Refining & Petrochemicals Middle East - - INTERVIEW -

On 10 May 2018, the com­bi­na­tion of Mcder­mott and CB&I brought to­gether a global up­stream and sub­sea EPC com­pany with an es­tab­lished down­stream provider of in­dus­trylead­ing petro­chem­i­cal, re­fin­ing, power, gasi­fi­ca­tion and gas pro­cess­ing tech­nolo­gies and so­lu­tions, thereby cre­at­ing an or­gan­i­sa­tion that spans the en­tire value chain from con­cept to com­mis­sion­ing. Cur­rently, the com­bined firm – known as Mcder­mott – has the in­te­grated tech­nol­ogy, en­gi­neer­ing ex­per­tise, con­struc­tion ex­pe­ri­ence and global reach to de­sign and build the en­ergy in­fra­struc­ture of the fu­ture. Linh Austin, se­nior vice pres­i­dent, Mid­dle East & North Africa, Mcder­mott, elab­o­rates on the ad­van­tages that the com­bi­na­tion brought in for the new en­tity, in an in­ter­view with Martin Me­nach­ery

Mcder­mott’s com­bi­na­tion with CB&I was pro­claimed as a trans­for­ma­tional ini­tia­tive. Can you please ex­plain the trans­for­ma­tional changes that are brought into the com­bined or­gan­i­sa­tion’s core com­pe­ten­cies from a re­fin­ing and petro­chem­i­cal point of view?

Look­ing at the way the two busi­nesses were op­er­ated ear­lier, the Mcder­mott le­gacy off­shore was very ge­o­graph­i­cally based, and the CB&I le­gacy on­shore was very prod­uct line based. For the com­bined Mcder­mott, it is im­por­tant that both the on­shore and off­shore busi­nesses are client fo­cused.

In the com­bined Mcder­mott, we want to make sure that our teams are closer to the clients – that is a ma­jor trans­for­ma­tional change in the way we run our busi­ness. Be­ing closer to the client al­lows us to serve them bet­ter in terms of un­der­stand­ing and ful­fill­ing their needs.

Our tech­nol­ogy busi­ness is more in­te­grated to­day than it was prior to the in­te­gra­tion. Lum­mus is a lead­ing tech­nol­ogy and brand, which is very much in­te­grated into the core ar­eas our busi­ness. Lum­mus un­der­pins ev­ery­thing that we do tech­nol­ogy wise across our or­gan­i­sa­tion.

Can you ex­plain three key changes in your on­shore ca­pa­bil­i­ties as a re­sult of CB&I com­bin­ing with Mcder­mott?

What is fun­da­men­tally dif­fer­ent for us af­ter the com­bi­na­tion is how we ap­proach the mar­ket. It does not change any of the tech­nol­ogy that we of­fer. The in­tent is to give the clients one-stop so­lu­tion from the

“When we con­sider our Mid­dle East busi­ness and the de­mand for many mixed feed crack­ers in the re­gion, our his­tory clearly demon­strates that we dom­i­nate that po­si­tion in terms of the tech­nolo­gies and the num­ber of projects that we have won.” Linh Austin, se­nior vice pres­i­dent, Mid­dle East & North Africa, Mcder­mott

well-head all the way to the stor­age. In the Mid­dle East, some­times we see off­shore and on­shore projects that have in­te­gra­tion and syn­ergy with each other. The com­bi­na­tion al­lows us to fa­cil­i­tate those kind of projects, which have the on­shore and off­shore el­e­ments to­gether.

A prime ex­am­ple for this is a project that we re­cently won in the United States. It is an on­shore project; but, we took some off­shore think­ing in it by us­ing the mod­u­lar­i­sa­tion con­cept. It fa­cil­i­tated in mak­ing the foot­print much smaller and al­lowed us to be suc­cess­ful. It will lower the cost for the client be­cause the foot­print was re­duced by 30%, which is some­thing that is very ap­pli­ca­ble to the off­shore mar­ket.

