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2012 EDITION: CONTRACTOR PROFILES OF THE TOP EPC COMPANIES AND SUPPLIERS IN THE MIDDLES EAST
TOP EPC CONTRACTORSRanked - Profi led - Interviewed
SPECIAL REPORT IN ASSOCIATION WITH
2 Oil&Gas Middle East June 2012 www.arabianoilandgas.com
COMMENT
2 011 and early 2012 have seen some of the most exciting contracts and commis-sions in the Middle East. From Pearl
GTL in Qatar to new export terminals in south Iraq, projects came on stream which have dramatically affected the upstream landscape and cemented the Middle East’s prime position as the world’s most important energy supplier.
And it’s not going to stop there.Barclays Capital estimates that global explo-
ration and production (E&P) spending in 2012 will be up 10%, with Middle East E&P spending expected to rise 12% due to a pickup in activity particularly in Iraq, Saudi Arabia and Kuwait.
Offshore and subsea will play a huge part in the region’s growth over the next few years, as the region grabs a slice of $217 billion of planned spending on subsea and pipeline work by 2017, with even that only being enough to ensure the replacement of lost production.
Even without any demand growth, around a quarter – 23.6 million barrels a day - of total oil supply will need to be replaced by 2017. The IEA expects the MENA region to add more
EPCs set for huge demandNext EPC contract cycle to trigger new EPC capacity boom
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This year’s top 50 fi rms won the battle of the backlogs in market dominated by fewer but larger projects.
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production capacity than any other region, investing $100 billion annually to meet the need for oil and gas.
Our 2012 EPC Contractors Special Report is the most comprehensive edition to date. In compiling our rankings, we have used a weighted combination of contract awards, backlog, revenue, EBITDA, net profit and shareholder return - all on show in our rank-ings on pages 26-27 - and broken down into stats for the region and the upstream sector. Where these figures remained confidential, we have used estimates based on reports, disclo-sures and industry comparables.
As a result, some results may surprise, and the rankings have been shaken since last year.
Our aim has been to provide a comprehen-sive view of who is really thriving in the region, and who is best placed to profit from the capex bonanza in the years ahead. So get reading, and join us online to tell us what you think.
Patrick Osgood, Deputy EditorE-mail: [email protected]
June 2012 Oil&Gas Middle East 33www.arabianoilandgas.com
TOP EPC CONTRACTORS
Having constructed all Qatargas’s LNG plants, Qatar is a natural market for Japanese gas special-
ists Chiyoda, a fact reflected in the company’s involvement in the FEED stage at the $10.4 billion Barzan gas develop-ment project, and the firm’s role in building the QP/Shell Pearl GTL plant. In August the firm also won an ‘on-demand’ EPCm contract from Qatargas for its seven LNG lines and other common facilities.
In November, Chiyoda won furnace replacement work for
CHIYODA CORP
Iraq’s North Refineries Com-pany at the aging Baiji plant, in a national sector which is set to take off over the next few years.
In Saudi Arabia, the company is working in Jubail on two con-tracts for thermal cracking and sweetening units for SATORP, with completion slated for 2013.
The company also announced a co-operation agreement with Saipem for collaboration on upstream and LNG projects. With plenty of offshore work up for grabs, the deal has the potential to add significantly to the company’s order book in the Middle East, so watch this space.
27TOPAZ ENGINEERING 28
Annus horribilis. That’s how Samir J Fancy, Chairman of Topaz’s parent com-pany Renaissance,
dubbed 2011 for the compa-ny. Profits across Topaz busi-nesses slumped 77% in the first half of the year, and the engineering group posted a loss of $22.1 million on $172.5 million of revenue in 2011.
Former CEO Fazel Fal-zelbhoy left abruptly in July. Renaissance subsequently disclosed fraud committed by an individual in the firm’s marine business, together with problems with project delivery in the engineering business for which the copany was forced to make $30 mil-lion in loss provisions.
