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Maersk Oil – under the surface

Maersk Oil – under the surface

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Maersk Oil – under the surface

Maersk Oil - under the surface

Contents Contents Contents Contents Contents Contents Contents Contents Preface Contents up: Ib Kruse Preface Contents up: Ib Kruse When Maersk Oil grew Preface Contents up: Ib Kruse Andersen When Maersk Oil grew Preface Contents up: Ib Kruse Andersen A decisive When Maersk Oil grew Preface moment: Nils Smedegaard Contents up: Ib Kruse Andersen A decisive When Maersk Oil grew Preface moment: Nils Smedegaard Contents up: Ib Kruse Andersen The promise: A decisive Jørgen Liboriussen When Maersk Oil grew Preface moment: Nils Smedegaard Contentsgoat with the seven legs: Henrik Jakobsen The promise: A decisive Jørgen Liboriussen When Maersk Oil grew Preface moment: Nils Smedegaard Contentsgoat with the seven legs: Henrik Jakobsen dream The promise: Jørgen Liboriussen A decisive about grew When Maersk Oil the up: Ib Kruse Preface moment: Nils Smedegaard Andersen dream The promise: Jørgen Liboriussen A decisive about grew When Maersk Oil the up: Ib Kruse Preface moment: Nils Smedegaard Andersen

motorway builder: up: Ib Kruse dream The promise: Jørgen Liboriussen A decisive about grew Hans-Henrik Kogsbøll When Maersk Oil the goat with the seven legs: Preface moment: Nils Smedegaard Andersen Henrik Jakobsen motorway builder: up: Ib Kruse dream The promise: Jørgen Liboriussen A decisive about grew Hans-Henrik Kogsbøll When Maersk Oil the goat with the seven legs: Preface moment: Nils Smedegaard Andersen Henrik Jakobsen Innovation andbuilder: up: Ib Kruse Gross-Petersen motorway constant care: Jørgen dream The promise: Jørgen Liboriussen A decisive about grew Hans-Henrik Kogsbøll When Maersk Oil the goat with the seven legs: Preface moment: Nils Smedegaard Andersen Henrik Jakobsen Innovation andbuilder: up: Ib Kruse Gross-Petersen motorway constant care: Jørgen dream The promise: Jørgen Liboriussen A decisive about grew Hans-Henrik Kogsbøll When Maersk Oil the goat with the seven legs: Preface moment: Nils Smedegaard Andersen Henrik Jakobsen An oil Maersk Oil grew up: Ib Kruse culture: Innovation andbuilder: Hans-Henrik Kogsbøll motorway meeting care: Jørgen dream The promise: Jørgen Liboriussen A decisive about the goat with the seven legs: Henrik Whenpioneer’s constant with foreign Gross-Petersen Jakobsen Preface moment: Nils Smedegaard AndersenLars Nydahl Jørgensen An oil Maersk Oil grew up: Ib Kruse culture: Innovation andbuilder: Hans-Henrik Kogsbøll motorway meeting care: Jørgen dream The promise: Jørgen Liboriussen A decisive about the goat with the seven legs: Henrik Whenpioneer’s constant with foreign Gross-Petersen Jakobsen Preface moment: Nils Smedegaard AndersenLars Nydahl Jørgensen Pushing the Jørgen Liboriussen An oil Maersk Oil grew Hans-Henrik Kogsbøll Innovation about the goat with the seven legs: motorway builder: up: Ib Kruse dream and meeting care: Jørgen The promise:envelope: Hans Flikkema culture: Henrik A decisive moment: Nils with foreign Gross-Petersen Jakobsen Whenpioneer’s constantSmedegaard AndersenLars Nydahl Jørgensen Pushing the Jørgen Liboriussen An oil Maersk Oil grew Hans-Henrik Kogsbøll Innovation about the goat with the seven legs: motorway builder: up: Ib Kruse dream and meeting care: Jørgen The promise:envelope: Hans Flikkema culture: Henrik A decisive moment: Nils with foreign Gross-Petersen Jakobsen Whenpioneer’s constantSmedegaard AndersenLars Nydahl Jørgensen negotiator: meeting care: Jørgen Pushing the Jørgen Liboriussen An oil pioneer’s constant with foreign culture: Innovation about the goat with the seven legs: Henrik motorway builder: Hans-Henrik Kogsbøll dream and Anders Würtzen The promise:envelope: Hans Flikkema Gross-Petersen Jakobsen A decisive moment: Nils Smedegaard AndersenLars Nydahl Jørgensen negotiator: meeting care: Jørgen Pushing the Jørgen Liboriussen An oil pioneer’s constant with foreign culture: Innovation about the goat with the seven legs: Henrik motorway builder: Hans-Henrik Kogsbøll dream and Anders Würtzen The promise:envelope: Hans Flikkema Gross-Petersen Jakobsen A decisive moment: Nils Smedegaard AndersenLars Nydahl Jørgensen negotiator: meeting care: Jørgen Pushing the Jørgen Liboriussenthe seven legs: Henrik An oil pioneer’s constant Magee Safety as a andbuilder: Hans-Henrik Kogsbøll Innovation about theTim with foreign culture: Lars Nydahl Jørgensen motorway Anders Würtzen dream mindset: goat with The promise:envelope: Hans Flikkema Gross-Petersen Jakobsen negotiator: meeting care: Jørgen Pushing the Jørgen Liboriussenthe seven legs: Henrik An oil pioneer’s constant Magee Safety as a andbuilder: Hans-Henrik Kogsbøll Innovation about theTim with foreign culture: Lars Nydahl Jørgensen motorway Anders Würtzen dream mindset: goat with The promise:envelope: Hans Flikkema Gross-Petersen Jakobsen negotiator: meeting care: Jørgen Pushing the envelope: Hans-Henrik seven legs: Henrik globetrotter: the Dilling An oil pioneer’s constant Mageethe Kogsbøll Safety as a and Anders Würtzen Innovation about StigTim with foreign culture: Lars Nydahl Jørgensen The motorway builder: Hans Flikkema Gross-Petersen Jakobsen dream mindset: goat with negotiator: meeting care: Jørgen Pushing the envelope: Hans-Henrik seven legs: Henrik globetrotter: the Dilling An oil pioneer’s constant Mageethe Kogsbøll Safety as a and Anders Würtzen Innovation about StigTim with foreign culture: Lars Nydahl Jørgensen The motorway builder: Hans Flikkema Gross-Petersen Jakobsen dream mindset: goat with negotiator: meeting care: Jørgen From pioneer’s Anders Würtzen Pushing the envelope: Hans-Henrik Kogsbøll globetrotter: Stig Dilling An oil local and constant Magee Safety as a mindset: Henrik Flikkema Innovation to global: Tim with foreign culture: Lars Nydahl Jørgensen The motorway builder: HansTirsgaard Gross-Petersen The motorway constant Magee negotiator: meeting care: Jørgen From pioneer’s Anders Würtzen Pushing the envelope: HansTirsgaard culture: Lars Nydahl Jørgensen globetrotter: Stig Dilling An oil local andbuilder: Hans-Henrik Kogsbøll Safety as a mindset: Henrik Flikkema Innovation to global: Tim with foreign Gross-Petersen man a the meeting care: The negotiator: constant Magee From pioneer’s Anders Würtzen Pushing the envelope: SteveTirsgaard culture: Lars Nydahl Jørgensen globetrotter: Stig Dilling Jørgen An oil local andmirror: Hans Flikkema Safety asin mindset: Henrik Daines Innovation to global: Tim with foreign Gross-Petersen man a the meeting care: The negotiator: constant Magee From pioneer’s Anders Würtzen Pushing the envelope: SteveTirsgaard culture: Lars Nydahl Jørgensen globetrotter: Stig Dilling Jørgen An oil local andmirror: Hans Flikkema Safety asin mindset: Henrik Daines Innovation to global: Tim with foreign Gross-Petersen A really great global: Henrik Daines man a the meeting Magee The negotiator:mirror: Hans Flikkema From pioneer’s Anders Würtzen Pushing the envelope: SteveTirsgaard culture: Lars Nydahl Jørgensen globetrotter: Stig Dilling An oil local to programme: Mariann Richterhausen Safety asin mindset: Tim with foreign A really great global: Henrik Daines man a the meeting Magee The negotiator:mirror: Hans Flikkema From pioneer’s Anders Würtzen Pushing the envelope: SteveTirsgaard culture: Lars Nydahl Jørgensen globetrotter: Stig Dilling An oil local to programme: Mariann Richterhausen Safety asin mindset: Tim with foreign leader the envelope: WürtzenJakob A really great global: Henrik Daines man a the individualists: The negotiator:mirror: Hans Flikkema From local mindset: Tim Magee Pushing among AndersSteveTirsgaard Thomasen globetrotter: Stig Dilling Safety asin to programme: Mariann Richterhausen leader the envelope: WürtzenJakob A really great global: Henrik Daines man a the individualists: The negotiator:mirror: Hans Flikkema From local mindset: Tim Magee Pushing among AndersSteveTirsgaard Thomasen globetrotter: Stig Dilling Safety asin to programme: Mariann Richterhausen leader among Anders WürtzenJakob A really great global: Henrik Daines man a the individualists: The negotiator:mirror: SteveTirsgaard Thomasen From local mindset: Tim Magee globetrotter: Stig Dilling Safety asin to programme: Mariann Richterhausen leader among Anders WürtzenJakob A really great global: Henrik Daines man a the individualists: The negotiator:mirror: SteveTirsgaard Thomasen From local mindset: Tim Magee globetrotter: Stig Dilling Safety asin to programme: Mariann Richterhausen leader among individualists: Jakob A really great global: Dilling Daines man a the mirror: Steve From local mindset: Henrik Tirsgaard Thomasen The globetrotter: StigTim Magee Safety asin to programme: Mariann Richterhausen leader among individualists: Jakob A really great global: Dilling Daines man a the mirror: Steve From local mindset: Henrik Tirsgaard Thomasen The globetrotter: StigTim Magee Safety asin to programme: Mariann Richterhausen leader among individualists: Jakob A really great global: Dilling Daines man in the mirror: Steve From local to programme: Mariann Richterhausen The globetrotter: StigHenrik Tirsgaard Thomasen leader among individualists: Jakob A really great global: Dilling Daines man in the mirror: Steve From local to programme: Mariann Richterhausen The globetrotter: StigHenrik Tirsgaard Thomasen leader in the mirror: Steve Daines A really great global: Henrik Tirsgaard Thomasen The manamong individualists: Jakob From local to programme: Mariann Richterhausen leader in the mirror: Steve Daines A really great global: Henrik Tirsgaard Thomasen The manamong individualists: Jakob From local to programme: Mariann Richterhausen leader in the mirror: Steve Daines A really great programme: Mariann Richterhausen The manamong individualists: Jakob Thomasen leader in the mirror: Steve Daines A really great programme: Mariann Richterhausen The manamong individualists: Jakob Thomasen leader among individualists: Jakob Thomasen A really great programme: Mariann Richterhausen leader among individualists: Jakob Thomasen A really great programme: Mariann Richterhausen A leader among individualists: Jakob Thomasen A leader among individualists: Jakob Thomasen

10 7 10 7 16 10 7 16 10 7 22 16 10 7 22 16 10 7 28 22 16 10 7 28 22 16 10 7 34 28 22 16 10 7 34 28 22 16 10 7 40 34 28 22 16 10 7 40 34 28 22 16 10 7 46 40 34 28 22 16 10 7 46 40 34 28 22 16 10 7 52 46 40 34 28 22 16 10 52 46 40 34 28 22 16 10 52 46 40 58 34 28 22 16 52 46 40 58 34 28 22 16 52 46 64 40 58 34 28 22 52 46 64 40 58 34 28 22 52 70 46 64 40 58 34 28 52 70 46 64 40 58 34 28 76 52 70 46 64 40 58 34 76 52 70 46 64 40 58 34 82 76 52 70 46 64 40 58 82 76 52 70 46 64 40 58 88 82 76 52 70 46 64 58 88 82 76 52 70 46 64 58 94 88 82 76 52 70 64 58 94 88 82 76 52 70 64 58 94 88 82 76 70 64 58 94 88 82 76 70 64 58 94 88 82 76 70 64 94 88 82 76 70 64 94 88 82 76 70 94 88 82 76 70 94 88 82 76 94 88 82 76 94 88 82 94 88 82 94 88 94 88 94 94

3 3 3 3 3 3 3 3 3 3 3 3 3 3 7 3 7 3

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History of Maersk Oil

Kraka, the first discovery in the Danish North Sea

Maersk Oil becomes operator of field developments and some exploration

Breakthrough with horizontal wells

Maersk Oil is awarded a licence in Thailand, withdraws in 1997

1966

1975

1987

1991

1962
Arnold Peter Møller was awarded the concession for Danish oil and gas extraction. Dansk Undergrunds Consortium (DUC) established.

1972
First oil from the Dan field in the Danish North Sea

1984
First gas from the Tyra field in the Danish North Sea

1990
Maersk Oil is awarded a licence in Algeria

1992
Maersk Oil is awarded licence with the Al Shaheen field in Qatar

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First oil from the Al Shaheen field in Qatar

Maersk Oil is awarded a licence in Kazakhstan

Maersk Oil acquires KerrMcGee’s assets in the UK

Maersk Oil is awarded licences in Brazil

Maersk Oil acquires shareholding in Iraqi Kurdistanfocused company

1994

2002

2005

2007

2011

1995
Maersk Oil is awarded a licence in Indonesia, withdraws in 2001

2005
Maersk Oil is awarded licences in Angola and Norway

2006
Maersk Oil is awarded licences in the US Gulf of Mexico

2010
Maersk Oil is awarded a licence in Greenland

6

The Halfdan platform in the Danish North Sea

7

Preface
By Frank Esmann
This is the story of one of the most successful, high-profile companies in Denmark: Maersk Oil The assignment was simple – the story was to be told by 15 people sharing their anecdotes Anecdotes are what add spice to the story; entertaining personal accounts, often told at the dinner table, just as often tinged with humour, warmth, irony or sarcasm Anecdotes are extremely subjective They may be revealing or moving but they must be taken with a grain of salt because they are the result of a process of memory and make no claim to be the whole truth In its more extended form, the task entailed a surprising challenge The idea emerged from the company’s desire to remind old and new employees of Maersk Oil’s roots and culture at a time of unprecedented growth in new employees The book also seeks to ensure employees know the history of Maersk Oil and feel pride in the company’s results The more interviews I conducted, the clearer it became that, although an anecdote is occasionally the antithesis of clean communication, it was possible to achieve the objective Is there pride? Definitely, yes Reeling off lists is tedious, but allow me to mention a few milestones as perceived by the interviewees: horizontal drilling; the contract that resulted in Maersk Oil obtaining the licence containing the Al Shaheen field in Qatar; the takeover of U S company Kerr-McGee’s fields in the UK North Sea; the MITAS programme and the change in management style and decisionmaking processes that is currently transforming Maersk Oil into a competitive global oil company in a market that, for many years, has been dominated by the Seven Sisters and state oil companies Every one of these accounts is based on genuine pride in the results that have been achieved in the past few years under the leadership of Thomas Thune Andersen and, later, Jakob Thomasen A turning point in recent times was A P Moller – Maersk Group CEO Nils Smedegaard Andersen’s visit to Aberdeen where he proclaimed that the group will focus on the oil business Today, Nils Smedegaard’s message is: “Maersk Oil will become a crucial component of the Group as it grows to have an entitlement production of 400,000 barrel of oil a day in years to come ” No company the size and composition of Maersk Oil can develop without strategic disagreements and structural changes They can occasionally result in the departure of managers who, over a long and active life, see their attitudes and deeply-held beliefs about the development of the company overtaken by modern perceptions of the future This is also part of the anecdotal story of Maersk Oil

