April’s North Sea helicopter crash turned the spotlight on the UK oil industry. Shell managing counsel David Isenegger tells Tom Phillips about the challenges of working in such a remote and dangerous industry
Recent events in the North Sea brought the oil industry to the front pages for tragic reasons.
Oil is often overlooked as a major business in the UK, with the enormous production from the Middle East dwarfing the dozens of oil fields operating in our own back yard.
But when a helicopter ditched into the sea in April killing 16 workers from BP, many were shocked at the high death toll in the industry and moved by the outpouring of grief from the northernmost part of the UK mainland. The fact is that, prior to the fatal crash (a similar accident in the same month saw all 18 passengers walk away unharmed), helicopter trips to the oil platforms were a daily event and part of the hive of activity that surrounds the industry.
The crash hit the oil and gas companies, most of which are based in the ‘oil capital of Europe’ on the east coast of Scotland and form a close-knit community of suppliers and contractors, hard.
“Aberdeen is a small city and an accident like that affects everyone – we all take it personally,” says Shell UK managing counsel (exploration and production) David Isenegger, who oversees a 16-strong legal team from the company’s Aberdeen office.
Shell UK employs 9,000 people at sites throughout the mainland and on dozens of oil platforms offshore in the North Sea, which reach out towards Norway and stretch east to the coast of the Netherlands.
Shell’s exploration and production arm sources and maintains the company’s oil and gas production, contributing towards 25 per cent of the overall oil and gas supplies used in the UK, and 16 per cent of our petrol and diesel.
Relying on a network of joint ventures and contractors, Shell UK is at the heart of the oil and gas community, and many of the company’s employees either knew those who died or knew someone who knew someone. Although rare, accidents like this have happened before and once again brought things into perspective.
“For Shell and the industry as a whole, safety is the biggest part of the business. We go to great lengths to make sure all the risks are as low as possible,” says Isenegger.
Until the accident, all thoughts were on the state of the oil market. Over the past 12 months, the price of oil has crashed, dropping from $140 (£90) a barrel last summer to $40 per barrel, before climbing again recently to around $60. In that same time, the company’s costs have doubled, causing headaches across the industry.
“The challenge for us is to help our business reduce its costs. This requires lots of work with suppliers and contractors. We’re in a fortunate position that this legal team is very skilled and has a lot of support from its business colleagues. We try to keep external spend as low as possible – it’s a strategy I’ve inherited and something at which we’re very successful.”
Aside from cutting costs, the priority for Isenegger’s team has been the sale of two platforms last year. Oil production has reached its peak and, keen to discard oil contracts that include the costly disposal of platforms, Shell UK decided to sell to small companies. The first to go was the Dunlin cluster, sold to Fairfield Energy in May 2008 for an undisclosed sum, while later that year the Abu Dhabi National Energy Company PJSC (TAQA) bought seven platforms for $631m.
“Declining production from those fields and their relatively high operating costs made them less interesting for us, but they are attractive to new entrants ready to invest and increase output,” explains Isenegger. “We managed to complete the deals with our internal resources. One of this team’s main strengths is that it can deliver multimillion-pound deals without using external counsel.”
Isenegger’s panel took a “great deal of trouble” to put together, and is refreshed every two to three years, with the next review planned for September 2010.
Meanwhile, the team’s in-house lawyers will be busy helping out Shell’s Irish and Norwegian businesses.
“It offers opportunities for the team to do international work from our base in Aberdeen,” says Isenegger. “Our lawyers get to work on big, exciting and interesting projects.”
For Isenegger – a Canadian-born lawyer with varied career that includes a stint at the UN – a visit to an oil platform earlier this year brought home the reality of the remote and dangerous side to the business.
“I had to go on a week-long training course,” he says. “It was one of the highlights of my career – very inspiring. They’re what this business is all about.”
Organisation: Shell UK, exploration and production
Industry: Oil and gas
Managing counsel: David Isenegger
Reporting to: Associate general counsel, EP Europe, Maarten Korsten
Company turnover: $458bn (worldwide)
Total number of employees: 9,000 in the UK, 104,000 worldwide
Total legal capacity: 16 in UK exploration and production, 700 worldwide
Main external law firms: Bond Pearce, Burness, CMS Cameron McKenna, McGrigors, Mills & Reeve, Paull & Williamsons
Total legal spend: £1m
1983-87: BA, University of Alberta
1987 -90: LLB, University of Alberta
1990-91: Trainee, MacKimmie Matthews, Calgary
1991-96: Associate, MacKimmie Matthews and McCarthy Tétrault, Calgary
1996-98: Team leader, UN Security Council, Compensation Commission, Geneva
1998-2002: Manager, international legal services, Sasol, Johannesburg and London
2002-07: Senior legal counsel, Shell International, the Hague and Dubai
2007-present: Managing counsel, Shell UK, Aberdeen