Competition has changed in ways such that a few newcomers have realised that projects are not that easy to execute and so they cannot bid very low.

José CARLOS GIL Executive Director INTECSA

Low bidder

May 5, 2017

TOGY talks to José Carlos Gil, executive director of Intecsa, about continuing to focus on downstream in Abu Dhabi, the importance of selecting good construction partners and expanding Intecsa’s activities in the region. With more than 50 years’ experience, Intecsa is a Spanish engineering company that specialises in EPC services for the hydrocarbons industry.

Founded in Spain in 1965, Intecsa originally provided engineering services for Spanish firm Dragados Industrial. It is now capable of executing engineering, procurement and construction projects in the petrochemical refining, upstream, environment and energy sectors. The company was established as a subsidiary of a Spanish international civil engineering company, the ACS Group.

• On refinery capacity: To be honest, I feel that there is an overload of refineries worldwide. Unless you have an internal consumer base in your own country where you can sell those refined products, there is no room for more. If you currently import, then you can continue importing with very low prices.

• On PDO’s strategy: For PDO [Petroleum Development Oman], the strategy is different as they are not willing to have large contractors doing the EPC, but are more willing to have large engineering and procurement companies and give the construction work to local companies.

Gil also discussed projects to be tendered in the region, the success of Intecsa’s purely EPC business model and his interest in renewables. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with José Carlos Gil below.

What are the highlights and activities for 2016?
Overall, 2016 went well for Intecsa. We were fortunate to be awarded a new project with Takreer [Abu Dhabi Oil Refining Company]. This is the expansion of the existing BeAAT plant that is next to the naturally occurring radioactive materials [NORM] handling facility due to be commissioned by the end of the year.
We expected 2017 to come in with stronger initiatives from ADNOC [Abu Dhabi National Oil Company], and it has. Whatever has happened is in the past, we are still in business in 2017 in Abu Dhabi and are continuing to focus on downstream.

What particular ADNOC initiatives are you talking about?
There is one long-expected project related to aromatics that was previously run by a company called ChemaWEyaat. It now goes under Takreer. We are interested in the gasoline aromatics project, which is at the FEED stage.
The FEED should be completed by the middle of 2018, so they are likely to invite proposals early next year. There are also gas projects we are interested in, such as Al Hosn probably tendering a gas expansion with the sour gas project.

How can Intecsa support Al Hosn’s expansion?

We have plenty of experience in this field. We are well established and have been one of the latest companies to come into the business.
Although we have executed several projects in Saudi and Kuwait, we are now trying to do our best in Abu Dhabi. We know the business well and are in line with the competitors of other countries. What we can add is our latest drive to deliver projects on time within the budget the client requests.

How do you manage to get the lowest bid among other players?
One of our main advantages is that we are purely an engineering, procurement and construction company. Our background comes mainly from the engineering side. Everything that you engineer well has to be procured well and in line with the scope of that EPC project.
Based on the fact that we are capable of doing our own engineering and our own assessment of whatever FEED is going ahead, we are able to follow the complete line under our in-house capabilities and that will hopefully lead us to the lowest price.
It is all a matter of having good procurement and construction partners. Construction partners have been harmed because of lack of business. The good part is they want to be aggressive when it comes to pricing and the bad part is they might become too aggressive and unable to comply with their commitments.
The base of sub-contractors capable of executing good work is decreasing as there is a lack of activity. That is one negative factor from 2016. On the positive side, only the good ones remain.

 

Who are your construction partners?
We do not have any specific preferred partner. We have established a long-term partnership with Alsa Engineering, but we assess the best subcontracting and partnership strategy for every project.

Who would you choose as your three most preferred partners?

We have executed many projects in Saudi Arabia, but here in Abu Dhabi we have just executed one, which is the flare gas recovery project for Takreer in both Abu Dhabi and Ruwais Refinery, for which the provincial acceptance certificate was issued last year. We are currently executing the NORM.
ALSA Engineering & Construction is one of our preferred partners. As contractors, CCC (Consolidated Contractors Company) has always been a good partner as has Al Hassan Engineering.
However, it is important that partners are not facing financial problems. This is not good for us as we always try to rely on capable partners, but unless they are financially strong there is nothing we can do to help them out.
It is true that sometimes your competitors can become your partners. You can probably be willing to share the risks, responsibilities and liabilities of large projects. Since the market in Abu Dhabi is a mature one, it has not been a market of huge profits. If you break even, it is considered good. Sharing risks is probably a good strategy.

Does Intecsa also run to break even?

Let’s just say that lately, we have been doing well. Again, we did not come in when the mega-projects were awarded in 2008. Those projects seem to have led some companies to incur huge losses.
We came in later with smaller projects and learned how the market works and who the good contracting companies and partners were so that we could gradually proceed to the larger projects with better knowledge of the market.

Can you disclose the details of the contract for the waste treatment plant?

The contract is about the expansion of the existing plant. This plant, which was designed and commissioned in 2011, deals with the hazardous waste coming from Takreer. With the increase in production in Abu Dhabi, the plant turned out to be insufficient to cope with all the waste.
As per the contract it should be commissioned by the end of 2019 and the value of the contract is around USD 250 million.

What other projects are you looking forward to in 2017?