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However, a new employee does well to remember that every company is like a living organism It must either develop and grow or die Employees living through these changes with great enthusiasm for the success of the company have impressions that are always subjective and characterised by their own dreams and ambitions However, the common denominator of all these stories is that what happened was for the benefit of the company What does this tell us? That every company experiences change, but that history must not be seen through the eyes of the future This project has been fun, moving and exciting, and I hope the anecdotes say something about the conditions under which a Danish oil company, emerging from a traditional, family-owned shipping company, has operated However, the book could not have been written if I had not been able to rely from the start on historian Morten Hahn-Pedersen’s book , A P Møller og den danske olie The same applies to extensive research conversations with retired geologist Bjarne Skovbro, Head of Exploration Lars Nydahl Jørgensen and Senior Vice President Jørgen Liboriussen The thanks I owe them is just as great as the thanks I owe the other participants, not least for their patience with a writer who, at least at the start, was a little hesitant about sentences such as “ we had 12 5 lb/gallon mud in the hole and the pore pressure gradient was 16 lb/gallon and rapidly rising ” The fact that this quote comes from a Briton who has more experience of the oil industry than most and now enthusiastically makes it available to ensure safe production is noteworthy in itself It also illustrates how English, Danish and technical slang merrily merge in the language of Maersk Oil It has been a bit of a challenge to make it all comprehensible to people other than the interviewees In terms of the last objective, I have received invaluable support throughout the process from the originator of the idea, Thomas Grøndorf, Global Head of Communications Today, 50 years after its birth and just as Denmark says goodbye to Mærsk Mc-Kinney Møller, Maersk Oil has developed into a global player in the oil industry Under the leadership of CEO Jakob Thomasen, a large number of people – referred to by the interviewees alternately, but always affectionately, as ‘individualists’, ‘specialists’, ‘prima donnas’, ‘loners’ and ‘technological geniuses with huge egos’ – have established Maersk Oil as a global oil company, the roots of which go back to classic A P Moller virtues and its experience of oil extraction in the tight chalk in the Danish North Sea It is a very different world from the one that, 50 years ago, allowed shipowner Arnold Peter Møller to be awarded the concession for oil and gas in Denmark The anecdotes concern virtually every aspect of the story of Maersk Oil The scale is smaller than that of the Seven Sisters, their role in global industrial revolutions and the 150-year-old quest for oil, money and power as recorded in the bible of oil history, The Prize, by Daniel Yergin in the 90s However, in the Danish context, the story of Maersk Oil is also an epic one because it is part of the history of a com-

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pany that every single Dane knows so well Conditions have also changed; Yergin’s latest book is called The Quest Energy, Security and the Remaking of the Modern World There is a huge difference between the two titles However, if there is one word that is universal and common to the oil industry, it is quest In the anecdotal history of Maersk Oil, the Danish equivalent – søgen – takes on a very special meaning In the 21st century, the story is not only about Maersk Oil’s quest to find oil It is also about personal responsibility, the ability to make decisions and finding new business models, new forms of cooperation and new and safer extraction methods The oil industry is full of drama and anecdotes These express pride in the technological innovation or surprise at foreign cultures with very different views on humanity than Denmark’s Sometimes they express respect for the legendary Mr Møller – such as the following story about the struggle against corruption: When Maersk Oil started work on the Dunga field in Kazakhstan in 2002, customs held back one of its containers – a classic trick known to people in virtually all industries, including relief agencies But it turned out the problem could be solved without bribing the customs officer – something Maersk Oil employees are simply prohibited from doing The officer was invited to the office of the local Maersk Oil manager The latter pointed to the wall where there was a photo of the President of Kazakhstan, Nursultan Nazarbayev, with Mærsk Mc-Kinney Møller The photo had just been taken at the company’s head office in Copenhagen, where Nazarbayev had been on a visit “This is your boss,” he said, pointing to Nazarbayev Then he pointed to Mærsk Mc-Kinney Møller: “This is my boss If you don’t release the containers immediately, these two will have to find a solution ” The containers were released And then there is the account by 32-year-old petrophysicist and MITAS graduate Mariann Richterhausen of the time when only she could determine whether a well had strayed into unknown territory in the subsurface in the Arabian Gulf Hairraising, I called it She thought it was cool… Anecdotes should be kept alive because they help us remember history, communicate with each other and exchange views This book seeks to tell the short version of Maersk Oil’s history via a selection of personal anecdotes and experiences Please feel free to discuss them, add to them and put them in context Most of all, this book is dedicated to all the Maersk Oil employees who are contributing or have contributed to making the impossible possible and thus creating the Maersk Oil success story Happy reading!

10

Ib Kruse
Title: Former Shipowner and Partner at A P Moller - Maersk, responsible for Maersk Oil Age: 80 Employed: 1950 (A P Moller – Maersk) Leisure interests: Golf, literature – especially Dickens

11

When Maersk Oil grew up
In the beginning, it was all much easier Ib Kruse, shipowner and member of Maersk Oil’s Board of Directors for over 30 years, knows what he is talking about “When Arnold Peter Møller applied for the Danish oil and gas concession, it was more about keeping the Germans out than about the chance of finding oil It started on dry land and the prospects were anything but bright ESSO and then Gulf Oil had drilled 31 wells without results ” “I negotiated the approvals At that time, the authorities had no special expertise in drilling, so they chose a practical approach,” explains Ib Kruse “They gave us free rein in the technical execution of the programmes but made sure that safety was paramount For example, a well had to be well-sealed, ‘so that farmers don’t fall into it’, as one head of department in the Ministry of Public Works once told me I even remember the crooked smile that spread across his face as he said it “We didn’t find anything either, but then the North Sea entered into the frame,” continues Kruse “A P Møller was interested in getting it into his concession This was despite BP’s head geologist reportedly saying that if oil was found in the North Sea, he would drink it The origin of this quotation is doubtful, but it has become part of the folklore of the oil industry The chief fire brigade officer in Copenhagen, whose task it was to approve the safety of our facilities in the Danish North Sea, took a practical approach ‘If something happens to your platforms, it’s your problem All I’m interested in is ensuring that people are evacuated if something happens,’ he said at one of the meetings I held with him ” When, in 1971, the Danish Underground Consortium (DUC) laid the plans for the first oil field, oil had been found in three structures: Anne, Abby and Vern Ib Kruse explains: “We reserved the right, with the ministry, to place a production facility at the location we considered to be most promising once it had been delivered by a U S shipyard The original intention was to start production in the Anne structure, but the intervening assessments gave preference to Abby, subsequently called the Dan field There were no problems The ministry had faith in us knowing what we were doing ” In the meantime, the authorities and politicians began showing more interest in the company and a dispute broke out concerning the borders on the continental shelf out in the North Sea The choice was between following a centre line principle or a depth principle The former would have given Denmark a better position in relation to Germany The latter would clearly have given Denmark a better position in relation to Norway

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“Our advice was to carry out extensive exploration drilling all the way around before drawing up fixed borders with Norway Now, the Ministry never paid much attention to A P Møller’s thoughts on international matters so, advised by Professor Max Sørensen, they reached the decision that Denmark should follow the centre line principle Ultimately, the Germans told us to go to hell and, via a ruling from a court in The Hague, they gained acceptance for the principle that local geographical conditions should be taken into consideration,” says Ib Kruse The result produced the myth that Danish Foreign Minister Per Hækkerup got drunk and gave the Norwegians the giant Ekofisk oil field “That’s not true,” declares Ib Kruse “The Government made a strategic choice The idea was that we should be nice to the Norwegians, so the division in relation to the Norwegians was based solely on the centre line principle as found in a Geneva convention from the 50s ” Maersk Oil’s hard-line attitude towards Germany also produced a bonus “Despite protests from the German government, we carried on drilling in the disputed areas and we found oil This benefited us in an arbitration case in the Hague This was how we got the strange little bulge on the border which meant the Dan, Gorm and Skjold fields as well as several other fields remained in Danish hands, and this is where the majority of our oil production comes from,” says Ib Kruse The discussions and the arbitration case delayed the development of production in the North Sea “To secure a new long-term concession, we had to start production by 8 July 1972 We were afraid we wouldn’t manage it, so we got a two-year extension But we actually ended up starting production on 4 July Then came the first unpleasant surprise We had expected that the Dan field would produce 500,000 tonnes in the first year It produced less than half that When the tanker Marie Mærsk arrived in Stigsnæs with the first cargo, we had gathered all the relevant dignitaries to welcome it What we failed to mention was that she was only half full,” explains Ib Kruse “The tanker didn’t look odd, though,” he adds, “It sat well on the waterline – it had taken a good measure of water as ballast on the voyage There was no reason to sully the mood of what was supposed to be a celebration ” At the beginning, the Dan field produced only 600-700 tonnes a day, or a third of what had been expected And the weather was often rough, so it was only possible to load ships 250 days a year This dampened the ardour of the partners They were not much in favour of making new investments in the Dan field But Mærsk Mc-Kinney Møller held firm It would succeed “I was the chair of the Operating Committee and was under extreme pressure Mr Møller put pressure on

13

me and I put pressure on the others ‘Come on now, let’s reach a decision on these new platforms Let’s get going ’ Things became easier when Gulf Oil lost faith in the Dan field and withdrew from the partnership completely,” explains Ib Kruse “One of our problems was that we lacked Danish expertise We had one advisor, Professor Sorgenfrei from the Department of Geography and Geology at the University of Copenhagen, and we employed a few Danish engineers that we sent to Gulf Oil so that they could get to know the industry It was important that, at an early stage, we received help from the US consultancy firm Miller & Lents They were a recognised firm They had the expertise and skilled people – geologists, engineers, petrochemists, geophysicists – in every area They were also able to help with gas contracts, pipelines and so on This helped us, particularly when we had to present arguments to our partners ” Then came the 1976 contract with the State, which changed the terms of the concession “Of course, we weren’t satisfied with it But it could have been worse We kept the oil rights, although there were a few minor cessions of territory However, the contract questioned whether we could keep our gas rights It ended with an extension of the period for gas exploration, but we also had to accept that it had to be sold to DONG [the state-owned energy company Danish Oil and Natural Gas, ed ], which essentially gave DONG a monopoly But gas production started ” “The 1981 contract was even tougher from our point of view,” explains Ib Kruse “As everyone knows, we ended up only retaining 2 per cent of the original area in 1986 The contracts stipulated that the licensees were entitled to a contiguous area of 2,000 sq km But the contract didn’t state where it was to be located We could choose the location afterwards We began negotiations with our partners and then had a meeting at the Ministry of Energy I chaired the meeting and told the Ministry which 2,000 sq km we had chosen, and indicated the area on the map As time passed, it turned out that, with one exception, we had chosen the right 2,000 sq km ” Maersk Oil had begun to grow up Exploration now began to take off Then in 1987 the breakthrough with horizontal well drilling made Maersk Oil a serious player But according to Kruse there was no bulletproof strategy “You don’t find oil by discussing strategy We were on the hunt for oil and if we found an interesting opportunity, we went to the Board with a recommendation If the Board said yes, but we lacked the money, we somehow found the necessary funding ” The next hurdle came when the price of oil dropped from 30 dollars a barrel to 10 dollars “We reacted by giving lead engineer Kjeld Fjeldgaard responsibility for all development of new field concepts and production When we talked about what title he should have, I said: ‘You will be a Production Manager, because we need production,’” explains Ib Kruse “It’s thanks to Fjeldgaard that Maersk Oil

14

became an international oil company As partner and shipowner, I of course had the ultimate responsibility, but he was the one who developed the concepts and he deserves recognition for that ” Later, Fjeldgaard was let go; however in his obituary after his death in 2007, Ib Kruse wrote: “He was a genius in the oil world We have Fjeldgaard to thank for our ability to produce enough oil in the North Sea to make Denmark self-sufficient He was inventive, full of initiative and dynamic If it took too long to get approvals from A P Møller’s international partners, he didn’t wait to set things in motion When he was asked why, he answered: ‘I’m not employed to cover my back but to do my best for A P Møller’ ” Then business in Algeria and Qatar turned up out of the blue, as Ib Kruse puts it “Maersk Oil had started to earn money in the Danish North Sea and when a partnership with Anadarko in Algeria came up, it suited us well I headed the negotiations and made recommendations to the Board of Directors With Qatar, a potential partner withdrew at the last minute I had nothing against that, but Mr Møller wanted us to have a substantial partner – millions were at stake, which was worth considerably more at that time than it is now We never did find a partner and got the whole lot instead Mr Møller never hesitated and we ended up with an impressive production of 300,000 barrels a day I still remember a Board meeting at which a member, somewhat peeved, commented: ‘Maersk Oil always exceeds its budget’, to which Mærsk Mc-Kinney Møller remarked: ‘Yes, Qatar is an adventure’ ” Without Qatar, Maersk Oil would be a different company today It now has the technical strength and the financial might to go out in the world and invest, even though it has become more difficult But without its pioneering spirit, Maersk Oil might never have grown up

15

HRH Prince Consort opens the tap for the first oil from the Dan field on 4 July 1972 Maersk Mc-Kinney Moller observes the milestone, in the background

16

Nils S. Andersen
Title: Group CEO, A P Moller - Maersk Age: 54 Employed: 2007 (A P Moller - Maersk) Leisure interests: Skiing, tennis

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A decisive moment
The goal of the A P Moller - Maersk Group to turn Maersk Oil into a modern, global oil company was made clear to everyone at a meeting in Aberdeen in 2008 when Group CEO Nils Smedegaard Andersen declared: “We will focus on our oil collaboration with Kerr-McGee” Since then, Kerr-McGee UK, Maersk Oil’s first international acquisition, has contributed to transforming Maersk Oil into the global oil company it is today But Maersk Oil had to learn the hard way that when you make acquisitions and expand, you cannot simply expect people in the UK, Norway or Brazil to think just like you do “We took over Kerr-McGee UK in 2005, but it didn’t go very well,” recalls Nils S Andersen “Kerr-McGee possessed a lot of expertise, among other things in exploration and the ability to squeeze the last resources out of old fields But there was a feeling that maybe it wasn’t such a good investment after all And so the people in Copenhagen withdrew from the project a little There was less contact, and in Scotland, people felt ignored and perhaps even under suspicion “It was unacceptable and we decided we needed to put an end to any talk about blame, about who paid too much and about who said what to whom As member of the Board of A P Moller - Maersk, I helped give the go ahead for the acquisition When we make a mistake, as we did with the integration, it’s important to acknowledge it can be rectified You shouldn’t withdraw and push problems to one side You have to lay your cards on the table so that you can move forward There were values we wanted to protect, but new ways of doing things were also necessary: innovative thinking, better cooperation skills, internally and externally, and greater creativity ” The decision to bridge the differences resulted almost immediately in a constructive development that has since strengthened Maersk Oil both in Denmark and abroad “It was necessary for someone to take responsibility In such situations it’s necessary to make use of the differences and build bridges between attitudes If you don’t do that, you won’t move forward It worked Now we work great together We learn a great deal from each other, and the acquisition of Kerr-McGee UK is really turning into a very good investment ” Maersk Oil’s importance in the Group has since increased significantly and A P Moller - Maersk has in recent years invested considerable sums in exploration and spent a lot of money on projects around the world In a few years, the company will

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Nils Smedegaard Andersen (at left) during a visit to Aberdeen in 2008, with the then Mangaging Director of Maersk Oil’s UK office, Michael Engell-Jensen, and the then CEO of Maersk Oil, Thomas Thune Andersen (at right)

have an entitlement production of 400,000 barrels of oil a day, which will make Maersk Oil a mainstay of the Group Maersk Oil will thus have created value for the money invested and will also have grown into a fine medium-sized global oil company From its roots in the tight chalk fields of the Danish North Sea, Maersk Oil developed expertise in production from difficult fields in medium-deep water opening the door to Qatar and the similar conditions there Then, a few years ago, Maersk Oil took the giant leap into deepwater with operations at water depths of over 1,500 metres At these depths, Maersk Oil works with operators in the Gulf of Mexico and Brazil and as an operator with its partners in Angola “Now we need to prove that we can also conquer these new areas We are constantly preparing ourselves for the next challenge, the next trend, the next opportunity That’s why we went for a licence in Baffin Bay, west of Greenland So, we need to boost our skills in oil exploration and production in the Arctic,” says Nils S Andersen, emphasising the A P Moller - Maersk Group will continue to invest in Maersk Oil, one of the four strategic legs supporting the Group

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“Maersk Oil’s financial success has been important to the Group In recent years, particularly when times have been hard for shipping, Maersk Oil has enabled us to continue the expansion of the company We have built up an oil company with special expertise, a special commitment and a special credibility that we are now using as the basis for internationalisation At the same time, there has been money for investments across the Group,” explains Nils S Andersen “We have the financial capacity to make the necessary investments to reach an entitlement production of 400,000 barrels a day We can’t be world champions in everything We’re not big enough for that, but we need to constantly look forward, be on the cutting edge of the latest technologies and be active on the newest fronts We can’t cover all technological aspects equally well We need to prioritise our research and development We must be skilled operators Business must be good We must not pollute Safety must be excellent and we must protect our name ” Being part of a global company and identified with the seven-pointed star opens doors globally Maersk Oil has clearly benefitted from this when its representatives travel around the world “What the Group offers is a global presence and a global brand If you want to enter a new market in any country, we are already there A P Moller - Maersk has a fantastic reputation for being an honest, reliable, skilled supplier within the areas we work – and not only because we are regarded as a respected and trusted company In many cases, our terminal and transport solutions are one of the preconditions for developing countries to even be able to participate in the global economy,” emphasises Nils S Andersen “Without the Group, Maersk Oil would be a medium-sized oil company that as an independent unit would have less impact and would not be as significant a player in the world market However, today’s Maersk Oil is significant, and that makes it all much more interesting It gets the credibility, the name and the recognition on top of everything else Furthermore, the A P Moller - Maersk Group as such is able to finance projects that would otherwise be outside Maersk Oil’s reach,” points out Nils S Andersen “In return, Maersk Oil owes a debt to those who have helped them get through the door We have a set of values that must be respected We must work with humility and due diligence, and people must be able to rely on our promises: Uprightness – Our word is our bond This is how the debt is paid And we get a great deal in return This is how we’ve managed to create a company with strong values ” But the oil industry is full of risk How does this affect the future of Maersk Oil and the A P Moller-Maersk Group’s confidence that its targets are met? “I’m convinced that we will meet the production target But it isn’t about achieving high production regardless of the costs The most important thing is the entitlement production of 400,000 barrels of oil a day is achieved safely with solid technical installations,

