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Power of

Thursday February 27 2014

Scotland

Special delivery

How a worldwide industry gets its critical supplies from Scotland

Crewing up

Jacqueline van den Akker on the changing face of HR


Thursday February 27 2014 | the times

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Power of Scotland

Welcome

North Sea governing national agenda It was no coincidence that saw two cabinets meeting in or near Aberdeen earlier this week. Both the UK and Scottish governments recognise the critical importance of North Sea oil and gas, not just to the economy, but to Britain’s constitutional future. So bringing ministers together in the oil capital of the country was a way of demonstrating commitments north and south of the border to its future development. In this issue Peter Jones stresses the need for clarity as politics threaten to obscure the key issues facing the industry; we look at the new technologies that underpin the future for oil extraction; show how the expertise developed over 40 years in the North East of Scotland is being exported across the world; examine the favourable prospects for financial deals activity and explore how the management of human relations on North Sea oil rigs is setting new standards. There may be political disagreement over how best to manage this critical resource. But no one doubts that it is remains a powerful economic force.

It is refreshing to read Sir Ian Wood’s recommendations on maximising our remaining oil and gas resources

Oil fund proposition has missed the boat The First Minister’s optimism over the prospect of emulating Norway’s shrewd investment strategy is a case of too little too late, writes Colin Welsh

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he upcoming referendum on Scottish independence has brought a new focus to the significance of the oil and gas industry to both Scotland and the UK as a whole. The First Minister, Alex Salmond, is offering to take greater care of the industry which under successive governments has seen 14 new energy ministers in the last 17 years — three of them in the last four years alone. He points to the estimated 24 billion of undeveloped oil reserves that are believed to remain in the North Sea and suggests they can bring riches to Scotland that can be used to build a fund akin to that shrewdly built up by the Norwegians throughout the heyday of North Sea oil development over the past quarter century.

Sadly, those days are over. Since 2000, the UK’s production of oil and gas has slumped from 4.5 mboe/day to 1.5 mboe/ day, much of the industry’s infrastructure is old and very costly to maintain, and the oil service industry — a significant benefactor of the current situation — has more work than ever before to arrest the production declines and bring smaller or more technically challenging fields into production. The large oil companies are waking up to the reality that no matter how much money they throw at the problem it is virtually impossible to grow overall production, so the words “capital discipline” and “returning cash to shareholders” are the new mantras. With crude prices now range bound and service costs soaring it is no surprise that the UK offshore industry, which is a mature and relatively expensive region, has seen new projects delayed or cancelled and major participants withdraw. In the current referendum debate, the First Minister is long on rhetoric and short on detail when it comes to the industry. His office refers to firms queuing up to invest a potential $100 billion |t: and points to Norway and its oil fund as a shining example for Scotland to follow.

Interestingly, this figure of $100 billion is somewhat misleading as it is derived from a 2011 Oil & Gas UK report and is the sum of actual and possible investment in the sector. At the time of its publication, only $44 billion of the capital spending was actually approved and under development with varying degrees of likelihood attributed to the balance of $56 billion. As for Scotland creating an oil fund, it is really a case of too little too late. Established in 1990, the $780 billion former Norwegian Government Petroleum Fund (now known as the Government Pension Fund — Global) has compounded over almost 25 years with much of its initial capital coming from the years when North Sea oil fields were bigger and more profitable than they are now. Too much of the value has been extracted from the UKCS over the past 40 years for Scotland to replicate this model. Moreover, when citing the economic model of Norway he inevitably fails to mention that the Norwegian Krone is a very volatile currency because the country is both small and its economy is oil dependent. In light of the undeniable challenges facing the industry, it is refreshing to read the recommendations of Sir Ian Wood with respect to what needs to be done in order to maximise our remaining oil and gas resources. The UK government can take credit for commissioning the report, but you have to question whether it would have happened had the referendum not been in view. Better late than never, I suppose. The important thing for the industry is that these recommendations are acted upon. Sir Ian has the knowledge, integrity, impartiality and the passion for the industry to drive them through. Whatever happens in September, he should be given the post of energy tsar with the power to make his recommendations a reality to ensure that we make the most of the opportunity that remains in the North Sea. Colin Welsh is Chief Executive Officer of Simmons & Company International Limited, a full service energy sector investment bank serving institutional investors, public and private companies and private equity firms and headquartered in Houston, Texas.

Maven Capital Partners is one of the UK's leading private equity managers, managing around £320m of client funds. Our highly experienced executives operate from six regional offices and invest in dynamic laterstage private companies across a wide range of industry sectors. 6 Queens Terrace, Aberdeen, AB10 1XL | T: 01224 517120 E: enquiries@mavencp.com | W: www.mavencp.com


the times | Thursday February 27 2014

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Power of Scotland

Peter Jones

Time for politeness is over: now the industry demands certainty

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or years, if you asked oil companies what they thought about Scottish independence, you were either told “no comment, we don’t do politics”, or “we operate in x countries, we’ll operate in x plus 1 if we have to”. There’s sense in that. Tough business folk who go out to play in the political sandpit discover that politicians play a lot dirtier and rougher than they do. Being seen to take sides can lead to a lot more than sand being kicked in the eyes. But being aloof also gives the impression that oil companies are above politics and not affected by what’s said and done at these low levels. People, and that includes politicians, have the idea that if firms get hit, say with sudden tax rises, they might complain, but they’ll just have to get on with it because nobody is listening to their gripes. Now the polite stonewall has crumbled. Bob Dudley, chief executive of BP, was first to break through it. Independence, he said, presented quite big uncertainties, about the currency and connections to Europe. BP would carry investing in the North Sea, but it was a question mark, he said, adding that his personal view was that Great Britain is great and ought to stay together.

