TOGY talks to
An integrated mega-project in Abu DhabiJanuary 30, 2019
Hong Namkoong, executive vice-president and managing director in the UAE for Samsung Engineering Company, talks to TOGY about the development and impact of the Ruwais Industrial Complex and how EPC companies can overcome the challenges of working in Abu Dhabi. Samsung Engineering Company is an engineering-based project management company.
• On Abu Dhabi’s EPC market: “The trend is moving towards more consortiums, joint ventures and alliances with local partners to meet increasing demand in terms of equipment and material, as well as field services including construction activities.”
• On Ruwais: “With over 837,000 bpd of crude and condensate refining capacity and 40 million tonnes of petroleum products capacity, along with over 4.5 million tonnes of petrochemical products production capacity, it is no surprise that this massive industrial facility has become the premier complex of the UAE and more likely of the global hydrocarbons industry. And obviously the ambition even became greater when ADNOC announced its strategic initiatives to further increase the refining capacity by 60%.”
Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find the full interview with Hong Namkoong below.
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How do you foresee the development of the Ruwais Industrial Complex and how will it benefit the UAE?
The plan to convert an area of the remote desert into a major industrial facility first began back in 1970. This was the inception of the Ruwais Industrial Complex, which is located 240 kilometres west of Abu Dhabi. With the inauguration of the first refining facility by ADNOC Refining (formerly known as Takreer), Ruwais has expanded to become a major integrated oil and gas, refinery and petrochemical complex.
It was in 2007 that Samsung Engineering was awarded its first project in Ruwais by Borouge (Abu Dhabi Polymers Company) for the olefins conversion unit. Through its successful execution, we were then able to win and complete an additional nine projects with a total value of USD 14 billion, including Ruwais Refinery expansion package #3 U&O [utility and offsite] for USD 2.9 billion, Borouge 3 PO [polymers] and LDPE for USD 1.6 billion and the Carbon Black Delayed Coker Project (CBDC) for USD 2.8 billion, among others.
We were recently awarded, in March 2018, two projects for ADNOC Refining for the Crude Flexibility Project (CFP) and the Waste Heat Recovery Project (WHRP), for USD 3.1 billion and 500 million, respectively.
With over 837,000 bpd of crude and condensate refining capacity and 40 million tonnes of petroleum products capacity, along with over 4.5 million tonnes of petrochemical products production capacity, it is no surprise that this massive industrial facility has become the premier complex of the UAE and more likely of the global hydrocarbons industry. And obviously the ambition even became greater when ADNOC announced its strategic initiatives to further increase the refining capacity by 60%.
For Samsung Engineering, let’s just say that we are proud to be in line with ADNOC’s long-term plans and goals by executing the CBDC Project, which aims to reduce environmental impact while creating value by improving refinery margins. This is being achieved by utilising vacuum residue and slurry oil to produce 1.7 million tonnes per year of value-added products, which will feed into existing ADNOC petrochemical plants in Ruwais and create new product lines for local industries, contributing to local buyers, the export market and the UAE’s overall economy.
There is no doubt that our Crude Flexibility Project (CFP), which we were newly awarded in March 2018, will play the same role in positioning the UAE as dominant player in the hydrocarbons industry.
In conclusion, I believe that these developments will help create the world’s single largest integrated refining and petrochemicals destination at Ruwais, reflected in strong GDP growth and allowing the UAE to gain market share dominance, especially in the Asia-Pacific region in India and China.
What are the details of the scope of your two ongoing projects at Ruwais?
The CFP will be the defining project for ADNOC Refining in becoming one of the top refining companies in the world. Various challenges lie ahead, especially with integration, revamping of existing facilities and handling the ARDS (atmospheric residue desulphurisation) process technology, etc.
But by processing medium-sour crude from Upper Zakum and from other countries, the CFP will allow ADNOC Refining to extract greater value from its current crude resources by liberating [freeing for exports] Murban Crude, which commands a higher price than sour crude on the global oil market. The project, which was awarded in March of 2018, will be completed in 2023.
The Waste Heat Recovery Project (WHRP) can be considered as a supplementary utility for this facility. Once it comes on stream in 2024, it will provide additional power and fresh water to the Ruwais Industrial Complex.
The details of the project can be summarised and broken down as the following:
Crude Flexibility Project (CFP)
• Project period: 2018-2023
• Contract amount: USD 3.1 billion
• Capacity: See Table 1. Please click to enlarge.
Waste Heat Recovery Project (WHRP)
• Project period: 2018-2024
• Contract amount: USD 500 million
• Capacity: See Table 2. Please click to enlarge.
How do you see the EPC market changing here in Abu Dhabi?
From our perspective, the EPC market in Abu Dhabi is changing, and therefore it requires further strong partnerships and collaborations between ADNOC and international contractors to increase its contribution to ADNOC initiatives: First, to increase local content (the in-country value [ICV] programme); second, human resources development for local Emiratis; and third, capex optimisation.
Hence, the trend is moving towards more consortiums, joint ventures and alliances with local partners to meet increasing demand in terms of equipment and material, as well as field services including construction activities.
On the other hand, we are required to support competitiveness by applying innovative strategies to increase efficiency for the execution of projects so that total resources and schedules of overall projects can be optimised and improved.