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The Gryphon installation in the UK North Sea Gryphon was damaged during a storm in February 2011 and is currently under repair, but is expected to return to production later in 2012

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high environmental awareness and on a profitable basis In the wake of a number of accidents, the oil industry has developed a reckless image over the years It is deeply regrettable that such accidents happen Luckily Maersk Oil is seen, not only by ourselves but by the rest of the world, as a company that takes safety and the environment very seriously In the North Sea, for instance, we have been able to reduce discharges of oil in the water [water coming from the field is tainted by oil, ed ] to far below the limits set by the authorities ” But how does investing in an oil company make sense when governments all over the world are trying to end their dependence on fossil fuels in their energy supplies within the next few decades? “There are many arguments in favour of independence from fossil fuels, and we agree with them entirely However the reality is that it can’t be done in the mediumterm And even 20-30 years into the future, it’s realistic to expect that there will be a considerable need for fossil fuels Even though there is considerable growth in renewable energy resources, they will not be able to supply the quantity of energy needed to meet future demand This is due, in particular, to governments’ rejection of nuclear power As things look at present, it’s quite simply unrealistic to believe that alternative energy sources such as the sun and wind can come anywhere close to replacing traditional fossil fuels That’s the reality of it, and that’s why we see it as our job to extract and use fossil fuels responsibly,” concludes Nils S Andersen

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Jørgen Liboriussen
Title: Senior Vice President, Maersk Oil Age: 66 Employed: 1972 Leisure interests: Outdoor activities, classical music and painting

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The promise
It was late autumn 1991 Jørgen Liboriussen, the geologist who four years earlier had led Maersk Oil to the highly prospective Berkine basin in Algeria, was about to make one of the biggest blunders of his life It concerned the Al Shaheen field in Qatar, which is now one of Maersk Oil’s golden eggs, with production of 300,000 barrels of oil a day In other words, Maersk Oil had an elephant on its hands This had been preceded by nearly 20 tumultuous years After a tentative but instructive start in Tunisia in 1973, Maersk Oil’s international activities had not yet really taken off “There had been a marked lack of good results in the North Sea The Dan field production was much lower than expected, and after the oil crisis following the Yom Kippur War, we had problems with the Danish state,” Liboriussen recalls The new Danish Minister for Energy, Social Democrat Poul Nielson, wanted Denmark to be independent of imported oil and gas In 1980-1981, this led to some extremely difficult negotiations with the Government Just five years earlier, in 1976, the then Minister for Commerce, Erling Jensen, promised the Group could work in peace but the crisis changed the situation “We asked ourselves: Where is all this going?,” Liboriussen says With the strong backing of his political supporters, Nielson proposed that other companies be involved in oil extraction The intention was to create competition for the A P Moller corporation and so state-owned oil company DONG was made partner in new licences “The negotiations were very intense,” recalls Liboriussen “They ended with the 1981 agreement which stipulated that on 31 December 1981 we had to hand over half of our old area in Denmark Two years later, on 31 December 1983, we had to hand over another 25 per cent and the remainder was handed over on 31 December 1985, apart from just 2 per cent where hydrocarbons had previously been found ” The contract was difficult to implement “We had to submit a work programme for how we were going to explore the 2 per cent we still kept The first, proposing five wells, was rejected Poul Nielson demanded 15, and it turned into one of the biggest arbitration cases in Danish history The relinquishment of the territory itself was also a problem We were constantly holding crisis meetings, which didn’t make for a good working atmosphere,” says Liboriussen The international partners were also losing their enthusiasm Gulf Oil had withdrawn on 1 January 1975 and Chevron withdrew on 1 January 1986 signalling their view

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that there was nothing to be gained from the negotiations By this time, Maersk Oil had spent a total of around 5 billion Danish kroner on oil and gas activities in the North Sea without any major results “Our new competitors didn’t have much success either The only fields they ever put into production in the past 30 years are the Siri complex and the Syd-Arne field (Arne Field) In connection with the relinquishment, we had to decide whether to keep the Arne or the Gwen structure We kept Gwen Hess took the Arne structure and was successful We never found anything commercial in Gwen,” concludes Liboriussen drily “As early as 1981, we realised where the future lay We had to go out into the world The next year, I became Exploration Manager, but there were only a few exploration employees in the company, and in 1985-1986 I was seconded to Shell In the meantime, with the help of a consultancy firm in Houston, we began to look at a small interest in Morocco On a flight to Morocco with our then CEO Ib Kruse, I passed the time reading various oil-related materials I stumbled upon Scout News from Petroconsultant S A about North Africa and exclaimed: ’What the heck are we doing in Morocco? We’re in the wrong country’ ” Whereas Morocco was of limited geological interest, the Berkine basin in Algeria was extremely attractive On Jørgen Liboriussen’s recommendation, the company went into action In addition, a new Algerian Subsoil Act which allowed Maersk Oil to do sound business in the country, was also quite helpful At head office, a dramatic decision was made that had wide-ranging consequences “The areas we were interested in turned out to be reserved for the US oil company Anadarko Petroleum Corporation Negotiations ended in 1989-1990 with a contract in which Anadarko was awarded 50 per cent and the British company Lasmo received 25 per cent It was a huge area in the middle of the Sahara and very difficult and expensive to work in We had imagined taking a cautious approach and only had plans for a small part In the negotiations on the percentage distribution, I finally recommended that we should take a 20 per cent share ‘Impossible If we can’t get 25 per cent like Lasmo, we won’t be involved,’ said Mr Møller ” “I still have the memo presenting my 20 per cent proposal on which Mr Møller crossed out the 0 and wrote 5 instead When you think about the subsequent success, it was an excellent decision,” says Liboriussen “Mr Møller’s motive was that we should be equal partners If we were going to be involved, we should do it properly To this day, very large quantities of oil are being produced in Algeria The fields we are involved in have peaked, but we are working on a number of new ones that will start production at the end of the year ” In 1987 Maersk Oil experienced a breakthrough with horizontal wells in the Danish North Sea chalk beds The project was supported technologically by the partners, but they were very cautious and not many knew much about the whole idea of

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stimulating chalk, a process known as fracking, using horizontal wells Liboriussen and his people said quite simply: “We have to drill ” Their argument was that, even if the horizontal wells were unsuccessful, Maersk Oil could simply turn them into standard deviated wells and not lose too much from the effort “So we started ” Maersk Oil did not invent horizontal well drilling and got technical help from its partners But the interesting point is that despite having the expertise, other oil companies did not drill horizontal wells to the ultra lengths that Maersk Oil ended up drilling Having mastered the technology, Maersk Oil became determined to find other places in the world with similar structures to apply the technology again “After a failed attempt to get a field in Oman, we discovered that prequalified international companies were being asked to tender for an area in Qatar’s part of the Arabian Gulf One of these was a Canadian company, Sceptre They had the most data, we had the technical knowledge In the summer of 1990, we met in Calgary, Canada, and I became more and more enthusiastic the more I learned, because I could see the field in Qatar was even better and even more promising than the chalk fields in the Danish North Sea,” recounts Liboriussen His conviction was not dented by the fact that Shell’s eight-volume technical study of Al Shaheen ended with the comment “This field cannot be exploited” ¨ But then Iraqi leader Saddam Hussein invaded Kuwait “We were in Calgary on August 1,1990 when war broke out Our first reaction was that the opportunity had gone up in smoke ” But the project was only mothballed As soon as Saddam Hussein had been driven out of Kuwait, Jørgen Liboriussen travelled to Doha and the project was resumed A bid was prepared in autumn 1991 At that time, Sceptre was definitely in and everything seemed fine “I had received the approval from management and Mr Møller for an interest share of 85 per cent with Sceptre with 15 per cent Before it all fell into place and the final bid could be submitted in Qatar, the project naturally also had to be approved by Sceptre’s Board of Directors “Their CEO said that he would call me as soon as the decision had been made, so I gave him my private number,” says Liboriussen “There is an eight-hour time difference between Calgary and Copenhagen, so I went to bed The phone rang at 3:30 in the morning Sceptre’s Board had decided that they definitely didn’t want to spend money on this Not good!” The next morning, Jørgen Liboriussen had to hang his head and go to the management and Mr Møller to explain that they lacked 15 per cent of the financing “We could easily handle the extra 15 per cent on our own but the fact that the Canadians wouldn’t touch it with a bargepole led to some skepticism Warning bells always ring when a partner is skeptical

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Maesk Oil and its partners are underway with a huge development of the El Merk field in Algeria The development will increase Maersk Oil’s share of production to about 40,000 barrels of oil per day

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“I then made one of the biggest blunders in my life I told Mr Møller, Ib Kruse and Kjeld Fjeldgaard that this project was so good that I could guarantee we could find a partner for the 15 per cent So I recommended that we went all in with 100 per cent and promised to find a partner within the near future who would take a reasonable share ” Despite skepticism, Liboriussen was given the go-ahead The bid for 100 per cent was submitted When, in the following weeks and months, Liboriussen was asked whether he found a partner, he answered: “It’s a no-brainer I can do it anytime” “Through my work with Shell, I had met Nasser Jaidah, who was now Manager of Exploration & Production at Qatar Gas and Petroleum Company When I came to Doha to negotiate in 1992, Jaidah sat opposite me The oil world is small He knew that we knew what we were talking about ” Jaidah accepted the technical bid prepared by Maersk Oil, the financial negotiations started and a contract was signed in the summer 1992 The process of finding a partner began, but after a year, Liboriussen had not found one A British company was interested in a large share at one stage but its Board included a former Shell man and Shell had previously written off Al Shaheen He said he would not, under any circumstance, recommend the company to be involved Later a Japanese company entered the frame “But at that point, we had started the first well, had looked each other in the eye and come to the conclusion ‘It doesn’t look so bad after all’,” laughs Liboriussen Maersk Oil subsequently informed the Japanese that if they wanted to come on board, they would have to put the money on the table “At that time, we had started the first horizontal well and when the Japanese didn’t want to bid more than a million dollars to join us, well, that was just too bad Other companies then suddenly also wanted to come on board But they never did And when we had finished our first wells, there was no doubt in our minds “Funnily enough, many people overlooked this episode and I was not directly reproached for never having succeeded in finding a partner,” says Liboriussen today “But it was stupid of me You have to be humble in this industry I was so sure of myself that I optimistically promised something I couldn’t deliver ”

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Henrik Jakobsen
Title: Head of Exploration and New Ventures, Maersk Oil in the UK Age: 54 Employed: 1983 Leisure interests: Football, rambling

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The dream about the goat with the seven legs
It was 1995 and the geologist Henrik Jakobsen, now Head of Exploration at Maersk Oil UK, had to make one of the most important decisions of his career “A few days earlier, Jørgen Liboriussen had asked whether I was interested in taking over the job as Resident Manager in Bangkok I had previously been abroad a great deal and was now back in Denmark with my wife and young children, although still travelling a lot I really didn’t want to have to go home and tell them that we had to leave again In addition, as far as I was aware, the situation was not particularly good with the project in Thailand ” The partnership in Thailand consisted of two Houston companies, Pogo and Rutherford, which together with Maersk Oil had each just under 32 per cent of the concession, and The Bank of Bangkok with 5 per cent Rutherford and Pogo had enough shares to gang up and control the decision-making process And they had increasingly started to do so “So I turned it down,” says Henrik Jakobsen The next day, then-CEO Kjeld Fjeldgaard, was on the phone “Have you got five minutes?” Fjeldgaard asked why he had turned down the job “I told him that, as far as I could see, my career to date had been on a steady upward curve, whereas the adventure in Thailand would end with us finishing our involvement for good That was not really my cup of tea,” says Henrik Jakobsen “You may well be right That’s why we want to have you out there,” said Fjeldgaard “What if I don’t want to go?” asked Henrik Jakobsen “Then I think you should look for a new job ” “When do you need an answer?” “By 9:30 tomorrow morning ” “We ended up in Thailand Today I see it as a decision that taught me a lot The working environment was very different from anything I had experienced before, which says quite a lot,” explains Henrik Jakobsen In spring 1988, Jakobsen had been seconded to DUC partner Texaco in London, where, in the old headquarters in Knightsbridge, he noticed considerable differences in the corporate cultures “My working area was mainly the Tartan, Piper and Claymore sectors in the British part of the North Sea, where not only Texaco but also Occidental were operating It was a culture shock coming from Maersk Oil in Copenhagen ”

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“The decision-making processes were more complicated and took longer than in Copenhagen I was used to faster response times, but our partners had a much more rigid, slower system,” says Henrik Jakobsen “At Maersk Oil, the job and the responsibility are correctly proportioned As employees we are assessed and weighed and then thrown into deep water to see whether we can swim This happened to me for the first time when I was sent to London The second time was when I was sent to Bangkok six or seven years later ” The partnership with Rutherford and Pogo had come about slightly by chance The Americans had previously been partners in a project in Morocco They had seen the blue ships with seven-pointed stars in Bangkok harbour and got the idea that A P Moller might be interested in joining them in a bid for a few concessions off the coast of Thailand Headquarters said yes, and the partnership got off to a strong start with several oil and gas discoveries This period in the early-90s was a turning point in the history of Maersk Oil The company had concessions in Algeria, Qatar and Thailand, which together had significant production potential and individually each were potential company makers But things went wrong in Thailand In hindsight, Maersk Oil had a huge success on its hands but withdrew due to strategic mistakes and personal disagreements “Remember that we were ‘brought up’ to look at limestone in the Danish North Sea,” says Henrik Jakobsen “Our Engineers, geologists and other staff didn’t have much experience of sandstone reservoirs at that stage, and those were the conditions in Thailand At the time, we were trained for lime, not sand This culminated in a great deal of professional and technical disagreement about the potential, both internally and externally, which resulted in considerable Danish caution in relation to our partners when it came to assessing the resources ” To start with, Maersk Oil wanted to get rid of a part of the concession area by selling it to Rutherford and Pogo and letting them run with the risk But the Americans were not willing to do so “We had said that that part of the concession area was not worth much and that we had not been willing to risk anything ourselves Yet now that we wanted to relinquish the area to our partners, we demanded money for it It was not the best starting point This was the situation when I arrived in Bangkok in June 1995 “It all ended in August 1996 with me flying from Bangkok to a number of technical and strategic meetings in Houston, also attended by Jørgen Liboriussen, among others,” continues Henrik Jakobsen “On the first day we talked technology Everyone agreed that there was significant oil and gas potential and we celebrated that on the same evening with a dinner We had made a new discovery and there was suddenly more oil than gas

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“The next day was about work programmes and money Pogo made a proposal to drill a very large number of wells and finally, addressed the Danes directly: ‘Well, are you in?’ “This was where things broke down We called Fjeldgaard, who said no ‘We can’t work this way,’ he said Two corporate cultures collided head on Maersk Oil wanted to play it safe and was interested in long-term yet cautious development of the discoveries in a block in which management doubted its potential The Americans, on the other hand, partly on account of the requirements for quarterly reporting to investors on Wall Street, wanted quick results with the development of earlier discoveries ” Maersk Oil now tried to find buyers other than their partners They provided access to data and invited other companies to come and view it “We had a bid from a company But, as is customary in the oil industry, the Joint Operating Agreement contained a passage stating that if Maersk Oil wanted to sell its share to a third party, the original partner could demand first refusal Pogo and Rutherford did so in spring 1997, and we left the partnership Fortunately, our local employees were offered jobs with our old partners, so they suffered no hardship,” says Henrik Jakobsen

