Paul Alcock, Executive Vice President, Acteon spoke to S2S about challenges and opportunities for the subsea services sector in the current economic climate
As the offshore sector again endures the downside of a traditionally cyclic industry, there are several differentiated and structural changes at play that may go unnoticed within the daily operational challenges of business. For most of the past 20 years and through three previous cycles, subsea and deepwater activities were viewed as the next logical steps to delivering greater and more efficient production. The dramatic rise of unconventional onshore production accompanied by a ruthless efficiency drive that has seen incremental unconventional production costs fall below offshore costs is now challenging that premise. The offshore industry now has a virulent competitor and appears to be failing in various key aspects.
Through a combination of technical challenges and inherent inefficient processes, the industry now has a model of subsea development delivery that at best is suboptimal, particularly in mature basins, and at worst fails to deliver any value in the current market. The standard reaction of operators to this market is to look at cutting costs within the supply chain. This has materialised as demands for rate and material cost reductions of 15% and more. This still falls noticeably short of the widely acknowledged 30–50% cost reduction that most operators regard as necessary for the subsea industry to be competitive and to regain its position as the engine of offshore production growth.
The challenge to deliver such a paradigm shift in costs and increased value within the supply chain does offer opportunities, and Acteon, among others, continues to push to provide these at a pace that repositions the sector to move forward. Of particular note are the efforts in
• increased collaboration
• a focus on solution-based services
• greater standardisation
• improved asset utilisation
• more efficient and effective personnel skills management.
The past few months have seen the announcement of a growing number of collaborative ventures across the subsea sector from loose alliances to full joint ventures covering a range of different propositions: front-endengineering design and construction; subsea equipment and installation; engineering and equipment, etc. On the surface, these collaborations offer shared value for the partners but underneath they offer greater potential value for working with operators to unlock value that cuts across traditional activities and silos.
The opportunity to bring different perspectives to bear and to challenge traditional processes can and does deliver the value increase clients demand. The truism of working with clients with alignment of purpose and clarity of objectives is the real value of the trend for increased collaboration. As operators more-widely recognise the value collaboration delivers, there are likely to be larger and different groupings. In targeting BG for acquisition, for example, Shell noted some of its differentiated practices when working with collaborative ventures and the considerable value this could unlock if applied on a larger scale.
At Acteon, we have an active culture of collaboration within our own operating companies that aligns with clients' demands for added value. One example of this is the floating production, storage and offloading facility relocation project described in this issue (page 16). Active collaboration in different combinations also enables us to approach things differently and to challenge convention to deliver results.
Acteon is not alone in advocating the value of solution-based services and our operating companies offer a solid track record in delivering such projects. What is different about our perspective, and that is becoming more widely accepted across the industry and highlighted as delivering true added value, is a practical and cautious approach that underpins a real service mentality.
Most “solutions” draw on a limited pool of internal assets and resources; we routinely utilise competitors’ technology and clients’ existing committed assets, such as chartered vessels or existing equipment, within a genuine solution-based approach. By applying our deep-domain knowledge and selected specialist equipment, we can work back from the optimal solution, understand the technical challenges and define the way forward that adds most value. By focusing on the optimum output and applying a service mentality and a cautious approach that cut across traditional boundaries, a true solution-based service can deliver considerable client value.
The subsea industry has long discussed the value of greater standardisation. Various assessments by operators, consultants and academia have attributed considerable cost increases and lost value to tailored or one-off projects and equipment. This issue is traditionally seen as an operator and equipment supplier issue in which the services sector is left trying to adapt after the fact. Beyond the fact that Acteon supports all efforts to increase standardisation in major subsea equipment, there is a wide range of areas, such as equipment interfaces, subsea communications and remotely operated vehicle tooling, where minor consideration of standardisation can deliver real service benefits. Where standardisation can deliver further enhanced value is within the context of asset utilisation.
As Acteon is one of the subsea industry’s leading providers of rental equipment, it is inherent to our operations to build and invest in equipment for long-term recurrent use. Within this process, we strive to maximise efficiency by standardisation. We can and do go further than the obvious provision of equipment by also working closely with clients to note the indirect value that is achievable through a more standard approach. For example, minor layout or design changes could facilitate the use of a smaller variety of equipment and thus lead to reduced mobilisation and demobilisation or deployment requirements and, potentially, even to lower-cost vessels to deliver cost reductions.
One area of growth for further potential is the collaborative use of a client’s own equipment, up to and including us managing the inventory on their behalf. The direct benefits of this include improved utilisation, increased efficiency and a shared alignment towards reducing costs and maximising value. Indirectly, this can enable clients to have a renewed focus on core activities knowing that they have a large and capable strategic partner. This model is already delivering value across areas as diverse as remotely operated vehicle tooling, installation reels and subsea hammers.
Alongside increased standardisation and asset utilisation, Acteon is striving to offer further value to clients through an active programme of personnel skill development. This goes beyond increasing the level of skills of our offshore technicians and looks proactively at opportunities to cross-train and package skill sets within teams to reduce the overall number of offshore personnel, thus improving safety and reducing accommodation requirements. This directly cuts costs and increases value. It also indirectly reduces expenditure by enabling the use of smaller fit-for purpose vessels to undertake the necessary work. We have successfully delivered multi-skilled personnel across a variety of activities covering reels, hammers, seabed drilling and grouting, among others, and continue to push to deliver more value to clients.
Over recent years, Acteon has seen notable growth in subsea life-of-field services (LoFS) supporting operational fields. In line with the changes already noted, the LoFS market is undergoing considerable changes in its efforts to be more flexible and responsive in its service delivery. Following a similar trend experienced over a decade ago within drilling service companies, the LoFS segment is moving from the disparate provision of select specialist services towards an integrated model with fewer interfaces and alignment with the production objectives of the operator. In effect, this means larger organisations and groupings (including joint ventures and alliances) offering substantial and more diverse packages of services to accommodate the complexity and technical demands of ageing assets.
The current subsea sector still has many smaller specialist companies, so the greater focus on operational assets married with the challenges of LoFS is likely to lead to further consolidation as a precursor to delivering increased value and reduced costs.
The long-term business model for Acteon combines organic growth and acquisitions that focus on service consolidation and an appropriate regional footprint. By moving beyond discrete services, we intend to unlock greater value through collaboration, a focus on asset utilisation, increased standardisation and a sustainable approach to cost reduction.