Technology from Europe: the Netherlands

Dutch companies will enjoy high activity, says IRO’s vice chairman

S. A. W. (Wim) Janse is managing director of Gusto B.V. and vice chairman of IRO, the Association of Dutch Suppliers in the Oil and Gas Industry. As the formal second-in-command of IRO, Mr. Janse works to ensure that the association’s activities and lobbying are geared properly to its goals and members’ needs. He also represents IRO’s views and interests in meetings with the Dutch government on energy issues and policies.

Question: How would you describe IRO's role within the Netherlands upstream oil & gas industry?

Answer: Within the Netherlands, we have two associations. One is NOGEPA, the Netherlands Oil and Gas Exploration and Production Association, which represents the interests of operators and associated oil companies. Then, of course, there is IRO, the association of suppliers and service companies here in Holland. We have a very good relationship between the two organizations, and we work very closely together. There is active lobbying going on for the interests of our members toward the Dutch government. So, the role of IRO in that respect is to look after the interests of our members. Indeed, our managing director, Hans de Boer, has done an outstanding job, as we have hit a new membership record. We now have more than 300 members within IRO, so we represent quite a substantial number of the Dutch service and supply industry in the Netherlands. At the end of 2005, I think we had just over 270 members, so we grew about 10%.

Q: How good was last year's E&P market for Dutch operators, and equipment/service companies? Was IRO satisfied with the amount of activity?

A: The Dutch oil companies, of course, have a booming business at this moment, as is the case for the service and supply portion of the industry. Most companies that we speak with are extremely busy, but especially those firms working internationally. In the Netherlands, there is nothing significant going on, no new major developments, save for one development project (that is mentioned later in this interview). In Holland, it's mainly a business of maintaining existing wells and offshore platforms, but most of our IRO members work internationally, and this is a booming business. I think that more than 90% of our members work internationally, for the export market, and are not directly focused on Holland. So, in summary, while there's not much happening in the Netherlands, if we look internationally at the amount of orders that our members got last year, and the activity that they have at the moment, then yes, we are more than satisfied.

Q: Based on your assessment of 2006, and assuming that high commodity prices continue, what level of activity and business do you expect for 2007?

A: Outside the Netherlands, especially, it will be the same as last year, if not better. We see that activity is still growing. Most of the companies that we represent rely on the E&P budgets of the oil companies, which are still high. So, there is a lot of new, growing activity going on, and there is a huge demand for our products and services. And even in the Netherlands, there will be some increase, too.

Q: Are high oil and gas prices generating extra business for Dutch companies, beyond normal expectations?

A: If we look back, we see that in the period from 2000 to 2004, the market, in general, was slow, with some exceptions. The huge increase in oil and gas prices after 2004 caused us to see that business was really picking up. And as I said before, business is now really booming. So, yes, the high oil prices have helped, but a particularly strong factor has been the high E&P budgets of the oil companies. In their search for new prospects and ongoing development of new fields, they have created quite a bit of additional new business for us in the last few years. Naturally, most of that business is export-related, probably 80-85%.

S. A. W. (Wim) Janse

Q: Last year, gas completions outnumbered oil completions by 23 to 5 in the Netherlands. Offshore, the ratio was 14 to 5. Is there any hope for improved oil activity, or is the Netherlands on an almost exclusively gas development course?

A: What we see in the Netherlands is that there is one significant development project, where one company, NAM (Nederlands Aardolie Matschappij, owned jointly by Shell, 50%, and ExxonMobil, 50%) is seriously considering re-opening the first field that ever produced oil in the Netherlands, the Schoonebeek field. It was discovered in 1943 during the Second World War and developed soon after. It was closed by NAM in 1996 as not being profitable anymore, but we now expect a reopening of Schoonebeek, and it will be onstream during 2009. So, there is, indeed, some oil activity in the Netherlands, after all. At the moment in Holland, we produce roughly 25,000 bopd, but Schoonebeek, itself, has an estimated reserve of about 100 million additional bbl of oil that can be recovered with new methods. This oil will be produced over a 20-year period, so roughly we have an additional oil production figure, if I take an average value, of about 15,000 bpd. That's quite a substantial increase from just one field. By some countries' standards, it might not be much, but it's impressive on our scale. On a percentage basis, it's about a 60% increase. But for that, NAM will have to drill on about 19 different locations, which means drilling 73 new wells; that includes producers and steam injectors. It's a very complicated reservoir to redevelop.