Myanmar

Laos Thailand

Bangkok
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Cambodia

Andaman Sea

Vietnam

Gulf of Thailand South China Sea
0 200 km

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Maersk Oil’s former Thailand project has now been taken over by Chevron and is still in production Chevron estimated, on takeover of the fields, that they had around 700 million barrels of oil equivalent in resources, equivalent to the Tyra and Halfdan complexes The outlook has since turned out to be even better “One of the myths at Maersk Oil is that the fiasco in Thailand was because we couldn’t get on with the Americans Under the circumstances, it was probably a correct business decision to withdraw, but I honestly believe that the reason was that our managers had a completely different approach to business from our partners That’s why, the project in Thailand never came to anything,” thinks Henrik Jakobsen Today, many years later and with the accumulation of experience, the conclusion must be that selling off the assets in Thailand was a strategic mistake During this period, Kjeld Fjeldgaard insisted generally that if further exploration was to be carried out, it should be for giant discoveries, so-called elephants This meant that, if Maersk Oil was to commence new projects, they had to be equivalent to those in Qatar and Algeria There was little or no interest in more modest projects “I think the huge success with the horizontal wells in the tight chalk reservoirs in the Danish North Sea and Qatar was behind this thinking,” says Henrik Jakobsen “But I also remember a meeting at which a Scottish consultant explained that, with the strategy the management was pursuing, it was almost impossible to find a geological play in the areas we had the opportunity to assess that fully resembled Qatar As the Scot bluntly put it: ’The seven-legged goat doesn’t exist’ In those years, it became something of a mantra for us Maersk Oil geologists that we were expected to deliver a goat with seven legs ” “From being a very Danish company, characterised by Danish culture, Maersk Oil is now internationalised,” says Henrik Jakobsen “We have become an international company in which the individual business units have a high degree of autonomy This model gives me a much greater feeling of independence Decisions are made further down in the organisation We are required to make decisions and we are naturally also responsible for them Success has not been absent ” The biggest challenge is finding the right people The talents “The supply of staff to the industry has flattened out, so the companies are all fighting for the same group of individuals We want to expand and employ more people At present, there are approximately 3,300 employees at Maersk Oil and our ambition is for global entitlement production of 400,000 barrels a day To achieve this target, we need many more employees, approaching 30 per cent more We work very hard to attract the right candidates We attend conferences to improve our branding, we take on young talents in the MITAS programme (Maersk International Technology and Science) and we sponsor students The greatest advantage we have over many of our competitors is that we are a growing company and we never compromise on safety ”

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Maersk Oil has given up the hunt for goats with seven legs But if one turns up, that’s another story

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Hans-Henrik Kogsbøll
Title: Head of Production Technology, Maersk Oil Age: 54 Employed: 1987 Leisure interests: Running, ballroom dancing, tennis, DIY

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The motorway builder
“To conquer without risk is to triumph without glory,” wrote the 17th century French dramatist Pierre Corneille Both glory and triumph often appear in anecdotes and are particular features of those recounting Maersk Oil’s work in the North Sea immediately after the breakthrough with horizontal wells in 1987 “The horizontal wells were a game changer for our operation in the Danish North Sea, but they were also a serious stress factor,” explains Hans-Henrik Kogsbøll, Head of Production Technology “The problem was that we knew that in a year we would be able to drill horizontal wells up to 31,000 feet long People cheered, it was fantastic, but they forgot that we could only stimulate 17,000 feet of the well Without stimulation, the wells don’t produce, so there was a potential risk that we wouldn’t make any profit from half of the new long horizontal wells The message from our then boss, Svend Aage Andersen, was clear: ‘Fix it’ ” “So we gathered all our contractors, and there were many of them then, and we were asked to bet on all the horses There was no time to wait for a project to finish, so many different projects were launched simultaneously It was all about raising the recovery rate so that we could start to make use of all the surplus capacity the platforms had We were producing to perhaps just 30 per cent of capacity at that time ” Work was done on solutions and improvements in the areas of fracturing, drilling, geology and petrophysics Hans-Henrik Kogsbøll focused on fracturing, which is the ability to create cracks in the reservoirs so that the oil can flow into the production well more easily “My boss back in the late-80s was Kevin Owens, from Texaco in Texas Kevin was of the fundamental opinion that any problem could be overcome This mindset was our driving force during this period and subsequently, and we had free rein to investigate all possible solutions We just had to succeed in fracturing the reservoir and thus increase production ” “As the oil industry was still new to Maersk Oil, and fracturing of horizontal wells completely new, we had to seek help outside the company ” Among other things, this meant service suppliers Baker Hughes and Halliburton came on track with stimulation systems for the wells Advice was also sought from Delft University

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of Technology in the Netherlands, an incubation centre for Shell Using laboratory tests, Jean Claude Rogiers from the University of Oklahoma in the U S provided inspiration for understanding how fractures develop Back in the late-80s, acid was the primary means for fracturing It worked well because it created the necessary cracks to allow the oil to flow, but only over a small area HansHenrik Kogsbøll then developed an interest in fracturing with water containing sand “Water with sand had the ability to create cracks over larger areas but the sand was also problematic because it would clog the wells up A grain of sand is approximately 1 mm and they have to be shot out through 8 mm holes in the casing to create the cracks in the reservoir, so there isn’t much room Sand can be compared with grain in a silo, which can become clogged if the grain isn’t loaded correctly or the pressure isn’t right So when the drill pipe became clogged with sand, we had to spend many rig days cleaning it And having a rig that costs several hundred thousand kroner a day to clean sand from a drill pipe when it should be drilling new production wells costs a small fortune ” Sand also had another unpleasant surprise When sand is pumped up with gas, it has the effect of sandblasting the pipelines They weren’t designed to withstand this and in the course of 20 minutes the sand could cut through the pipeline “It happens It is not dangerous but we learned from a few costly mistakes With a Danish supplier from Fredericia, we worked on spraying or coating the grains of sand so that they could tolerate pressure and temperatures This allowed us to control them better in the drill pipe ” Hans-Henrik Kogsbøll is reluctant to call fracturing a game changer, but he says it played a significant role in Maersk Oil’s success “The horizontal wells can be compared to the motorway from Copenhagen to Holte It’s hard for people to reach the motorway, but once they’re on, they can get to Copenhagen quickly With fracturing you could say we built the approach roads creating a fast flow towards Copenhagen – that is we made the marginal flanks of the reservoirs commercial We subsequently became better at building motorways and approach roads As a result, the motorway now goes as far as Helsingør, if we continue with the metaphor, and we have a vast network of approach roads The next step is to extend the motorway up to Sweden and the more marginal Swedish forest roads This places new demands on our technologies and capabilities ” It still takes three days to perform sand fracturing in one zone of the drill pipe And this is expensive when hiring a rig costs at least a million Danish kroner a day So there is a great deal of money to be saved if the process can be accelerated “The contractors are back We have always had a unique innovation environment with the mantra ‘better and cheaper’ It’s actually very simple If we don’t constantly develop our innovation, we will be overtaken by our competitors And that’s untenable in the long run ”

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One of the new projects that can take fracturing to the next level can best be compared to a pinball machine, according to Hans-Henrik Kogsbøll “This is all fairly abstract But imagine a game of pinball where you can push a button to move the flippers and shoot a ball around The idea is that we send a ball down through an injection or production well at high pressure Down in the well a few flippers stick out, opening a little sliding door in the side of the well and when the ball comes rushing past, it hits the flippers If we can get it to work, we’ll be able to carry out sand fracturing in six hours instead of three days This makes it profitable to work even more marginal flanks in a field ” Hans-Henrik Kogsbøll has gradually become one of the more mature employees in the office You can see his eyes light up when he talks about the old days One tale after another is waiting to be told He leans back in his chair “You should hear this one too,” he says: “I was on a drilling rig in the Danish North Sea It was ten in the evening, summer, and I said out loud: ‘Now, it would be lovely to have some strawberries and cream ’ An hour later, the rig supervisor reported: ‘Strawberries for everyone!’ He had had them flown out by helicopter, hopefully because it was coming out anyway I’m not sure if that sort of thing happens anymore ” And then the next: “It used to be quite popular to have casual Fridays when people didn’t wear a coat and tie Some of us old guys called it ‘ugly shirt and tie day’ We strutted in wearing cyclamen ties and Hawaii shirts It was a shocking sight, but what fun we had ” When Hans-Henrik Kogsbøll is asked to explain why he has stayed at Maersk Oil for so many years and has not been tempted to try something new, he returns to the entrepreneurial spirit and having fun “It’s great fun, what we do The world today is, of course, different from the way it was in the 80s and 90s, when, like optimistic entrepreneurs, we launched ourselves into one hopeless project after another without much experience But we had the will to make them succeed and we had the support of management For example, I ran around a Norwegian military training site and measured the ballasting from the shooting we used in the sand fracturing It was real Mickey Mouse stuff and produced some big bangs “We’re still entrepreneurs today but it’s more of an academic task now as people are much better trained and have different approaches to a task We also have many years of experience to draw on now ”

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There are about 400 water injection and production wells in the Danish North Sea This photo was taken at

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t a drilling rig in 2010

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Jørgen Gross-Petersen
Title: Senior Facility Engineer, Maersk Oil Age: 68 Employed: 1973 (A P Moller - Maersk) Leisure interests: Collects books from the 17th-19th centuries

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Innovation and constant care
One of the things Maersk Oil is good at is technical innovation One of the people who has contributed to this for 30 years is Senior Facility Engineer Jørgen GrossPetersen “As a young man, I was research-oriented,” he says “I graduated as a mechanical engineer with a PhD from DTU [the Technical University of Denmark, ed ] but there were no vacant positions Instead I came to A P Moller, which had plans to create a development department It never came to anything, but I was involved in making the first series of nine steam-powered container ships ” The interesting thing about this is that the system of steam turbines and boilers on a container ship corresponds to what is called separators in the oil world On container ships, the steam is separated from the boiler water, while in the oil world, it is oil, gas and water that are separated Apart from the water, which is a single-component system, engineers in the oil industry work with the separation of oil and gas, which is a multiple system with thousands of components A time came when not many ships were being built and Gross-Petersen was moved to the department for drilling platforms He stood out by, among other things, persuading management not to use the Maersk Explorer drilling rig as a production rig “The idea was that the Maersk Explorer should be used in the Skjold project That would have kept Maersk Drilling out of drilling activities for two or three years, while it was being used as a production rig instead of a drilling rig Our drilling capacity and expertise would have been lost Fortunately, I managed to put a stop to it ” The Skjold field is still producing stably 35 years later and brand new production facilities would have been needed today if Maersk Explorer had been used “I learned a lot working there, but then a dream position opened up at DTU I applied for it, and got it Unfortunately, it turned out not to be quite what I had dreamed of There was too much teaching, too little research and, in all honesty, it was a bit too static So I applied to return to A P Moller and was taken on again It was a bit of an unusual situation ” What is the biggest technical innovation in the history of Maersk Oil? “I believe it was when we constructed the Gorm field We built two wellhead platforms, a processing platform and a gas flare platform and subsequently extended the project with a pumping platform that had a pipeline to shore But there were restrictions built in from the start and they were the problem ”

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A wellhead platform is the platform from which the wells penetrate down into the sea bed When Maersk Oil started work on the Gorm field, it was thought 16 wells would be enough These would be connected to two wellhead platforms, each with nine slots The planned 16 wells and two sets of nine slots left only two slots in reserve If the reservoir turned out to have been considerably larger than the then known reserves, it would have been necessary to build a completely new wellhead platform That would have been a very big project, taking around two years to design and build and costing around half a billion kroner in today’s money “Yet, this is exactly what happened -- we wanted to drill more wells than we had slots for, so we were stuck We couldn’t proceed After Gorm, we started the Tyra project The system we used was fundamentally the same except that the two wellhead platforms had two sets of twelve slots, i e capacity for 24 wells,” explains Gross-Petersen “But then came the idea of horizontal wells It was clear that a horizontal well through relatively narrow oil-bearing layers would produce a much larger contact area than a vertical well and therefore had the potential to produce more oil It turned out to be a success, but it is worth remembering that it wasn’t only the idea of drilling horizontally that was innovative We also had to work out how to get more slots as quickly and as cheaply as possible ” The first experiments with horizontal wells were conducted on the Dan field Maersk Oil had found a slot on a satellite wellhead platform called Dan E The idea was to heave the existing conductor up, remove the well and then drill a new one, only horizontally “But I had another idea,” says Gross-Petersen “I proposed that we make three additional slots on one of the wellhead platforms on Dan F The innovative feature was that we basically located them on the outside of the platform This might seem risky at first glance because the weather in the North Sea is rough The impact from waves can be very high because the depth is just low enough for them to start to break at the platforms We had calculations that showed that when many wells are side by side, the total resistance to the waves is not the sum of the resistance of each pipe It is smaller There was what we call a shadow effect This meant that the wellhead platform could withstand slightly more impact from the waves than the individual calculations showed, allowing for more wells to be added to the wellhead platform ” Two other factors suggested that it could be done Firstly, the materials used were nearly always stronger than they were specified to be Secondly, if there was a requirement to use a 9 4 millimetre plate for a structure a 10 millimetre plate was normally used “To me, this meant that we could add more wells I was actually convinced that we could definitely build three slots on Dan F, which was being built offshore,” says Gross-Petersen And they did

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Tyra West , in the Danish North Sea

The first well was horizontal The result was mixed but there were positive signs Then came another two horizontal wells They were huge successes Then the old problem arose but in a different form Horizontal wells had produced overwhelming benefits – the ultimate recovery of oil could be potentially doubled and later tripled But that meant more wells and more slots were needed “We started to calculate We took everything into account; the shadow effect, the additional safety of thicker plates, the expectation that everything was stronger than the specifications actually dictated … and concluded that we could add no fewer than 12 additional wells,” says Gross-Petersen “In the end, 12 additional wells were placed on each platform, except one, which got 13 extra These are the wells that carried the Dan field through They are the key to how we managed to really get production going from the tight chalk fields in the Danish North Sea This applies to Gorm, Skjold, Dan, Tyra and all the other locations We have since added over 100 slots, which was obviously not free of charge, but we did avoid spending half a billion on a wellhead platform each time we needed an additional slot, and we could drill the wells much faster ” There have been plenty of other, smaller innovations Maersk Oil has patented some of them, while others are awaiting approval In connection with the COP15 conference in Copenhagen in 2009, Gross-Petersen wrote a report on energy-

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optimising production on behalf of the Danish operators He reviewed all of Maersk Oil’s, DONG’s and Hess’s facilities in the Danish North Sea This resulted in the development of a new safety valve system for flare gas recovery to ensure that when for safety reasons gas is removed from the production system and burnt, it is done safely Another invention credited to Gross-Petersen is used to make oil, water and gas flow continuously into separators from satellite platforms through multiphase pipelines without a hitch At high speeds, these substances flow fine, but at lower speeds in the pipeline, gas and oil have a tendency to collect in clusters, “burps” as he calls them But with this invention that problem is a thing of the past for Maersk Oil “A third area in which we have been extremely innovative is unmanned platforms We took inspiration from Texaco and Shell on a visit to the Gulf of Mexico But we made the platforms so simple that they are really nothing more than wellheads and risers and a few small diesel generators to produce electricity for instruments and safety devices There are no helicopter decks, no rescue boats, no fire pumps ” Dagmar and Kraka, which began production in the 90s, are based on a so-called STAR concept – Structure Adapted for Rig Installation “The STAR platform is a structure, but its actual origin is a simple platform that can be compared with an oil well in a field onshore,” says Gross-Petersen And the simplification is continuing in line with development “We also operate with monopiles However, they can only be used in 40-metre waters The capacity is reduced to four well slots here, but no crew or maintenance is required It is simply a pipe down into the sea bed, resembling slightly the technology used for offshore wind turbines ” But don’t the simple platforms often break down? “No For the first platforms of this type, the number of hours they have been out of operation has been low, which isn’t all that surprising considering how simple the construction is ” If there is a place where there is a real need for constant care, it is in the management of all of these facilities There are many examples, and Gross-Petersen gives just one, showing how he does his work in the spirit that lies behind the legendary requirements for employees of the A P Moller - Maersk Group “It was in Qatar We had purchased a rig but needed to convert it to a producing platform We bought processing equipment and installed it The rig had been in 30 metres of water in the North Sea so we had to extend the legs to the 60 metres we had in Qatar But when I saw the result, I was concerned about the stability of the rig [the rig’s ability to right itself, ed ] A rig like this is sailed out to where it will start operating While it is being towed in shallow water, the legs are drawn up so they rise into the air like towers from the deck I began to do some calculations and worked out that if the water began to come in over the railing, the rig would capsize because the legs were so much taller I also realised that this would

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happen in rough weather I therefore gave the captain a direct order that, if the weather turned bad, he had to lower the legs regardless of where he was and of the delay this might entail ” The weather did turn bad The captain lowered the legs and the rig did not capsize “I showed constant care on that occasion,” says Gross-Petersen

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Lars Nydahl Jørgensen
Title: Head of Exploration, Maersk Oil Age: 56 Employed: 1985 Leisure interests: Choir, hiking

