It will probably be the last platform of its kind to leave here.
Nearby is what the future is more likely to hold for yard owner Kvaerner: the rusty Njord A platform, which it built two decades ago, is back for a refit so it can continue production in the North Sea for another 20 years.
Oil companies posted bumper profits in the fourth quarter, benefiting from rising crude prices and cost cuts made during the slump years between 2014 and 2017, but they have made it clear in recent months that they will not let costs rise again.
For Statoil, this has meant calling time on giant oil platforms and instead looking to build more modest installations and, where possible, revamp existing infrastructure.
For hundreds of suppliers, from oil services firms to rig owners or engineering companies, this means coming to terms with the fact that industry spending may not rebound as it has after previous downturns.
As well as cutting their own costs further, they must adapt by finding alternative sources of revenue in the Norwegian sector, one of the world biggest offshore markets and viewed as a global bellwether.
For Kvaerner, which like many peers relies on Statoil for much of its revenue, the focus is to expand business areas that are currently small but which it expects to offer the best paths to growth in the new industry reality.
These activities include decommissioning and recycling platforms, refitting existing ones and building smaller, unmanned platforms, the company said in its fourth-quarter report last month.
“In the traditional oil platform market, we expect that it will level out in the short term, but decline over the longer term,” Kvaerner CFO Idar Eikrem told Reuters.
At the Stord yard, set in a fjord surrounded by snow-capped mountains, Kvaerner cut its cost base by 20-25 percent during the oil market slump, but that might not be enough.
“We still need to chase cost cuts, even now. We are competitive now, but we will not be tomorrow if we keep on ‘charging’, as we used to say,” Steinar Roegenes, the yard’s managing director, told Reuters.
‘LEANER AND MEANER’
The writing is on the wall globally.
Last year, 16 out of 24 offshore projects sanctioned by oil companies worldwide were expansions of “brownfield” sites that have already been developed rather than new projects, according to a report published on Thursday by energy consultancy WoodMackenzie.
The consultancy did not provide comparative figure for previous years, but said it was seeing “significantly smaller projects, alongside a greater appetite for brownfield and expansion projects”.
“Not only are these projects less risky than greenfield developments, they also tend to be less capital-intensive and are quicker to bring onstream, offering a quicker payback and better returns on development dollars,” the consultancy said.
“We should continue to see operators favouring a ‘leaner and meaner’ path in 2018.”
Like Kvaerner, other offshore suppliers are also diversifying in Norway.
Oil services firm Aker Solutions bought a 5 percent stake in California-based Principle Power, which builds foundations for floating offshore windmills, for an undisclosed sum in February, with a view to increase it to 10 percent at the end of the year.
“We see a major opportunity in offshore floating wind where demand is growing in the transition to a low-carbon future,” Aker Solutions CEO Luis Araujo said.
Subsea 7, which specialises in building and laying oil and gas installations on the seabed, is expanding into renewables, by installing offshore wind farms.
It is bidding for tenders installing offshore wind mills in Britain, Germany, France, among others, following its work installing the turbines of the Beatrice wind farm, Scotland’s largest offshore wind park.
“In the … medium to long term the renewable business is, without any doubt, a growing business,” Subsea 7 CEO Jean Cahuzac said on a call with analysts on March 1.
Any shifts by Statoil have huge repercussions in Norway, where it dominates an offshore oil sector, which accounts for more than 100,000 jobs and has an annual turnover in the region of $50 billion.
Kvaerner, for example, relied on the oil major for about 60 percent of its 6.5 billion Norwegian crowns ($831 million) revenue last year. Aker Solutions, which drew more than half of its 22.5 billion crowns revenue from Norway, said Statoil was one of its top clients.
Statoil said in February said new types of offshore installations could reduce capital spending by 30 percent and operating costs by 50 percent compared to conventional oil platforms – meaning less money for suppliers.
That spells an end to behemoths like Aasta Hansteen, which is the world’s largest spar-type platform and has a 200 metre-long cylindrical hull, most of which is submerged.
“The Aasta Hansteen platform was decided in 2012,” Margareth Oevrum, Statoil’s head of technology, projects and drilling, told Reuters during a visit to the platform. “Had we decided it today, we would have built it smaller.”
($1 = 7.8503 Norwegian crowns)
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