In this project, we will be able to mod­u­larise an on­shore fa­cil­ity, us­ing one of the Mcder­mott fab­ri­ca­tion fa­cil­i­ties around the world. The com­bi­na­tion al­lows us to utilise our fab­ri­ca­tion yards to sup­port both on­shore and off­shore projects in the fu­ture.

Has the com­bi­na­tion re­flected pos­i­tively in se­cur­ing new busi­ness, post 10 May 2018?

The project in the United States that I men­tioned ear­lier is a pre­cise ex­am­ple for this. If we were the Mcder­mott and CB&I be­fore the com­bi­na­tion, nei­ther com­pany would have won this project. The com­bi­na­tion gave us a so­lu­tion that is dif­fer­ent for the client, which was orig­i­nally think­ing in a very tra­di­tional on­shore way of do­ing the project.

There were a se­ries of dif­fer­ent bid­ders for the project. While bid­ding for the projects, we were able to bring in a dif­fer­ent set of think­ing, whereby we were able to show how to re­duce the tra­di­tional foot­print by ~30%. Rather than the stick-build­ing con­cept for the fa­cil­ity, we were able to ex­plore us­ing mod­ules. We will be able to mod­u­larise at one of our fa­cil­i­ties and ship the mod­ules in to the project site.

We have yards that do mod­u­lar­i­sa­tion around the world. For ex­am­ple, we have one yard in Jebel Ali, which we set up in 1984, pri­mar­ily cater­ing to the GCC re­gion’s re­quire­ments. It could be used glob­ally as well. Other ex­am­ples are our fab­ri­ca­tion/ mod­u­lar­i­sa­tion yards in Batam in In­done­sia and Al­tamira in Mex­ico. Those fa­cil­i­ties as well as the Qing­dao Mcder­mott Wuchuan fa­cil­ity in China are used to sup­port our global projects.

What we are aim­ing at is how does the cost of fab­ri­ca­tion used with mod­u­lar­i­sa­tion com­pare to the stick-build­ing con­cept? In the tra­di­tional process, at the peak time of the pre­vi­ously men­tioned project, we may have 4,000 to 5,000 em­ploy­ees on the site, do­ing the whole in­te­gra­tion. In the men­tioned project in the United States, we capped out at closer to 300 peo­ple by go­ing for mod­u­lar­i­sa­tion.

This is only pos­si­ble be­cause we are bring­ing in mod­ules at the project site, and all that we are do­ing at the site is just the tie-ins. It gives us mas­sive lo­gis­tics sav­ings, and safety sav­ings to the clients. Again, the com­bi­na­tion al­lowed us to do this, which we would not have been able to do be­fore.

We are opt­ing for mod­u­lar­i­sa­tion wher­ever it makes sense, like in LNG and eth­yl­ene fa­cil­i­ties. We are ap­ply­ing mod­u­lar­i­sa­tion to re­duce safety is­sues and cost in­volved, and to be con­sis­tent in qual­ity. When we build a mod­ule at a fab­ri­ca­tion fa­cil­ity, it is like build­ing any­thing in a fac­tory. We have much tighter con­trol on qual­ity com­pared to stick-build­ing at a project site.

Wher­ever it makes sense, we are try­ing to push the bound­aries for the mod­u­lar­i­sa­tion con­cept. At petro­chem­i­cal fa­cil­i­ties, when you do site work, some­times you can run into is­sues that ex­tend the sched­ules. Mod­u­lar­i­sa­tion gives the client more cer­tainty about sched­ules. It also gives ad­di­tional safety, and en­sures qual­ity.

We can def­i­nitely claim that mod­u­lar­i­sa­tion gives more cer­tainty on project sched­ules. Us­ing mod­u­lar­i­sa­tion con­cept in more projects and think­ing that way as the ba­sis of our de­sign, may even­tu­ally pro­vide data to sug­gest you can see an im­prove­ment

in sched­ule. We can­not quite make that claim to­day.

