Diversification and exploration

Trinidad and Tobago

TOGY talks to Adrian Achan, general manager of AdON Group, about the company’s core maintenance activities, diversifying into the lubricants markets and looking to expand regionally to Guyana and Suriname. AdON Group provides EPC services to the oil and gas industry in Trinidad and Tobago. It also provides consulting services to a major players in Trinidad and Tobago including Petrotrin, Repsol and BP.

AdON is the representative of Japanese electronics corporation Omron and is working to set up a construction unit separate from its engineering unit to better serve the needs of the industry. TOGY spoke to Adrian Achan about the potential of natural gas in Trinidad and Tobago, as well as discussing his views on the need to diversify and how to go about doing so. AdON identified a need to provide more niche services in the low price environment, adapting to the changing needs of the industry.

• On working for Perenco after Repsol: Perenco took over the assets about a month after the contracts were signed. It was in their best interest to maintain the contracts because [that] was the most recent market value at the time of their acquisition. Perenco has a different vision from Repsol since their philosophy and culture are much different in terms of contractor goals and deliverability.

• On successful diversification in the low price environment: We have seen a shift in the overall upstream activities with depressed oil prices. Seeing the need to diversify, we began looking into the chemicals and lubricants niche. Over the past few months and via research and negotiations we were able to sign off with representing with Valvoline, as the exclusive representative for Trinidad and Tobago for the next five years.

• On the potential for natural gas development: Our business is focused on the energy sector so by this logic production of natural gas will have a plus effect. There is a benefit for anyone who is in the energy sector, especially the upstream area. Exploration will lead to production, and with production, the end services will fall into play.

Besides touching on these topics, TOGY spoke to Adrian Achan about his company’s activities in Trinidad and Tobago, and the dynamics of the local fuel consumption market. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Adrian Achan below.

What are some of the operational updates for the past year?
Within the energy sector as a whole, there have been a lot of major projects deferred. With this trend our internal focus has been channeled to provide more support to the maintenance side. Predating 2017, we have secured contracts with Perenco and previously with Repsol. We are working on welding fabrication and rigging services for topside integrity as well as general welding and piping repairs. The E&I [electrical and instrumentation] side of our company remains our core service. Coverage averages four years contract lifecycle.

Could you tell us a little more about this contract?
The contract with Perenco will last for the next three years. Perenco took over the assets about a month after the contracts were signed. It was in their best interest to maintain the contracts because [that] was the most recent market value at the time of their acquisition. Perenco has a different vision from Repsol since their philosophy and culture are much different in terms of contractor goals and deliverability.
There has been a shift to maintenance in the current environment. Could you tell us about the projects that are happening?
AdON’s welding, fabrication and rigging maintenance operations are supposed to maintain the assets of the Poui and the Samaan fields, as well as the compressor platforms. The electrical instrumentation contracts span the entire TSP fields. AdON recently completed the BPTT Mango platform well tie-in activity works providing E&I coverage of services. We recently came out of doing the CCTV installation, linking BPTT’s Mahogany to BPTT’s Juniper’s pool and gas platform for communication. We are also in pre-work stages for a number of projects for Perenco, Massy WG and BPTT.

What is your strategy to diversify and innovate in the market?
We have seen a shift in the overall upstream activities with depressed oil prices. Seeing the need to diversify, we began looking into the chemicals and lubricants niche. Over the past few months and via research and negotiations we were able to sign off with representing with Valvoline, as the exclusive representative for Trinidad and Tobago for the next five years.
Our analysis shows although construction may have slowed, persons need to maintain their assets of plants and equipment for extended periods rather than making new capital investments. The same principle applies to persons and their automobiles.

Are these areas that you would be interested in for further diversification?
We have begun the process [of diversification] with the mechanical side of the business. For example, the existing contract that we have with Perenco for welding and fabrication is a new division under AdON.
We also saw the possibility of a small services provider like ourselves capturing opportunities because the bigger players may not be as cost-competitive and others have left for various reasons. This is where we thought AdON could gain a small market share. The same notion of thinking also applies to the electrical and instrumentation side of our business.

What would be some of the factors that give you an advantage?
We are more flexible [than our competitors]. We are a family-owned private business, thus a lot of the decisions can be made faster with less bureaucracy. We have a highly trained, experienced and motivated workforce. We are fortunate enough to have domestic and foreign capital and can finance our projects. Our cost structure is lower, so the cost savings can be transferred to our clients.

