Surfing the industry

There are not too many people within the subsea business that saw through – from their very beginnings and from the inside – the growth of two of the biggest players in the business. Elaine Maslin speaks with Allen Leatt to find out more.

Photo of Allen Leatt. Photos from Allen Leatt.

Allen Leatt has seen through the creation of both Technip and Subsea 7 into the offshore construction firms they are today, having worked at the likes of Stena Offshore and Stolt Offshore.

Leatt, now CEO of the International Association of Marine Contractors (IMCA), is taking on a different challenge. IMCA, formed in 1995, has roots deeper than Leatt’s first days in the industry in 1982. IMCA, formed after the merger of the Association of Offshore Diving Contractors (AODC) (itself formed in 1972) and the Dynamically Positioned (DP) Vessel Owners Association (formed in 1989), now has about 1000 member companies.

Leatt joined the organization in October 2015 and reorganization has been high on the agenda, both to reflect its size, and the current economic environment. It’s a new challenge for Leatt, whose roles at Stena, Stolt, Acergy, Technip and Subsea 7 were geared toward delivering contracts and problem solving on projects.

Having been through previous downturns, he’s confident the industry will get through this one. “Aberdeen knows better than anyone the state of the industry today,” he said at a diving seminar in the Granite City in mid-November. “We know no one has any control of these macroeconomic matters. We also know we have tremendous resilience in this industry. It’s a cyclical industry. We will adjust to being fit for the purpose ahead of us.”

Rising costs are to blame. Some attributed to post-Macondo regulations (10-15%, according to McKinsey Research), Leatt says, some due to complex specifications and operators choice (45-55%), and 30-40% due to the supply chain. Capex cuts of 25% in 2015, and the same in 2016, means there’s less work to go around. New business models, not just rightsizing, are needed to survive and for the industry to again prosper, he says.

A civil start

Leatt as a graduate engineer and air diver in the late 1970s.

Leatt is a civil engineer by training, having graduated from at Aston University, Birmingham, where he recently received an honorary DSc. However, from the start, he’s been in the marine sector. At his first job, with John Laing Construction, he was given the opportunity to train as a diver, to supervise diving contractors. He qualified as a diver in 1978 and became a chartered engineer in 1982, moving that year to Aberdeen to join the offshore business, working for SubSea Offshore. He’s not looked back.

“The glove fit,” he says. “(In the marine civils industry) we worked in strong tides with no visibility. I knew the limits of what could be done. When I moved to Aberdeen, there was so much energy, so much initiative you could take, and so much pioneering activity. It was an exciting time.”

His career took him to New Orleans in 1986, but then his first oil crash happened. “The cost cutting was brutal. Everything stopped,” he says. Leatt decided to do an MBA at Cranfield University, UK. Then, Piper Alpha happened, shaking the industry to its core. Leatt then joined with a relatively new firm, Stena Offshore. “It was a small company, with a fantastic owner, but it was losing money,” Leatt says.

New diving support vessels were bought, acquisitions made, such as the reel ship Apache, and by 1994 the firm had US$300 million revenues (from $25 million when Leatt started in 1988) and was “very profitable.” Stena Offshore merged with Coflexip in 1995, which then, in the 2000s, merged into Technip. During this time, Leatt also helped form Perry Slingsby Systems, by merging Perry Tritech, of which he was CEO for a time, and Slingsby Engineering, bought by Coflexip Stena Offshore. “In a market with zero growth,” he helped the company enter the commercial and military fiber optic cable laying markets. The firm was later bought by Forum.

Starting at Stolt

Leatt, meanwhile, went on to work at Technip’s Paris headquarters, as executive vice president for the subsea umbilicals, risers and flowlines (SURF) product line, covering ships, equipment, factories, and corporate engineering centers in the SURF segment. But, he was soon to start over, joining Stolt Offshore in 2003. “It was losing money, so the board brought in a new management team,” he says. “Within a year, the market had also turned. It was another marvelous journey.”

