15 January 2016
Credit to: Focus Reports for Initial Interview
The VP global business development, sales & marketing of LR Senergy highlights his team’s unique expertise in offshore and deep-water projects and foresees a brighter outlook for Indonesia’s oil and gas industry. He furthermore outlines why LR Senergy, a company with a genuinely outstanding reputation for organic growth, recently decided to enhance its portfolio by entering into an alliance with Claxton Engineering.
LR Senergy recently teamed up with Claxton Engineering (Claxton) to add rig decommissioning services to its portfolio. Given LR Senergy’s strong tradition of organic diversification from within, what was the thinking behind the alliance?
The catalyst behind the move was undoubtedly the way late 2014’s crash in commodity prices forced us to re-assess and rationalize the commercial prospects for certain business lines. The rapid growth of the oil and gas industry’s decommissioning segment was arguably the result of this lowering of commodity prices. Rather than simply relying on organic growth as in the past, we not only leveraged our network of established business partnerships, but also searched for new collaboration opportunities. The fact that we found some late life assets were no longer economically viable, accelerated our desire to offer a full range of solutions across this segment. As our range of essential decommissioning service offerings stood at approximately eighty percent, an alliance with Claxton was the ideal way forwards for us.
LR Senergy is renowned for a high degree of flexibility and innovation coupled with a strongly entrepreneurial spirit and an unrivalled ability to seize emerging opportunities quickly. As we already possess the knowledge, expertise and resources to excel, our partnership with Claxton is enabling us to further close gaps in our service scope.
How do you define LR Senergy’s positioning in the oil and gas value chain?
When explaining our business to clients and partners, I always quote my CEO, Mr. James McCallum: “LR Senergy is a plug and play operator in the upstream segment.” So whilst providing the technical capabilities of an independent mid-sized exploration and production (E&P) company, we offer the added advantage that we do not actually own any oil and gas assets. In other words, we are not just a knowledge partner for clients, we are a fully-fledged oil company for rent.
Our clients engage with us in several ways. Some simply need us to fill their team’s current capability, capacity or niche skills gap, while others commission us to completely project manage areas of their business or individual asset needs. We are also tasked with managing or supporting opportunities companies have identified for possible acquisition and require our independent assessment to complement their own view of the value or potential value of the asset. We ultimately benefit clients by providing solutions across the entire upstream value chain.
Please give us a brief overview of the scope of LR Senergy’s activities in Indonesia.
When I became LR Senergy’s regional manager for Asia Pacific in early 2011, my mission was to develop our business around the region’s main energy hubs. While we already had a head office in Malaysia and two smaller offices in Australia, we then had no presence in Indonesia. As the country is second only to China as an operational base for Asia’s leading national, international and domestic oil and gas companies, our 2011 opening of a Jakarta office was a natural step. Our Indonesian operations are continuing to grow steadily. This is especially true of sub-surface disciplines, plus our two key software products, IPTM and ICTM, a new way to integrate oil and gas well data. Our four years here have seen us launch a full-spectrum service menu which includes not only well project management and well engineering, but also highly specialized associated auxiliary services which cover all niches surrounding the sector.
What is LR Senergy’s current key focus?
When Lloyd’s Register (LR) made its initial investment in Senergy in 2013, it intended to purchase all remaining shares by September 2016. In summer 2015, LR accelerated this plan so as to realize the synergies and efficiencies between itself and LR Senergy ahead of schedule. With the investment now completed, everyone is focusing on achieving these goals by further speeding LR Senergy’s integration into LR.
Along the way, we have succeeded in seamlessly blending our unique skills and experiences and launching innovative and integrated market-wide solutions. Internally, we are striving to create market-led value by fully understanding and melding each business segment’s essential capabilities with our industry’s current and future demands.
What role is Indonesia expected to play for LR Senergy?
As mentioned earlier, when I assumed responsibility for LR Senergy Asia Pacific, it was clear that as the region’s second largest market, Indonesia simply had to be in our portfolio. Strategically, Indonesia remains vital for LR Senergy’s future vision. In offering strong economic growth fundamentals that are paving the way for exceptional long-term opportunities, it is probably one of the world’s top three economies. A fast developing country with a huge demand for energy, Indonesia is also rich in oil and gas resources whose potential it needs outside help to fully exploit. At LR Senergy, we are determined to support Indonesia’s E&P industry in developing national talent and deploying knowledge-based solutions to address the challenges it will face as it prepares to meet growing energy demands. I have never doubted that the country will be a huge long-term asset for us. The cumulative growth we have experienced these past four years has merely underlined that potential.
How do you assess Indonesia’s future in Asia?