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An oil pioneer’s encounter with foreign culture
In many industries, rapid deployment is not only an everyday occurrence, but also the salt of life This is also how it is in the oil industry Abroad is where an oil man wins his great victories and meets people of a completely different sort and with entirely different attitudes to those he is used to This was also how it was for Lars Nydahl Jørgensen, current Head of Exploration and member of the Maersk Oil Executive Team He is one of the Maersk Oil people who has left his mark on both the internationalisation and the professionalisation of the company If you ask him today what he is most proud of, ‘internationalisation’ and ‘professionalisation’ are what he mentions first His second proud moment is more specific It came when he and seven other Maersk Oil people opened the office in Qatar and, within four and a half months, began drilling the first well in what would become the Al Shaheen field “The capital Doha was not the sparkling city we know today When my wife and I wanted to find out where it was, we looked it up in an encyclopaedia and found a picture of a Bedouin tent in a desert This was before the Internet and virtually all there was to say about Doha However, we ended up having a good time there and established good contacts with other families with children The experts at Carsten Niebuhr Institute taught the first team of Maersk Oil people how we should behave in relation to the Muslim culture we would be living in ” It was less than six months after the first Gulf War The Qataris had decided that there was to be a tendering round in connection with the world’s biggest gas field, which is in the Arabian Gulf close to the border with Iran In the strata above the gas field, Shell had found oil a few years earlier, but they were unable to start production Their test wells showed potential of a paltry 200-300 barrels a day, which was too little to be profitable However, internationally, Maersk Oil was at that time clearly a “technological frontrunner in terms of drilling horizontal wells”, as Nydahl puts it After several years of testing, the company had discovered in the Danish North Sea that the extraction rate could be boosted from 5 to 25 per cent of all the oil in a reservoir “It was a real breakthrough,” says Lars Nydahl The Qatar field was unique because it is one of the few places in the world where there are rocks similar to the white chalk in the North Sea The Play, as the geologists call it, was right “When an oil company opens a new office, everyone starts out as a generalist Jobs have to be done You have to share the work and once in a while there are jobs

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Pacific Jade sailing with the first oil cargo from the Al-Shaheen field in 1994

On 14 December 1998, Qatar’s then Minister of Energy and Industry, H E Abdulla Bin Hamad Al Attiyah, inaugurates a new offshore installation on the Al-Shaheen field, with Maersk Oil management and employees

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that fall outside the normal areas of expertise of the individual employees This is how it’s been at Maersk Oil’s offices in Bangkok, Doha, Jakarta, Almaty, Muscat, Ashgabat, Algiers, Luanda, Rio and Houston,” explains Lars Nydahl In case the readers are not sure what cities these are, they are the capitals of the countries in which Maersk Oil has or has had exploration activities “Qatar was one of the projects in which the word monumental applies both to the scope of the task and the result achieved In three years, we had to perform two seismic surveys and drill five wells Drilling Manager Leif Velser couldn’t manage all the preparations for the first well himself, so he and the office manager, Svend Aage Andersen, delegated tasks I was the geologist on the team but ended up in charge of processes such as wireline logging and coiled tubing which, in simplified terms, involve various types of operations and measurements in the wells The former made some sense, but the latter was definitely not one of my areas of expertise I don’t remember whether we ever had any use for the services covered by the coiled tubing contract, but then I hoped there were enough experts looking over my shoulder ” This would never be acceptable in the streamlined Maersk Oil of 2012 If the office is small, specialists at head office provide the necessary assistance, although the decision-making paths are now much less hierarchical than they used to be But it was something else that Lars Nydahl remembers best from his time in Doha It was fun The eight people felt like pioneers “In our industry, it was a total exception for us to be able to start drilling four and a half months after arriving We were lucky in one crucial area A Maersk Drilling jack up rig was available, so we contracted it and this was one of the reasons why we could start quickly We started with a vertical well, followed by two horizontal ones and then two exploration wells After just two years, we had test-produced the first horizontal wells and we knew that the company would almost certainly make money in Qatar,” says Lars Nydahl Not many people thought Maersk Oil had much chance of realising the most optimistic expectations As written about in a previous chapter, by the early-90s Shell had already given up, the Canadian company Spectre had withdrawn, and, in Copenhagen, Jørgen Liboriussen was struggling to sell some of the interests in the licence to another company During this period, Maersk Oil was in contact with around 40 companies, all of which could have had a share on very favourable terms They all said no, thank you “Our little team of employees in the office held sweepstakes and most were of the opinion that there was only a fifty-fifty chance of getting the oil up And we had the most up-to-date data,” says Nydahl A hair-raising period? Lars Nydahl: “One or more companies could, at that time, have acquired up to a 40 per cent share of production that is now 300,000 barrels

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of oil a day The project in Qatar was a real elephant, as we now know It is probably the most successful fiasco in the history of the company Qatar, Algeria and Thailand were what we in the industry call real company makers ” Lars Nydahl stayed in Qatar for two years, after which he was called home and appointed chief geologist “I was chief geologist for nearly a whole year,” he comments “Then I was asked whether I wanted to go to Indonesia In the meantime, we had bought a house and settled down with the family in Copenhagen, so I called my wife and asked: ‘Are you sitting down?’ “Two minutes later, we had made the decision to strike camp and head to Jakarta ” The desire to encounter a new culture and gain new experiences was still strong The situation in Indonesia was reminiscent to some extent, but only some extent, of that in Qatar Maersk Oil’s licence areas were off East Kalimantan, taken over from another company The idea was to explore while trying to expand into new acreage However, Indonesia did not live up to the expectations in Copenhagen “We had a wide range of proposals for where to go in, but there was never the necessary support at head office in Denmark, where the size of the projects in Qatar and Algeria set the scale of our ambitions We only managed to drill two holes and they were dry Then it was over,” says Lars Nydahl There was no shortage of encounters with foreign culture, and sometimes dramatic encounters “As manager of the office in Jakarta, I once visited the provincial capital of East Kalimantan As was only fitting, I was to call on the provincial governor, the extremely influential head of the military and the chief of police,” explains Lars Nydahl “The latter turned out to be a fairly young man with the imposing title of brigadier general He was charming and gave a lively account of his work in the slums and prosperous areas of cities, in small towns and out in the country However, he found working out in the countryside worst of all ‘What is so bad about it?’ I asked ‘The damn crocodiles We have nothing but trouble with them,’ he answered ” It just so happens that, along the rivers in East Kalimantan, a number of tribes live close to the water and once in a while some unlucky bloke gets taken by a crocodile It is part of life “The policeman did not see things that way When a crocodile took a person, there was often no body or the body was badly knocked about It struck me that what he called trouble was not respectful of the people who had lost their lives Nor did it involve sympathy with their relatives It was about the irritation of a bureaucrat at all the work it caused him when he couldn’t establish the identity of the victims This opened my eyes to how differently we look at the value of a human life,” says Lars Nydahl There were also more entertaining interactions In Indonesia, Maersk Oil had a very large staff of local employees They were very proud to work for Maersk Oil, and they did a lot to show this externally

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“Our administration and personnel manager was called Sudaryanto He had previously been a colonel in the army and wasn’t just an unusually competent employee He also understood how to build a bridge between Indonesian culture and the culture in a modern Western company Really well He was so proud of his job at Maersk Oil that, when he built himself a new house, he had a large glass mosaic installed in the gable window with a fine seven-pointed white star on a light blue background Each point was nearly a metre long When I saw it, I asked myself how many employees in our part of the world who work under the flag with the seven-pointed star would dream of decorating their own house in this way at their own expense?” The Nydahl family’s experiences ended with an evacuation when Indonesian President Suharto was overthrown in 1998 During the upheaval, there were civil war-like conditions Most Western companies evacuated their employees, and Maersk Oil did the same “We came back after a week and spent 18 months under the new regime It was a very moving period as we watched the birth of a new democracy first hand On my return to Jakarta, I was welcomed like a king in the district where we lived I was one of the first Europeans to return, and was therefore a sign that normality would now be re-established ”

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Hans Flikkema
Title: Drilling Manager, Maersk Oil in Qatar Age: 59 Employed: 2007 (seconded to the DUC from Shell from 1983-87) Leisure interests: Sailing, history

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Pushing the envelope
Hans Flikkema had been called to see Torben Lynge, then personnel manager of Maersk Oil He had just travelled around the world looking for knowledge on horizontal wells and had submitted his travel expenses claim He knew what to expect Or so he thought Lynge looked up from the papers on his desk, but instead of giving Flikkema a dressing-down for having spent too much money, he said: “Hans You work for Maersk Oil now You don’t have to live off junk food You can eat a steak and drink a glass of red wine from time to time ” Flikkema laughs loudly down the phone from Qatar, where, just over 20 years later, he is now Maersk Oil’s Drilling Manager in the Al Shaheen field “It was good to know,” he says Johan Flikkema was born in a small village in the north of the Netherlands on 10 January 1953 As the Dutch are wont to do, his family immediately began calling him something else, Hans In this case, this tradition must have created considerable confusion There were 13 children in the family Laughter peals down the phone line again “I’m a proud mining engineer from the Technical University in Delft,” he says “But I fairly quickly gave up on the idea of working underground I am quite tall and quickly grew tired of bending down in the low mine galleries So I preferred to work on the surface ” That was in 1978 This was a golden era for the Netherlands when all the major fields in the Dutch part of the North Sea started to go into production “The world was at our feet The oil crisis in the wake of the Yom Kippur war in 1973 was over Demand was growing and all the big companies were competing to chuck oil and gas onto the market ” At that time, the Delft University of Technology was practically a branch of the oil giant Royal Dutch Shell, which is now the fifth largest oil company in the world Shell got its hands on the young mining engineer even before he graduated A degree in mining engineering was about the closest a young person could come to meeting the needs of the oil companies, so such graduates were in great demand Flikkema was literally employed before he knew it himself “On the Monday after I had passed my exams, I received an invitation from the company Would I like to visit them? Almost as soon as I had walked in the door, they placed a contract on the table ready to be signed I never even had a job interview,” he explains

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In 2008, Maersk Oil set a new world record with the longest horizontal well – 12 3 kilometres

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The world was at his feet On his first day at work, an air ticket was thrust into his hand and he was sent to Brunei “That was how things worked back then ” Shell had discovered a number of complicated fields in Brunei a few years previously This was where Hans Flikkema met the man who would later become CEO of Maersk Oil, Kjeld Fjeldgaard, who had been seconded to Shell “A man of a special calibre,” says Flikkema “A strong personality We had a very special relationship, often characterised by heated discussions He managed the company in a manner that was different from today but I am fairly convinced that he was the reason I came to Copenhagen ” That was in March 1983 Flikkema was on the way to his next post in Papua New Guinea “A few days before departure, I received a message from Shell headquarters “Sorry, but your next pay cheque will not be issued in Papua New Guinea, but in Copenhagen’ Fjeldgaard had pulled some strings I had been seconded to Maersk Oil,” says Flikkema “Naturally, we didn’t know much about Denmark but we had no idea how big a role A P Moller, the company, played in the national consciousness I will never forget the day I was on the way home from work to our house in Birkerød, and my wife called and asked me to drop by the market to pick up a few things on the way I bought a lot of things, went to the till and discovered that I had forgotten my wallet at the office I apologised and was about to leave the shop without the goods when the woman at the till saw my A P Moller badge ‘No problem,’ she said ‘We’ll send the bill in the morning And you will also get a 10 per cent discount because you work for A P Moller ’ I was speechless The trust in the company was actually so overwhelming that I didn’t need to take out my credit card to pay a restaurant bill A Maersk Oil business card was enough ” In 1987, Flikkema returned to Shell in Malaysia Prior to that, however, Fjeldgaard had sent him around the world to figure out how the efficiency of the wells in the Danish sector of the North Sea could be enhanced “It was a fantastic time,” he says “I went wherever information could be found The horizontal wells were what it was all about The principle was not new, but the details were After visits to Alaska and Canada, I ended up in a town in Italy where the French company Elf Aquitaine, which later became Total, was drilling horizontal wells in limestone This was a decisive moment This was precisely the experience we were looking for and I returned to Copenhagen with the good news,” says Flikkema The expertise was with the Elf subsidiary Horwell, which had its headquarters in Paris Flikkema travelled there and at the very first meeting he had an experience that he will never forget “The manager of Horwell, Janesini was his name, had put a few drawings of horizontal wells up on the screen and was standing right behind

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The G-platform at the Al-Shaheen field in Qatar The field produces 300,000 barrels of oil a day

me to explain what we were looking at Suddenly he grabbed my head and turned it so violently to the side that I thought he wanted to break my neck “‘You can see what it involves,’ he said “‘Normally you drill from top to bottom Now you drill horizontally Gravity changes everything!’ “It was a paradigm shift, a simple experience that gave me great insight I was enthusiastic and fortunately the Maersk Oil management were too Horizontal wells began to be drilled in the Danish North Sea and by 2008 they were such a great success in Qatar that Maersk Oil was listed in the Guinness Book of World Records with the longest horizontal well in the world at 40,320 feet, equivalent to 12 3 kilometres ” When Hans Flikkema left Shell in 2007, Maersk Oil was at the top of the list of companies he wanted to work for The reason was the new management style “I was attracted by the direct interaction I mean you could get a decision made in the morning and start implementing it on the same afternoon,” he says However, the experience he had in the 80s was also important “The main reason I went to Maersk Oil in 2007 was the experience I had had with my line manager in the 80s, Svend Aage Hansen He was manager in Qatar, and we were not only colleagues but also friends He was a fantastic person with extraordinary charisma Always present, always on the ball; I noticed this every single time I entered his office ”

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And what does Maersk Oil do better than other oil companies today, at least according to Hans Flikkema? The reply is as if taken from American author Tom Wolfe’s book on the pioneers of the US space programme, The Right Stuff: “We’re pushing the envelope of existing technologies ” Pushing the envelope has nothing to do with paper envelopes It comes from a special risk curve that is used in mathematics In everyday language, in the oil industry this sentence has gradually become synonymous with crossing borders of innovation It is not about risking life and limb or compromising the operation At the bottom of each email Hans Flikkema sends today it says: “My personal stand on Incident-Free is that I can never justify to myself or others that anybody working under my responsibility can get injured ” Pushing the envelope is not about compromising on safety but about daring to let inventiveness meet reality and seeing whether it leads to new technological insight “Maybe we drill faster than others Speed things up The drill breaks But we learn from that And most importantly of all: if we have prepared the test properly, we are not reproached if it goes wrong ”

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Anders Würtzen
Title: Head of Group Public Affairs, A P Moller - Maersk Age: 50 Employed: 1988 Leisure interests: Many different interests

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The negotiator
Anders Würtzen is sorry He does not have many anecdotes to share But that does not make his story any less interesting Anders Würtzen, now Head of Group Public Affairs at A P Moller - Maersk, is part of the story of the concession agreement between A P Moller - Maersk and the Danish State The concession agreement is essential to the story of the basis for and establishment and development of Maersk Oil, which, in turn, is part of the history of Denmark as an oil state Since 1962, when Arnold Peter Møller was granted sole rights to explore throughout Denmark, the terms of the concession have been changed numerous times The best known negotiations are probably those in 2003, when the Danish State and A P Moller - Maersk negotiated the terms that would apply after the end of the original 50-year term of the sole rights in July 2012 Anders Würtzen was involved in the negotiations in 2003 as deputy chief executive of Maersk Oil “We have to go back in time to understand the situation we found ourselves in in 2003 40 years of long-term arrangements and investments lay behind us and there had been doubt for a long time as to whether it was even possible to establish commercially sustainable production from the Danish sector,” says Anders Würtzen “We had made a lot of discoveries but they were of limited size In 1972, we passed the first milestone and met the requirement of commercial production within ten years of being granted the sole rights ” At the time of the first production in the North Sea, the Danish State wanted to reduce its dependence on Arabian oil-producing countries after the dramatic oil price rises during the oil crises “Throughout the 70s and as a result of the energy crisis, there was a political debate on the more fundamental principles of oil extraction in relation to self-sufficiency, state participation, management of oil activities, state co-ownership and the establishment of a state oil company And there was also a hope that, as in Norway, volumes of oil were just waiting to be extracted from the Danish part of the North Sea,” recalls Würtzen However, it was not as easy as people might have hoped, and Maersk Oil and its partners in DUC struggled to make production commercial Danish production of oil and gas began from the Dan field, but production was initially disappointing Then Gorm came into production in 1981 It was a huge facility and a considerable investment for Maersk Oil, but this field did not produce that much either Other fields were added but right up to the end of the 80s the extraction of oil from the Danish fields did not turn much of a profit Maersk Oil was not favoured by the

