The mission of the International Marine Contractors Association (IMCA) is "to improve performance in the marine contracting industry", and that’s precisely what Allen Leatt has set out to do since taking over as the trade association’s chief executive in 2015.
Leatt has spearheaded an “extensive” list of positive changes at IMCA, from efficiency and cost reduction drives to safety and anti-bribery measures, many in response to – or in some cases, despite – trying times for the offshore sector. “It doesn’t stop there,” Leatt said. The association is still hard at work to better serve its members.
In this Q&A interview withe OEdigital, Leatt shares his thoughts on the state of the offshore industry today, including top challenges for marine contractors and IMCA’s efforts to help address them.
What’s the number one, most pressing issue facing IMCA members today, and what is your organization doing to help address it?
The most pressing issue facing IMCA members is of course a lack of market demand and therefore a backlog of meaningful projects. We are therefore working with contractors and oil companies to promote the message of getting projects off the drawing board by adopting procurement specifications that are pragmatic and workable. Of course, there should be no compromise on safety or quality, but we all know of the excessive gold plating that super-majors have developed over many years of technical conservatism. Fortunately, that is now coming into focus and there has been much more collaboration within industry to create better value through better informed design choices. Technology should reduce costs, not increase the burden on industry, but that has not always been so apparent in the past.
The downturn has had a pronounced, lasting impact across many levels of the offshore supply chain. As the industry starts to crawl out from its slump, what are the most important take-away lessons?
It is clear that prolonged periods of high market demand create both runaway inflation and industrial inefficiency, which ultimately results in a painful market adjustment. We have seen this phenomenon at work in our industry before, and in this current crisis the inflationary aspects were very evident a full year before the collapse in oil price in 2014 – ever higher costs resulted in the brakes being applied to new offshore developments. Come late 2014, the almost total collapse in market demand created the worst ever economic downturn in our industry for a generation. The key lesson for the future in my view is to create lasting operational and economic efficiency.
Our industry today is, by some estimates, around half the size it once was – but will be far more efficient than at $100 oil, so we must maintain and improve on this efficiency level in order to be more productive and return the industry to a position of sustainable profitability.
The offshore wind energy sector is growing in importance, particularly in Northwest Europe, and has provided a welcome new market for contractors with the necessary assets and cost efficiencies. The market in the US and parts of Asia also looks promising and IMCA has many members who see this as an emerging global market of significant scale.
What are some of the ways IMCA has helped its members to cope with the prolonged industry downturn?
We have responded to the challenges in various ways, but principally driven by the need to improve efficiency and therefore like our membership in this market, do more with less. The list is extensive, but you asked!
As you can see there have been multiple efforts on many fronts to improve the service offering to our members. But it doesn’t stop there, we have plenty of more initiatives in-hand for this year and next.
What are some of the other ways you plan to improve support to IMCA members?
IMCA is largely a technical trade association, rather than a purely lobbying body, but we have made impressive inroads into many areas of common interest of our membership, such as Health and Safety, the new Environmental Sustainability agenda, Contracts and Insurance, Ethics and Compliance, Competence and Training, and Regulatory Affairs. We have very active committees working on these topics and more will be added as the need arises.
On many levels, there’s a clear need for greater collaboration between oil companies and contractors. Is this something your group is working toward? If so, how?
One of our roles is to provide a platform for discussion on such subjects. In fact, besides having the vast majority of marine contractors in the world as members, we also have many oil companies as members. Our Annual Seminar in The Hague last November provided the perfect opportunity for discussing these matters, and our panel session of executives from BP, Shell, Allseas, Subsea 7, and McDermott debated this question in open forum. The discussion focused on procurement strategies ranging from integrated solutions to simple chartering solutions. No doubt various approaches will be taken by different operators, but it is encouraging to see that after many decades of debate, that operators are now actively engaged in the collaboration agenda.
The Jones Act has been a particularly hot topic of late in the U.S. Gulf of Mexico. What’s IMCA’s take on the matter?
