He has just flown into Amsterdam, the Netherlands, from Aberdeen, Scotland. He's found time to go to a gym and work out before he talks.
Hugo Heerema leads Bluewater Energy Services, one of the top floating production, storage and offloading vessel (FPSO) owners and operators worldwide, and he's a big proponent of this type of offshore production technology.
Because he has kept a journalist waiting, he has the humility to apologize - even though the reason for his delay, the weather, was beyond his control.
He is one of the three brothers active in the oil and gas industry. Pieter Heerema runs the Dutch-based Heerema marine construction group, while Edward Heerema operates pipelay company Allseas and Excalibur Engineering, which is developing the Pieter Schelte decommissioning vessel.
But it is Bluewater that has made news of late by buying two FPSOs within weeks. Although primarily focused on Europe, Hugo Heerema is keen to see his company break out of that region, and his sights are set on expansion. He firmly believes the Gulf of Mexico will provide new opportunities for his floating production vessels.
In August, Bluewater bought the Berge Hugin FPSO - working on the Enterprise Oil-operated Pierce field in the UK North Sea - from Norway's Navion. Within a week, Heerema followed up with the purchase of the Navion Munin, operating on the Lufeng field offshore China.
Bluewater already had three North Sea FPSOs: the Bleo Holm, producing on the Ross and recently onstream Blake fields; the Uisge Gorm, working for Amerada Hess on the Fife and Fergus fields; and the Glas Dowr, which operated for Amerada on the Dauntless and Durward fields in the UK North Sea and is set to work for Soekor off South Africa on the Sable development.
On buying the Berge Hugin, Heerema said Norwegian state operator Statoil decided it was going to sell noncore assets in light of its impending initial public offering, including drilling and floating production assets. Navion shipping was 80% owned by Statoil; Rasmussen held the other 20%.
"Therefore the decision was made to divest," the shipping boss said. His staff already had looked over the vessel. "The opportunity arose, we expressed an interest in April this year, we visited (the vessel) and went through the process.
"The Berge Hugin was a very logical purchase because it fits with our existing North Sea operations. We can further optimize the running of our fleet," Heerema said.
The Pierce Production Co., which operated the Berge Hugin, is being taken over by Bluewater as part of the deal too, and its 17 onshore personnel are being retained, Heerema said with some pride.
"It is a high-quality FPSO and a high-quality organization with a good production and safety record - the deal offers economies of scale."
Renaming
As with its other North Sea units, Bluewater has decided to rename the FPSO, incorporating a bygone language. Old English, spoken in England and southeast Scotland between 600 and 1100 AD, is providing the new name, the Bluewater Hæwene Brim.
When Bluewater announced the Berge Hugin deal in July, the president said, "We believe excellent opportunities exist in the greater Pierce area to prolong production for many more years to come."
Heerema explains his optimism: "We think that the Hæwene Brim has a long time to go on Pierce. The Pierce reservoir seems better than anticipated." And Heerema is confident further satellites will be tied into the ship "in the course of time." Blane field, estimated to contain about 30 million bbl of oil, is the most obvious candidate. It is close, in Block 30/3a, while Pierce is in Block 23/23a, about 15 miles (25 km) north, and after a US $100 million deal to buy out all of Petrobras UK's North Sea assets earlier this year, Enterprise became owner and operator of Blane. "The Hæwene Brim is the ideal infrastructure nearby," the Bluewater boss said.
Given the amount of it in the Pierce field, Heerema said gas will have to be produced when the oil has run out, and he suggested other nearby satellites may be waiting to be tapped. Furthermore, there is government pressure on UK oil companies to move on dormant discoveries. This fact bolster's Heerema's belief that Bluewater will have UK market opportunities in the future, including west of the Shetland Islands. "There is a lot of drilling going on there, which is very promising. Time will tell." He sees upside for the Bleo Holm on Blake and Ross too: "The reservoir is greater than they thought. I think it is common knowledge that Blake is a very satisfying reservoir."
No decision has yet been taken on renaming the Munin ship operating on the Lufeng field. Heerema said there may be commercial reasons it will not be possible to do so. "With the Munin, the contract runs out in 2004, but we even think it may be off (the field) a little bit earlier. But there we see a very good market for that vessel in China, Australia and even the North Sea."