Then came Colin Welsh, chief executive of Simmons & Company International, corporate finance specialists for the energy sector, who comments on the facing page. He said: “I wholeheartedly endorse what Bob Dudley said yesterday regarding the uncertainty that the question of independence brings to our industry and the threat that this poses to our economic future.” The word “threat” made this a pretty strong challenge to the Scottish government, who responded with the claim that £100 billion is going to be invested in the North Sea. Their message is pretty clear. There’s nothing to worry about, the oil and tax revenues will keep on flowing, with the between-the-lines subtext — shut up Mr Welsh. Except that Mr Welsh, who ought to know about investment flows in the oil business worries that it is misleading, maybe even dangerously so for the health of the North Sea and all the jobs that depend on it. “Where is this £100 billion? Who is going to spend it?” he asks. The number comes from Oil & Gas UK, the offshore industry’s trade body, whose 2013 activity report says: “Companies have just under £100 billion of capital investment in their plans.

“Of this £44 billion are already approved and under development and another £30 billion have a better then 50 per cent chance of approval over the next few years.” Translation: only £44 billion of capital spending is guaranteed, and the prospect of the remaining £56 billion being spent is chancy. Just this month, developments worth about £10 billion — Chevron’s Rosebank and Statoil’s Bressay fields — have been put on hold for up to a year because the profit-making potential looks to have deteriorated. And even if £100 billion was invested, it may not equate to increased production. Between 2008-12, according to Oil & Gas UK, some £39 billion was spent on capital investment and yet oil liquids production from the North Sea fell from 1.57 million barrels of oil per day (bpd) to 860,000 bpd, a 45 per cent decline. Comparing that with the US, Ernst & Young reckon that £772 billion was spent on exploration and production between 2008-12, much on the fracking boom, and liquid oil production increased from 6.97 million bpd to 10.32 million bpd, a 48 per cent increase. The lesson is pretty obvious. If you are

The problem of where to invest is increasingly troubling the oil majors

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an investor interested in putting a few billions into oil and gas production, the North Sea, where there are no big fields to be discovered, is not the most exciting place in the world to place it. The problem of where to invest is increasingly troubling the oil majors and the big independents. In the background, there is the worry of price volatility. Prices, he says, have become range bound between $80 and $120 because at $80, now the cost of fracking a barrel, firms can just stop fracking, reducing supply, and wait until the price rises again. That sounds reassuring for the North Sea but there, says Mr Welsh, costs are rising fast as companies desperate for skilled labour poach from each other by offering ever higher wages, making the business, despite historically high endproduct prices, still quite high risk. And that’s where the uncertainty caused by the independence referendum isn’t welcome. “You want fiscal and regulatory certainty,” says Mr Welsh, who worries that an independent Scotland cannot immediately provide that. “Scotland doesn’t have the regulatory and fiscal infrastructure, it would have to build it all from scratch.” And that, he fears, could turn out to be a big disincentive to invest in a Scottish industry that provides tens of thousands of jobs and billions of pounds in tax revenues on which the success of the Scotland economy, independent or not, critically depends.


Thursday February 27 2014 | the times

4

Power of Scotland

Deals and dealmakers

Buying into a bright future Prospects are positive and the flow of potential deals demonstrates that the downturn has been weathered, writes Rob Stokes

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espite the volume of mergers and acquisitions, management buyouts and other deals involving North Sea technology and services firms remaining below pre-crisis levels, deals are on the up and prospects bright. “The flow of potential deals is very positive,” says Jock Gardiner, the partner who leads the Aberdeen-based UK energy services team of private equity firm Maven Capital Partners. Maven tends to buy businesses making £1 million to £2 million profit a year with a view to exiting at around the £4 million to £6 million annual profit level attractive to a wider buyer group. “It is a genuine golden period for the

right type of business due to a combination of getting more from the North Sea, investment in new fields, and refurbishment and maintenance of infrastructure for existing fields,” Gardiner adds. Themes playing well with investors include subsea technologies and capabilities, drilling technologies, maintenance, asset integrity, corrosion control, refurbishment, enhanced oil recovery, and better and cheaper exploration. For example, Fife-based HSC Control Systems, a Maven portfolio company, currently has record order books and good prospects for at least two or three years, Gardiner says. “2013 was the highest year for deals since the downturn,” says Tom Faichnie, corporate finance partner at the Aberdeen offices of chartered accountants Campbell Dallas, which conducted financial due diligence on behalf of Maven Capital Partners for the latter’s acquisition last December of a £5 million majorMaven’s Jock Gardiner sees a positive flow of potential deals this year

