It was on the plane ride home to Moncton in 2007 that Maritime Hydraulic’s president and CEO Kim Carruthers started to worry about a deal he had just signed with ATP Oil and Gas Corporation to build a production riser tensioning system.
The worry was understandable. The Moncton-based company had never done any work for the offshore oil industry before. Now it had $12-$13 million project on the books. Carruthers knew the offshore oil industry could be a great opportunity to grow the company, which designs and manufactures custom hydraulic components and systems for heavy industries. Still, Maritime Hydraulic had also taken a big risk. If it screwed up this job, it would likely be the first and last one it would get in the offshore oil sector. “On that plane ride home I thought, ‘Oh boy, what kind of trouble have I gotten us into’,” Carruthers says.
It’s been a decade since Maritime Hydraulic secured that project, and taking that risk has paid off for the company. The project with ATP was a successful launching pad for Maritime Hydraulic to do even bigger things in the offshore oil business and helped it secure work with some of the sector’s biggest companies.
Even though it’s based in New Brunswick – a province with no offshore oil industry of its own – Carruthers and Maritime Hydraulic have shown that if you combine world-class products with entrepreneurial spirit, you don’t have to be in St. John’s or Halifax to get in on the offshore game.
There’s no doubt that a thriving offshore oil and gas industry can have a tremendous effect on an economy. Newfoundland and Labrador is the prime example. A 2012 report by Stantec outlining the economic benefits of the offshore petroleum sector on Newfoundland and Labrador from 2008-2010 demonstrates how great the impact can be. In 2010, total labour income (wages and employment benefits) in the province from the offshore oil industry was $311 million, and the industry represented 25 per cent of province’s gross domestic product.
New Brunswick, however, has no offshore oil industry (and not much of an onshore industry, either.) It has no oil fields like Newfoundland and Labrador’s Hibernia to exploit and there is no exploration occurring in its waters. However, it does have companies with expertise that the sector needs. The challenge is to first get recognized, then to convince oil and gas companies to give them a chance.
In Maritime Hydraulic’s case, Carruthers says the company’s start in the offshore oil sector came about thanks to a sales agent in Houston who had connections in the industry. That agent knew ATP was looking to get a production riser tensioner system built and because it was a relatively small player in the Gulf of Mexico’s offshore, it was willing to work with a company that was innovative and nimble.
“It wasn’t a difficult decision to try this. The question was would the industry accept us,” Carruthers says. “We struggled at first. It was a brand new industry for us. But we got through it and it was a successful job, and that job got us the experience and references to go after companies like Shell and Total.”
Maritime Hydraulic has not only gone after Shell and Total, it’s been able to work with them. It now has offices in Houston and Malaysia through its subsidiary company, MHD Offshore Group. The Shell project involved – you guessed it – manufacturing a riser tensioning system for the TLP Olympus oil platform in the Gulf of Mexico. Carruthers says its current work is with France’s Total on a $20 million project for its Moho Nord offshore oilfield in the Republic of Congo.
Carruthers says when the company first started its offshore oil business; sales were in the range of $2.5 million annually. Now they are well over $10 million annually. Of course, the industry downturn has impacted Maritime Hydraulic and forced the company to be innovative.
With companies across the globe slashing capital spending and exploration and development plans, new drilling rigs and production platforms that the company could be working on aren’t getting built. “The oil price environment is not allowing a whole lot of new rigs to be built, so we’ve re-focused on the service side of the offshore oil sector to develop business during the downturn,” Carruthers says.
That’s led to work with Shell, refurbishing tensioning equipment on one of its drilling rigs in the Gulf of Mexico. The company also recently snagged another job with Murphy Oil refurbishing a set of tensioner equipment on a drilling rig in offshore Malaysia.
Another New Brunswick company that has been looking for business opportunities in the offshore sector is Saint John steel and metal fabricator Bourque Industrial Ltd. However, it’s had a tougher time making a name for itself. John Bourque, president and grandson of the company’s founder, Leonard Bourque, says it hasn’t yet been able to make major inroads into the industry. “Our business is not built on oil and gas projects,” he says. “We’re walking that road to see if there is a fit.”
The majority of the work it has found in the offshore oil sector has been for ExxonMobil’s $14-billion Hebron project. Bourque says the company has provided temporary steel for the construction of Hebron and that’s made up the overwhelming majority of its offshore oil and gas work. The issue for Bourque is that it hasn’t landed the kind of jobs Maritime Hydraulic has: permanent work designed and fabricated by the company that’s used on drilling rigs or production platforms. “When you do permanent work, it builds your resume and you can expand on it,” Bourque says.
It could be difficult to get that kind of work in the near future as the industry continues to deal with the industry slowdown. Bourque spent a week in Newfoundland and Labrador recently on a business trip and says he found things “quiet” there as the construction phase of Hebron winds down and the project expects to produce first oil in 2017. “Are there opportunities there? Yes there are. Is it in the oil and gas sector? I’m not so sure right now,” he says.
Carruthers says he expects 2017 to be a moderate year for his company with no growth in oil and gas sales. But the company is still busy and employs approximately 80 people at its Moncton facilities. It also continues to develop new technology. He says Maritime Hydraulic has developed tensioner technology for rigs working in ultra-deep water of 10,000 feet or more. Carruthers thinks that’s the next great frontier where companies will look to in their search to discover more oil and gas reserves.
“We need the price of oil back in the high $50s and low $60s. Then I think you will see a lot of new activity,” Carruthers says. “We’ll be ready once companies make the decision to go forward with that.”