GE Oil & Gas continues acquisition, expansion strategy

In less than a decade, GE has extended beyond its Nuovo Pignone turbomachinery heritage, building an integrated drilling, surface, and subsea systems franchise that includes VetcoGray, Hydril Pressure Control, Wellstream Holdings plc and the Well Support Division of John Wood Group plc. Today, GE Oil & Gas operates in over 100 countries, has over 16,000 employees, and generates sales of approximately $9 billion.

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Company selects geographic, technological targets to complement existing strengths

Eldon Ball
Senior Editor
Technology & Economics

In less than a decade, GE has extended beyond its Nuovo Pignone turbomachinery heritage, building an integrated drilling, surface, and subsea systems franchise that includes VetcoGray, Hydril Pressure Control, Wellstream Holdings plc and the Well Support Division of John Wood Group plc. Today, GE Oil & Gas operates in over 100 countries, has over 16,000 employees, and generates sales of approximately $9 billion.

Manuel Terranova, Senior Vice President, Regional Operations and Global Sales – Drilling & Production, GE Oil & Gas, recently met with Offshore magazine to talk about the strategic thinking behind GE's trail-blazing acquisitions, and its plans for future expansion.

Offshore: What's the rationale behind the acquisition strategy?

Terranova: Starting in 2007, VetcoGray gave us an established position in subsea trees, manifolds, and controls manufacturing and services. Acquiring Hydril Pressure Control allowed us to add the riser package for rigid riser systems and for drilling riser systems. By manufacturing the BOP and marrying it to the legacy marine riser VetcoGray product line, we upped the stakes in managing a larger portion of the subsea system. Through Wellstream, we are now firmly established in the flexible riser space, which is essential to completing our offering across the subsea value chain, and is especially important given the fast growth in deepwater E&P. The trend toward FPSO-enabled field developments in Brazil and West Africa requires efficient and reliable disconnect systems from the surface, and therfore, make flexible risers the obvious choice. In addition, we have a solid offshore differentiator through our ability to offer single unit and modular turbine and compressor solutions for FPSOs.

Our portfolio now addresses all key segments in the oil and gas value chain from subsea and onshore drilling and production systems through to LNG, pipeline, storage, industrial power generation, refining, and petrochemical applications.

Offshore: What were the factors that made the acquisition of Wellstream attractive?

Terranova: Wellstream typifies our strategic approach of high-tech manufacturing for mission-critical applications, with a favorable services pull-through. Our desire to further expand our comprehensive system solution from wellhead to topsides served as a primary motivator for acquisition. Adding flexible risers to our product line represented a great fit.

Wellstream's strong position in Brazil also provided additional motivation for the acquisition. Wellstream has a state of the art quayside manufacturing facility at Niterói just outside Rio de Janiero, which further strengthens our established rooftop presence in Brazil and enables us to continue our expansion and localization programs. At the same time GE has a fantastic footprint and reach in key oil and gas producing regions where Wellstream needs support to achieve accelerated growth. For example, Asia Pacific and West Africa – both key regions where GE Oil & Gas is already firmly rooted – are key growth markets for Wellstream.

With some life-of-design requirements approaching 40 years, understanding how hydrocarbons flow through the system has become a big market differentiator. The more pieces of the system that you design, manufacture, and service, the stronger position you're in to support the customer with a reliable flow assurance regime over the lifecycle of the field. The addition of flexible risers to an already robust subsea offering provides another critical building block for better systems analysis and more comprehensive flow assurance models.

We believe that systems integration equates to a more attractive, value-added proposition for our customers, across all aspects of operations, from the design engineering, manufacturing, testing, execution, and services phases, as well as in procurement and long-term asset management.

Keeping innovation flowing through the injection of new technology is fundamental to what we do at GE. In Wellstream, we not only saw an established high-tech product line to help complete the subsea systems jigsaw, we also saw a tremendous opportunity to enhance the product line, for example by introducing GE's expertise in remote monitoring and diagnostics. The ability to monitor and inspect the flexible riser string in real time is a key area of our focus. In addition, we will exploit technology know-how from across our other GE businesses such as material sciences to enhance Wellstream's product line. It's not a far stretch to take GE Aviation's composites expertise and patent portfolio, evident in three-dimensional fan blades technology, and apply it to the subsea arena for jumpers, flowlines, and flexible risers.

Offshore: At the time you bought VetcoGray, were you also thinking of expanding into other areas of oil and gas and looking at other possible acquisitions?

Terranova: Yes. We were predominately – but not exclusively – a rotating equipment business until the VetcoGray acquisition in 2007. We knew which adjacencies we were interested in occupying (for example, electrical submersible pumps), and then we looked at what was available and met our evaluation criteria. For the past ten years we've been looking to expand into multiple adjacencies that meet the high technology manufacturing and services criteria.

Offshore: What about the acquisition of the Well Support division of Wood Group plc?

Terranova: We are market leaders in the high-pressure, high-temperature, high-specification portion of the surface market. In the low/medium specification segment of the surface equipment market we have put our primary focus on two notable markets: North America and the Middle East.