ity equity stake in oilfield infrastructure engineer and fabricator R&M Engineering Ltd, Huntly, Aberdeenshire, as part of a management buyout (MBO) of R&M. “Our fees from corporate finance work last year were around three times the level in 2012, and that’s probably true of the number of transactions we carried out too,” Faichnie says. Already this year, Campbell Dallas has acted for the Scottish Loan Fund’s £3.5 million investment in Aberdeen-based energy services firm Coretrax Technology and was recently in the process of selling a business in the non-destructive testing space as Power of Scotland went to press. “2013 was buoyant for us as a lot of owners took the opportunity to sell out,” says Malcolm Laing, partner at Aberdeen law firm Ledingham Chalmers, which advised deals involving a number of oil technology and related companies. Among the more interesting stories in which it was involved was the partial, then full, acquisition by Arria NLG of University of Aberdeen spin-out Data2Text which uses artificial intelligence to process huge amounts of raw electronic data to generate English language reports.This is being deployed for applications including analysing data from the automated monitoring of large-scale, mission-critical machinery on production platforms in deepwater Gulf of Mexico. Arria NLG subsequently staged a $160 million-plus flotation on the Alterna-

2013 was a buoyant year for us as a lot of owners took the opportunity to sell out

tive Investment Market last December, generating a substantial return for shareholders that included Data2Text’s founders and the University of Aberdeen. Factors driving deals activity include a revival at higher transaction values in the availability of bank funding. “For one transaction we are working on there is competition between three or four banks keen to fund it,” Faichnie says. The majority of deals are still equity only though. Gardiner confirms revived bank interest in providing debt but stresses that they tend to be more interested in larger companies. “Size equals quality in their minds,” he says. “We’re seeing a lot more involvement from private equity with plenty of cash,” says Malcolm Laing, partner at Aberdeen headquartered law firm Ledingham Chalmers. “Players such as Maven, Simmons Private Equity, Lime Rock and many others are funding deals that banks would have funded several years ago.” Realistic prices are another driver. “Price expectation gaps have narrowed in recent years,” Faichnie says. “It took a couple of years or so after the downturn for people to recognise that they would not get a ten times multiple of EBITDA.” Pricing depends on size of company. For the largely £5 million to £15 million transactions in which Campbell Dallas has been involved of late, multiples of four to five times are more the norm, Faichnie says. “The more technology is involved, the


the times | Thursday February 27 2014

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Power of Scotland

Martin Laing says prices have been rising for companies with hi-tech solutions

higher the multiple, and larger businesses go for more. Prices were toppy before the downturn, and though the market is building up we are now seeing sensible pricing.” Says Gardiner: “Trading is buoyant for service companies so valuations and aspirations on pricing reflect that as there is a lot of money from private equity and trade buyers for service companies. For us, the knack is to buy wisely below the radar screen because of the size of companies we invest in and then work with the management team to build real value.” Laing comments: “Prices have been rising, particularly for the companies providing proven hi-tech solutions to problems and making exploration easier and cheaper or prolonging field life.” Trade sales have been the staple exit route in recent years. “Over the long term, there’s been a fairly steady conveyor belt of transactions in the north east of Scotland, from development capital to help entrepreneurs

kick off, followed by an initial then secondary buyout, and finally a sale to trade with the people who make money then reinvesting in early stage companies,” Faichnie points out. “In the past three or four years, larger transactions at the end of the conveyor belt have continued but we have not seen the initial buyouts. That is kicking off again, but until it flows through we will miss the secondary buyouts. It will be maybe three years before we see that followed by the larger ones going out to trade.” Says Gardiner: “Larger service companies with revenues around £100 million tell me they are keeping their options open (over exits) but my view is that the most likely exit even for those guys is likely to be even bigger private equity, or trade, with IPOs as a third place category. There are not many oil services companies quoted on the UK stock exchange and there’s always been a question about how well City fund managers understand the sector.” While UK revenues are welcome, many investors seeking geographical diversification for their assets are interested in the international growth prospects of companies that have cut their teeth in the UKCS. “Even the SMEs that we invest in and which have UK headquarters all have global footprints, whether through having international customers or having overseas bases and subsidiaries themselves,” says Gardiner. R&M Engineering, for example, has

Even the SMEs that we invest in which have UK headquarters all have global footprints

enjoyed sustained organic growth in the UKCS to reach turnover near £15 million and is now starting to piggyback on key North Sea relationships to build and ship work for overseas customers. Maven’s investment and strategic support will help R&M to address new markets by establishing a laser survey and scanning division providing 3D survey capability through advanced laser scanning and software that generates a 360o wraparound scanning image of high accuracy. For deal advisers, having international connections in the industry is a must. Campbell Dallas is part of the UHY network of independent accounting and consulting firms in 87 countries with offices in over 275 major business centres including one of the largest accountancy firms in Houston, the USA’s offshore oil capital. UHY is building up offices in all the world’s main oil and gas hubs to support international businesses. “We meet with UHY representatives from these hubs meet several times a year,” says Faichnie. Similarly, Ledingham Chalmers is a member of the Lawyers Associated Worldwide network through which it hooks up with international lawyers as well as having longstanding relationships with other law firms. “We are finding that a lot of service companies in Aberdeen are doing as much if not more work overseas as they are here, so there is often an international dimension to contracts and other aspects of advising and working for these clients,” says Laing.

