Tullow Oil CIO: ‘Satellite Becoming More of a Secondary Option’

By | April 14, 2011 | Feature, Telecom

[Satellite News 04-14-11] Tullow Oil has exploration operations spread around the globe, making its communications needs very complex. Tullow looks to use a mix of satellite and fiber to meet its needs, and CIO Andrew Marks discussed how the oil company evaluates different communications technologies.

SATELLITE NEWS: A year ago, you said, “Satellite is king for now, but you have to ask, is the long-term satellite VSAT deal at risk?” Has your opinion changed during the past year?

Marks: The easy answer is, “It depends.” As I said last year, there is still a significant market for satellite, because there are extremely remote locations onshore and, equally, a great deal of our operational work remains offshore. You have to be realistic and say there is a long-term future for VSAT and long-term deals to be done. What has changed is that onshore, and I am talking about in places in Africa where we do business, although I don’t see why it would be different in South America and Asia, there is a significantly reduced market for where satellite is the only medium available. I think satellite is becoming more of a secondary option. We still commit to satellite, but it is not the channel on which we place our primary telecoms links.

SATELLITE NEWS: How is Tullow Oil using satellite today?

Marks: Taking offshore examples, we have rigs and floating production facilities offshore [near] West Africa, and they are still very much satellite first and only. It will be a long time, if ever, before we have the infrastructure to replicate what has been done in the North Sea and lay a fiber backbone on the seabed and link it in to our onshore infrastructure. That is driving a future for VSAT, first and only. Let’s take Uganda as another example, which I talked about last year. At that time, it was VSAT only. During the latter part of last year, we had one fiber connection that transformed performance for staff in-country, and now we have a second fiber connection on a different provider on a different cable going down to the coast to a different submarine cable giving even greater resilience. In that case, it is fiber first and second, with VSAT third. If I can give you a third example, we recently inherited an office in Nairobi, Kenya, which already had a fiber connection. We upgraded it within a month of taking over the office and never even thought about VSAT.

SATELLITE NEWS: Your communications choices in Kenya and Uganda have moved away from satellite?

Marks: Knowing the two countries as I do, fiber was coming up from the coast. The evidence is now that if you take on an office infrastructure in Kenya, there is capacity in the market for fiber. You just don’t need VSAT. And if you wanted a second link — which we will — we will get a second fiber-based link with a different provider going down a different route. I doubt I will ever put a VSAT link in there.

SATELLITE NEWS: Does that paint a very bleak picture for VSAT in your future?

Marks: It is down to the maturity of the infrastructure in-country. There are plenty of countries where even fiber is relatively new. We do a lot of business in Gabon where they have landed a subsea cable. There is, however, limited capacity that has been wholly taken up already. There continues to be growing demand for more terrestrial capacity out of Gabon, however, there is none to be had at the moment. The only way to connect facilities in Gabon is through VSAT and/or to expand what VSAT we have already. There is clearly still a substantial marketplace for VSAT. I don’t think the end is nigh, but I do see the market narrowing and the growing influence of terrestrial. There is still capacity required by companies like Tullow Oil, and those requirements cannot be covered by the terrestrial market. VSAT does have that capacity.

SATELLITE NEWS: You said you wanted to see more transparency from satellite players when it came to pricing. Has this happened?

Marks: I was challenging the satellite players and the middlemen to be more competitive on price. I wanted to highlight that we were being offered an inferior product in terms of latency and overall performance and we were being charged 2 to 3 orders of magnitude more for it. If you are going to charge that, we need to understand what the costing is. I talked about licensing. I talked about the relationships with governments, which was often used as a reason for the cost and a reason for the time it took to provision satellite capacity. I offered to help broker between the various agencies to make things better for all parties. I am not aware of any change in this myself.

SATELLITE NEWS: What are some of your major capital expenditure plans for new communications networks?

Marks: We are focused on making what we have more reliable. I have greater confidence in countries like Ghana and Uganda. Both are current and future significant revenue generation opportunities for Tullow with growing oil production. There is obviously the underlying operational risk to consider, but in terms of communications, reliability is key. Investment is going in at the front-end in terms of multiple links and in the backend in terms of rationalizing and centralizing systems back here in the United Kingdom so I can provide more services down the wire with the confidence that we have suitably robust connections to deliver those services. I am saving infrastructure costs locally. I am using clustered environments back here in the United Kingdom, which is cheaper than deploying local offices in every country of operation. I am then able to spend more money on operating a telecoms network to give me the reliability and performance we need.

SATELLITE NEWS: What is the role of VSATs in the future?

Marks: There is a huge amount of work continuing in IT to provide low-bandwidth solutions. The whole concept of apps that will work over a mobile device is a real opportunity. Satellite will still be able to provide the response times required for the sorts of data we are talking about in our industry and the transactions that need to be supported. The thin-client concept works really over VSAT, so it still remains attractive on that basis. It still performs. It can handle a voice call perfectly. Once you have paid for the capacity, there is no extra charge in that respect. The bottom line is that it does come with a significant up-front premium. It is simply a lot more expensive than a terrestrial link. Once you have the terrestrial link, it is usually more reliable and has better performance. Latency is the big issue for VSATs. It is physics.

SATELLITE NEWS: How else are you altering your communications network throughout Africa?

Marks: We have continued to grow our existing capability. In Ghana, we have put in additional links to provide reliability. I have already talked about Uganda, which was once VSAT only, but last year we saw the change to dual terrestrial links with reliability and improved performance making VSAT secondary. We continue to grow our business into new countries for exploration. We are finding we can go straight into Kenya and have access to a broadband capability in terms of terrestrial and not even have to think about VSAT. Then you have somewhere like Ethiopia and other countries in West Africa where we still need VSAT first. There is no short-term terrestrial option in somewhere like Gabon. Therefore, VSAT is the only option we can adopt. We are putting in additional links and taking what is available in the market, but I would not say VSAT is our first choice. I would say we use it when it is our only choice.

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