Executive vice president Tore Torvund has reorganized Hydro Oil and Energy, dividing the Exploration and Production Norway division into two. Safety and other important challenges will get increased focus. For the first time, Hydro will have a division directed from Bergen. The reorganized business area will have joint staff and support functions.
Torvund confirmed that this step is, among other things, a consequence of weaknesses uncovered in Hydro's organization after the tragic fatal accident on the Oseberg East platform on Christmas Eve last year. However, improved safety is not the sole reason for reorganizing.
"These changes underline how Hydro is continually developing its three business areas, where management is responsible for the development of its own area. Agri was the first off the mark with its turnaround operation over a year ago. Light Metals is also working with similar plans. What we are doing in Oil and Energy is a natural progression towards the goal of a more vital organization," Torvund said.
Is it a new and different Hydro we are coming to recognize?
"After stating our goal of concentrating on three core areas, Oil and Energy, Light Metals and Agri in the fall of 1999, we have gradually focused activities on increased synergies within each business areas. That does not mean there is not a continued need to coordinate and realize synergies between the three areas. Sharing management and other personnel resources across divisional boundaries, as well as the allocation of capital is a good opportunity to benefit from Hydro's overall strength and size.
A larger oil company
Tore Torvund points out that Hydro has become a substantially larger petroleum operator on the Norwegian continental shelf since the acquisition of Saga. In terms of operatorship, Hydro currently accounts for one-third of all Norwegian oil production.
"That alone demands huge management involvement. Meanwhile, we are building up our international activities. Just in the past few weeks we have been awarded technical assistant status to state-owned oil company Sonangol on Block 34 in Angola, and have entered into an agreement for exploration stakes in the Gulf of Mexico. This all requires increased leadership attention within Oil and Energy. In addition, the internal and external evaluations carried out after the fatal accident in the North Sea last December have shed light on the fact that our focus on operations and safety has not been satisfactory," Torvund says.
"I have therefore decided that it is right to divide our large Norwegian offshore activities into two divisions: Operations and Production Norway and Exploration and Development Norway.
Safety gets top priority
Does this mean that this will be the only consequence of the organization's shortcomings in connection with safety?
"Dividing our Norwegian activities into two constitutes, in my opinion, a significant increase in focus on the weaknesses uncovered. In addition, we have implemented numerous safety enhancement measures over the past several months. The investigation we have carried out does not point to any individual in the Hydro organization, who is responsible for the accident that occurred last Christmas Eve. I am impressed by the proactive response of the entire organization, which is strongly safety focused today. That does not cloud the fact that additional changes may be required, but this is a vital step in the process of continual improvement."
Torvund emphasizes that no connection exists between criticism of Hydro's North Sea safety record and the resignation submitted by Exploration and Production Norway chief Lars T. Bjerke.
"Bjerke has led Exploration and Production Norway since the integration of Saga on January 1, 2000. He has also been a key player in the work to integrate the two organizations, and has made a vital contribution to the smooth process that has resulted in an organization that functions well and has produced excellent results. Lars Bjerke has agreed with splitting the organization, and has been asked to take on one of the head of division posts. However, after 20 years in key management positions, he now wishes to step back and concentrate on other work in the industry. His resignation brings into force a severance arrangement that he negotiated with Saga's board of directors before Hydro took over the company.
Operation and Production in Bergen
The new division Operation and Production Norway will have overall responsibility for ensuring that the company's operations in the North Sea follow the safety and operational requirements set by both Hydro and the authorities. The division will be responsible for the further development of the huge values the investments and resources on the Norwegian shelf represent.
"We consider it appropriate that the responsibility for this area is situated in Bergen. This will, therefore be the first "Norwegian" division to be led from anywhere outside of the Oslo area, and represents a definite boost to our presence in the Bergen region. I think this will not least have a positive effect for the employees in the division," comments Torvund.
Torgeir Kydland (44) who is in charge of organization in Oil and Energy, will head the new division. He has worked for two periods on demanding tasks in Hydro's operative organization in Bergen, alongside playing a key role in the business development of Exploration and Production Norway.
Exploration and Development just outside Oslo
"Business development and further development of the engagement on the Norwegian shelf, where we can see there are still considerable opportunities, will be taken care of by Exploration and Development Norway which will be situated at Kjørbo, Sandvika in Bærum just outside of Oslo. This division will primarily be responsible for Hydro's future licenses and the development of our large undeveloped fields, including Ormen Lange. The responsibility for the follow-up of Hydro's portfolio of fields where the company is not operator will also fall to this division."
Exploration and Development Norway will be headed by Torstein Dale Sjøtveit (46). He played a key role in the preparation of Hydro's application in the 15th licensing round for the Norwegian shelf. It was in this round that the company was awarded responsibility for the development of the Ormen Lange field. In recent years he has been responsible for building up the company's operation in Angola.
Stronger international focus
After the reorganization, Exploration and Production International will still have the overall responsibility for the development of technology and expertise in the Oil and Energy area. According to Torvund this is due to the marked need to exploit and develop Hydro's technological advantages in the company's international projects, not least in Angola, Canada and Russia.
In connection with the expansion of activities overseas, more resources will be allocated to the regional units, which will also have a more clearly defined responsibility for their results.
Morten Ruud, Reidar Sæther, Bengt Göran Markeborn and Tom Røtjer continue as heads of division for Exploration and Production International, Energy, Oil Marketing, and Technology and Projects respectively.