In the short-term, Indonesia will undoubtedly continue to face challenges such as its current fuel subsidy policy that equates to approximately three percent of the country’s gross domestic product (GDP), arguably an unsustainable situation. As Indonesia is a net importer of crude oil, this situation is quite unique. In trying to address the situation, I understand the country is looking to enhance its energy mix with increased production of its gas reserves. Indonesia also has a comparatively challenging production sharing contract (PSC) fiscal terms that translate into commercial and economic challenges for E&P investors in a globally competitive marketplace. This may be why several E&P operators have decided to temporarily withdraw from the market here.
Despite the Indonesian oil and gas industry’s current standing, I am confident about its recovery and bright future prospects. The country’s new government understands the issues facing it and is proactively working to resolve them. The fact bureaucracy is being reviewed and minimized is starting to make it easier to do business here. Next year a new law covering the oil and gas regulatory framework is expected to be passed. We hope that this will stimulate upstream investment by improving fiscal PSC terms for the international oil and gas community. Such a development is likely to prove vital for Indonesia as arguably its history of underinvestment in exploration mean much of its resources remain unexploited. The fact that the country is home to one of the world’s largest deep-water basins is just one example of the exciting future prospects that lie ahead. Led by President Joko Widodo, the country’s new government appreciates the importance of upstream investment for its future and is striving towards stimulating domestic and foreign investments.
Some 75 percent of Indonesia’s remaining oil and gas reserves are located offshore and will almost certainly require higher costs and pose higher risks to extract. How will LR Senergy enable clients to overcome such challenges?
My team has built up an excellent track record in successfully executing such projects and has the experience and the technical expertise to enable operators to thrive in the most hostile environments. One of the most recent projects we were awarded was the drilling of one of Vietnam’s first-ever deep-water offshore wells. We won the contract because of our proven expertise in fully realizing the aspirations of our clients in this area.
We remain such a strong natural choice for offshore and deep-water projects because in the current climate of low commodity prices, oil and gas companies are looking for cost efficiency and innovation – something at which we excel. Once the traditional methods of cost cutting have been exhausted, innovation remains the only way clients can realistically hope to ensure economic feasibility for their projects. Our membership of the Lloyd’s Register Group (LR Group) also gives us a measurable competitive edge in providing cutting-edge innovations that will generate short-term cost savings for clients.
LR Group is 100% owned by the Lloyd’s Register Foundation and is determined to sustain the global energy industry by combining some 255 years of industry knowledge with Industry players and academia. In collaborating on joint industry projects (JIPs) LR publishes “Technological Radar” reports which combine and consolidate all information our staff gained in the field in order to accurately predict and ultimately fulfil market needs. Our clients overwhelmingly inform us that their long-term investment will be reduced as long as oil prices remain low. That said, short- and medium-term investments that unlock potential ways to enhance efficiency and cut cost are much sought after. In realizing this, LR is totally committed to identifying and implementing innovative solutions that ensure clients can enhance efficiency and reduce running costs without compromising health, safety or quality standards.
2015 saw many oil and gas companies slash their spending. What challenges did this pose for LR Senergy and how are you addressing them?
Lower oil prices mean our business has shrunk dramatically as many projects with total value estimated at over USD$100 billion have either been deferred or cancelled. Both LR Senergy and our parent group saw the warning signs sufficiently early enough to fully prepare for the ‘worst case’ scenario. Having analyzed market trends, we subsequently set ourselves targets and swiftly implemented actions that would ensure we could reach them. This ultimately meant that we probably began restructuring and identifying cost efficiencies far earlier than many of our competitors.
Additionally, we have changed our business cost paradigm and sought out collaborations via which to further reduce our cost base. In doing so, we are innovatively identifying creative solutions that cut costs while maintaining our all-round excellence. To this end, we insist on collaborating with long-term partners who share our uncompromising attitude to quality and health and safety. Before entering into such collaborations, we bring senior-level LR Senergy executives together with equally excellent but younger, often less experienced staff from our partners. This ensures we are able to leverage the same high quality team at a lower cost while our partners’ workforce benefits from their new LR Senergy colleagues’ experience. Such combinations ultimately ensure we can measurably reduce costs whilst offering our clients unwavering levels of excellence and quality.
In a nutshell: why does LR Senergy remain so many industry players’ first choice ‘go-to’ partner?
We can not only show an enviable track record of delivery and being commercially flexible and innovative, we have also earned a reputation for being very easy and efficient to work with. Our most important characteristic is that we are 100 percent independent and not bound to other specific equipment or products. This is unique in the industry and means we are completely different to all our competitors. Combined with the broad scope of our portfolio, such independence is tremendously advantageous for both our clients and ourselves!
What is next for LR Senergy?
As LR has just completed its investment, LR Senergy’s future will be collaboratively determined by our new parent company. To this end, we are currently refreshing strategies, observing internal procedures and seeking opportunities to increase efficiency and effectiveness by consolidating our experiences and skills to further serve the market. In focusing on identifying the right synergies born of the collaboration with LR, our aim is to create benchmark value-added solutions for not only our clients but also the market as a whole.