the Netherlands

Vol. 226 No. 4

Dutch sector is turning the corner, says IRO chief

Hans P. de Boer is Managing Director of IRO, the Association of Dutch Suppliers in the Oil and Gas Industry, based in Zoetermeer, near The Hague. IRO is the single largest Dutch association in the industry. He is responsible for general management of IRO, including external matters, political relations and strategy.

Question: What is IRO’s role and activity within the Netherlands upstream industry?

IRO Managing Director Hans P. de Boer

Answer: Our role is to assist and expedite the process by which our members obtain new business and develop new technologies. It is a very important, prominent role that we take very seriously. We all know that the market in Holland and the North Sea has been very limited over the last few years, so we have been quite active in promoting the Dutch industry to other operators worldwide. This role takes many forms, including participation in trade shows, conferences, publications, etc. – any venue where we can get out the word about the latest Dutch technical innovations and capabilities.

Q: How did the Dutch E&P sector fare economically last year?

A: Until the middle of last year, the market was very slow, and it was slow over the past three to four years. And yet, that slow pace was not always in line with higher oil and gas prices. Finally, last summer, we saw a turn in the tide, as activity picked up noticeably. The second half was much better, and my expectations for this year are very high. We are benefiting from high prices throughout Europe. 

Q: What level of activity and business do you expect for 2005?

A: I’m very positive about this year and even into 2006. The Dutch government’s figures say that there were just 23 wells drilled in the country last year (many of them in the second half), including 18 offshore. This year, their data suggest that there will be just over a 50% increase in drilling, to 35 wells, of which 25 will be offshore.

And these numbers are just the business on our own home turf. To this, one has to add all the business that our service/ supply firms are doing in other countries, which is substantial. Projects are coming up over the next two years that make me feel that we’re looking at a very good market. We’re really looking forward to coming to OTC again. We’ll have the same size delegation as last year, about 45 companies, and we will occupy 11,000 sq ft. I’m quite optimistic.

Q: Are Dutch companies obtaining extra business because of the high oil and gas prices?

A: Well, I doubt that this one-for-one relationship exists, in the sense that over the past two years, oil prices have been high, and yet very little has happened. Instead of concentrating on their core E&P business, we had operators buying back shares but not investing enough in capital projects. That’s a game that you can only play for a while, but you can’t go on like that forever, without any new developments.

So, the fact that the market is turning up now is good, but it is hard to relate it to high oil and gas prices. Prices are too high in my opinion – they’re hard to justify. Since the bottom crashed in 1998, the price has been going up, and yet, activity did not respond until just last summer. So, I can’t see the direct link between high prices and the amount of business.

Q: What are some current industry initiatives and projects, within which IRO is playing a role?

A: One thing that is important in Western Europe is that the gas market is being liberalized. In the past, the gas market was mainly under the thumb of individual governments, but this is all changing, due to new regulations issued by the European Commission. So, there is a high focus on natural gas at the moment. As such, we, IRO, are in the process of setting up a special work group that will focus on natural gas, including LNG. The latter is going to be a very important item in the world market for the future. We call our study meetings the IRO Gas Group, with a number of members working together to jointly develop new business related to LNG.

Q: Is the Dutch government doing enough to encourage E&P activity?

A: We are becoming more and more dependent on rules and regulations coming from the European Community in Brussels, and less dependent on the Dutch government. Unfortunately, in Brussels, the oil and gas industry is getting no support whatsoever. All they want to talk about is renewables and green energy.

Nevertheless, our Netherlands Minister of Economic Affairs wrote a letter to Parliament, announcing a number of measures that he wants to take to improve the industry. These items particularly relate to further development of our gas sector, including development of marginal fields, by bringing in new independent operators. Some examples of such operators are ATP from Houston, CH4 from the Netherlands and Vermillion from Calgary.

So, they are trying to get additional smaller independents to come in, take over these marginal fields and stimulate the local market. The government also wants to trim down the amount of rules and paperwork required to obtain an E&P license. In addition, officials want to do something about operators that don’t use the licenses that they already have in their portfolios. All these initiatives were announced last October, although I must say that we have seen very little action to date. 

Q: What are some major field projects that Dutch firms (either oil companies or service/ supply firms) are involved in?

A: One obvious example is offshore Sakhalin Island, in eastern Russia. Shell operates the Sakhalin II project to develop the Piltun Astokhskoye oil field and the Lunskoye gas field in the Sea of Okhotsk. Phase 2 at Sakhalin underpins what may be the largest single, integrated oil and gas project ever undertaken. This $10-billion phase will allow year-round oil and gas production in a severe climate area.

Also, Dutch firms are very active in various Kazakhstan projects. Shell, specifically, is very active in developing gas in Qatar and Saudi Arabia. And some Dutch companies are active in projects in the Gulf of Mexico. One market that we find quite promising for the future is the country of Mexico. We went over there with a trade mission last year after OTC, and we were just there again a little over a month ago. Hopefully, we will be successful there in the future.

Q: Does any project serve as a good example of upstream technical work involving Dutch companies?

A: Again, one good example is Sakhalin, where we do a lot of work under harsh conditions. Another example is the Gulf of Mexico, particularly in deepwater field developments. Examples of the work involved includes installing insulation and laying deepwater pipelines. The latter involves companies like Allseas.

Q: Are Dutch companies at all concerned about the aggressive expansion of Chinese companies into regions outside Asia?

A: Right now, I’m not too concerned about the Chinese coming in. So far, we haven’t had much contact with them. But as you know, the Chinese are learning very fast. So far, they lack the real technology to go after the better E&P projects. But this, I suspect, will not last too much longer, given that they are fast learners.

Q: How does IRO feel about OPEC’s continued attitude toward oil output levels and prices?

A: It’s just all part of the game to keep prices high. But to me, there’s no real justification for the current price of oil…it is too high. Yet, I find that a number of entities have found this price structure to be quite nice for their own purposes, and they are becoming accustomed to it. If there was really an urgency to produce more oil, I think the operators would have begun their additional development projects sooner.

Q: Toward which international areas do you think that operator interest, and money, are moving?

A: In my opinion, the real future is with natural gas. Look at the countries that have good gas reserves, and you will find where the future lies. In the Netherlands, we’re just lucky to have some good gas reserves. The Former Soviet Union and the Middle East also have good gas reserves to tap. 

Hans P. de Boer is managing director of IRO, the official association of Dutch suppliers in the upstream oil and gas industry. After graduating in 1971 with an MS in civil engineering from the University of Technology in Delft, the Netherlands, he served 20 years in the dredging and marine construction industry, mainly on overseas projects in the Middle East, the Far East and North Africa. From 1991 to 1997, Mr. de Boer was active in the offshore industry for several major Dutch service/ supply companies. In 1997, he became a member of the executive board of IRO. He is a board member of EUROGIF and a member of the Royal Institution of Engineers (KIVI), CEDA and SPE.