Mcder­mott’s port­fo­lio in­cludes more than 100 li­censed pro­pri­etary tech­nolo­gies, sup­ported by more than 3,500 patents and patent ap­pli­ca­tions. Can you please elab­o­rate on how th­ese tech­nolo­gies have helped re­fin­ing and petro­chem­i­cal in­dus­try to re­main com­pet­i­tive in the cur­rent chal­leng­ing mar­ket en­vi­ron­ment?

With Lum­mus, we have the lead­ing tech­nol­ogy on eth­yl­ene and heavy crude pro­cess­ing. How does that help our clients? As demon­strated in the plants and fa­cil­i­ties that we have built around the world, the tech­nol­ogy of­fers high yield and fan­tas­tic op­er­at­ing costs, and gen­er­ates a bet­ter re­turn on in­vest­ment.

Now, with the com­bi­na­tion, we can not only give our clients the tech­nol­ogy but also all ca­pa­bil­i­ties in con­structabil­ity. We can give the clients an in­te­grated so­lu­tion. Many times, a project might have the right tech­nol­ogy, but if it can­not be in­te­grated and built in to the other el­e­ments, the project might end up with hic­cups in the start-up it­self. We pro­vide a one-stop so­lu­tion to project own­ers, which we are re­ally proud of.

We have signed on in a num­ber of projects for the crude-oil-to-chem­i­cals (COTC) tech­nol­ogy. In-house, we have most of the COTC tech­nolo­gies, which are based on re­fin­ing and petro­chem­i­cal in­te­gra­tion. We can en­sure that, by in­te­gra­tion, all those tech­nolo­gies pass through a com­mon plat­form.

In Jan­uary 2018, Saudi Aramco, through its wholly-owned sub­sidiary Saudi Aramco Tech­nolo­gies, had signed a three-party joint de­vel­op­ment agree­ment with CB&I and Chevron Lum­mus Global to scale up and com­mer­cialise Saudi Aramco’s Ther­mal Crude to Chem­i­cals (TC2C) tech­nol­ogy. Can you please ex­plain the sta­tus of the TC2C tech­nol­ogy, post Mcder­mott-cb&i com­bi­na­tion?

As you know, the ac­tual COTC agree­ment be­tween Saudi Aramco and SABIC is con­fi­den­tial. Our early tri­als sug­gest that the tech­nol­ogy is go­ing very well. Mcder­mott of off­shore had no play, or foot­print in the COTC tech­nol­ogy. The COTC tech­nol­ogy is with us af­ter the com­bi­na­tion of Mcder­mott and CB&I. With our port­fo­lio of tech­nolo­gies and ca­pa­bil­ity to in­te­grate those tech­nolo­gies, the early tri­als have been very pos­i­tive. I think it is fair to say that COTC is in fact a wa­ter­shed tech­nol­ogy, and we are re­ally ex­cited about it.

Mcder­mott’s tech­nol­ogy port­fo­lio in­cludes a broad range of com­ple­men­tary eth­yl­ene pro­duc­tion tech­nolo­gies. What is the role of this port­fo­lio in keep­ing Mcder­mott as a pre­mier fully in­te­grated provider of tech­nol­ogy, en­gi­neer­ing and con­struc­tion so­lu­tions for the down­stream in­dus­try?

When we con­sider our Mid­dle East busi­ness and the de­mand for many mixed feed crack­ers in the re­gion, our his­tory clearly demon­strates that we dom­i­nate that po­si­tion in terms of the tech­nolo­gies and the num­ber of projects that we have won. An ex­am­ple of this is our flag­ship project for Or­pic in Liwa Plas­tics In­dus­tries Com­plex in Oman, which takes us all the way from FEED to li­cens­ing, and fi­nally to the EPC.

