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Faith pays off for drilling contractor Stena

Only two out of seven Stena Drilling rigs had work on their plates at the start of last year.

Those were “very scary times”, recalled chief executive Erik Ronsberg, who was faced with “tough” decisions about how to tighten the Aberdeen-headquartered firm’s belt.

Work was scarce in an oversupplied market and there were rumblings about job losses.

The last downturn was particularly hard, for all drillers, not just Stena Drilling, which has more than 1,300 employees, 360 of whom are residents of north-east Scotland.

But parent company Stena, the Swedish, family-owned group, had witnessed plenty of downturns and had confidence in Stena Drilling’s fleet.

Being part of such a large organisation adds resilience. It’s unlikely that every company in the group will be struggling at the same time.

Stena Drilling was allowed to keep investing in its vessels and looks set to reap the rewards of that faith.

The fleet, which is now six-strong following the sale of Stena Clyde, is currently very busy.

The drilling market is still challenging, but Mr Ronsberg feels the fundamentals are looking more positive.

About 120 rigs have been scrapped since 2014 and the number of drilling businesses has been reduced by mergers and acquisitions.

Many feel investment in offshore oil and gas exploration and production needs to pick up, having been in the doldrums in recent years, though climate change activists would disagree.

In the UK North Sea, the arrival on the scene of smaller oil companies backed by private equity has given rise to a “rebirth” of the basin, Mr Ronsberg said.

More exploration may be taking place in the Norwegian sector, but in the UK new operators have stepped into the space occupied by North American majors and are carrying out brownfield projects to keep mature fields producing for longer.

That’s why the UK Continental Shelf is experiencing a bigger uptick in activity than many competing regions, said Mr Ronsberg, who has been in his current role since January 2017.

While long-term contracts are in short supply, he is optimistic that Stena Drilling can keep the Don and Spey vessels busy in the North Sea, as more tenders come into his sights.

Mr Ronsberg said he was “waiting with bated breath” to see what Equinor is going to do with the Rosebank development, west of Shetland, and is hopeful of continuing its good working relations with French major Total.

The North Sea has undergone something of a transformation over the last few years, and so has Stena Drilling.

At the start of 2018, Energy Voice learned the firm was in consultation with 450 people – about 60 of whom were north-east residents – spread across three drillships warm-stacked in Gran Canaria.

What could have been a grim situation was quickly turned on its head.

Deals were struck to supply drilling rigs for Energean, Nexen Petroleum UK, now Cnooc Petroleum Europe, and Timor Sea Oil and Gas Australia.

Total booked the Stena Don semi-submersible for its Glendronach well, west of Shetland.

The raft of deals meant Mr Ronsberg could put the brakes on the firm’s redundancy plans, which would have affected up to 128 people.

There were still sacrifices to be made. A small number of people were let go, some positions were not re-staffed after employees retired, and some crew members were asked to take pay cuts.

Mr Ronsberg, who, refreshingly, handled the media duties himself during those fraught times, accepts the salary drops would have been problematic for staff, and is grateful to those who stuck with the company.

Stena Don’s story was a microcosm of the company’s experience.

Before its call-up by Total, the vessel was out of action after coming off a long-term contract on Equinor’s Troll field on the Norwegian Continental Shelf.

Mr Ronsberg said the decision to warm-stack the Don and say “goodbye to a lot of Norwegian colleagues” was one of his toughest decisions.

Skip to the end of last year, and it was involved in one of the UK North Sea’s biggest recent exploration success stories – Glendronach, with its one trillion cubic feet of recoverable gas.

Stena Don has since received hefty investment to fit an eight-point mooring system at a yard in Rotterdam.

The company also increased Stena Don’s crew capacity and deck space.

The upgrade is expected to open up a wider market for the vessel, which was built specifically for Troll.

The rig was booked in by Total for a new well on the Laggan field, also west of Shetland, in the first quarter of this year.

And later this year it will drill Cairn Energy’s Chimera exploration well, located east of Shetland, near the Ninian field.

Stena Drilling also reflagged the Don as British and registered the vessel in Aberdeen, which Mr Ronsberg sees as a “mark of quality” for the company.

Stena Spey, also a semi-sub, has just finished a job on the Shaw field for Repsol Sinopec Resources UK and will soon drill a new sidetrack well on the Guillemot A field for Ping Petroleum.

Mr Ronsberg, who grew up in China and Hong Kong, said Stena Drilling benefited from a potent combination of “Scandinavian humility and UK drive”.

He said: “We care about what we do and where we do it and we always challenge.

“That can mean ‘stopping the job’ for safety reasons, or saying if you think we can do the job better.

“We can adapt equipment and make it perform better and meet clients’ expectations.”
Mr Ronsberg said he was delighted with the positive feedback received from North Sea clients.

He said Stena Drilling implements a “one team” approach and tries to work as closely as it possibly can with customers.

“If you get the culture right on a rig, then everything else follows, in terms of safety and high performance,” said Mr Ronsberg, a British national whose career has taken him to the US, Canada and Norway.

He feels Stena Drilling is well positioned for growth and, while the financial side of the business remains a “challenge”, Mr Ronsberg believes an improvement is on the cards, supported by higher vessel utilisation.

“Like all offshore drillers we have had tough years, but we have been allowed to spend money making sure our rigs are up to date,” he said.

“That approach has been acknowledged by the fact we have got work for the rigs.”

Investment in the fleet is ongoing, according to Mr Ronsberg, who spoke of a dual mud system and increased crew capacity for the Stena Forth drillship, which has been working off West Africa for Tullow.

Stena Drilling has also received accreditation from DNV GL for the managed pressure drilling (MPD) capabilities of the Stena Icemax and Carron drillships, making them the industry’s only two vessels to have achieved the accolade.

Mr Ronsberg said the MPD systems were expensive, but that improved management would enable the ships to drill wells previously thought to be “undrillable”.

He reckons very few other companies have invested as heavily in their assets as
Stena Drilling, which is determined to stay ahead of the competition.

Mr Ronsberg said opportunities for bigger drillers to “swallow” smaller rivals were still out there.

He also said rates were “still a challenge”.

“We are trying to get better rates for our rigs given the investment we have in them,” Mr Ronsberg said.

“But we also understand that the economics for many fields in North Sea would not work if rates went sky high.”

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Craigmill, Pitcaple, Inverurie, Aberdeenshire, United Kingdom, AB51 5HP
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