Men who put oil industry on real-time
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Fortunately for Ian Johnson, oil is hardly ever found in handy places such as Piccadilly Circus or in the outer suburbs of his native Melbourne. Indeed, the fact that it has a habit of being discovered in places such as Borneo, Congo or the Gobi Desert is the raison d’être of Visean Online, a company he founded five years ago with Matt Connolly, his joint managing director and fellow Melbourne Business School MBA.
“Visean provides oil companies with real-time access to offshore oil rig data,” says Mr Johnson, a tall, blond 40-year-old with a plain way of speaking. “This is important, since most rigs are a long way away from head office.”
The axiom “time is money” is particularly apt in the oil industry, where an offshore rig can cost in the order of US$1m (£580,000) a day to operate. Packed with expensive equipment and manned with a 100-strong crew, from geologists and electricians to cooks and “roughnecks”, an oil rig is much like a small city and almost as costly.
“Everything runs in 15 minute lots,” says Mr Johnson, “each of which has to be accounted for in a log book. Everyone is trying to do things in the shortest possible time, so making faster decisions is everything.”
In the past getting information from the rig to head office, where, says Mr Johnson, “the real decisions are made”, took between a couple of hours and a couple of days. Immediate communications were restricted to satellite phones and faxes which were expensive and relayed only a limited amount and type of information.
For in-depth geological data, reel-to-reel tapes had to be helicoptered off the rig, often across oceans and continents.
“What we do is eliminate that time lag,” says Mr Johnson. “We make it possible for people in a head office in Houston to see exactly the same information that people sitting on the rig halfway around the world are seeing. They can then make decisions interactively, not reactively, which not only saves time but leads to better decisions because they’re dealing with problems as they arise.”
The technology works by sucking up information from the rig via satellite into a data centre, which can be logged into using a normal web interface.
“The enabling technology is high bandwidth satellite communications and the internet,” says Mr Johnson.
An electrical and computer engineer with 15 years’ experience in the oil industry, Mr Johnson came up with the idea for Visean while doing an MBA at MBS in 1998. “I originally enrolled to broaden my horizons and as a way of exiting the oil industry,” he says, “though it didn’t quite work out like that.”
Studying for the MBA at the same time was Mr Connolly, an old oil industry colleague, whom Mr Johnson had first met in 1990 while working for Schlumberger Oilfield Services in Asia.
While Mr Johnson’s MBA was geared towards finance and business strategy, Mr Connolly’s had more emphasis on entrepreneurship and new venture creation.
“It gave me an understanding of what investors required to part with their money,” says 38-year-old Mr Connolly, who now lives in Houston, heading Visean’s North American operations. “Pretty handy stuff when it came to launching the business.”
In early 1999, Mr Johnson mentioned to Mr Connolly an idea that had been kindled by a project he was doing as part of his MBA.
“It was an assignment on communications,” says Mr Johnson. “I chose oilfield communications, looking at how much they cost, how they were being used and where it was heading.
“At the same time, the internet boom was beginning to push satellite communications and I began to wonder how you could bring the two together more effectively.”
Mr Connolly finished his MBA and started working for a venture capital company called Pacific Commerce.
“But we kept playing squash together,” says Mr Johnson. “Matt and I began to talk more about my idea, just ad hoc, really, about doing something internet-related in the oil industry. A lot of our talking was done in the pub after our games.”
By the end of 1999, after almost a year of further discussion and research, the pair developed a prototype of their idea, which they took to oil industry roadshows in south-east Asia.
Encouraged by the feedback, Mr Connolly left his job to work full-time on the project; the pair then put together a business plan and rented some office space in Melbourne.
“It was still an unpaid job,” says Mr Johnson. “But we’d done all the homework, and we thought, ‘OK, let’s put our balls on the line.’”
The first difficulty was raising money. “We weren’t just starting a company,” says Mr Connolly, “we were starting a company wanting to create a technology to sell into a global market. It was a big call, especially in Australia, where no one really knows anything about the oil industry.
“Mining is big, but the oil industry isn’t a well understood sector of it. People were more interested in putting money into retail websites because they could understand that, but when it came to our idea, they were like: ‘What do you mean, a real-time data transmission system for the oil industry?’”
Eventually raising A$250,000 (£110,000), largely through Mr Connolly’s venture capital contacts, they paid for software developers to build a working model, which they then had to trial with an oil company. “Our investors said, ‘Get the technology working on an oil rig, and we’ll give you another A$500,000,’” says Mr Connolly.
A small Sydney-based company called Roc Oil decided to “give them a go”, trialling Visean on a drilling campaign in Mongolia.
“It was ideal,” Mr Johnson explains. “You couldn’t get more remote from Australia than the Gobi Desert and the technology worked perfectly.”
Even though Roc gave them “proof of concept”, they still did not have a paying customer.
“The oil industry is full of good ol’ boys who have been working the same way for 30 years,” says Mr Johnson, “and they were reluctant to pay what we charge [US$750 per day, per rig] for some new technology they didn’t really understand.”
After nine months of chewing through capital they finally signed a contract with Houston-based Murphy Oil, which was drilling in the Malaysian province of Sabah. But everything looked certain to end badly when the company failed to find oil.
“After four months, they were about to stop drilling and terminate our contract when, on the last stages of the last well, they struck oil. If that hadn’t happened it would’ve been the end of us, because we literally had two days’ cash left in the bank.”
Four years later, Visean is still with Murphy Oil; other clients include BHP, Total and Cairn Energy.
“Ian and I make a good team,” says Mr Connolly. “I concentrate on front man activities – liaising with potential clients, negotiating and marketing – while Ian takes care of the number crunching, product development and technology.
“It’s worked well because we played to our strengths and had a strong belief in what we were doing.”
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