All to play for in the North Sea One reason for confidence in the future investor appeal of Scotland’s oil technology and services firms is that record investment went into the UKCS in 2013. There are clouds on the horizon as operational costs rise and exploration declines, and some large projects have been delayed. These factors, costs in particular, have seen industry optimism decline in almost every quarter since mid 2012 as measured by the Business Sentiment Index compiled by representative body Oil & Gas UK. That said, the index for Q4 2013 found optimism was still eight points above zero on a scale of -50 to +50 with a core above zero indicating a positive mood. With billions of barrels of oil or its equivalent still to recover from the North Sea, and industry and government collaborating to shape policy to maximise recovery, the future looks encouraging. The findings of the 2014 industry activity survey that was conducted by Oil & Gas UK and published this week broadly confirmed this positive picture while also realisitically underlining the challenges that lie ahead in the sector.

Ledingham Chalmers LLP is a regional law firm with a national reputation. Our focus is to work within the sectors that drive our regional economy. Our clients operate within the energy, construction, agriculture, food, fisheries and tourism industries. We provide the optimum blend of legal experience, industry knowledge and international outlook to help you navigate the intricacies of start-ups, mergers, acquisitions, disputes and employment law.

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Thursday February 27 2014 | the times

6

Power of Scotland

Cover story

Becoming part of the cr Change and innovation within the flourishing oil and gas industry pose new requirements for human resources. Here, RedWave’s Aberdeen director tells Ginny Clark how the company is meeting the challenges

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t can take a strong character and a special group of skillsets to get on in the oil and gas industry, and one person who demonstrates those qualities by the barrel-load is in the business of tracking down many more. Jacqueline van den Akker, Aberdeen director of leading industry recruitment specialists RedWave, forged her career moving through the HR ranks of industry giant Ensco before making a successful switch to the other side of the personnel fence. That experience, that ability to see both sides, has given Van den Akker a unique, and valuable, insight to clients’ on and offshore needs. “Having worked in-house in HR, I developed a strong understanding of what makes a rig work, for instance,” she says. “I established close bonds with the crews, I’ve sat in galleys and listened to what was working and what was not working and I know how crucial the team dynamic is to a good working environment. “You either like working offshore or you don’t. You won’t learn to live with it, and if that’s how you feel then you won’t stay very long in this part of the oil and gas industry.” Based in Aberdeen for 25 years, with its head office in Beverwijk, Netherlands, the company originally known as InterServices changed its name to RedWave at the start of this year. Now a market leader, RedWave supports the offshore oil and gas industry by providing highly skilled candidates and services both offshore as well as onshore. RedWave is focused on expanding its client base and continuing to build and maintain close relationships with both personnel and clients within Europe in addition to assignments further afield in locations such as Asia, Africa and the Middle East. Over this quarter century, and particularly in the past five years, the technological changes and innovations within a flourishing industry have placed different requirements on workforce resources. “In the past few years we’ve seen big changes in the recruitment demands of the oil and gas industry, first with technological advancement, in particularly off-

You either like working offshore or you don’t. You won’t learn to live with it and in that case you won’t stay long

shore, but also in terms of a more global outlook,” says Van den Akker. “People only used to be interested in opportunities at home but now are much happier to step on a plane and travel, to locations such as Africa and Asia. “Of course, there is also a skills shortage, and this has been well publicised and continues to be an issue, with a specific focus on engineering and technical expertise being most sought after. However, experience is highly sought after too. In the downturns of 2004 and 2008 many rig personnel were made redundant — and that meant people who had built of a wealth of expertise went out of the industry altogether. Now companies can’t afford to do that anymore; it’s been a hard lesson to learn but they know the value of that experience and that they cannot simply lose it.” Of course, just as the oil and gas industry itself has changed, so too have many of the sectors that support it, and Van den Akker says that means new challenges for RedWave. “In the past six years we’ve seen the number of companies coming into recruitment increase exponentially,” she says. “There are even companies from London coming up here and they all want a piece of the action. This makes it more challenging for us to deliver to our clients, and that means we have to increase our efforts in what is a very competitive arena.” So in a busy field, what makes RedWave distinctive? “There are a combination of things we offer, and can do, that can demonstrate our strength against this increasing competition,” says Van den Akker. “To be successful you need to understand how the offshore environments work. We know what it takes to get offshore and to be offshore. This depth of knowledge helps us to build strong relationships, not just with out clients but also with our personnel. There are real challenges to finding skilled personnel for oil and gas, so we have to keep thinking about how we get more people into the industry, and that can also mean encouraging clients and those seeking work to be more creative and more flexible.” With the skills shortage reaching a critical point, recruitment is focused on encouraging more women into the sector, while also engaging and inspiring young people as a way of ensuring the industry has the expertise necessary to support its progress in the long-term. However, tackling the problem right now means companies are increasingly recognising the benefits of hiring from other sectors, where technicians, engineers, and other staff, may not have realised the potential of their expertise. “There has been a lot of coverage in the media about transferable skills,” says Van den Akker. “Yet there is still a hurdle for some companies, with a mentality that

