Crain’s Business Article –
Little guys can win big jobs in the oil and gas industry
By Dan Shingler
You don’t have to be a big Houston-based industry insider to land significant new business in the oil and gas sector.
Look at Labyrinth Management Group. The environmental and safety consulting firm in Medina recently was chosen to audit the compliance of offshore drilling giant Transocean with new federal safety and environmental protection requirements. Labyrinth’s not just a small fish in the oil and gas pond. It’s an embryonic minnow.
“That’s the strange thing; we have a small office. I just have five employees,” said Labyrinth president Lance Traves shortly after getting the job.
Transocean, on the other hand, is a whale that’s as famous as Moby Dick. Not only is it an international leader in deep-water offshore drilling, but it gained notoriety with everyone from school kids to world leaders in 2010 for its role in a drilling catastrophe.
In April of that year, Transocean’s Deepwater Horizon drilling rig exploded, killing 11 workers and ultimately dumping 210 million gallons of crude oil into the Gulf of Mexico. The spill went on for nearly three months and was seen by hundreds of millions of television viewers watching via underwater cameras.
So auditing Transocean’s compliance with safety and environmental requirements is a big deal.
Normally, only producers like Transocean’s client in the Gulf spill, BP, are required to have what are known as SEMS, or Safety and Environmental Management Systems, subject to federal scrutiny and public audits. But because of the Gulf spill, Transocean is on a short leash.
Its auditor will be charged with ensuring that Transocean’s SEMS is what the company says it is, by monitoring a broad swath of practices, procedures, reporting methods, tracking systems and other things that go into ensuring the safety of a drilling operation. It’s a bit like an ISO 9000 audit in terms of dealing with systems and standards, but also entails some physical auditing of rigs and equipment on-site.
Passing the helicopter test
Traves is honest — his company was not Transocean’s first choice. But federal regulators did not approve of its other choices, he said. Labyrinth recently had done SEMS audits for one of Transocean’s clients, the huge Italian oil company Eni. So, when Transocean asked around for another possible auditor, Traves ended up getting the call. He was, he admits, surprised, even when he flew to Houston to talk to Transocean executives.
Traves was surprised he was in the running, but not intimidated by the job. The Eni work had been similar in scope and he’d done audits for big refineries that were even more complicated. But he wanted to make sure his new client- had their eyes open.
“That was one of the first things I said: “You understand that I’m in Ohio.’ … Then I said, “You understand I only have five people, right?’” Traves said.
He certainly wasn’t posing as an industry giant. “But I didn’t talk myself out of the job,” he notes.
Then, he had to interview with eight federal agencies, including the departments of the Interior, Energy, Justice, the Environmental Protection Agency — and even the Coast Guard. That might have actually been easier than the talks with Transocean, because government regulators liked that Labyrinth was an independent outsider, Traves said.
“The DOJ guy said: “We really think you being someone outside of that industry is a good thing.’” Traves recalled.
Finally, he had to be physically certified for the work — including proving he could get out of an upside down helicopter, while underwater, at a NASA facility.
“The rigs are 150 miles out in the Gulf,” Traves said “If a helicopter has a mechanical problem, it’s going in the water, and they want to know you can get out.”
Now, he and his team will be working hard to get Transocean’s first annual audit prepared for federal regulators and the public. The audit is due in April.
No second chances
Traves said his experience serves as a lesson to his firm and other professional service organizations, especially those involved with environmental and safety issues. As drilling becomes more complex, dangerous and is done more often in the United States, the oil and gas industry is going to need plenty of outside help from firms large and small, he said. That’s just as true for terrestrial drilling in places like Ohio’s Utica shale region as it is in the Gulf.
Others are noticing that, too, and consulting and engineering firms in Ohio are chasing new oil and gas work, as other out-of-state firms move to Ohio to get their share of work from Utica.
Pittsburgh-based engineering firm Hull & Associates opened an office in St. Clairsville in 2013 to capitalize on oil and gas work, and Connecticut-based BL Companies opened a Canton office in 2012 for that same reason. Similarly, Dayton-based CESO Inc., another engineering firm, opened an office in Canton in 2011 because of increased oil and gas work.
Many of these firms report that they find more oil and gas work than their new offices can handle, which creates work for their other offices. They also end up getting work in other sectors.
“We’ve seen in Ohio what we were hoping for, and that is that the shale industry creates some opportunities for our architectural and civil (engineering) groups to be involved in hotels and restaurants,” said CESO vice president Steve Olson.
Traves said his firm will continue to seek more work in the energy sector, which has gone from being none of his business to representing almost half of his firm’s total revenues in the last five years.
The oil and gas industry is well connected, Traves said, so good work is often rewarded with referrals for yet more work.
“It just further supports the opportunities for Ohio-based firms in the oil and gas world,” he said. “You have to do good work. That’s the key. You don’t get many second chances in the energy world.”