Topaz has now restruc-tured, with Renaissance CEO
Stephen Thomas at the tiller for the time being, and the oil and gas business – incor-porating Adyard Abu Dhabi – standing alone under former Petrofac man Tony McKay (see interview on page 42).
Topaz may come back stronger than ever. Renais-sance displayed admirable transparency in dealing with Topaz’s problems. As well as cleaning house, the company dumped unprofitable busi-ness segments. Eagerly chas-ing new work, McKay says the engineering business will break even by the end of this year, and says Topaz’s facilties at Mussafah, Liwa and Fujai-rah give the firm the means to develop its niche EPC oppor-tunity with a renewed focus on the UAE, and brownfield pro-jects in particular.
42 Oil&Gas Middle East June 2012 www.arabianoilandgas.com
TURNAROUNDAT TOPAZTopaz Engineering is recovering from a torrid year with a new structure, a laser focus on the UAE market, and a new head of Oil & Gas, Tony McKay
T ony McKay is just eight-een months into his job at Topaz’s oil and gas en-gineering business, but
he has already made big chang-es, and is bullish about the firm’s ability to capture a unique slice of upstream EPC work from the region, as demand remains high.
A former Petrofac man with over 35 years’ experience, McKay is confident Topaz‘s oil and gas engineering division – now organized into EPC (50%), fabrication (20%), rig repair (20%) and maintenance (10%) - has something unique to offer, and is set to break even in the next year.
Priority number one for McKay was rationalizing the busi-ness. “We needed to make it clear what we could deliver and define our service offerings, from a pre-vious amalgam of what we were doing. Now we have done that, we see that each offering has a good future,” he explains.
“Clients want two things: qual-ity and delivery,” he says. “You can be a low-cost provider, but that doesn’t get me out of bed in the morning. I don’t think it’s sus-tainable. Instead, we have advan-tages in terms of our location and our track record of delivering complex projects,” McKay says.
Topaz’s record of offshore work sees it set to win big in the next few years.
June 2012 Oil&Gas Middle East 43www.arabianoilandgas.com
TOPAZ INTERVIEW
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The company has also devel-oped a new HSE ethos which has already dramatically reduced incidents. “I see LTIs and healthy and safety as a key metric for any company,” says McKay. “To me it’s a measure of a good busi-ness. If you’re organized, you’ve got good safety, you get good pro-ductivity, and you make money.”
EPC“We’ve identified a niche in the EPC market,” says McKay, “nestling below the big players, specializing in what I call incre-mental projects.”
McKay says a lot of compa-nies shared the kinds of prob-lems Topaz’s engineering busi-ness suffered with in 2011, partly as a result of a clogged bid pipe-
line. “It’s not been an easy two years to be in the Middle East,” he says. “Despite high oil prices, there’s reluctance at the moment to spend the money. That said, there’s no shortage of projects.
“The bid pipeline is phenom-enal. It’s full but we still have an issue of projects not being awarded. I’m expecting a sea-shift when the next major off-shore project is awarded. Once this is approved, I can see the sea doors opening, because there are incremental projects which have not yet happened but which are required for it.”
Under McKay, the business has streamlined and improved its bidding operation. “We’re now much more confident about what we can and can’t win,” explains
McKay. “Our EPC target range is $5-50 million, and we think that we will pick up a good basket of those. The effort to bid on a $150 million project is probably more than tenfold what it is to bid on a $30 million project, and the cost is a lot more than tenfold.
So we reflected on our offer-ing and thought, where is our best target market? We now see our niches in the $5-50 mil-lion and $0-1 million brackets, with the latter getting approved quicker and our track record in that area.”
“Safety is a measure of a good business. If you’re organized, you’ve got good safety, you get good productivity, and you make money”
Topaz has a reputation for delivering complex projects and packages on time.