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price of oil either In 1981, everyone expected it to rise but it fell and was around 10 dollars a barrel at the end of the 90s Throughout the 90s, Maersk Oil had a return on its investments of under 10 per cent From the point of view of the company, it was not particularly attractive, given the risk involved “We had spent a lot of money on investments in exploration and production facilities When you have to wait for many years to recoup investments, it gets expensive, taking interest into consideration, and at that time the interest rate was not 1 per cent,” says Anders Würtzen But at the end of the 80s, Maersk Oil finally cracked the code to the Danish subsoil “This dense layer of limestone in the subsoil was our biggest challenge New methods were required to boost production and the breakthrough came with the development of horizontal well drilling and well technology At the same time, we began to invest in small, gradual expansions of the installations so that we didn’t have to spend billions on building big new production facilities and then wait to see whether production went well It was essential for the company that the efficiency of the fields grew,” says Anders Würtzen as he gets up to fetch a lump of rock that looks like a large split plug from the shelf behind his desk It is heavy, sandstone, yellow with a few fairly thin black lines It seems completely impenetrable I hold it in my hands and think that even if I went at it for an hour with a hammer and chisel, it would be impossible to see that I had tried to strike even the smallest crack in it “If you took a similar plug from the more common sandstone fields in the Norwegian subsoil and used it as a plug in a bath full of water, the water would stay in the tub for 14 days If you used Danish limestone as a plug, the bath would not be empty for 30 years This gives you an idea of how dense the Danish subsoil is,” explains Würtzen With the introduction of new extraction methods and technologies, the atmosphere at Maersk Oil became more optimistic By employing and training its own engineers, the company matured In the 90s it had become so specialised that it was ahead of its competitors in specific technological areas, which made it the leading company in extraction from the dense layers of chalk in the Danish North Sea Production of oil and gas has since increased dramatically and has contributed to Denmark’s selfsufficiency in oil and gas since 1997 Therefore, when the State began the 2003 negotiations with a motion in the Danish Parliament, the knowledge and understanding of the Danish subsoil and its potential among Maersk Oil staff, politicians and civil servants was greater than during the debates of the 70s and 80s “There may have been some in Denmark who still thought there was as much oil in the Danish sector as in the Norwegian sector But there wasn’t and the parties to the negotiations knew this They also knew that it was difficult to extract During the discussions leading to the 2003 agreement, the expectations were therefore kept low A number of the old requirements were dropped and the focus was more on how Danish society

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Mærsk Mc-Kinney Møller and the then Danish Minister of Trade, Arne Christiansen (Liberal party), toast the signing of the gas agreement between A P Møller and the Danish state on 9 March 1979

could get the most out of the North Sea,” says Würtzen “There will probably always be discussion on whether the fiscal balance is right when it comes to oil concessions Oil is very important to the economy but if you tax oil companies too heavily you don’t get the necessary investments to optimise and extend production This makes the cake smaller and the tax revenue falls There is more oil in the North Sea but extracting it requires investments in expensive new technology and new methods ” The negotiations in 2003 ended in one of the most important and most debated agreements between the State and a private enterprise in the recent history of Denmark It filled six pages and had 11 main points Maersk Oil was granted sole rights until 2042 But not without paying a price The agreement changed the distribution of the profit between the DUC and the state with effect from 1 January 2004 One of the results of this change was that the DUC had to pay a 20 per cent profit share to the State up to July 2012, when the State, via the Danish North Sea Fund, becomes a partner in the DUC with a share of 20 per cent at no charge In this way the state received a much higher share of the profit than in the original agreement and this applied eight-nine years in advance In the area of tax, the special deduction for plant investment, the hydrocarbon deduction, was dramatically reduced with immediate effect, and the hydrocarbon tax rate was reduced from

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70 per cent to 52 per cent There were also a number of changes in the field taxes, production tax and pipeline tax The tax level for the DUC companies had been just over 40 per cent of profit for a few years With the new agreement in 2003, the state expected to receive at least 60 per cent of the profit With the subsequent rise in the price of oil, the state has received even more In fact, it has taken two thirds of profits since 2003 “On any additional earnings we pay marginal tax of 71 per cent in the Danish North Sea So, even if we assume the risk of considerable new investments, the state gets 2 kroner for every one kroner of profit we receive No other business activities would be able to deliver this,” says Anders Würtzen “During our negotiations with the State in 2003, we each had a number of demands and wishes On the one hand, we wanted to secure an extension of the sole rights and constant conditions in the long term so that we could make the necessary investments and organise production accordingly On the other, the Government wanted continued high investment activity and the security of a considerably higher share of the profit than previously This succeeded But we couldn’t have put the same agreement in place without the compensation agreement ” The compensation agreement involved the DUC companies being compensated for “effects of existing legislation or of new Acts and other rules that specifically affected producers of hydrocarbons in the Danish part of the North Sea” “This was part of the great balance that was struck in the negotiations, in which the individual items were weighed against each other, resulting in the compromise,” says Anders Würtzen Maersk Oil has subsequently, as a result of the agreement, invested considerable amounts in the Danish oil and gas fields The agreement has actually resulted in more than 30 billion kroner being invested in increasing extraction in this relatively short period of time Since 2003, the DUC partners have paid over 200 billion kroner in tax to the Danish State and more than 13,000 people are directly or indirectly employed by the activities in the Danish part of the North Sea Eight years later, in the year to which the original agreement would have run if it had not been extended in 2003, the government has decided to carry out a service inspection of the agreement “The inspection concerns not only us,” remarks Würtzen, clearly aware that the general perception of the service inspection is that it only concerns the A P Moller-Maersk agreement with the State But since 1962, when A P Moller was granted sole rights to conduct exploration in the entire Danish sector, more than 55 different, mainly private but also state oil companies have actively tried to find oil and gas in the subsoil In ten years’ time, other oil companies outside DUC are expected to deliver a significant part of the production from the Danish North Sea However, the debate about Denmark as an oil

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state has flared up again and has put the 2003 concession agreement back in the spotlight Rising oil prices, among other things, have created a political debate on whether the State has received enough tax revenue from North Sea oil “Oil prices rose after 2003, fell during the international financial crisis in 2008 and then rose again The price of oil will continue to rise and fall in the future The parties behind the North Sea agreement in 2003 knew this, of course Therefore, the focus was on ensuring that the State received a high share of profit with both low and high oil prices,” says Anders Würtzen “The current agreement supplies everything the parties wanted and emphasised during the negotiations The agreement works and continued success in the North Sea is linked to trust in each other as credible contracting parties A service inspection can help shed light on the conditions and opportunities in the North Sea with a view to the future Therefore, we are also happy to participate,” says Anders Würtzen, who is following the service inspection with Maersk Oil

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Tim Magee
Title: Senior HSSEQ Advisor, Maersk Oil in Kazakhstan Age: 61 Employed: 1991 Leisure interests: Hunting, guitar, music

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Safety as a mindset
In its best form, health and safety in the workplace are a mindset But you need training and coaching to get there When you get up in the morning until you go to bed at night you should ideally be aware that every single action you take or decision you make has a safety aspect that can have consequences for yourself, your colleagues or the entire company These are consequences that only a few may have thought about when the search for oil and gas in the ground and subsea began 150 years ago Spurred on by the dream of a big discovery, men have been willing to risk life and limb in the hunt for oil and gas Not long ago, the “Safety Representative” had very little say in many Danish companies, not just in the oil industry But precisely because high risk is part of the oil industry’s DNA, extreme safety consciousness must be part of it as well According to the 61-year-old Senior Health, Safety, Security, Environment and Quality Management (HSSEQ) Advisor Tim Magee, Maersk Oil is an example of how to make safety awareness part of an oil company’s DNA Tim Magee was born in London and trained as a professional soldier in the British army He specialised in reconnaissance and surveying and served in places including Germany and Northern Ireland In 1972, his training led him to the US-based company Seismograph Services Ltd (SSL) which specialised in surveys and seismic preliminary surveys in difficult and inaccessible areas “I spent 18 years in 30 different countries and have worked under every condition from impenetrable jungles to deserts and swamps,” he explains In January 1991, he came to Maersk Oil as Chief Surveyor and spent many years on everything from mapping and positioning to seismic surveys, shallow gas surveys and geotechnical surveys, primarily in the Exploration Department In other words, Tim Magee has been on the frontline for many years, out where exploration begins Magee is currently in Kazakhstan, but I caught him on the phone in Doha, the capital of Qatar And it is from Maersk Oil’s operations in the Al Shaheen field in the Arabian Gulf that he takes the examples that show he knows what he is talking about “Recently, a problem was registered with one of the helicopters transporting people to and from the platforms in Qatar There have previously been problems with

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All employees and many contractors have taken safety workshops as part of Maersk Oil’s vision to be incid in this photo, on their way to work at the Dunga field in Kazakhstan

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dent free More than 6,000 people have participated in these workshops, including the three employees

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the rudders on these helicopters So instead of just grounding this one helicopter, the management in Doha decided to stop all flights They wanted to find out whether it was an isolated problem or a general one before resuming the flights We are therefore currently transporting people to the platform by sea This has been an extremely costly decision for us, both in terms of time and efficiency, because sailing can take up to 12 hours each way Ten years ago, we might have found a good reason to continue the flights,” says Magee “The Drilling Manager in Qatar has also stopped production on a rig for a day because there were too many minor incidents The guts to declare this kind of time out is essential and sends an important signal that safety is a priority – even when it costs time and money ” These kinds of decisions can cost Maersk Oil money and/or production in the short term And if there is any industry in which time is money, it is the oil industry But these decisions are not only right in the long term; they may also prevent the company from suffering a disaster In the oil industry, the worst disasters are of a size and scope that can wipe a company off the face of the earth But avoiding accidents is not the same as avoiding risks, according to Tim Magee “What matters is that we as a company, and as individuals, understand the risks associated with our decisions and actions, and that every possible precaution is taken to remove or reduce that risk to an acceptable level ” “Until a few years ago, the quality and efforts with regard to safety were extremely varied in the oil industry,” he says “In exploration, it was often the local manager who set the standards And the standards were not always the same ” People like Tim Magee have argued in favour of uniform standards with centrally established and enforced rules covering health, safety, security, the environment and quality When Thomas Thune Andersen became CEO in 2005, the focus shifted to the systemisation of safety standards, and the work continued when Jakob Thomasen took office in September 2009 It was no walk in the park, because there was no decision on who should be responsible for ensuring that standards are disseminated throughout the entire company “Our Corporate Affairs department was established to set a centralised focus on these important areas within HSSEQ, but within a year it had been dropped,” says Tim Magee A decisive turning point was when Jakob Thomasen took up his position: “Two years ago, when we started Incident-Free, we held a couple of two-day workshops for the top 100 employees in Maersk Oil We invited people from every part of the operation Jakob Thomasen made it clear that safety had to be improved, giving a few personal examples to illustrate why safety topped his agenda, and more importantly he said he expected a noticeable change in future A few months later, I could see that that attitudes were beginning to change in critical areas Instead of resisting yet another corporate initiative, the local country managers were asking for help to implement it The attitudes were beginning to change; the

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mindset had changed,” says Tim Magee “Safety is part of Jakob’s mindset As a consequence, Maersk Oil has become a safer and better place to work since his arrival on the scene,” says Tim Magee There is no shortage of concrete results The Incident-Free philosophy and programme are up and running In 2011, more than 6,000 Maersk Oil employees and contract staff went through the programme, and although Tim Magee has found awareness-raising to be an uphill battle, great progress has been made “When all factors and parameters are taken into account, we lie pretty much in the middle of the field compared to other oil companies in safety, security and quality,” says Magee “But in some areas we are far ahead of our competitors We have brought the number of personal injuries down and the same applies to the number of major incidents The statistics are difficult to interpret because they don’t say much about the culture It’s a journey – not a destination And so we have a lot of work ahead of us ” There is another reason why this process is important “We need role models,” says Tim Magee “People who, via their personal conduct, demonstrate that they mean what they say when they talk about increased focus on employee health, safety, security and our impact on the environment ” Who is the role model? According to Magee the short answer is “… the man who shows the way through his behaviour and is ready to intervene when he sees something that is unsafe ” However, he also talks about the tough, long haul ahead that involves other ways of adapting safety awareness at Maersk Oil Greater confidence comes with greater knowledge and experience of a specific task This is beneficial – up to a point Many have a tendency to lose respect for the risks associated with a task they have performed over an extended period of time Experience does not necessarily lead to indifference, but it can lead to carelessness As a person’s skills and self-confidence grow, an exaggerated selfconfidence often sneaks into his or her mind, which then leads to the attitude: “Been there, done that I know everything I need to know about this task and there is nothing else I need to learn ” What makes these two paradigms so treacherous is that they thrive in the subconscious Many people are simply not aware that they play a role in their consciousness, and that they can lead to fatal miscalculations in certain situations “We must always feel vulnerable so that we keep our respect for the job and the mindset ”

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Stig Dilling
Title: Drilling Advisor, Maersk Oil in Kazakhstan Age: 55 Employed: 1981 Leisure interests: Golf, mountain biking, skiing

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The globetrotter
For the first time in our conversation, a look of astonishment crosses Stig Dilling’s face “Can you tell me why it’s so hard to entice a young engineer to Kazakhstan?” he asks I have found a brother-in-arms “No,” I answer, “I really can’t ” Nor have I ever understood how a journalist can think to turn down a hardship posting “Aktau may not be a dream posting for a Danish family with children,” I add cautiously “Listen When I was employed by the company, we were perhaps 20 per cent Danes Then more and more arrived Finally, we had whole departments that were purely Danish The trend is now moving in the opposite direction again We are finding it harder and harder to attract engineers I don’t understand it It’s an attractive industry with loads of challenges ” We sit and think about the lack of spirit of adventure among young people “Oh well Now I’m in Kazakhstan The drilling rigs there are a bit smaller and they are on land instead of the sea bed We have offices nearby and there is a camp a few kilometres away where the workers live They work four weeks at a time in 12-hour shifts Stig Dilling, Drilling Advisor at Maersk Oil, steals a glance at me My right hand still bears the mark of his handshake and he has smiling eyes Stig Dilling says what he thinks In his comments, I hear an echo of the rough, bantering, barbed tone and humour you can hear on any Danish building site He is no rough neck but he leaves the distinct impression that he would earn their respect As his story progresses, I discover that working rules can be entertaining “There are a number of general working standards and safety regulations for Maersk Oil that we follow all over the world Remember that we work with virtually all nationalities The rules can be adapted locally but there are also a number of local rules that just have to be followed This produces interesting results,” says Stig Dilling “One rule is that our employees must have their blood pressure taken and undergo an alcohol test every day ” “Blood pressure?” “Yes Every single day, the employees in the field queue up to have their blood pressure taken ”

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“Why?” “Well, we have to ensure that people are healthy and that they have not drunk alcohol before they go to work We have zero tolerance for alcohol It goes without saying that we can’t have people walking or driving about intoxicated If you don’t comply with the safety rules, things can go terribly wrong But perhaps it’s also because of all the stress the local traffic can cause them,” laughs Dilling “Joking aside, though: The biggest problem when you are working on land is road transport If there is a place where risk is a factor it is here In the oil industry as a whole, far more people are killed in vehicles on roads than working on platforms The problem naturally affects onshore operations above all, where there is more vehicle transport than in connection with offshore operations A stream of tankers, cars, buses and trucks flows back and forth to and from the camp and in all directions “In Kazakhstan, the challenge is made worse by the fact that the roads are in such poor condition and people drive differently Despite a general speed limit of 90 km/h on roads, people drive faster The number of road users is also increasing with the expansion of the oil activities And road safety is not helped by the winters being long, with temperatures down to minus 40 degrees Celsius, while the summers are the exact opposite with unbelievably dry heat and temperatures often up to 40-50 degrees Celsius ” Corruption is another problem Maersk Oil has a set of very strict rules against corruption but they were made more specific and stricter recently after Maersk Oil rolled out a major anticorruption training programme in the organisation The result is that Stig Dilling now behaves in this regard in a manner that many other foreigners do not “In that part of the world you are often stopped by a policeman even though you haven’t done anything The only reason for waving you over is to squeeze a bit of money out of you,” says Dilling “Nine out of ten hand him a note and drive on I mean, really, the man isn’t paid enough and the extortion money is all that keeps him and his family afloat But this is against our policy, which can lead to interesting episodes Just before Easter I was on my way to the office when I was stopped by the police, who were hoping to catch drunk drivers I didn’t have my passport on me It was in for registration Of course, I hadn’t touched a drop So he kept going on about the passport Wouldn’t let up He had to see my passport, he said Before I left home, I had taken the money out of my wallet and, by putting my hand in my pocket I could have given him the note he was looking for, but we aren’t allowed to do that Finally, I showed him my empty wallet A sad little smile crossed his face, then he shook his head and let me drive on I have a lot of sympathy for such a man ” “But generally, things have got a lot better than the first time I was here Back then we were often stopped by the police in Almaty for imaginary offences in the hope

