “We don’t need all of that capacity to develop our exploration and development of existing facilities, so that’s there for acquisitions if the right ones come along and they work from a technical perspective,” he says. Where possible the company builds on the experience of the companies that it acquires by retaining their workforce and management.

And indeed Lundin Petroleum has made carefully considered acquisitions in the past, which have expanded both its expertise and its capabilities. The first acquisition made by the company came in 2002, when it bought Coparex International from BNP Paribas for $172.5 million. This business added new exploration licenses and assets to Lundin Petroleum, transforming it from a purely exploration based business into a company with approximately 16,000 barrels of oil equivalent produced per day. Subsequent investments have been similarly well considered and have resulted in impressive levels of growth.

Building on experience

Lundin Petroleum operates in a multicultural industry, and the company supports this by taking on local employees in each region. “We have between 40 and 50 people in our Geneva head office and about 14 different nationalities. They’re people we’ve picked up invariably from places where we’ve operated and identified people with potential,” Heppenstall explains.

In total approximately 300 people work for Lundin Petroleum around the world and all have access to training and achieving their potential. “In all business people are key. Everyone’s got access to technology but what differentiates you is how you interpret that technology, so we constantly invest in training and development,” Heppenstall says.

In addition, the company has worked with the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee to set up a scholarship scheme. This will cover the cost of a one year Masters degree for one if its employees based in one of its emerging markets. In 2006 the scholarship went to an Indonesian lawyer, while this year’s participant is a lecturer in law in Ethiopia.

Corporate Social Responsibility

While taking on employees local to the area, the company also has a strong sense of its corporate social responsibility. “We’ve got the Corporate Donations program,” Heppenstall explains, saying that the company works for the benefit not just of its shareholders, but seeks to benefit the local government and communities, helping them to develop while providing employment. The company has a team of professionals dedicated to deciding where these funds would be best spent and in the most effective way.

A number of organisations have benefited from the funds that have been provided by Lundin Petroleum. SOS Children’s Villages, which help to care for orphans and abandoned children, have received sponsorship for a number of their locations; Lundin Petroleum sponsors Gammarth Village in Tunisia, Jakarta Village in Indonesia and Go Vap Village in Vietnam. These charities offer vulnerable children access to care, education and counselling, which will significantly improve their quality of life. In addition, funds have been donated to the Bridge of Hope children’s charity in Sudan and Save the Children Norway.

The Green Book

Lundin Petroleum also has a comprehensive HSE management system, the Green Book, which ensures that the company adheres to best practice and that everyone involved with a project is safe. “Clearly before we send any of our staff out we need our contractors to bring all locations through a very detailed risk assessment,” Heppenstall says. It also takes local environments and jurisdiction into account so that it always operates according to best practice.

This is in addition to the integrated system of continuous improvement which ensures that Lundin Petroleum stays efficient while it expands. “This is a system that we have developed in house because it is not something that you can go out and buy off the shelf. In certain areas where we operate, such as Norway, you have to have a management system that is audited and approved by the regulatory body,” explains Heppenstall.

He goes on to say that continuous improvement is an interactive process at Lundin Petroleum which changes on an ongoing basis depending on the feedback that Lundin Petroleum receives from its people and the industry.

This flexibility is something that Heppenstall really feels gives the company an edge over its competitors. “We like to think that we are the first mover and we like to think that we can make decisions quickly...we like to get into areas with strong technical potential and our business is driven by going where the oil and gas is and managing all the risks associated with that,” he says.

And indeed he believes this ethos will drive the company to achieve success and supply the increasing global demand for hydrocarbons. He says that while there is investment in renewable sources of energy, the world is very much dependent on fossil fuels, which means that Lundin Petroleum is going to “more and more difficult places, not just logistically, but politically in order to supply a future hydrocarbon spring.”

Click here to view the corporate brochure on Lundin Petroleum