A helicopter pad is washed down before the arrival of crew for another challenging stint of offshore work


the times | Thursday February 27 2014

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Power of Scotland

rew is mission critical Jacqueline van den Akker believes that the industry has to give people realistic information about working offshore as many ‘genuinely don’t know what it means’

Ensuring we can deliver the right people to our clients means we also have to build close relationships with the personnel we deal with. We use social media and Skype to help us do that, to get to know people and what’s important to them. Sometimes, that can be a key reason why they will choose us over other recruitment companies. I spoke to one of our medics recently, and because of the strong links and the fact he likes us, he had chosen RedWave out of three offers. So if we can attract and retain those people, it works well for our clients too.” Van den Akker admits there is still some work to do for an industry that has to sell itself to qualified people who may believe oil and gas just offers jobs where you get your hands dirty and spend a long time away from home. “We have to give people realistic views of what it’s like as many people genuinely don’t know what it means to work offshore,” she says. “The future of our industry depends on bringing more people in. In the Netherlands, our company is involved in going to open days at schools and universities, providing students with information and getting them graduate placements. The benefit of that is that they are often hired on. That is something

Human touch Jacqueline van den Akker, the Aberdeen director of RedWave, joined the company in 2008. She previously held a number of HR roles within international oil and gas company Ensco, including that of HR coordinator and HR supervisor. Van den Akker has a postgraduate degree in HR management from the Robert Gordon University and a masters degree in nutrition and dietetics from Chico State University, California. Redwave – which before January 1, 2014, was called Inter-Services – is a recruitment consultancy whose core focus is on the oil, gas and energy sectors, first established in Aberdeen in 1989. Personnel crews work in the UK, Danish, Dutch and Norwegian sectors of the North Sea and also further afield.

only a certain type of experience can be suited to going offshore. Yet there are people from other backgrounds who will have the right skillsets and experience, people who have come out of the Armed Forces for instance.

A

n engine is an engine, being on board a ship can be the same as being on board a rig, so as an industry we have to be more open to personnel transferring in. There was a time when extra personnel used to be positioned on board, so that they could gain experience as a way of developing a talent pool. However, a lot of that type of resource is not available any more. So one of the initiatives we can look at is graduate or apprentice programmes, and we also have to look at how else we can support our cients to ensure there is a constant supply of people coming in.” The main focus for RedWave is recruiting qualified personnel for drilling, production and engineering work, along with providing medical services in the

exploration and exploitation of gas and oil reserves, both onshore and offshore. As ever, it comes down to matching the right people with the right job. “There is a high demand for people with 10-15 years’ petroleum geoscience experience,” explains Van den Akker. “These people go all across the world, and there is a lot of demand here. Clients have high expectations, and so they should, of finding the ideal worker, but finding candidates who match all the criteria can be difficult. The fact is there can be some candidates who, although they may not appear to match every aspect of the criteria, can be successful if properly supported. So, for some clients to be a little more open-minded would be helpful. “Were looking at trying to develop this — ultimately we are recruiting everywhere, not just in Aberdeen, and the market process will always be the same. It’s a bit like baking a cake! There is a set list of ingredients, but it’s all about achieving the right blend, and in this case that’s the attitude, skillset and passion for the industry.

we want to start doing here in Aberdeen. We’ve already been involved in a number of ex-Forces jobs fairs where we’ve discovered ther is a lot of misinformation and misconceptions about the industry out there. We’d like to get more involved in bringing people in and we supported the Energising the Nation’s Future campaign. But we have to balance the elements of corporate social responsibility, it’s important we give guidance but we are a recruitment company. So while it’s good to be involved in getting information out there, we want to be offering something to our clients too. We’re particularly interested in an apprentice scheme, if clients are interested and willing to take on trainees. Of course, once an apprentice has six months experience they will be more attractive to a number of employers, so we don’t want to lose them, and have to make sure there is a return on the investment. But we’re working on this and already speaking to clients about it. In the Netherlands, they have just placed 11 more students, which is