The only project happening with ADCO is the Bab-integrated and Bu Hasa development, and there is also Haliba and Qusawira at a smaller scale. With Takreer, the sulphur recovery unit was tendered in January but there has been no award as yet.
The waste heat recovery project should be on commercial submission soon. This is an interesting project that is also related to efficiency. All the gases and heat that is being released into the atmosphere will be used for power generation. Ruwais is a Takreer facility, but they also supply energy to other operating companies. Borouge should be executing the expansion of their PE3 that was tendered in late 2016, which has still not been awarded.
They will go for a new Polypropylene-5 plant with the same technology. They are also planning for a new cracker called Borouge 4.
If some of the gas projects come online, Gasco should return some of their compressor stations. For ADGAS, there is the IDG (integrated gas development) package. One of the packages was on hold and was tendered in the past year but was not awarded. We are interested in all these projects, but going by the normal success ratio, if you make one out of 10 you are considered lucky.

How is competition in PMC?
Competition has changed in ways such that a few newcomers have realised that projects are not that easy to execute and so they cannot bid very low.

When it comes to the regional outreach, in which markets are you looking at to expand your presence?

Probably the most interesting and difficult market that we would like to go into is Iraq. Iran is also an appealing market, but it is difficult to get a financier. In Kuwait, everything apart from petrochemicals has been tendered already. Oman is a very slow market. Bahrain has a new refinery, but only a few groups were invited.

How important is this market for Intecsa and how different is it to operate here compared to other markets?
This market is very important because it is our base for the rest of the GCC except Saudi. Our competitors have been aware of our presence in Saudi and Abu Dhabi, so we have to keep our presence strong. We keep getting projects here so we have to generate a turnover for the company.
In Abu Dhabi, the most difficult thing is to break through the market, and once you achieve that you have to keep going. Abu Dhabi is a very mature market, well regulated, transparent and with lots of competition.
We have good partners here as compared to other countries where the market is not as well developed and transparent. The business environment in Abu Dhabi is very good and we enjoy working here. It is different from the Americas, Africa and Central Asia. The clients are well educated here and you cannot enter into business if you do not provide quality.

What is your business strategy for 2017 and 2018?

Business will continue in line to deliver the projects our clients need. We will keep working on making clients rely on us as a new company here, but with a long experience and standing in other countries. We want to maintain a presence in the market and show that we are committed to delivering what we have been awarded.
We have strong group backup; ACS has been the largest international contractor in the world for the past four years. Financial strength is also important to enable a company to carry on business when the environment is not that conducive. You need financial strength to help partners deliver their part of the business.

Do you see renewables as something that interests you in 10 years?
Intecsa was founded as an engineering company for the industrial sector, including refining, petrochemicals, fertilisers and mining. But as you can see we have also introduced renewables here. We have experience with more than 24 GW of energy installations outside of Spain. That power generation also includes renewables.
We were targeting some projects in Abu Dhabi for solar, but most of the renewable energy projects come under the investment scheme and we are not so keen on investing. We are more of an EPC contracting company rather than a developer.
One of our latest projects in Saudi is a combined-cycle power plant that works together with a solar field. It is the first project in this area for this type of plant. We are also looking for further opportunities in renewables.

What does Intecsa bring in terms of quality of service and solutions to the market here?
What Intecsa offers to clients here is based on our track record, the projects that we have executed and the history of the company. The company was founded as an engineering company so the value added is from an engineering point of view.
The engineering determines the necessary items for construction, which includes the type of equipment and the efficiency of the equipment. We are able to assess that from our in-house capabilities to deal with all the services related to EPC contracting.
That procurement will lead towards construction efficiency to provide the performance guarantees needed by the clients. We do not have any outsourcing of engineering, procurement or construction management.
Since we do not rely on any subsidiary company for construction in Abu Dhabi, we rely on the local market, which is well established.

What is your general outlook for 2017?
After the slowdown in 2016, the outlook for 2017 is promising. Budgets are being re-adjusted and priorities are being taken into account. We have seen that many of the projects that were on hold in the past year are now being floated.
The strategy of the new ADNOC group of companies is pretty much in place. They have a vision for 2030. They are in a position to accomplish their targets. Intecsa is in a place to provide ADNOC with the facilities they need for development.

You mentioned that Oman is a slow market, but what projects are you targeting there specifically?

We were not able to qualify for the new 200,000-bopd-capacity refinery. Intecsa is an oil company with an engineering background. We became an EPC contractor about 15 years ago. Back then, we were not big enough to build new refineries in the market. In Spain and Mexico, we participated for a few phases of refinery construction, but never as a greenfield. We did not get that reference and were not able to qualify in Oman.
The commercial bids have been delayed for a long time. Once it is made commercial, we will see if the government wants to go ahead. Also, IPIC [International Petroleum Investment Company] pulled out of the joint venture with an Oman oil company.
To be honest, I feel that there is an overload of refineries worldwide. Unless you have an internal consumer base in your own country where you can sell those refined products, there is no room for more. If you currently import, then you can continue importing with very low prices.
For PDO [Petroleum Development Oman], the strategy is different as they are not willing to have large contractors doing the EPC, but are more willing to have large engineering and procurement companies and give the construction work to local companies.
We are more of an EPCM company. We do construction management and not the construction itself.

For more information on Intecsa in Abu Dhabi, including the company’s work building flare gas recovery systems on two Takreer refineries, see our business intelligence platform, TOGYiN.
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