UK: Amerada Hess - the boys with the black stuff. (2 of 2)

UK: Amerada Hess - the boys with the black stuff. (2 of 2) - Plans for a full-scale oil platform were well underway when, in 1986, the oil price crashed. Back at the drawing-board a distinctly worried management came up with the novel idea of converting

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Last Updated: 31 Aug 2010

Plans for a full-scale oil platform were well underway when, in 1986, the oil price crashed. Back at the drawing-board a distinctly worried management came up with the novel idea of converting a semi-submersible into a floating production facility. It was a gamble that paid off: in July 1989 the AH001 came on stream and the entire facility, even with £18 million worth of safety amendments in the wake of the Piper Alpha disaster, had cost AHL 20% less than the original estimate.

The two fields, together with a small satellite, Hamish, are now producing at annual daily averages of 62,000 barrels of oil and 17 million cu ft of gas. With combined recoverable reserves amounting to 117 million barrels of oil, up 30 million on initial estimates, and 65 billion cu ft of gas, the AH001 will be busy for the next 10 years.

Yet it was really the discovery of the Scott field which launched AHL into the big time. Exploration director Richard Hardman positively bubbles with excitement as he sketches out little diagrams to explain how Scott straddles two blocks, with a major fault line dividing the reservoir. Earlier drilling by Amoco had produced unpromising results, but in 1987 AHL returned to the site, drilled a well in the adjoining block and hit oil.

After a keenly fought contest between the two companies, AHL secured operation of the Scott field, with recoverable reserves estimated at 450 million barrels of oil, 290 billion cu ft of gas and 40 million barrels of natural gas liquids. When Scott comes on stream in 1993 it will account for some 10% of UK Continental Shelf production and, in all, will be the largest operation in the North Sea.

The Scott field will involve AHL in the sort of expenditure that makes for bad dreams. It will cost a cool £1.29 billion to build the two platforms linked by twin bridges 60 metres long. Equally, however, once on stream it will be a veritable Midas, generating daily revenue of $4 million at present rates.

The downside to such success is, inevitably, how to sustain it. AHL participated in 30 exploration and appraisal wells in 1990, only one of which holds any real promise. Drilling in a water depth of 410 feet, 100 miles west of the Shetlands, produced "a very thick oil column. We'd hope that this is large," Hardman cautiously notes. But with depths nearly twice those in the North Sea, and weather that has had the full span of the Atlantic in which to gather force, the Shetlands would be no joy ride to develop.

"We'll probably try to look abroad," Hardman adds, "but then so are all the other oil companies." Actually Amerada Hess already has a small interest in an offshore concession in Thailand and recently acquired a 10% share in an onshore oil field in West Africa. The Rabi Kounga field will give AHL some 15,000 barrels per day, but this hardly compares with Scott's output. Nor, as Hardman points out, would it go far in Britain, with consumption currently running at 1.5 million bpd.

The location of new sources is not the only anxiety that Hardman expresses. In common with many of the staff, he fears growing too large too fast. AHL has expanded from 30 to 500 staff in only eight years. A new London headquarters is under construction and there is talk of yet another extension to the offices in Aberdeen. Hardman thinks that "550 employees would be ideal"; operations manager David Hays clearly agrees.

Laidlaw acknowledges the problem. "As you get bigger how do you prevent yourself from becoming bureaucratic?" he asks. Despite a CV that would have earned him employment almost anywhere, he himself chose "to work in an organisation where people were treated as people". But he is also honest enough to confess that he wanted the "chance, at an early age, to make a mark on events". Staying a big fish in a little pond was never his aim.

So successful is AHL's track record to date that rumours abound of its imminent takeover. Laidlaw sees such speculations as "a compliment", though he swiftly adds: "I think we have a pretty secure shareholding." In fact it is not just the oil industry which regards the company with respect. Even the City, that most notoriously fickle of suitors, seems to have nothing but praise. Oil analyst Fiona Nichol at Kleinwort Benson, one of the few to follow AHL's fortunes, notes: "It's been one of the better performers in oil stocks in the last few months."

Does nobody have anything critical to say about AHL? Competitors covet it, the City loves it, the staff ooze enthusiasm, citing their American-style "mission statement" as if divinely inspired. If this is indoctrination, it's sure got the Moonies beat.

But it is finance director Francis Gugen who sums up what is obviously the greatest source of satisfaction to AHL employees. "When I tell people where I work, they no longer say 'Amerada who?'," he quips.

Amerada Hess has, it seems, come of age.

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