It’s about achieving the right blend, and that’s the attitude, skillset and passion for the industry

a very good success rate, and I can’t imagine a similar programme here in the UK would not be successful.” Having worked in a number of HR roles with Ensco, Van den Akker has gained a valuable perspective on the needs of RedWave’s clients. “It’s been very helpful,” she says. “You can quickly develop an understanding of what someone is looking for, what is going to fit. I was responsible for a few instillations at my previous job, and each one was different. They’re a bit like families, so you can’t introduce someone without there being a ripple effect, and that can be negative or positive. You want to maintain a stability, and so you need to understand what they will face, which can be night or day from the other installation. If you keep putting the wrong person in it won’t be successful.” As the oil and gas industry looks forward, Van den Akker believes RedWave can play a significant role in helping to develop more opportunities for clients and personnel. “There is a finite resource in terms of exceptional candidates,” she says. “There is such a limited pool these days, and over the next 10 years if we grow and develop the industry then we have to look at how we can sustainably bring people in. There will be two styles of achieving this, contractors plus search and placement. The big companies such as Shell and BP all have graduate programmes but apart from a handful, the smaller ones don’t. We need to position ourselves as a company where we can run those programmes for them. “Opito is carrying out a labour market intel survey, and what will come out from that will be very interesting in terms of what is required from the industry. Students who are potential candidates will receive STEM (science, technology, engineering and maths) training. But that’s a whole process that will bear fruit six years down the line: what we need right now is sourcing talent from other areas. We need to bring the whole energy industry together to collaborate, a little less of the ‘this is my area and that’s your area’ would really help going forward. To address the skills shortage we have to look at people from new backgrounds with experience, and then see how we can bridge that gap. “At RedWave we’re very optimistic about the future and looking to find our place in it. We’ll also be cross-networking with the Netherlands office to see what’s different over there, look at the whole industry and continue to move forward in competitive times. We’re passionate about oil and gas, and working hand in hand with what the client wants, we’ll be successful.”


Thursday February 27 2014 | the times

8

Power of Scotland

Logistics

A worldwide movement that is key to industry’s survival

The outlook is healthy for supply chain companies, who can expect decades of work both at home and abroad. Ginny Clark examines the strategies and services involved

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auling drilling rigs on and off-site, or delivering electronic components for vital repairs, more than 300 UK-based companies are mobilised across the world’s roads, seas and skies to ensure our oil and gas industry keeps moving, and keeps running smoothly. With oil and gas exports of goods and services valued at £7 billion, and with last year’s capital investment levels estimated at a record high of £13.5 billion, the industry supply chain is now worth around £27 billion overall.

Often working in extreme environments, and always with a clock ticking down on a number of deadlines, these companies are not only meeting logistical challenges through freight-forwarding at the front-line of their business, but are also at the cutting edge of the industry, where innovation is helping to drive the demand for safe and cost-effective supply chain solutions. Some of these specialists have grown and flourished as integral components themselves of a 40-year industry, still anchored in the North Sea but active as part of an oil and gas sector in more than 100 markets overseas, while others may be third-party logistics providers now bringing capability, experience and skill levels forged across a range of industries.

All are in the business of sourcing, supplying and providing an effective supply chain management service that ensures a rapid response and the purchasing power to finance supplies at a price that keeps the industry moving forward. Craig International Supplies (CIS), is part of the Craig Group, a privatelyowned, family-run Scottish business with around 80 years of maritime and energy experience. Now with bases in Aberdeen, Houston, Cape Town, Poland, Hamburg, Mozambique, Ghana and Canada, and around 40 specialised buyers, CIS employs 70 people and supplies into more than 55 countries worldwide, and is also working on setting up in Perth, in Australia. In delivering cost-effective procurement services to the global oil and gas industry, explains Jill MacDonald, joint managing director, CIS sources and supplies a range of products and third party procurement services for oilfield operations both onshore and offshore. “Our complete trading-house solution is a much more efficient way for customers to procure a range of goods and third

Companies such as Craig International Supplies specialise in cost effective procurement to the industry on several continents

party services,” says MacDonald. “Not only do we provide cost-savings through our specialist sourcing, consolidation of vendors and bulk-buying, we also save time and resources by offering a complete service, including pre-qualification of second tier suppliers, over which the client has total visibility of spend. In addition, our web responsive systems provide real-time system integration, expediting and e-invoicing. “We cut our teeth in the North Sea from our headquarters in Aberdeen, and have expanded our global reach by following our customers into other geographic regions. “Our key hubs are Aberdeen from where we supply across Europe and beyond, Houston from where we supply to the Americas and Cape Town, which is our base for Africa. “Our approach has always been to think global but act local, and that is why we continue to explore and open other bases to support these hubs and ensure we are part of the community in those places.” Underlining its programme of expan-


the times | Thursday February 27 2014

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Power of Scotland

We are customer led into new countries and are exploring opportunities in Australia

Jill MacDonald of CIS says the approach is always to ‘think global but act local’ sion, CIS recently won the prestigious supplier of the year gong at the Africa Oil and Gas Awards. “This recognised our major expansion in South Africa and neighbouring countries including Namibia, Angola, DR Congo, Nigeria, Equatorial Guinea and Cameroon,” says MacDonald. “We recently opened a base in Ghana and continue to look at options to expand further in to East Africa with Craig International Mozambique Limited, and bases planned in Pemba and Maputo in early 2014. We are always customer led

into new countries and as such we are currently exploring our opportunities in Australia with our major clients. “The global oil and gas industry supports a multi-billion dollar supply chain, and as an international market leader in procurement, CIS is playing a key role in that supply chain. With the high level of major new projects coming on stream in Australia, Africa and South America, and the shale gas sector emerging in Europe, there are significant opportunities ahead for us and we plan to capitalise on these by demonstrating our proven track-

record in on-time, on-budget procurement services and by opening new bases to support the in-country needs of the industry.” In the past year CIS has secured a new three-year contract with BP, with an estimated annual spend of £12.8 million, to provide non-critical services to BP bases around the UK, a deal that has created a