Are you planning to introduce any additional services or products to clients?
We are considering [introducing] bolt torqueing, along with the fabrication and welding operations. Piping and spool piece manufacturing and installation is another area of business we are exploring. These services can be used for a diverse market from natural gas transmission lines to the wastewater sector.

Do you want to take your expertise and apply it to other countries in the region such as Guyana?
Most definitely Guyana, and Suriname is also on our radar. We have not done any physical explorations, but Guyana looks like the most stable prospect in the short term and Suriname in the long term.

In Guyana, which industries would you be interested in?
The oil and gas sector with our electrical instrumentation and automation service component. We are not currently looking offering the welding and fabrication services overseas just yet. Electrical and instrumentation remains our core strength. The transfer of those skills from Trinidad to Guyana would be an asset.

Domestically, what are some of the opportunities that you see in upstream or downstream projects?
We have reached out to EOG and BHP and are in the process of pre-qualifications. In addition we are meeting with the engineering companies at a local level to sort out possible strategic partnerships. These companies include Massy Wood Group, WorleyParsons and Fluor.

Could you elaborate on what kind of partnership you are looking for?
A lot of companies realise that they want to offer an EPC unit [through which] they would provide the engineering and outsource the construction. This is where we realized that a small outfit such as ours could significantly contribute to these larger companies. The larger names come with larger costs and a higher level of bureaucracy. Because of our size, we can offer greater flexibility. We can become the ideal fit for construction partnerships.
Also, in terms of procurement, we have access to major buying houses in the USA and Europe. While the price is competitive in China because of lower costs, our dealings with the upstream sector shows us our clients are not driven by the price. They prefer quality to cost. That is one of the reasons why we went to Valvoline, which is a completely USA-based manufacturer.

Could you tell us some of the names you are working in upstream in terms of procurement?
We’ve worked with Perenco, Massy Wood Group – and by extension BP because [according to] BP’s business model in Trinidad contracts must go through Massy and Fluor.

Could you tell us a bit about the downstream projects?
We are currently looking at the downstream aspect of our business more closely. [However], our strengths lie in the upstream area. We’ve started to communicate with NGC, Petrotrin, Methanol and Methanex [plants].
Within the next one to two-and-a-half years we would like to see a balance [in upstream and downstream works]. In 2017, we could split our portfolio 75% upstream to 25% downstream.

With the push to increase natural gas for power production and to better feed downstream, do you see this driving any of your business in the future?
Yes, because our business is focused on the energy sector so by this logic production of natural gas will have a plus effect. There is a benefit for anyone who is in the energy sector, especially the upstream area. Exploration will lead to production, and with production, the end services will fall into play.

There are some discoveries for the short to mid-term that are supposed to have first production by 2018. With that in mind, do you think natural gas activities will increase for you by that time?
We remain cautiously optimistic. Given our experience in the sector, once these explorations bear fruit, we hope to be involved in the production side, in terms of the services that we can provide.

What are your thoughts on the demand for lubricants in this market and how would you see your role there?
We have a great deal of potential in the C&I [commercial and industrial] segments. Given our experience in this sector we decided to put major trust in the C&I side by recruiting fleets and lease operators as well as some of the offshore providers to provide oil and lubricants for their plant machinery. Until now, we have made some progress in generating interest. It is only a matter of time before we see some positive results.
Initially, it would be challenging. However, we are offering independent lab testing in the USA on the quality of the lubricant that could compare samples with our competitors. This would allow our clients to make informed decisions.
We are trying to be as innovative as possible. Many of our competitors wouldn’t do this. They market their product as the best, but we are confident that we can support our product with scientific evidence.

What is your opinion on the differences between the commercial and the consumer sectors of automobiles? Which one is more concentrated in terms of present players in the market?
PCMO [passenger car motor oil] would be the larger volume customer right now. Everyone probably has two or three motorcars in Trinidad and must maintain their vehicles. This would be the largest player in terms of volume.
In terms of volume per player, the commercial customers differ. Some may have one or two fleets while others may have 100 trucks [and] 10 cranes and so will have a larger figure. The volume mover will differ according to their needs.

What will AdON’s strategy be moving forward?
AdON will remain the parent company and have a construction arm of the company that will provide construction services. The engineering unit [will continue] providing engineering and products such as lubricants and chemicals. Each will operate under its own P&L, but it will ultimately be run under a single holding company. Our company slogan is “One company, many solutions.” We try to live up that. Regionally, we are looking to extend our reach and grow our footprint.

For more information on AdON in Trinidad and Tobago, such as its work on both green- and brownfield sites, see our business intelligence platform, TOGYiN.
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