The fully in­te­grated so­lu­tion – from tech­nol­ogy all the way to ex­e­cu­tion – is what Mcder­mott brings in as a unique of­fer­ing to the mar­ket that oth­ers can­not. And, we are in a dom­i­nat­ing po­si­tion for the mixed feed crack­ers, which seem to be a promi­nent fac­tor in the Mid­dle East right now.

What is the sig­nif­i­cance of the Mid­dle East re­gion in the busi­ness port­fo­lio of the com­bined Mcder­mott?

The largest vol­ume of global busi­ness for the com­bined Mcder­mott orig­i­nates from the NCSA (North Cen­tral South Amer­ica) re­gion, which ac­counts for ap­prox­i­mately 40%, fol­lowed by the MENA re­gion, mak­ing for nearly 30%. The Mid­dle East busi­ness was very promi­nent for the Mcder­mott off­shore. For the CB&I on­shore, it was much more op­por­tunis­tic – it was not a big busi­ness in terms of the vol­ume. When we look at the Mid­dle East, the on­shore mar­ket is ac­tu­ally big­ger than the off­shore mar­ket here. For us, we have to be quite se­lec­tive be­cause there are so many projects go­ing on in the re­gion in the on­shore busi­ness. It is a mas­sive mar­ket. But, we will be se­lec­tive based on our tech­no­log­i­cal ca­pa­bil­i­ties.

The projects that we are go­ing to se­lect for par­tic­i­pat­ing are those for which we have the key tech­nol­ogy that can ac­tu­ally make sure that we can pro­vide a dif­fer­en­tial value to the client. Go­ing for­ward, the com­bi­na­tion

of the on­shore and off­shore busi­ness in the Mid­dle East should be our big­gest mar­ket.

Which are the ma­jor down­stream projects cur­rently man­aged by Mcder­mott in the Mid­dle East?

The ma­jor on­shore projects that we are work­ing on right now are Liwa Plas­tics In­dus­tries Com­plex project of Or­pic in Oman; the re­fin­ery re­vamp project of SATORP in Saudi Ara­bia; the clean fu­els project of KNPC in Kuwait; and the crude flex­i­bil­ity project of ADNOC in the UAE. We also have the Duqm Re­fin­ery stor­age project and a num­ber of other stor­age projects in the re­gion.

Can you en­vi­sion three key achieve­ments that will be the re­alised by end of 2020 by Mcder­mott in its down­stream busi­ness in the Mid­dle East, which would not have been pos­si­ble with­out the com­bi­na­tion with CB&I?

First and fore­most, it has to be syn­ergy. We see a num­ber of projects, not just in the Mid­dle East but around the world, for which we have the abil­ity to pro­vide com­bined so­lu­tions for on­shore and off­shore, which is bet­ter for the client. That is the fun­da­men­tal el­e­ment of the com­bi­na­tion be­tween Mcder­mott and CB&I – the syn­ergy and the one-stop so­lu­tion that takes away all the as­so­ci­ated risks. This is a key ad­van­tage of the com­bi­na­tion.

The sec­ond prime ad­van­tage is the con­cept of how do we take our on­shore and off­shore think­ing around the LNG and eth­yl­ene plants, where mod­u­lar­i­sa­tion makes sense.

The third ad­van­tage of the com­bi­na­tion is be­ing closer to the clients by lead­ing our on­shore and off­shore busi­nesses from each of our key mar­kets – Mid­dle East, Amer­i­cas, Africa, Europe and Asia-pa­cific.

If you look at the on­shore busi­ness of CB&I be­fore, we have done very lit­tle work in South­east Asia, while we have very good pres­ence in the off­shore busi­ness in the re­gion. We would ex­pect South­east Asia to be a very im­por­tant and emerg­ing mar­ket for us, which would not have been pos­si­ble prior to the com­bi­na­tion.

Or­pic’s Liwa Plas­tics In­dus­tries Com­plex EPC 1 – steam cracker unit with off­site work and util­i­ties in So­har, Oman.

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