Subsea Innovation Being Tested Now

Managing Director Tore Halvorsen at FMC Kongsberg Subsea expects the number of Norwegian contractors they use to decrease in the years ahead. But personnel with high education will secure the company’s continued existence at Kongsberg - as the main center for subsea innovation within the largest subsea company in the world.

Right now the company is testing out their new riserless light well intervention equipment at Coast Center Base (CCB) at Ågotnes near Bergen.

Tore Halvorsen has responsibility for the world’s largest company within subsea equipment, situated in the inland city of Kongsberg. ‘Being close to the sea is not important, but being close to the expertise means everything,’ he smiles.

FMC Energy Systems is the largest supplier of subsea equipment in the world. Halvorsen and his staff are handling subsea contracts for the Eastern Hemisphere, which at FMC means markets as far apart as Canada and Angola. The Western Hemisphere is served from Houston.

‘But we are pretty pragmatic here. If Statoil needs us in Venezuela, we will handle that from Kongsberg, as we are situated close to Statoil headquarters. At the same time, when a Houston based oil company awards contracts for FMC Subsea equipment in Africa, our Houston office will handle it,’ Halvorsen explains.

That makes Kongsberg a vital center for subsea deliveries all over the world. And more importantly, it is the main center for further subsea innovation within FMC Energy Systems. ‘Knowledge and expertise is vital to survive here in Norway,’ Halvorsen says.

Price Competitive Engineering
‘One distinct advantage in Norway is actually cost – of engineers,’ Halvorsen continues. ‘Bluecollar work is less expensive abroad. But with less differentiated wages in Norway than many competing countries, time cost on engineering is actually higher abroad.’

‘What we have in Norway which gives us a competitive advantage is the relative low cost of personnel with high education.’

‘At the same time we will never be able to compete on price within production. We would like to keep on using Norwegian companies, but we expect an increasing amount of our manufacturing will be going abroad, especially to Eastern Europe,’ Halvorsen says. ‘So when planning for the future, it is vital to plan for sustainable technology clusters.’

‘We will continue to manufacture our products at the place which gives us ‘best world price’. Since we don’t own the manufacturing plants we can take our business to whoever gives the best price and whoever is best situated for each particular job. That gives us more flexibility, and a better position than our competitors here in Norway,’ Halvorsen says. Many fabrication units are struggling for survival in Norway at the moment.

Kongsberg Innovation
The technology is continuously being pushed with regard to developments at ever-deeper waters, longer distances, temperature and pressure, etc. A technology cluster is important in order to stay in front of developments. Hi-tech car and aviation companies are among the neighbors of Kongsberg Subsea at Kongsberg Næringspark. All the companies are developments from the remnants of Kongsberg Våpenfabrikk (KV). ‘Kongsberg has a very positive and professional engineering spirit, which provides a good feeding ground for innovations and developments,’ Halvorsen says.

This technology cluster was recently formalized through the organization ‘Kongsberg Innovation’. That is an organization owned by the companies at Kongsberg Næringspark, dedicated to handle innovations from the participating companies and make available new findings that might be of interest to other industries than where it was developed.

‘We might discover something during our work which we don’t see as significant to our products, but which might be of help to one of our neighboring companies. In that case we leave it with Kongsberg Innovation,’ Halvorsen says.

It is an idealistic strategy in a world with strong focus on intellectual property and the competitive advantage of industrial secrets. The organization was set up in late 2002, so it is early days yet to know whether the idea of sharing information works in practice.

Testing at Ågotnes
FMC Kongsberg Subsea also has 350 people working at CCB at Ågotnes. They are busy installing and servicing subsea equipment, in addition to testing new equipment.

‘The facilities at Ågotnes are extremely good. They have an artificial well, where we can simulate different conditions with respect to temperature and pressure to verify the quality of our equipment,’ Halvorsen says. ‘A great feature of CCB is that we can test our equipment in a well at 50 m depth directly from a crane at the dock. That cuts the cost of testing seriously compared to going offshore on a rig when we need to test equipment.’

Most of the subsea deliveries from Kongsberg are tested at Ågotnes. But being the largest subsea supplier in the world, and offering servicing all over the world, means FMC Kongsberg Subsea has needed to develop new facilities.

‘We have established a testing facility for West Africa at Luanda in Angola. Between 80 – 90 people are working there on a rotation basis,’ Halvorsen says.

‘When it comes to testing I should also mention another advantage of being situated in Norway. That is the willingness of both Statoil and Norsk Hydro to try out new equipment,’ he points out.