IMCA members have always held the Jones Act in great respect. In fact, we have members who have both coastwise approved vessels and internationally flagged vessels; and the system has worked well to support developments in the Gulf of Mexico for many decades. In early 2017 however, it looked as though the status quo could be tipping out of balance if international vessels were to be significantly hampered by regulation or, in the worst case, even banned from working offshore the USA. Fortunately, this did not happen, but there is still no resolution to the problem, which leaves a large cloud of uncertainty hanging over future developments in the Gulf. The risk being that given there are no high-capacity domestic vessels for heavy lifting operations, deepwater pipelaying or deepwater construction, that new projects in the Gulf would simply not go ahead and operators would move investment capital elsewhere in the world. It should be noted that the international ships are operated by the large international contractors who are based in the US, employ thousands of workers, pay US taxes and support their local communities. So, a pragmatic solution is essential otherwise everyone loses. As the Economic Impact Assessment Study produced by the American Petroleum Institute (API) showed, the cost to American industry and the American tax payer would be enormous. This is why we have been very active in supporting API and the Jones Act in clarifying the distinction between transportation work and construction work. Hopefully common sense will prevail and that the lawmakers will provide the clarity and certainty that industry needs.
From technical standpoint, in terms of vessels and equipment, where do you see the most room for improvement? What needs to be done to fill these technology gaps?
We have to recognize that up until say 2005, there had been very little fleet renewal due to the sluggish economic environment in the industry spanning many years. Once oil hit $100, the renewal program started and then accelerated very quickly. So much so, that today the industry has a modern fleet of tonnage in pretty much all market segments. Consequently, I don’t see too many technology gaps per se. There are of course pressures to reduce carbon emissions, and we will no doubt see many initiatives in this area, such as the use of battery and hybrid power systems on ships. These are all positive developments which can offer a level of technical differentiation. The offshore wind energy market has seen a rapid growth in the scale of wind turbine generators, and with it the size and complexity of jack up crane vessels to install the new generations of generators. This size and power-race could possibly see the entry of some new disrupting technology – with the obvious risks of equipment obsolescence.
Many see new digital solutions as the next wave set to shake up the offshore industry. From your point of view, what are the greatest benefits – and challenges – posed by digitalization?
We share that general view, but at this stage it remains unclear where the disparate range of technologies will converge, and even the super-majors are struggling with this question. What is for certain is that the technology will need to add value rather than deploying smart kit simply because we can. A recent study by Bain & Co showed that the digital uptake in the oil and gas and mining industries lags well behind consumer facing industries. But I think we all intuitively share the view there must be plenty of upside in the vision of the digital oilfield offering the promise of improving productivity and asset efficiency. However, the shape of that vision is not yet fully in focus, and that is why we have established our Digital Committee to share the views of our members on possible developments in the future – as broad-scale digital projects don’t necessarily have a great track record in delivering the anticipated benefits.
Allen Leatt is a civil engineer by professional training and has 35 years of experience with leading contractors in the offshore construction industry in technical, managerial and executive roles.
He has wide experience in marine contracting and played a senior role in the development of the integrated subsea construction business model in the early-1990s with the formation of Coflexip Stena Offshore, which subsequently became Technip. He was the CEO of Perry Tritech based in the USA and latterly Executive VP of Technip’s SURF Product Line based in France. After 15 years with Technip, he joined Stolt Offshore in 2003 (later renamed Acergy) as Chief Technology Officer within the executive management team, with a broad portfolio covering engineering, R&D, SCM, and an extensive fleet renewal programme. In 2011 Acergy merged with Subsea 7 and he took on the role of Senior VP for Engineering and Project Management. He joined IMCA in October 2015.
He is a Fellow of the Royal Academy of Engineering, a Fellow of the Institution of Civil Engineers, a first class engineer member of the Smeatonian Society, and a chartered engineer in the UK. He holds a Bachelor of Science degree in Civil Engineering, a Master’s in Business Administration, and a h.c. Doctorate of Science degree.