Supply chain is key link The UK Oil and Gas Industrial Strategy underlines the need not only to sustain but also to promote the growth of the supply chain in domestic and international markets. With around 1100 companies achieving combined revenues of £27 billion in 2011, it’s clear the supply chain is key to the success of the UKCS. Last November, it was announced Scottish exports of oils and gas to the rest of the UK and international markets were estimated to be worth more than £30 billion in the previous year, with international sales by the Scottish oil and gas supply chain more than doubling from £3.4 billion in 2003 to £8.2 billion in 2011. Enterprise and Energy Minister Fergus Ewing said then the figures demonstrated Scotland was ‘undeniably a main player’ as an international oil and gas exporter. He added: “Sir Ian Wood’s recent review of maximising oil and gas recovery underlined the significant

Knowing the drill At CEVA Logistics, our in-depth understanding of upstream, downstream and project activities means we can help you deliver parts and equipment wherever you need them. Our specialist energy team can support with tailored services and solutions to all major sub-sectors in the energy marketplace including: • warehouse and hub management • air and ocean international transportation • barging operations • heavy-lift services • husbandry services • domestic distribution • IT solutions

• export packing • charter solutions • supply boat chartering • turn-key project management • rig and vessel clearance • customs brokerage • new-build/upgrade project.

To find out how CEVA can help your operation, contact: Sean Kelly: T +44 1530 568 766 / M +44 7788 925 186 / sean.kelly@cevalogistics.com

www.cevalogistics.com

number of new jobs at its Aberdeen headquarters, and the company also opened a new office in Krakow to help support a contract with Shell to provide both products and services. CIS also offers Ebuy, a bespoke online catalogue, as part of its determined approach to stay at the forefront of supply chain and purchasing technology. The

value of the North sea oil and gas industry. It highlighted the industry’s experience and expertise Fergus Ewing highlights of global competitiveness building a globally competitive supply chain. Increasingly, our companies are embracing the major opportunities in the oil and gas supply chain, winning lucrative contracts to export products and services from Scotland. We have many creative and innovative companies capable of identifying growth opportunities in overseas markets and making a significant contribution to such business for many years to come.”


Thursday February 27 2014 | the times

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Power of Scotland

Sean Kelly of CEVA says the company is always ready to mobilise effectively ‘at a moment’s notice’

company has designed Ebuy to meet the day-to-day procurement requirements of the global energy industry, by providing simple, online access to more than 60,000 products across 1,000 categories that clients can use ‘anytime, anywhere’. Leading-edge technology ensures Ebuy has a fully integrated system to allow their clients to streamline the purchasing process, and also has an ability to integrate with customer systems such as SAP, Maximo or Ariba. CIS says this means customers can build new orders quickly based on their purchasing history and also track orders with online expediting and proof of delivery reports. CIS now has a £60 million turnover and a buying power approaching £4 million per month, which represents an increase of 25 per cent since 2011. MacDonald says this helps CIS to create a competitive advantage through its ability to pass on significant savings to services and products customers. However, whether operating here in the UK or internationally, MacDonald

believes it is the values and ethos that comes from being part of a family-owned group that has helped CIS to grow into one of Scotland’s most successful businesses. For CIS, she stresses, it is not just about the delivery of innovative products and services, but being determined to maintain a leading position in safety, and in people development. “With robust financial performance and low-gearing, the long-established, highly respected business ensures that we have the financial muscle to invest in stock and new premises to proactively and reactively meet the needs of our customers wherever they are in the world,” adds MacDonald. “The entrepreneurial spirit of the company means that we can be fleet of foot and flexible. The family values and atmosphere within the group, as well as the respect commended by the group within our industry, also help in the recruitment and retention of staff.” It is precisely those kinds of strengths and capabilities that are currently under the microscope, with Oil & Gas UK having appointed Ernst and Young to research the economic contribution of Britain’s oil and gas supply chain. The aim is for the study, announced three months ago, to provide an economic snapshot of the contribution made across 42 subsectors, with the resulting information to be used in developing market intelligence reports on those that offer potential for high growth, profitability and capability – vital for both government and industry as they look to make the most of new opportunities, with Scotland’s industry-led Oil