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Maersk Oil has initiated a billion dollar development of the Dunga field in Kazakhstan When the development is finalised, production is expected to be 30,000 barrels of oil per day

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of a little extra pocket money I think I have the record for being stopped; six times on the same trip Here in Aktau it hardly ever happens anymore ” When the talk turns to work, Stig Dilling becomes enthusiastic In Angola, he worked with a Maersk Oil team that included people from France, Scotland, the U S , Nigeria, Angola, Argentina and Denmark “If you want, you can travel the world and work in many different societies I have worked in Indonesia and the Middle East with my entire family I have also worked in Africa and Central Asia and met all kinds of people This is one of the great joys of my job The new recruits are highly skilled, ready to take on the challenges Their qualifications span the whole range of skills from low voltage to high voltage to physics to chemistry to geology, you name it,” he says “In Kazakhstan, we are currently collecting the equipment to be used in further developing our field here and putting the teams together ” Maersk Oil will drill 198 wells with four drilling rigs in this latest expansion as part of a billion-dollar field development plan that will take production from the current 6,000 barrels of oil a day to 30,000 barrels Dilling expects to spend 19 days per well The wells are vertical and have to reach a depth of 1,750 metres The reservoir is in sand “In Angola, we drilled even deeper, and we first had to pass through a layer of salt We are slowly gaining more and more experience of sand and we also have all kinds of new people who know a lot about it,” says Stig Dilling The field in Kazakhstan, Dunga, is an old Soviet field that was tested in the late60s and early-70s When the Soviet empire collapsed in the 90s, two companies from Oman and Portugal entered the frame and a little later Maersk Oil became a partner and operator The concession is currently divided into 60 per cent for Maersk Oil, 20 per cent for the two others, and the Kazakh government is represented as the controlling authority “The target is 30,000 barrels a day We expect to be able to deliver this If we don’t, we should just go home ” The train has started in Kazakhstan If all goes to plan, the oil from the new wells will begin to flow at the end of 2012 The first well will be drilled on 1 August Then work begins on the flow lines and trunklines that will take the oil to the storage facilities With everything included, a drilling rig in Kazakhstan costs around 250,000 kroner a day The last well drilled in Angola cost around 3 5 million kroner a day, and the whole operation cost around 5 5 kroner million a day “This is why we oil people have a slightly abstract relationship with money We see an onshore operation, which costs a fraction of an offshore operation, and offshore operations as being equal and get just as bored and irritated by them if something goes wrong, regardless of whether the operation is cheap or expensive The figures don’t really mean anything The only thing that concerns us is time We must be efficient and deliver an Incident-Free operation The company

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has made the decision and so there are a just a specific number of billion kroner available The only thing we can do is to make it as efficient and safe as possible and keep to the plans made Over time, I have discovered that this is a good mindset to have when wrangling with these huge projects You shouldn’t focus on the project’s size or on the enormous sums in the budgets You should focus on time and safety “The challenge is to get the right people for the right tasks and it should be attractive to live in the places where we operate, including Aktau Put diplomatically, this is somewhat of an uphill battle But we will succeed eventually ”

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Henrik Tirsgaard
Title: Head of Geoscience, Maersk Oil Age: 50 Employed: 1991 Leisure interests: Italian opera, World War II history, Austrian wine, Liverpool FC

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From local to global
“HEY! Now we’re moving ” That was in 2005 Maersk Oil had acquired the UK assets of the U S company KerrMcGee for around 3 billion dollars and thus gained control of ten fields in the UK North Sea “It changed everything,” says Maersk Oil’s head geologist, Henrik Tirsgaard “It gave us new working opportunities – people were getting a bit tired of only working in the chalk in the Danish North Sea and the Al Shaheen field in Qatar The acquisition of Kerr-McGee UK opened up new opportunities and created new visions ” It also led to a collision between two corporate cultures, which put a damper on the enthusiasm among the Maersk Oil people for a while It was a collision that indicated more than anything else what changed in the corporate culture Tirsgaard talks about it in a lively, involved manner, but also with one important reservation: “Assessments of changes in corporate culture are always extremely subjective Every single employee has their own unique perception So this is my experience of the difference between the old and the new ” “The wow atmosphere at Maersk Oil was because many people had interpreted the old strategy as an isolationist attempt to avoid becoming too big,” explains Tirsgaard “Management dreamt about the seven-legged goat, but many employees saw it as an excuse for not expanding activities They had experienced again and again that, whenever they glimpsed new opportunities to make a good discovery, new requirements were laid down But now we were going out into the world The change in culture was now to be realised ” The two corporate cultures were revealed for the first time when, one year after the merger, Maersk Oil held a large internal conference for all geologists and geophysicists in the company All the old and new Maersk Oil employees met for the first time to debate the profession, technology and working methods “This gave rise to a lot of tension,” says Tirsgaard The older Maersk Oil people, in particular, found the former Kerr-McGee employees’ approach to the subjects and presentations rather lightweight “What exactly can they do,” they whispered in the corners In return, the Kerr-McGee people found the Maersk Oil employees to be narrow specialists obsessed with totally meaningless details “It’s necessary to concentrate on the big picture,” they stressed “Superficial,” snarled the Maersk Oil employees

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There was a reason for the difference in outlook between the generalists at KerrMcGee and the specialists at Maersk Oil “We were proud of our leading-edge expertise and they were proud of their working methods We had world records in horizontal wells and water injection And we knew more than most people about how liquids behave in the rocks in the subsoil ‘If you don’t understand those types of detail, you can’t understand the rest,’ said our geologists In return, Kerr-McGee had built up successful exploration methods in the UK North Sea from which we benefit today when we drill for oil in other parts of the world such as Brazil, Angola and the Gulf of Mexico in the USA ” This, then, is the long-term benefit of the merger: the expensive, difficult conditions under which a company explores for oil today often involve great depths and high pressure Maersk Oil’s diligence with technical details can benefit the company, while Kerr-McGee’s tradition of focusing efficiently on the big picture contributes to an understanding that is necessary to the ability to dare act in high-risk situations However, there was also another challenge The Maersk Oil culture appeared arrogant to outsiders and functioned internally as a patriarchy The company was very top-led, which had created a strong hierarchy This meant employees felt considerable loyalty to the company but there were things you did not talk about The organisation thus came to resemble a big family, one which had not developed in line with the world around it “You definitely didn’t get a pat on the back if you talked about measuring our success and efficiency in relation to the market,” says Henrik Tirsgaard “The focus was extremely inward because a comparison with others might mean that we perhaps weren’t doing as well as we thought we were, or as our owners thought And that wouldn’t look good “The turning point was the change of management in 2004 At that time, it had become clear to many that the closed, stiff top management had not led to development, in both technological and management terms The world around us had moved faster than the top management had been able to keep up with ” So when Thomas Thune Andersen entered the frame, new opportunities opened up The management suddenly realised that, in order to survive as a business, the company would have to work together better and more efficiently and have wider distribution of responsibility and a better-founded decision-making process “The person who really accelerated change is our current CEO, Jakob Thomasen He views Maersk Oil as a thoroughly knowledge-based company and is therefore more focused on creating value via efficient organisational dynamics and structures than on maintaining a narrow, stiff management hierarchy ” The differences in culture between Copenhagen and the former Kerr-McGee employees in Aberdeen have now virtually disappeared Every second year since the takeover, joint conferences have been organised As early as at the second one,

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The Janice installation in the UK North Sea Janice was one of three producing installations that Maersk Oil acquired in connection with the purchase of Kerr-McGee’s UK assets in 2005

people felt a completely different respect for each other’s expertise compared to the first meeting There are still discussions about the relationship between Copenhagen and Aberdeen, but they have recently primarily been about equality more than expertise The shocks caused by the transformation from a little Danish oil company to a global player are noticeable throughout the organisation Thomas Thune Andersen was responsible for the acquisition of Kerr-McGee UK and he was able to do it not only because he was bolder but also because he had the clear support of A P Moller - Maersk “Maersk Oil is now an equal partner with other business units in the A P Moller - Maersk Group,” says Henrik Tirsgaard “We have tested the synergy potential between us and found the most obvious potential lies in administration, HR and communication, while there is less than expected in other areas For Maersk Oil’s understanding of itself, the decisive factor was when Nils S Andersen said: ‘We will now invest in oil activities’ Today Maersk Oil is seen as more than a cash cow for the shipping part; Maersk Oil also recognises that if the company had not been part of the A P Moller - Maersk Group, it would perhaps not have survived as an independent oil company We have learned to appreciate each other ”

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Seismic interpretation is crucial to an oil company’s ability to find and produce oil and gas effectively

Is the Maersk Oil culture strong enough to meet the challenges facing the company? “In the oil industry, we are comparable to an intelligent university graduate with great potential We have loads of skilled employees and a solid recruitment policy, but we lack global experience This is where we are vulnerable We are now competing with the big boys in the class We have the drive and the energy necessary, but we lack experience,” says Tirsgaard “It’s not all that easy to expand,” he continues “The oil is primarily in the Middle East but the concessions are mostly held by large national oil companies and they rarely have any interest in inviting others to join them We have both the strength and the will to invest but it is difficult to gain access to the attractive areas Collaboration with local governments and national oil companies can be politically risky and many international oil companies are fighting for the same rights Finally, there is extraordinarily tough competition from China The Chinese don’t seem to take much notice of market prices but have supply security as a significant driving force In many cases, they are willing to overbid and have been very aggressive in places such as Angola and Brazil It basically seems as if the negotiators from the state-owned Chinese oil companies come with the attitude: ‘We don’t need to make a profit, we just need access’,” says Tirsgaard

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What has changed, and what has not, in the corporate culture of Maersk Oil? Henrik Tirsgaard is in no doubt: “It remains a respected, solid company from a small, neutral nation We are known for a range of specialist skills and for delivering on time within the agreed budget Our partners appreciate this a great deal We have the classic A P Moller -Maersk virtues and we take good care of our employees ” “But we need to shake off the burden of the past, open up to the world around us and be prepared to measure ourselves in relation to our competitors on the global oil market,” says Tirsgaard That is a big culture shift ”We must recognise that we are no longer enough as we are and that we must constantly develop and improve professionally and managerially The growing interest in alternative energy sources is another significant challenge There is stiff competition for talent, and naturally enough universities don’t just focus on meeting our requirements They also train people in skills other than those we need Worldwide we employ between 10 and 15 graduate geologists and geophysicists every year Unfortunately, only 10 per cent of them are Danes We would like this percentage to be a bit higher ” Maersk Oil’s acquisition of Kerr-McGee UK was one of the biggest turning points in the history of the company The enthusiasm triggered by this first international acquisition took Maersk Oil a big step on the path towards internationalisation but also revealed weaknesses in the old organisation Now comes the hard work

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Steve Daines
Title: Head of Exploration, USA and Brazil, Maersk Oil Age: 57 Employed: 2005 Leisure interests: Photography, music, cycling, travel

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The man in the mirror
When Steve Daines, current Head of Exploration for Maersk Oil in the US Gulf of Mexico and Brazil, came to Maersk Oil in 2005, he had the experience that meant he could rightly be called An Oil Man He was born in the UK and studied geology at the University of Liverpool “After university, I wanted to go out into the world Perhaps it wasn’t a longing to go abroad, but I was very curious about getting to know the rest of the world and finding out what it could offer I was lucky I got a job in a small geological service company called Exploration Logging It had its roots in Sacramento, California, and offered its services to most of the large international oil companies This was my start, and my first posting was in Singapore ” Daines travelled around a great deal He had jobs in the waters off Japan, Australia, Pakistan, India, Dubai and Indonesia, among other places, contracted to operators including Shell, Exxon, Woodside and Chevron “I spent two and a half years on the front line in this business,” says Steve Daines When the front line service was over, he got a job in the head office in Sacramento His job was to update and rewrite a manual for predicting pore pressure This is a very important factor in oil exploration It describes the pressure in the rock being drilled, is measured in pounds per square inch (PSI) and is converted to the equivalent mud weight, which is measured in pounds per gallon (lb/gal) Put simply, the higher the pore pressure is, the heavier drilling mud needs to be used to prevent liquids or gas from shooting up through the drill pipe with dramatic force and causing a blow-out “I think the most important experience I gained during this period was a feeling for data and how to interpret it There is a difference between assessing data when you’re sitting at a desk and when you’re working on a rig,” he says We will find out later what this experience taught him What other valuable experience has Steve Daines brought with him to Maersk Oil from his long life in the industry? There are several answers “I wanted to find oil and gas where others had given up ” His next job was in the oil company Conoco For the next twenty years, he worked in Houston, Dubai, Jakarta and elsewhere “Yes,” he says, “I was an operational man I was good at defining the tasks and performing them ” In 1999 he was employed by Kerr-McGee, a U S company with interests in the UK North Sea Kerr-McGee had just closed its office in London,

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had taken over a company called Oryx and had started to build up a new team in Aberdeen, Scotland “It was very small I was ‘explorer number three’,” he laughs Two years later, the Aberdeen office had 20 or so people and exploration was focused on the central part of the UK North Sea “All the big companies said that there wasn’t anything left We thought the opposite and we succeeded in working up a substantial portfolio ” Over the following few years, seven commercial discoveries were made, including the Culzean gas field The negotiations on Maersk Oil’s takeover of Kerr-McGee UK took place in 2005 Maersk Oil had tried to buy into the Gulf of Mexico, but had not yet had any success Now they were interested in the UK North Sea, and Steve Daines had prior knowledge of the Danish company because Kerr-McGee was an operator in the only block in which Maersk Oil had a stake “I was part of the team that was to sell Kerr-McGee UK to Maersk Oil We had selected five interested companies and the first one that presented its bid was Maersk Oil The Danish delegation was led by Thomas Thune Andersen and numbered around 20 extremely competent employees My first thought was: ‘These guys mean business’ ” “One of the things that really pleased me was that the first question they asked was: ‘How can we retain your people?’ It had been a difficult time for us All the employees knew that something was brewing They were insecure Some were afraid of losing their jobs When I heard that question, I realised that there was a good chance that we would be bought as a going concern And we were That was a great day I thought the first few meetings went well The message from Copenhagen was that Maersk Oil wanted us to continue the work that we had done previously, that they wanted to learn from us I privately also frequently heard the comment: ‘Continue with what you are doing We want to learn from you’ ” Maersk Oil ended up valuing the experience and attitudes at Kerr-McGee But even before the takeover, Steve Daines was aware of the problems that takeovers of this type can bring with them “Basically it’s about attitudes towards ideas and entrepreneurialism I call it the push back and pull forward philosophy For example: You present the management with an idea and in a big company the answer is: ‘Prove why we should do it ’ In the other, perhaps slightly smaller company, the reaction is different: ‘Give me a reason why we should not do it’ ” Maersk Oil was initially reluctant, while Kerr-McGee showed forward-thinking, according to Steve Daines “The first time we noticed the difference was when we applied for approval of the drilling programme for the next year We had been used to working with one-year plans, i e investments in a portfolio instead of going from project to project This was new to Maersk Oil So we created a new format, but it came as something of a surprise that it had to be created from scratch at Maersk Oil ”

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The Incident-Free programme is, amongst other things, about intervening if you see an unsafe situation The image is from the North Sea

On the other hand; this was part of the attraction Maersk Oil seemed a little old-fashioned at the time, “rather quaint”, as Steve Daines puts it He also uses a few other words to describe the difference between the two corporate cultures “Maersk Oil’s management thinking was deterministic, Kerr-McGee was probabilistic ” He saw the Kerr-McGee culture as value-driven, based on collaboration and good communication and with a flat organisation Maersk Oil was more formal, hierarchical and people had a tendency to delegate upwards and not take responsibility “Here’s the rub, Frank: we had gained the impression that Maersk Oil wanted to learn from us, but they didn’t listen There was no curiosity Instead we were told that there was only one way of doing things: theirs ” Things got worse when a number of financial decisions in Copenhagen left the impression in Aberdeen that head office thought the acquisition had been a bad deal When did things change? Was there a decisive moment? “Absolutely I still remember it Nils S Andersen and Thomas Thune Andersen came to Aberdeen with a clear message: the acquisition had been a success, the integration would continue and

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A platform has the highest safety preparedness every time a helicopter lands on it or takes off