44 Oil&Gas Middle East June 2012 www.arabianoilandgas.com
TOPAZ INTERVIEW
McKay sees a lot of promise in brownfield projects. “It’s been a part of our business for the last seven years. We are now looking to tackle bigger projects, focused on Abu Dhabi,” he says. “Indeed, apart from fabrication, we see ourselves as a UAE business. We don’t see ourselves for many years being outside the UAE. If we do, it would be to Oman and Qatar. They are close and we have a track record there.”
FABRICATION“We see fabrication as two offer-ings,” McKay explains. “First, as support to the prime EPC con-tractors, where we are bidding to the likes of Petrofac, Fluor, Saipem and Technip. They don’t have a full capacity for fabrica-tion, and certainly not in the region. So those companies are a primary source of work. Sec-
ond, because we have a skilled workforce with experience off-shore, we can do construction alongside them too, and provide an integrated offering.”
While fabrication is currently running with spare capacity, and McKay reports it has been quiet across the region for the last two years, this is poised to change, predicting the regional sector is “going to go from dearth to sur-feit in the space of 18 months.”
“The longer-term backlog prospects are looking phenome-nal,” he says. “With the EPC con-tracts coming, the level of fabrica-tion is immense.” 240,000 tonnes of fabrication demand is coming into the market in 2013-2014, between UZ 750 (140,000), Umm Lulu/Al Nasr (40,000-60,000) and SARB (60,000) alone. McKay sees that regional fabrication capacity will need to expand.
“There’s an expectation that all the fabrication is going to be done in Korea – that’s just physically not possible,” McKay explains. “Korean yards are very busy already doing major LNG projects for Australia, so other than shipyards they are quite sat-urated. We may even start target-ing Australian LNG projects that are coming on stream, and are looking for a partner to bid with.”
McKay also sees Topaz doing work for the Iraqi market before the next two years are out. “We believe that most assets going into Iraq will be built outside the country, and will be modular, maybe 50-500 tonnes, for loading in and installation in-country,” he says. “We are less than three day’s sail away, and can do highly complex work, so I think we’re perfectly located for Iraq. “All in all, fabrication is set to become one of the jewels in the crown, even though it is quiet now.”
McKay says the company’s maintenance offering is prof-itable, and he envisions the business doubling in size after an investment in new capacity. “We also see it a major busi-ness opportunity for the future,” McKay reveals. “Most places have outsourced their mainte-nance work – the UAE hasn’t. We know that Takreer and ZADCO have been looking at outsourcing recently.”
RIG REPAIRSThe company, having once dropped rig work, is back in the game, with the capacity to work on rigs onshore and do work in situ. “Because of the contin-ued boom for the oil price, and the amount of rigs out there, we know there’s work,” McKay says. The firm had two bookings last year, with McKay predicting
a total of four in 2012. The divi-sion, headed up by industry stal-wart Willie Duff, is getting back into the market by developing a reputation for reliability.
“We’ve been working to get our rig reputation off the ground with lots of small projects and are now getting approached for work, because we are more responsive than others for small projects and have a fantastic reputation for safety and get-ting things done on time since we re-started nine months ago,” McKay explains, “and as people have become wary of the stabil-ity of other facilities, we are well positioned.”
“There’s $200 million up for grabs offshore Abu Dhabi with its five-yearly SPS rig-recertifica-tion programme this year, with 12 rigs coming up. We’re expect-ing to get at least two and have played it cautious and budgeted for one,” McKay reveals.
PROSPECTSOne project in particular exem-plifies Topaz’s recent past, and its current process of renewal. Last year an 18-tank projects for Gulf Petrochem was caught up in a ferocious storm, threaten-ing to derail the project and set Topaz back 3-4 months.
“We’re just reaching hando-ver now, and the client is really happy,” says McKay. “We took a month to appraise things, and drafted in specialists from [UK firm] Motherwell Bridge. It actu-ally turned into a success story: there was a problem, people came together and we got it done without a single safety incident.”
Come what may, McKay says Topaz is ready for new chal-lenges. “I absolutely believe that this business has got a huge future,” he beams.
