2008 Annual Report - SBM Offshore

SBM Offshore Annual Report 2008 / Report of the Board of Management81• project debt fully serviced by lease income from initiallease duration;• apply conservative policy with respect todepreciation;• manage fleet operations in-house;• engage all senior staff for the fleet under directemployment;• place safety and environmental protection as aprimary concern.The strategy includes the further expansion of the leaseand operate business as a major component of the futuregrowth. The lease of other types of facilities, such asMOPUstor, MOPU, semi-subs etc., is now often beingpursued, as the same principles can apply to any oil andgas production unit provided that it has at least the samerelocatability potential as an FPSO. Recent examples ofsuch facilities are being developed for new geographicalareas including the North Sea, Canada and the Gulf ofMexico. It is expected that the efforts made during the pastfour years in the development of gas related technologywill offer the lease business another area for expansion inthe coming years with FSRUs and LNG/LPG FPSOs.PartnershipSometimes, partnership is considered an efficient wayto pursue and secure business. In the lease and operatesegment, the partners are in general responsible for apre-defined part of the project. They also acquire a certainpercentage of the ownership of the production facility.Reasons for having equity partners onboard include:• getting access to certain specific expertise notavailable within the Company;• getting access to a tanker under construction in orderto meet the required delivery time schedule;• mitigating business risks, especially for units wherethe initial lease contract is relatively short;• taking mutual advantage of a client’s preference fora particular company, which does not itself havethe necessary competence to supply and install acomplete FPSO;• financing of the equity investment as well as enlargingthe potential banking group through access to thepartner’s relationship banks.Partnership is only engaged when it both enhances theprobability of securing the business and in the long runadds value to the Company’s performance.After Sales Services and Offshore ContractingThe Company currently owns and operates two dynamicpositioning offshore construction vessels, the older smallervessel 100 percent owned by the Company and thenewer larger vessel owned by a 50/50 JV between SBMOffshore and Solstad. The larger vessel was designed forand has been engaged in the installation of the Company’sdeepwater moorings, whilst the smaller vessel has beenengaged in many different types of offshore constructionwork. The supply of spare parts and engineering andinspection services for the Company’s existing threehundred plus terminals also has been a very importantactivity, which will continue to expand in the future.Development of Engineering and ProjectResourcesThe Company’s execution capability has been expandedvery significantly over the last few years with a largeincrease in the number of staff employed in the Group.As with new employees in any company, it takes a certainamount of time for them to become knowledgeable andproficient with the Company’s products and procedures.This has been especially challenging at a time when theCompany has been working at a very high level of loading.Management considers that the Company has reacheda suitable level of project execution capacity and will nowconcentrate on improving competency and efficiency ofthe work force.