For instance, we expect that the potential risk raised from working in an environment with remote locations and harsh weather conditions can be minimised and eliminated by adopting an approach such as applying modularisation and utilising automation equipment for construction work to allow less work at the site and therefore increase efficiency.
Also, the EPC market revolves around energy sector trends. We see a clear upward trend in the energy sector, with a shift in the sector to a sustainable co-prosperity model. In addition, we perceive that there will be complex mega-sized projects in the coming years and therefore the EPC market has to gear up and be ready to take on these challenges, by providing technical solutions and ideas to reduce the opex, reflected in the increase in energy efficiency.
What other opportunities do you see locally and regionally?
Though there are some fluctuations in the oil price, the oil and gas sector is slowly picking up its pace. Not only the UAE, but the rest of the countries in the region are planning to either expand their production in the upstream, further their gas export train additions or increase their value-added petrochemical complexes.
In the UAE, we are closely monitoring what we consider our second home, Ruwais, especially in the LAB, Borouge 4 and New Refinery projects. In the region, there are downstream project opportunities all being planned simultaneously in the KSA, Kuwait, Qatar, Bahrain and Oman. We recently had our Duqm Refinery Project financial closing in May  and are expecting the same for the Bapco Modernization Program. So we are keen to follow up on upcoming downstream projects in the next one or two years.
What are the challenges of working in Abu Dhabi and how can EPC companies overcome them?
The challenge that we face not just in the UAE, but also noticeably in the Gulf region, would be the growing demand for localisation, i.e., further adopting the implementation of ICV and IKTVA [in-Kingdom Total Value Add] programmes.
Let’s be honest. For a newcomer, this is indeed a huge challenge and more likely to become an obstacle. But for Samsung Engineering, having worked alongside ADNOC’s initiatives for the last decade, we gladly embrace it and take it as an opportunity for building a close win-win partnership.
You may have seen our recent press release, awarding a contract for a complete range of cables to a local manufacturer, Ducab. We found out that there was value chain synergy where Borouge provides its raw materials to Ducab, which then uses them to manufacture its cables, which Samsung Engineering then purchases for its CFP and WHRP projects for ADNOC Refining. Our strategy in overcoming the challenges of localisation is to further seek out similar cases here in the UAE.
Moreover, through detailed engineering and studies we have adapted a modular mode of construction, which reduces the site activities significantly, keeps us ahead of schedule and allows us to work in controlled environments without impacting the integrity and overall operation of the plant.
Further to this, we have also initiated talks with ADNOC and are considering working on long-term partnership schemes, starting from the bidding stage, to increase our competitiveness in this industry. This arrangement allows us to undertake detailed studies and explore various factors to reduce capex and opex through the execution phase.
What is Samsung Engineering doing in the way of technology integration?
Samsung Engineering has a keen interest in integrating advanced technologies into the oil and gas industry. Keeping in line with ADNOC Group’s 100% HSE culture across the industry, we have utilised our Samsung Group’s IT platforms including, but not limited to, VR [virtual reality] technologies for remote HSE training. We hope to provide continuous improvements in health, safety and environment.
Furthermore, we are also working closely with our partners to develop efficient ways to increase automation onsite. One example is automated welding of pipes onsite.
In addition, from the viewpoint of Samsung Engineering, which has extensive experience in project management and engineering, applying a modular construction approach would provide greater value to our clients. We believe that it will eliminate the difficulties we are facing in harsh working environments and remote sites. We are also evaluating the establishment of local fabrication presences via JVs and partnerships with local companies.
Henceforth, I have the utmost confidence that we can transfer Samsung Engineering’s technical and project management know-how and expertise to local companies while minimising execution difficulties at the site.
We are also exploring and working with our partners on developing early production facility (EPF) solutions. The objective is to provide an integral solution and begin production early for units like utilities and offsites while the full-field development is being planned and permanent facilities are being built.
In areas of water treatment facilities and desalination projects, we are strategically participating not just as an EPC contractor but also as an O&M operator and equity investor.
Therefore, we are certainly able to provide flexible business models to the client, and thus they can maximise their return on investment.
What is Samsung’s strategy for 2019 and beyond?
Our prime goal is to be a localised strategic local partner, ensuring that our growth is equally reflected in clients’ growth and vice versa. I am referring to being long-term partners, persistent in creating values and sharing them with the client, thereby contributing to project performance and growth of the UAE’s local industries.
Furthermore, we are closely following the developments in the Middle East. Samsung Engineering realises that the client values and resonates with its objectives when it comes to maintaining HSE standards. Conforming to these initiatives, Samsung will continue to propose business plans that meet the needs of our clients. Further to this, we will contribute to improving the safety culture so that all of our stakeholders can work and return home safely.
Moreover, when it comes to the UAE, there is a big drive and focus around enhancing in-country value. Samsung Engineering is working closely internally and with our partners to encourage the use of local goods, services, manufacturing and employment of Emiratis in the private sector to stimulate economic diversification and growth.
Lastly, using our technical excellence and world-class capabilities, we are committed to becoming a reliable business partner and working hand in hand with our clients. Since Samsung Engineering was created as an engineering company – one that moved into the realm of project management – we strive to work towards being the top engineering-based project management company.
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