Q: Last year, there were 39 wells drilled in the Netherlands, and 40 are expected this year. However, oil production fell to just 25,849 bpd last year, while gas output was 6.97 Bcfd. Given these results, is the Dutch government doing enough to encourage E&P activity? Would you like to see any special initiatives created?

A: There is no real special support from the government. There is a long-term E&P policy in the Netherlands, and the thing that changed a few years ago was the government's discontinuing of �Depreciation at Will� in early 2003. I think that the abolition of that fiscal instrument may be hampering quite a few new developments�operators are a little bit more reluctant to step in. But saying that, we have a new coalition government that took office on Feb. 22. So, a new Dutch regime might give some fresh hope that could stimulate the development of marginal fields in the smaller gas pockets that we know are out there. Yet, we have to act quickly if we want to use the existing infrastructure that there is in the North Sea in the coming years. We should act now; otherwise, the existing pipeline infrastructure might be too old to hook up the new fields to it, and then we might need substantial, additional investment to bring those fields online.

Q: What are some major field projects worldwide that Dutch firms are involved in?

A: A lot of Dutch companies are working worldwide�at my own company, Gusto, we have activities around the world. But the same is true for many IRO members. There are a lot of Dutch companies involved in developments ongoing at Sakhalin, as well as in Qatar and in Kazakhstan. We are also doing work in the Gulf of Mexico and offshore West Africa, of course. In all the larger developments going on, you see the involvement of various Dutch companies, either as servicing firms or as equipment suppliers.

Q: What are some good examples of upstream technical work that Dutch oil and service companies are involved in, either in the Netherlands or other parts of the world?

A: I have to list a number of Dutch companies. For instance, looking at FPSOs, two of the larger suppliers of floating production systems come from Holland�SBM Offshore, of course; with offices in Monaco, Schiedam and Houston, but they are listed on the Euronext Amsterdam stock exchange here in Holland, as well as Bluewater. And, looking to specialized equipment, both in pipelay and drilling equipment, as well as special vessels, there is Huisman-Itrec, Keppel Verolme (completing several units); IHC Holland Merwede shipyards (building the two pipelay vessels for Subsea 7); Allseas (deepwater pipelines); plus my own company, Gusto, for large cranes, pipelay equipment and special designs for all kinds of drilling units and other offshore vessels; and Heerema and Seaway Heavy Lifting for various types of heavy lifting. Of course, there is also Fugro for geotechnical engineering and surveys. The list can go on and on.

Q: Is IRO concerned about places of geopolitical instability in the world and the effect they may have on E&P activity?

A: I think from an IRO viewpoint, there is not a direct concern. What you mentioned in terms of instability is happening mainly onshore (as in Venezuela, Sudan, Russia, China, parts of the Middle East, etc.) at the moment. Perhaps it might even drive the larger international oil companies to start developing more and more offshore fields, where they can have a greater direct say in regulations and operations, if possible. But because our expertise and equipment reside in the service/supply industry, our firms will remain necessary. So, we don't see it as a direct threat.

Q: Does OPEC's continued strong attitude toward output levels and prices help or hurt the upstream sector?

A: Of course, OPEC has an influence on oil prices. Judging from what we see at this moment, the instability in some countries might influence the prices more than what OPEC is doing. Besides that, all kinds of more local-related phenomena could have an impact. For instance, if you see a large hurricane coming into the Gulf of Mexico, you see that influence on prices. If a shortage of refining capacity is mentioned, that also drives up the price. Another example is BP having problems at Prudhoe Bay, and the price goes up. So, more and more, it is a speculator's market, driven by emotions. If OPEC mentions something in terms of a higher or lower producing capability, that is one of the factors, but perhaps not the strongest.

Q: Toward which international areas do you think that oil and gas company interest, and investment, are moving?

A: If you want to mention specific areas, what we see are moves toward deeper water, the Arctic, West Africa, the Gulf of Mexico, as well as a shift toward areas where there is a possibility for new gas exploration. We see a gradual shift from oil toward gas, as it becomes more important in the overall fossil fuel industry. I would re-emphasize that we see many companies gravitating toward all kinds of areas for deeper water, and we see a lot of recent interest in the northern/Arctic areas�Sakhalin is an example, so is Stokhman.

Q: Do you have any additional comments?

A: Only to say that the forecast for the coming years, as we see it in Holland, is very promising. We are very optimistic about the future of our industry. Here in Holland, there is a lot of activity going on for renewables. However, we still think this country, and the world in general, will remain dependent on fossil fuels for seven decades. There is a huge need for fossil fuels, so this offers good opportunities for us, the Dutch industry.