An acquisition could be on the cards for German industrial services giant Bilfinger as it looks to expand its footprint in the UK North Sea by further developing its maintenance, modifications and operations services.
Tom Blades, chief executive, said the company had no shortage of engineers, they’re just not in Aberdeen.
The purchase of another business, combined with the redeployment of staff members from other parts of the world, would add another string to Bilfinger’s bow in the UK.
The company already has 2,000 employees on 70 assets in the UK North Sea, putting delivery team’s plans into action and identifying potential process safety issues.
Bilfinger’s offshore business, Bilfinger Salamis UK, is best known for its inspection, maintenance and modification work.
Mr Blades believes complementing those services with engineering “makes a lot of sense”.
Mr Blades said: “If a solution comprises three steps, in one part of the world we’re doing A, in another part we’re doing B and in another C.
“There are very few parts where we’re actually doing A, B and C.
“Modification work typically begins with an engineering aspect, where an engineering team designs what needs addressing, whether that’s repairs, an extension or an improvement.
“In the second phase another team implements that.
“That’s typically what we do in Aberdeen.
“We are present on the facilities actually implementing someone else’s engineering projects.
“We realise that customers in Aberdeen will continue to push for efficiency, so if we’re able to bundle our service offering, that’s good for the customer and for us.”
Mr Blades said Bilfinger would look to take on minor modification projects, worth less than £10 million at a time.
He also spoke about the thorny issue of contract rates, which were cut drastically across the supply chain during the downturn.
In a previous interview at Offshore Europe 2017, he told Energy Voice that North Sea customers were squeezing harder than ever before on prices, with some trying to lock in lower rates for as long as 15 years.
With Brent prices in the mid-$70 range and operators catching up on their maintenance work, service companies should be able to earn a higher price.
At the same time, the company has no intention of adding cost for its customers, Mr Blades said, adding that Bilfinger will be under less pressure to increase prices than larger service companies.
“When I look at pricing it’s still pretty low and aggressive, but this is the beginning of a possible upcycle,” Mr Blades said.
“When people start to catch up on their modifications and maintenance, resources get tighter.
“At that point customers are prepared to pay more for quality and longer term relationships.
“We have our base, long term contracts with customers who were smart enough to negotiate lower rates in return for longer term commitments.
“That gives us a platform where we can predict our future commercial position.
“We know we are going to be on those contracts a year or two from now.
“Then, as other operators come in you can command a higher price for quality.
“Operators are prepared to pay for that, so for new contracts we definitely see a higher price, which is normal.
“We do look at long term sustainability, and that has a price.”
He said Bilfinger was an ideal partner for some of the newer, private-equity-backed entrants to the North Sea who need to outsource different services.
He said: “We have the size, experience and breadth, and our customers know we’re going to be around for a while.
“When you have a downturn a lot of people disappear, but we’re not in that category.
“We’re here to stay.”
But Mr Blades said the most recent downturn was not the first to have beset the sector.
He also said all businesses had different philosophies on maintenance, but was clear that operators would not put off safety critical maintenance.
“Some companies may say an asset can never fail, whereas it’s not unusual to find companies with a maintenance backlog that say, ‘let’s have a fail and then fix mentality’,” he said.
“Rather than preventative maintenance, they let the equipment fail and then they fix it.
“That is also a valid proposition.
“When the oil price is low, projects were delayed and now as operators begin to rebuild their balance sheet, some of that will flow over into catch-up maintenance.”
Using digitalisation for preventative maintenance in plants is another area Bilfinger wants to expand into in the North Sea.
Mr Blades said the company already had “boots on the ground” in a lot of downstream facilities and had successfully introduced its “dashboard” in Europe.
The platform gives customers three types of information – descriptive, predictive and prescriptive.
The first two are self-explanatory; the third is “the neat one”, according to Mr Blades.
He said: “Prescriptive is when you know something is going to fail and roughly when it’s going to fail.
“The next question is: What can I do about it? We offer that so customers can make decisions.
“We can give the customer a dashboard with the three attributes on it.
“That recipe is working and can also be applied to offshore platforms.”