‘I suppose small organizations like the Norwegian oil companies are more open to alternatives, and need to be more focused on cutting-edge technology, than the oil giants. Now, with all the mergers between the supermajors it will be even harder to get new equipment tested by the industry,’ he adds.

The major oil companies probably feel the stockholders breathing down their neck and are therefore more reluctant to make any decision that might cut into their earnings. A fact that makes them much less flexible.

‘Our advantageous testing opportunity might be weakened now that the North Sea is on the decline. In the future we will probably to a larger degree manufacture and test equipment closer to where it is to be delivered, for instance in Luanda.’

When asked, Halvorsen agrees the good relationship with Statoil and Norsk Hydro is an advantage for Norwegian companies in foreign markets. ‘But we expect no free ride.’

‘Also, it is vital for Statoil and Norsk Hydro to get operatorships before they can make an impact on contract processes,’ he says, adding; ‘they need to get operatorships. Period.’

Australia and China
FMC Kongsberg Subsea is the major supplier of subsea equipment world wide, in competition with Aker Kvaerner, ABB and Cameron. We asked Halvorsen how they are going to keep their strong market position.

‘We know that a lot of subsea equipment will be needed in the North Sea in the years to come, when tail production makes it necessary to extend existing platforms with subsea equipment. We also know that our equipment will be needed in all major new oil areas of the world, because oil and gas finds are situated in deep water,’ Halvorsen says.

‘Remember that only a few years ago the North Sea was regarded deep water, not so today! We had the advantage of developing our subsea technology in a time when there was a lot of focus on subsea development in our ‘home area’ – when the North Sea was in the forefront of technology. The challenge now is to develop that advantage and to continue to be in the forefront also when technological challenges lies elsewhere in the world.’

‘We are already heavily represented in all major oil and gas areas, such as the North Sea, Gulf of Mexico, Brazil and West Africa. We are developing our facilities in these areas, as well as increasing our presence in new markets. We have been working on the Australian market for a while, and are now confident it will be of increasing importance for FMC Kongsberg Subsea. As most contracts there are for gas developments, they take time to finalize. Gas fields are naturally not developed until sale of the gas is agreed. But now we are starting to gain contracts there,’ Halvorsen says.

‘China is another exciting market where we have had some deliveries an where we expect much more business in the years ahead.’

‘An additional strategy is to get more business out of the deliveries we have today,’ Halvorsen smiles. ‘We are working to increase our presence within servicing. Subsea equipment will need maintenance and maybe extensions over time, and we are working hard to be awarded more of that work.’

Local Presence
‘Ensuring local participation in a project is also very important in order to gain contracts within new markets,’ Halvorsen explains. Kongsberg Subsea has developed programs for educating local workers for instance in Angola.

‘We recruited people in Angola, took them to Norway for training in welding techniques, and now they are back working on installations from our site in Luanda,’ Halvorsen explains.

‘Doing this is really not a problem. Angolans have some good schools, so we found people with good background to start training. The challenge is to do this properly, so that it is not seen as a threat to the people within our organization, but as an asset for all people involved. We all see this as a way of securing future contracts for us all!’

Halvorsen and his personnel at Kongsberg Subsea are responsible for approximately USD 400 million of FMC Technologies Inc.’s business. The total turnover of FMC Technologies Inc is approximately USD 2.2 billion. Energy Systems has roughly USD 1.2 billion of that cake, the rest being divided between FMC Technologies Inc’s two other main areas, Airline Equipment and Food Equipment. Energy Systems is made up of one Subsea division and one Surface Products division.

FMC Kongsberg Subsea is an active player in their local community. Amongst other things they are main sponsors to one annual cultural festival, Glogerfestivalen. The company also found reason to pay parts of the interest rate on a loan obtained in order to build a new road in to the city. The road was therefore completed in late 2002, years ahead of schedule, improving communication between Kongsberg and Oslo.
‘It needed to be done,’ says Halvorsen pragmatically.

FMC Kongsberg Subsea’s history goes back to the oil and gas division of the old stat owned company Kongsberg Våpenfabrikk (KV). It changed name to Kongsberg Offshore in 1986. It was privatized in 1987, and bought by Siemens. FMC took over in 1993. Tore Halvorsen has been at Kongsberg through all the turbulence.

‘When I first arrived at Kongsberg, I promised my wife we would stay here for 3 years,’ Halvorsen smiles. ‘We have now been here 22 years!’ Which goes to say a lot about his negotiation skills, or/and about the excellent professional and recreational opportunities at Kongsberg.