Both the Surface and ESP businesses within Wood Group featured a loyal and expansive customer base in the US. They have a very effective service shop footprint and a well-established international supply chain, which allows us to leverage best cost countries. Those are some of the competitive advantages that they bring to the table, not to mention a fantastic services DNA.

A critical piece of Well Support to highlight is the ESP (electric submersible pump) space. This acquisition has firmly rooted GE into the enhanced oil recovery segment. We believe we can take the Well Support electric submersible pump line and inject new technology – whether it's coating technology or connections technology – to enhance efficiency or reduce still further the mean time between failure of ESP systems.

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RamTel Plus displays the position of BOP ram blocks as well as the pressure needed to open, close, and shear in real time.

Offshore: How about new product development? I think you have some post-Macondo products in the works.

Terranova: One of the things we did after the Macondo accident was to accelerate the involvement of our sister businesses in new product development. We've doubled our efforts in furthering how we can bring the “aviation mind set” to the industry with the help of experts in our GE Aviation business. The result of these collaborate efforts is an extended product line that will help deliver significant safety, reliability, and efficiency benefits for customers.

For example, we've developed a hydrostatic pressure assisted ram. Basically, this uses hydrostatic pressure – the pressure the equipment is subject to when submerged – as a way to augment ram force. This avoids the need to put additional accumulator valves on the seabed. Additional regulations will result in an increase in required ram capacity, and this is a simple and effective way to avoid making the BOP stack much heavier.

Another enhancement is our Drilling iBox system. This is a straightforward data logger which can track and record vital information from every function triggered on a BOP. The data logger captures every discrete event triggered – such as a valve actuation – from the BOP control system.

Post Macondo, the question becomes: “How can we better use captured data to assess the general health of the BOP?” Or, “how can we use data to determine when the next service interval should be scheduled for the BOP?” Here again, we looked to other parts of GE, where we're already delivering service prognostics for locomotives and aviation jet engines. So we basically exploited expertise from our GE sister companies and applied the same logic in the oil and gas space.

Prognostics enable us to predict when service intervals should occur in order to prevent in-operation delays or non-productive time on a rig. Being able to predict that time interval is a significant time and cost savings to the customer. The last thing any operator wants is unplanned maintenance operations while the rig is working offshore. Our solution helps increases safety and reliability, and also helps avoid non-productive time on the rig.

Offshore: Any other new products in the pipeline?

Terranova: GE's new RamTel Plus is a very accurate position sensor that is designed to survive a catastrophic event and will tell you the exact location of the ram inside the bore. This is to save engineers from having to use indirect flow calculations. It gives a positive reading of where the ram sets in the bore.

We also launched an ROV display panel that is light activated and is supported by a trickle-charge battery system that sits of the seafloor. Hopefully, this never gets used – but if an operator has to deploy an ROV to check or monitor the BOP, there's a subsea control panel available that will give the exact ram position and pressure indications as well. So, for example, if all the topside systems are lost, real-time readouts are available regarding what's happening inside the BOP. It's straightforward, simple, and very effective.

We've also recently developed a black box recorder for rigs that can survive a catastrophic event and be reclaimed off the bottom of the seabed. Remote monitoring and diagnostics on all our product lines enables our customers to see what's happening offshore from an onshore location, whether it's the BOP or other operations that may be occurring on the rig.

Offshore: Do you have some other acquisition targets for the future?

Terranova:With over $4.1B in recent oil and gas-focused acquisitions, we have a lot of work to do to integrate the businesses and drive operational synergies to benefit our customers and GE shareholders.

We certainly have enough to keep us busy for a while, but we do continually assess what's available in the market, mindful of any opportunities to add real value to our customers. In addition, we continue to look at JVs and partnerships that can help us to grow, particularly in fast-emerging oil and gas regions where stable growth can be accelerated through localization and collaboration.

Ultimately, our acquisitions are intended to help our customers increase production and profitability. Customers should be reassured by the fact that GE Oil & Gas has a solid track-record of organic and inorganic growth, of continuous investment in reliable innovation, and of longevity and continuity in the segments we enter. GE has put skin in the game. We will continue to lead the industry with technology solutions to help our customers tackle tough and complex engineering challenges. We're here for the long haul.

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Manuel Terranova is Senior Vice President, Regional Operations and Global Sales – Drilling & Production, GE Oil & Gas. In his 10 years with GE, Terranova has occupied a number of operational roles, including Sr. VP, Subsea Product Platform and Commercial Operations, and GM of Pipeline Integrity Services and CEO of PII. From April 2002 through March 2006, he served as the GM and CIO for Information Management at GE Oil & Gas. During his tenure, he successfully deployed one of the largest process and system redesign efforts ever undertaken at GE. In 2010, Terranova received the General Electric Chairman's Award for Leadership in Technology and Innovation, and received accolades from former GE Oil & Gas CEO, Claudi Santiago, for his contributions to the Subsea Platform business.

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