KCA Deutag is in line to resecure a sizeable Norwegian North Sea drilling contract with Statoil, plus the company is bidding for long-term UK work with Total and Taqa Bratani.
The company has enjoyed a significant run of success with UK North Sea contract renewals and competitive tenders over the last 18 months.
Add Norway, Azerbaijan, Sakhalin and Angola and the current backlog is around $1.6billion, of which the flagship contract is with Azerbaijan International Operating Company. This alone is worth $550million.
Energy estimates that further significant UK successes could push the backlog past $2billion, generating fresh employment at the company as a result.
Neil Stevenson, business development director, said: “Even in the North Sea every contract has been renewed or extended. And now we’re seeing fresh opportunity in that market. Despite the tax issues and threat to activity, there is tendering going on.
“Taqa is out to the market and we’re coming to the end of that process. Total is also out to tender for Alwyn and theoretically also Dunbar platform, including tender-based drilling services.
“There are up to three years worth of drilling to do with Total. Transocean has traditionally brought a semi-submersible in to carry out tender assist operations and we had an involvement on the Dunbar platform.
“They [Transocean] will bid and we’re pairing up with one or two semi-submersible operators to provide the complete package. This represents a genuine opportunity to grow our North Sea business further and would create new jobs.
“There are other projects in the engineering phase from conceptual through front-end, detailed design and operations.
“We’re involved in Clair Ridge, and if they ever come out of the tunnel, there is Statoil with Bressay and Mariner as opportunities.”
Mr Stevenson added the Norway market had remained buoyant and, while Statoil’s capital budget has been slightly cut, there is plenty of activity.
KCA Deutag is currently responsible for drilling operations on seven Norwegian platforms, mostly Statoil’s and will hopefully resecure that work.
Statoil has come to come to the market with a re-tender of drilling for up to 17 platforms across the three incumbent contractors: Archer, KCA Deutag and Odfjell.
“It will be a tender that involves all three and we’re approaching that in a positive manner because, at the moment, by their own metrics, we’re the top performing contractor for Statoil,” he added.
The work will almost certainly be divided, as is the semi-state Norwegian operator’s custom.
However, the real growth opportunities for KCA Deutag are outwith the UK North Sea, which currently accounts for 7% of group turnover.
But it is not because the firm’s UK business has shrunk. CEO, Brian Taylor, said activity levels had remained remarkably constant over the past 16 years or so, except that in the mid 1990s the UK Continental Shelf had accounted for about 98% of the company’s turnover.
Mr Taylor said: “Our UK turnover has not dropped in any dramatic way; it’s just that our overseas work has taken off dramatically. Here in the UK we have a very competent organisation, about 450 people working offshore, and another 50-60 onshore under UK country manager, Martin Allens.
“We cannot pretend that all corporate attention is on the UK. We’re headquartered here but it gets the attention that’s commensurate with 7%.
“Aberdeen is still a very big centre and, being here, we’re located very close to a number of significant clients with whom we work worldwide.”
Mr Taylor warned that the north-east of Scotland now imposes a number of restrictions and frustrations, but added it remains a very important centre for the group.
Echoing the strategic value of Aberdeen city and shire and the need for government to value the North Sea properly, Colin Welsh, chief executive of Simmons and Company International, said the city faced two basic futures. They are domestic uncertainties due to the North Sea “hitting a speed bump” because of the extra 12% selective corporation tax imposed by Chancellor George Osborne in the 2011 UK Budget, and superb international business opportunities because of an “incredibly positive” global outlook.
On the North Sea tax situation, Mr Welsh said: “I suspect that, if you caught Mr Osborne and Danny Alexander at a quiet moment today, they would probably have to admit, at least to themselves, that raising SCT was a massive own goal.
“One could take some solace from the fact that whatever isn’t being developed today will instead be developed at some point in the future. But there is no doubt that this is unhelpful to the present. Yet there is no doubt that the prognosis for capital in the industry is incredibly positive. That said, this assumes the broader economy hangs together.
“It’s a brave man who would try and forecast how we come out of this. You really have to hope that the politicians will sort themselves out and devise something that’s better than just a sticking plaster approach to solving the debt crisis.
“Meanwhile, everybody has to go about their business as usual in the expectation and hope that the storm clouds pass. Everything looks good as long as the broader economy hangs together. People are planning for the future, effectively in the same way as they always did.
“The good news is that there are lots of opportunities in the sector and so there’s lots of capital looking for companies to invest in; and in oil services for sure because it is realised that this is an industry with fabulous growth prospects where investors can make a lot of money going forward.”
As for Aberdeen’s standing and value to companies doing business overseas, he added: “By definition it must be world class. The issue is could it be better? Could Aberdeen be more pivotal in the future? Of course it could.
“The reality is that Aberdeen has the capability to grow and to become an increasingly important cog in the energy machine. It has the potential to do that.”