The business was renamed Acergy, and Leatt became chief technology officer, overseeing the building and conversion of a number of vessels and acquiring what became the Seven Borealis from owners who were struggling to finance it at the time. “It’s a big Swiss army knife,” says Leatt, with clear fondness.

In 2011, Acergy merged with Subsea 7 and Leatt become vice president of engineering and project management, with 2000 engineers on his staff. You could say the rest is history.

Joining IMCA

Leatt as CEO of Perry Tritech in the late 1990s early 2000, seen with the chairman of Coflexip Stena Offshore (now Technip).

In 2015, after 33 years in the offshore contracting world, becoming a Fellow of the Institution of Civil Engineers and the Royal Academy of Engineering, as well as a member of the Smeatonian Society, Leatt decided on another change and became IMCA’s CEO.

There are of course serious challenges facing the industry, which IMCA can help address. There’s gold-plating and duplication – i.e. around engineering requirements – that needs to be challenged, says Leatt, to make the industry much more efficient.

“The technologies are well understood and this industry can solve any technical problem thrown at it, but the requirements have gone up and up over the years, often with little justification, and as a result we are at risk of creating uneconomic solutions,” Leatt says. “I’ve been on projects where the pipeline welding criteria makes it almost impossible to weld. Conservative engineering is fine by me, but there comes a point in time where you have to be pragmatic and make realistic engineering judgements. I learned many years ago to rationalize designs rather than endlessly optimize their performance, and I think that philosophy is as relevant today as it was 30 years ago.”

Among IMCA’s many current projects, there is one looking at contracting terms and conditions, including attempts by some oil companies to change the traditional knock-for-knock arrangements, in ways that put too much risk onto contractors and will strain insurance norms, Leatt says. This has been an issue since the Macondo disaster in the US Gulf of Mexico in 2010.

IMCA continues to monitor and target improvements in safety in the industry, collecting data every year. “Safety has been the linch-pin since the [AODC] was formed in the 1970s,” Leatt says. “The industry was brand new and the safety record very poor, but the regulators couldn’t act fast enough so the contractors came together to form AODC.”

On the technology side, an area close to Leatt’s heart, IMCA has looked closely at DP rules and guidance. But, IMCA also has groups looking at ROVs, survey, competence and training, lifting and rigging, and others.

The latter has had a focus on wire rope; and, more recently it has looked at synthetic rope, as it’s become increasingly used for heavier lifts, while there’s little by way of an established inspection and maintenance regime for the ropes to ensure their integrity, particularly if they’re being used repeatedly.

IMCA is also reviewing industry technologies where others, such as Oil & Gas UK or the Oil and Gas Authority, are not already doing so. One example is around pipelines or subsea construction, where efficiencies could be made.

Technology adoption

Leatt has more experience than many when it comes to the SURF business and in his view it’s a conservative business where technology is adopted incrementally, rather than disruptively, “but where improvements are continuous.” A hot (literally) area at the moment is flowlines insulation, where he sees trace heated pipelines as showing great promise, helping to reduce the need to service lines in subsea architecture. “But, it is not quite as straight forward as the reading on it might suggest,” Leatt says. But, he still thinks this technology will be successful. Likewise, diving and ROV tool development will most likely continue to be incremental in nature.

Areas where the industry faces challenges are the interfaces between operators and their partners, as well as operators and contractors. But, there is an opportunity to reduce the latter. While he thinks operators could do more to improve the industry’s current economics, instead of just leaning harder on the supply chain, contractors could work together more to offer simpler interfaces with operators. Leatt lived through CRINE (Cost Reduction Initiative for the New Era)in the early 1990s and feels the industry could benefit from some of that thinking and leadership today. Some of this type of activity has already been going on, but more could happen, Leatt says.

“There’s been the drive to take costs out and cut capacity, reduce man power, but it’s not enough. If we want to transform things to a different level of performance, we have to think differently and be bold enough to commit to it,” he says. “Large operators can do great things, but breaking the mold is very difficult for them. Small players can deliver through a different model, which the larger guys naturally find difficult. Likewise, the large contractors and service companies today have great opportunities to reshape the marketplace. A crisis always creates room for creativity and thinking differently.”