Built as a sister to the Berge Hugin, the ship's hull is of equally high quality, Heerema pointed out. "Only the topsides are less complex," he said. "It is an ideal candidate for any harsh, well-regulated environment. We are very bullish about that vessel."
But there is more. Bluewater has another hull built, painted in its company colors and ready for a conversion. It has a moonpool and could accept a turret. The Aoka Mizu - Bluewater in Japanese - has been laid up for more than a year in Labuan, between Sarawak and Brunei, awaiting a decision on its future. Heerema ruled out converting it to an FPSO or floating storage and offloading vessel (FSO) speculatively. He is willing to do so only when a suitable contract is secured. "This size of tanker, and of this quality - there will be a demand for it in the North Sea or the west of Shetlands," he said. Norway, Australia or elsewhere also could provide an opportunity, he said. The unit has a 105,000-DWT hull with 660,000 bbl of storage capacity.
Clearly the company wants to break out of the confines of Europe. It has other products apart from FPSOs, such as catenary anchor leg moorings, wishbones for tanker mooring, and turret mooring and offshore loading systems. Although these have been sold globally, the FPSO market is the most attractive. Bluewater came close to landing a contract to supply an FPSO for the Albacora Leste field off Brazil. Heerema said Bluewater was the front-runner, and a deal was ready to be signed, but internal wrangling over the issue of local content with the Petrobras engineering arm, Segen, resulted in the tender being withdrawn.
So Bluewater has since turned to Africa. Although the Bonga and Kizomba projects hold no interest for the company because they are owned rather than leased FPSO deals, other African opportunities - in particular, Agip's Abo field - are exciting the Dutch company. Here, Bluewater is competing with its usual rivals, Single Buoy Moorings, Nortrans and Bergesen, to supply an FPSO for the development.
Other targets on the horizon include the Gulf of Mexico. Heerema firmly believes federal regulations will permit floating production and offloading vessels, or even FPSOs and FSOs eventually, as the United States seeks to lessen dependence on imported oil.
Optimum economics are provided by FPSOs in deep water, better than any other technical solution, Heerema said. "If a spar and an FPSO are considered for a field, then normally the FPSO is considered the most cost-effective."
Where field reserves are less than 200 million to 300 million bbl of oil, the leased FPSO is by far the best solution, he said.
Heerema underlined his certainty about the use of FPSOs in the Gulf. "It only needs rubber stamping by the authorities," Heerema said. "With the Bush administration being intrinsically more interested in developing the country's own reserves, my guess is that process would take a maximum of one more year. Pretty quickly after that the first tenders will come out. My guess is (invitations to tender) in early 2003."
Competition
Looking at the competition from the Far East, Heerema said the likes of Hyundai - which clinched the FPSO contract for ExxonMobil's Kizomba project - and Mitsui and Keppel FELS are not a great threat to his company. "They are not in the business of owning and operating," he said. "Shipyards have a different risk profile than contractors. They are not organized to develop safety cases for FPSOs, nor do they have the operational management and infrastructure to deal with supply logistics. These are elements which take many years to build up."
And the future of FPSOs? "FPSO technology will be there for at least 20 years."
He conceded subsea production is winning ground, but said that type of production technology still has a lot to prove. It may not be the cheapest either when environmental and safety concerns are factored into the cost equation. "Even if you have subsea production, where do you go with the oil? A subsea production system will very probably have an FSO above the subsea system to store the oil. Subsea will never wipe out FPSOs as they are today. It does not worry me."
He said FPSOs will always have to compete with fixed platforms and other floating production solutions. But it will not be Bluewater that develops new process technology. "We are innovators, but not in the process technology area" he said. "We will see more gas storage and gas-to-liquids maybe.
"In a world where gas flaring is going to be banned - and rightly so because we shouldn't burn useful energy - something will have to be done with that gas, either produce it one way or another, or reinject and store it in a reservoir."
That doesn't mean the group is not going to change. Heerema confirmed he is looking at new technologies. "But it is far too early to say anything yet. We don't want to be the dinosaurs of floating production."
Just because he has bought two FPSOs, Heerema said, that does not mean his company - which is entirely privately owned - will rest on its laurels. "We do have a healthy balance sheet. We are profitable, and we have been for years. We are still keen to take on new projects. Acquisition of the Berge Hugin and the Munin does not mean we have to stand still for a while."

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