General Electric Co (GE), the US-based multinational conglomerate, yesterday said that its oil and gas unit will acquire the well-support division of British energy services firm John Wood Group Plc, for $2.8 billion in cash.

Aberdeen-based Wood Group is an international energy services company with revenues of $5 billion, employing more than 29,000 people and operating in 50 countries.

The Group has three divisions - Engineering & Production Facilities, Well Support, and Gas Turbine Services - providing a range of engineering, production support, maintenance management and industrial gas turbine overhaul and repair services to the oil & gas, and power generation industries worldwide.

With 3,800 employees, more than 20 manufacturing and multiple service centres worldwide, Wood Group's Well Support division is comprised of three business platforms, Electric Submersible Pumps, Pressure Control and Logging Services.

In 2010, the Well Support division recorded revenues of $947 million and EBITDA of $166 million. The division, which generated 13 per cent average annual revenue growth over the past decade, is expected by GE to generate $1.1 billion in revenue and approximately $200 million of EBITDA in 2011.

The proposed deal propels GE as a key player in enhanced oil recovery by adding electrical submersible pumps (ESPs) to its growing portfolio of drilling and production solutions.

The proposed acquisition also provides GE with entry into the fast growing demand for enhanced oil recovery segment from mature oil fields using downhole pump 'artificial lift' in brownfield developments.

According to GE, demand for products and services that enhance oil recovery is expected to grow significantly driven by an expected decline in production from existing wells and the increasing complexity of developing new reserves.
 
ESP deployment is one of the most effective methods of enhancing production and also one of the fastest growing segments in the oil and gas industry. ESPs will be paramount in helping oil producers meet the rising global demand for hydrocarbons, as maturing fields are expected to account for over 70 per cent of global oil production output by 2012.

Production of unconventional oil and gas is a rapidly expanding global segment. Unconventional gas production will account for 35 per cent of the increase in global supply, while unconventional oil is expected to meet 10 per cent of world demand by 2035, according to the 28 member countries International Energy Agency report 'World Energy Outlook 2010.'

The proposed acquisition is part of GE's growth strategy to invest in its high-technology industrial businesses. GE's oil and gas unit had 2009 revenues of $7.7 billion and profit of $1.2 billion.

In December the company said it would acquire UK oil and gas services company Wellstream Holdings for $1.3 billion. (See: General Electric to acquire Wellstream Holdings for £800 million)

Claudi Santiago, president and CEO of GE Oil & Gas said, ''With world-class products and people, Wood Group's Well Support division is an excellent strategic fit with our business model of high technology engineering, manufacturing and services.

The acquisition is another major step forward for GE Oil & Gas in executing our strategy to equip and serve our global oil and gas customers with the mission-critical equipment and solutions required to address their toughest technical challenges and growth objectives.''