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we should leave the negative attitudes behind us This was a real turning point I remember it as if it were yesterday Things moved forwards after this, and our current CEO, Jakob Thomasen, is now well on the way to making us a strong, focused, international oil company ” Steve Daines remembers another experience, many years ago, when he was working for another company on a drilling rig in the East Java Sea, just south of Mandura There was a risk of a blow-out and he landed in a situation in which, on an open short-wave radio to the manager onshore, he had to threaten the operator He told him if the drilling was not stopped immediately, he and his company would leave the rig It was a decision he had to make alone It would cost money But it was right Not long ago, Steve Daines, participated in a seminar on safety on drilling platforms There were many topics In recent years and after several serious accidents, the oil industry focused more on the consequences on safety of the interaction between plans, actions, decisions, policies, processes, values, responsibility and commitment “With our Incident-Free programme, we are creating a mindset in which it’s natural to intervene and stop production or colleagues if you find it necessary The operations in the Gulf of Mexico are now almost back to the level before the Deepwater Horizon incident in 2010 Big changes have been made to the control mechanisms and one sign that they are working is that the insurance premiums for wells in the Gulf of Mexico have not risen ” Safety is the absolute highest priority on Maersk Oil’s agenda There is no doubt that it is a genuine, deeply-felt objective As is obvious, Steve Daines has practical experience that Maersk Oil can make use of His advice is simple: “Safety is created by ensuring that anyone can speak their mind, use their expertise, call out And who is ‘anyone’? It’s the person you see in the mirror every morning ”

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Mariann Richterhausen
Title: Petrophysicist, Maersk Oil Age: 32 Employed: 2009 Leisure interests: Swimming, running, Russian and Scandinavian literature

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A really great programme
“I’m insanely happy to be working for Maersk Oil! I think the company has given me much more than I have paid back to date ” This statement is from a 32-year-old petrophysicist at the Tyra centre at the company’s head office Unsolicited and clearly from the heart There is good reason for this Mariann Richterhausen was fast-tracked into Maersk Oil via a programme that could make a young job-seeking Danish graduate drool with envy Its name is the Maersk International Technology and Science Programme, but everyone just calls it MITAS Mariann Richterhausen studied geophysics at the University of Copenhagen, including a stint University of Bergen, Norway Bergen is one of the best places in the world to study oil geology and geophysics because the university receives considerable subsidies from the Norwegian oil industry and the courses are therefore well financed “In Copenhagen, the geophysics course is a mixed bag,” says Mariann Richterhausen “The interior of the Earth, oceanography and a variety of other subjects are mixed together In Bergen, I had to choose whether I wanted to concentrate on the interior of the Earth or the atmosphere, as the disciplines are represented by two very different departments I took the interior of the Earth and have not regretted it “It’s fun to play around with complex formulae but it can be difficult to relate them to the real world However, in geophysics you can link your background knowledge in physics to what happens in the Earth This fascinates me While the geologists inspect the rocks by looking at them, feeling them and tasting them in an attempt to map their age and nature, we geophysicists and petrophysicists put everything into mathematical formulae We create models for the subsoil and use them to estimate which properties in the rocks will be able to give us the response that we see in the data we have collected For example, we can distinguish layers of clay from lime and sandstone, and we can calculate how porous the rock is and how much water it contains This allows us to locate the areas in the subsoil where there is the highest probability of finding the most oil, and thus save a lot of money by avoiding drilling empty wells ” When Mariann Richterhausen had taken her university degree, she never doubted for a moment that she wanted to enter the oil industry I will try Denmark first, she thought, and the only real possibility was Maersk Oil “What primarily attracted me was that the company offered an oil technology training programme ”

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The MITAS programme is a two-year introductory programme for graduates It consists of three rotations; this means the graduates work in either three different business units or in three different departments in the same business unit It is also possible to choose to do the MITAS programme in three different countries “This is what I did,” says Mariann Richterhausen She now has a network of around 400 oil people worldwide “It’s invaluable Perhaps the biggest benefit of all,” she says “I started very naturally in the geophysics group in Copenhagen For the first eight months I worked on the processing of seismic data and had a mentor At that time, the programme was still new and there was no real agreement about what it actually involves and what to do with someone like me My mentor was convinced that the S in MITAS stood for Student even though I had a Master’s in geophysics and therefore didn’t exactly consider myself a student assistant ” Today everyone at Maersk Oil knows what MITAS stands for “It was probably not the fastest start,” says Mariann Richterhausen “I was given some interesting projects to work on but you would have to call it an ‘amiable introduction to the oil industry’ Perhaps that was very good though There was enough to think about the first time I entered the head office ” A big shock for a young woman? “Don’t forget that I had been studying physics at university, where there were far more men than women I had always been in classes with lots of guys At university, I was the only girl in a class of 30 Therefore, it wasn’t strange at all to enter a working environment in which there were more men than women There were actually more women than I had expected “On the other hand, the encounter with the corporate culture was something of an upheaval after university I had been used to mooching around in whatever clothes I wanted It was new for me to have to iron trouser creases and wear highheeled shoes But I got used to it fast and I now actually like it a lot When people are well-dressed, it also sends out a signal that they are well prepared and ready to be in action all day long ” Mariann Richterhausen’s second posting was in Doha, Qatar “It was really great living there They had never had a MITAS geophysicist before, and it hadn’t really been decided what I should do when I arrived We were two geophysicists in a department of 60, so there was more than enough to do ” Maersk Oil in Qatar is a production operation and currently employs 600-700 people It is the biggest office in Maersk Oil after the headquarters in the heart of Copenhagen “This was a real upheaval,” says Mariann Richterhausen “I carried out studies of the data we collected in the Al Shaheen field And I was offshore, which I had never tried before It was a fairly overwhelming experience at the

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MITAS is Maesk Oil’s programme for recent graduates in the fields of Geology, Geophysics, Petrophysics and Engineering Pictured is the class of 2009

start I don’t think I will ever forget my first helicopter flight We hovered over the turquoise water and I was finally going out to see where all the oil that keeps the world going is extracted You couldn’t be anything but enthusiastic about that My fellow passengers were ten Indians, all men, who were going to work on various drilling rigs and platforms “I was going along to support the drilling operation We get real time data as a well is being drilled This allows us to interpret the formations in which the drill bit is located and you can then manage the drilling accordingly If you are approaching a bad zone, you can move it up or down The managers sit in one container, those who collect data sit in another I sat there with the geologist and looked at screens of data As long as there are no changes, it’s routine work The drill bit moves through the right formation, you interpret your data, look at drill samples and prepare your reports It just goes on But suddenly you can drill into something unknown, for example if you run across a fault And then there is uncertainty about where you are The atmosphere gets intense People rush back and forth asking ‘what’s happened’ and ‘where are we?’ It’s important to get into the right layer again I was involved in one episode when we received a data response that meant we could be in two different layers One was very close to the reservoir zone where we wanted

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Mariann Richterhausen at work on a platform in Qatar

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to be The other was very far away We didn’t know where we were This is when drilling for oil gets hair-raising You suddenly have to make a decision: should we go up or down, right or left? It costs several thousand kroner a minute to drill, so a wrong decision can be expensive And we had to give the decisive advice “It’s great to be involved in that sort of thing,” says Mariann Richterhausen “This is where theory becomes reality You have to have tried it to fully understand how it feels It’s great when you have made the right decision and go out onto the drilling floor and see one gigantic drill pipe after another being lowered down into the deep It’s super And you can’t help smiling ” And what is it like being the only woman in the man’s world on the drilling rig? The working conditions are different from the North Sea, where the men are only out for 14 days at a time In Qatar they are out for a full month “Fairly noticeable,” says Mariann Richterhausen “As soon as I had arrived, a guy fetched me a sweater because I was cold, while a muscular American roughneck made sure that I got an electric heater ‘No one has ever done that for me’, laughed my middle-aged, male geologist colleague ” Mariann Richterhausen’s third posting was to Stavanger “It’s an exploration office and the deadline is always far in the future When I was there, we were around 30 employees Compared with Doha, where the focus was entirely on the day-today operations, it was like landing in a completely different world There wasn’t the same daily pressure There was time to think, analyse and discuss But it was professionally very interesting there as well Our working material comes from ships that collect acoustic data It can be compared to a treasure hunt We sit and look at seismic images of the subsoil and suddenly you see something that makes you exclaim: ‘Wow, that might be interesting’ ”

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Jakob Thomasen
Title: CEO, Maersk Oil Age: 50 Employed: 1988 Leisure interests: sailing, music, cycling and running

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A leader among individualists
Jakob Thomasen does not really tell anecdotes Well, somehow he does but they are more the results of the life experience and visions that have made him CEO of Maersk Oil If you ask him which field made Maersk Oil as a company, he does not hesitate for a second: “The Skjold field in the North Sea made a very significant contribution to Maersk Oil’s success We drilled two fantastic wells, Skjold 2 and Skjold 6, and extracted 40,000 barrels of oil a day for nine years Pure oil, no water This supported the DUC financially and the drilling of the expensive horizontal wells which resulted in such high profit both in Denmark and in the Al Shaheen field in Qatar Skjold was a jewel in Denmark, while Qatar drew us into the international arena as a serious operator ” Such development requires good leadership What are the cornerstones of his leadership philosophy? No hesitation again: respect for the employees and, in particular, faith in individualists “A large part of the value in the oil industry is created by a very small number of dynamic individuals Individualists, egos, prima donnas, if you will, who have been able to ‘crack the code’ in the various links in the value chain The lesson for me is that, if you can put the right people together to perform the right tasks, you are up and running “It’s important for the model to be adjusted depending on how the work on the oil or gas field develops Since my start as CEO, I have tried to give the individualists, the egos if you will, the opportunity to thrive in a creative technological and business environment At the same time, I have tried to create a simple structure around this environment The result is maximum transparency for management and the greatest possible freedom for the technical experts ” Jakob Thomasen knows what he is talking about He himself has been one of these ambitious egos and has contributed to some of the quantum leaps in the history of Maersk Oil The first time was when the Nils field, now called Regnar, was being expanded “I was a young geologist full of ideas Our horizontal well technology was state-of-the-art Nevertheless I proposed that we could just drill a simple vertical well in Nils and pure oil would come up We drilled The oil came up, but it was mixed with water “The boss called: ‘You promised!’“ I was panic-stricken, but I said: ‘Let’s wait a bit ’ After a few days, the oil began to flow without water ”

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This taught Jakob Thomasen the importance of keeping a cool head in the oil industry Luck is also important “Things went very slowly in Qatar for a while Our first test well was not a clear success and the oil was not flowing as we had hoped I was working as geologist on the team that was to assess the development potential My contribution included a three-dimensional model of how much oil there was in the subsoil The model produced completely new, very high figures The maps showed that there was oil over a much larger area than we had previously thought ‘This can’t be true I must have made a mistake,’ I thought I checked, checked again and checked a third time but it was all correct, to my great surprise I will never forget the smile that spread across the face of the then manager in Qatar, Svend Aage Andersen, when I came into his office and showed him the new maps ” Before long, Maersk Oil was producing more oil than it had ever dared hope for It was also extremely fortunate that, at that time, Qatar had a great need for revenue “We ensured not only a smooth start to oil production but also to the cash flow into the country,” says Thomasen What are the basic conditions for a Danish oil company such as Maersk Oil in the industry today? “Firstly, we depend on gaining access to a piece of land or an area of water where we can search for oil Normally, a state owns it,” says Jakob Thomasen “Secondly, we have to replace every single barrel of oil or a cubic metre of gas we produce Our production is not recreated automatically In the oil industry, we talk about picking the lowest hanging fruit first, the easy oil, but you have to remember that it’s not like an apple tree where new apples grow next year It takes several million years for the new apples to grow We have to keep finding new fruit and they are always higher up the tree ” Surprisingly enough, many people still regard the oil industry as the land of milk and honey You stick your nose in the ground, the oil flows and you sit back while the money flows in “That’s not how it is The strategy we have now embarked upon, and on which we want to base the future of the company, aims to maximise the extraction of oil and gas in the areas in which we are already working The North Sea is our pioneer area We know it like the back of our hand and we have a tradition of extracting more and more oil and gas via new technology, inventiveness and risk appetite “The second basic condition is that, although it is very far into the future, someday the extraction of oil and gas in Denmark will cease Therefore, we need to go out into the world and find new fields at the right rate,” says Thomasen “These may be areas in which we have already explored, although without luck We have had success with this in some cases But they might also be completely new areas Most large oil companies take a broad approach, investigate a few fields and maybe find one large field or a few slightly smaller ones After a while, they have

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to restructure or rationalise their portfolio We are good at using our specialist knowledge to go in where the big companies have perhaps given up because they made discoveries they thought were too small to develop The trick is to go in where value can be created and this is hopefully where our experience from the North Sea can come in handy You can enter the value chain anywhere from the exploration of a brand new field to a very mature field, and we do this But we are particularly focused on developing the ageing fields in the North Sea where there is still a lot of value hidden ” “A third basic condition is that costs are getting higher and higher It is becoming increasingly difficult to find oil It requires more manpower and new expertise New requirements for environmental protection and safety can be expensive To this is added the risk of the oil price falling, which can only be met by being cautious in our price predictions, which, in turn, limits what we can start “This is where my ideas about a well-oiled organisation that can function globally come in It must be possible to scale up or reduce the size of the organisation fast, depending on the conditions and, if a discovery is made, we have to be able to design a project, mature it and put it into operation on time, on budget and with the right quality ” Where does Maersk Oil’s cutting-edge expertise lie? “We have a strong history of large, capital-intensive projects and we have good traditions for discipline, financial management and execution These are the key qualities behind Maersk Oil’s success Fundamentally, of course, it’s about being better than the others at finding oil, and we have shown that we have been able to crack the code in both the Danish North Sea and Qatar These fields are an important part of our corporate culture, our brand if you will There have been problems that initially looked fairly hopeless and caused others to back out For example, Texaco withdrew from DUC in the early-80s Therefore, an important part of the story of Maersk Oil is that we have shown the ability to go in where others have given up ” Jakob Thomasen knows better than anyone else that the oil business requires a constant supply of new ideas He is therefore in the process of building an organisation that will be able, in the long term, to leave its footprints in the value chain in areas other than oil These will not necessarily be alternative forms of energy “We are not into wind turbines,” he says “World energy consumption is growing so even if we have more alternative forms of energy, there will be a growing need for oil and gas Our task is to supply oil and gas in a safe, environmentally responsible manner This requires a lot of investment, innovation and collaboration ” He mentions the TriGen technology as an example of the oil industry of the future “We’re working with our partners CES and Siemens on new technology, based on space rockets, that can be a game changer in the industry The technology, TriGen,

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is a turbine that burns gas with a high content of CO2 This produces electricity, pure water and pure CO2 that can be re-injected in the oil fields and thus boost oil extraction The whole process is emission-free as the CO2 is stored underground In other words, the technology is a win-win situation for all parties It makes gas fields that no one previously wanted to touch, because the CO2 content of the gas was too high, commercially attractive The technology is environmentally-friendly and it helps us supply the necessary oil to meet the world’s growing energy consumption ” Apropos the basis of this book, the mindset A good example is Angola, where Maersk Oil entered Bock 16 after several other oil companies had already drilled a few wells without success Maersk Oil made a substantial discovery as soon as they drilled their first well It was a team effort but the success was particularly due to the technical experts, the individualists, the prima donnas, who were able to use the latest seismic technology to lead the drilling staff in the right direction “It was a fantastic experience,” says Thomasen “The orchestra played as one and suddenly they saw something that others could not see We have done the same in the UK North Sea, going into really mature oil fields and beefing them up by using various new exploration methods It makes no difference today whether we work in sand or chalk ” “From my point of view, Maersk Oil is best as an oil company when people work together across disciplines and are given the tools they need That’s the only way That’s how it works If we can maintain that business model, we are in business ”

Maersk Oil – under the surface Published in July 2012 by: Mærsk Olie og Gas A/S Esplanaden 50 1263 Copenhagen K Denmark www.maerskoil.com The book is written by journalist and author Frank Esmann Edited by Maersk Oil Editor in Chief: Thomas Grøndorf Photo: Morten Larsen, Mærsk Olie og Gas A/S Cover photo: Tyra East in November 2007, photographer: Bent Medvind Sørensen Print: Cool Gray A/S Circulation: 15,000 ISBN: 978-87-995457-0-4 Reproduction permitted with clear source reference.

July 2012 marks 40 years since HRH Prince Consort of Denmark turned the tap on the Dan platform to start Maersk Oil’s and the DUC’s oil production from the North Sea. Maersk Oil has since grown its oil and gas activities spreading its wings to operate around the world. In the book ”Maersk Oil – under the surface”, 15 former and current employees give their personal take on how Maersk Oil developed from a company rooted in Denmark and a strong Mærsk culture, to a global player recognised internationally for its success with challenging oil and gas fields. Journalist and author Frank Esmann weaves together major milestones in Maersk Oil’s history with touching, exciting and deeply engaging stories from interviews with the participants, painting a portrait of a growing company driven by a pioneering spirit.

Maersk Oil Esplanaden 50, 1263 Copenhagen K, Denmark Tel.: +45 3363 4000, www.maerskoil.com

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