GAC confident over rapid growth plans for Scotland

W

ith 300 offices, 10,000 people and more than 50 years of ship agency experience, GAC is well known to ship owners and operators. But there’s more. GAC also offers logistics support to the energy sector and in Scotland those services are coordinated from Aberdeen by Steve Gibson, GAC UK’s General Manager, Energy, Nationwide GAC UK has 21 offices and that number is set to rise. Globally, the Group is present at all major energy hubs including Rotterdam, Houston, Singapore, Brazil and Dubai, where it has its headquarters. “Business is growing so fast that we’re looking to double the size of our operation in Aberdeen,” says Gibson. “We currently have 8,000 sq ft of warehousing and another 80,000 sq ft of outside storage. But it’s not enough to accommodate our growth and the port’s expansion plans.” GAC’s Department for Transport-regulated facilities uses the latest inventory management technology linked to the company’s proprietary IT programs and meets the strictest security standards. Every staff member undergoes rigorous security, compliance and ethics, HSSE and business awareness training, mostly through the award-winning in-house GAC Corporate Academy. There is also a specialist dangerous goods team. GAC UK is TRACE-certified, essential in the energy sector according to Gibson. So too are GAC

Steve Gibson, GAC UK’s General Manager, Energy companies throughout Europe, from Kirkenes, Norway in the north to Limassol, Cyprus in the south. Fully equipped to support every stage of offshore activity, GAC also offers value-added services, such as weather routing and bunker fuel supplies. The Group handles 60,000 vessels annually and in Aberdeen alone, GAC serves more than 100 vessels every month. In the far north, the number of vessels handled by the Shetland office at the port of Lerwick has jumped 100 per cent since 2010.

We are strategically placed globally to deliver a high level of service irrespective of the logistics and location. As a leading procurement and supply chain management company we understand the need to be strategically placed to meet the needs of our clients. We have bases in Aberdeen, Houston, Cape Town, Calgary, Hamburg, Accra, Takoradi and Krakow with future bases planned in Brazil, Mozambique and Australia.

GLOBAL SOURCING, WORLDWIDE SUPPLY www.craig-international.com

Call us today to discuss your procurement needs: T: +44 1224 701 888

ABERDEEN

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HOUSTON

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CAPE TOWN

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CALGARY

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HAMBURG

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ACCRA

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TAKORADI

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KRAKOW


the times | Thursday February 27 2014

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Power of Scotland

and Gas Strategy already committed to growing and developing the supply chain. Born of the merger between TNT Logistics and EGL in 2007, CEVA Logistics is a leading supply chain management company with a background across a wide variety of market sectors, including energy. With energy-focused operations across the world and energy hub locations in Houston, Dubai, Singapore and Aberdeen, CEVA has relationships with a large number of leading companies in the oil and gas, mining, EPC and renewable energy industries. Sean Kelly, Supply Chain Development Director for UK, Ireland and Nordics at CEVA, says their focus is on providing solutions for large and medium-size national and multinational companies, with 50,000 employees in more than 160 countries already involved in delivering effective and robust supply chain solutions across that variety of sectors. “For the oil and gas sector, it’s all about building sustainable growth for our strategy going forward,” he says. “We have freight management cross-border traffic in key energy locations around the world. Every project has different challenges, we need to be dynamic, flexible and knowledgable. Our strengths are an ability to offer flexibility and a portfolio of Smart Solutions. “Our Smart Energy team designs and tailors seamless sets of services spanning the global energy logistics chain from supplier to end user based on proven supply chain management tools”. CEVA has end-to-end supply chain capability

Whether it’s ocean freight, road freight or air freight, big or small — the same processes are involved

encompassing freight management and contract logistics into one operation. Such services can be integrated or offered in a stand alone way depending on customer requirements. “We have the world class technology, CEVA Matrix, which is our proprietary technology platform that enables each individual customer to achieve a new level of supply chain efficiency.” CEVA has more than 500 dedicated

CEVA has operations across the world and hub locations include Dubai

Energy specialists supported by expert teams for specific projects. There is full compliance with FCPA and Health, Safety and Environment, with a dedicated compliance team, zero tolerance compliance policy and environmentally responsible supply chain operations, handling a diverse array of cargo in dimension, weight and commodity, including out-of-gauge equipment. CEVA’s track record, and extensive capability, makes it

well-positioned to provide the solutions demanded by the offshore and onshore energy industry, says Kelly. “There is a standard set of solutions across sectors,” he says. “Whether it’s ocean freight, road freight or air freight, big or small, heavy or light, the same processes are involved but our portfolio of Smart Solutions offer customisable modules built on proven methodologies that are designed to meet the unique needs of the energy sector. “We also have the ability to provide speed under pressure, as due to the dynamic nature of the energy industry we are ready at a moment’s notice to mobilise resources, not just locally but effectively around the world, quickly and safely.” Keeping the oil and gas industry supplied with everything from canteen teabags to offshore pipe work, UK companies make for a resilient supply chain that is not only vital for the success of the oil and gas industry in the decades to come, but also continues to play a significant role in the economy’s growth and development.


Recruiting energy personnel for a bright future

www.redwave.co.uk RedWave (Aberdeen) Limited | Thistle House | 24-26 Thistle Street Aberdeen | AB10 1XD | T: 01224 640600 | F: 01224 642422 | Email: info@redwave.co.uk

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Power of Scotland 27th February 2014.

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