TOGY talks to
Strategy in the Kuwaiti supply chainJanuary 29, 2019
Ravi Kashyap, senior vice-president of operations for the GCC and Middle East at Petrofac, talks to TOGY about the importance of building relationships in such an active market and the best approach to lowering costs. Petrofac is an oilfield services firm that designs, builds, operates and maintains oil and gas facilities.
• On relationships and pricing: “Over the years, Petrofac has grown globally and executed many large-sized projects. This experience has helped us forge relationships, and we can expect our suppliers and contractors to give us the most attractive and competitive pricing. That only happens if they trust they will be treated fairly, just as we feel clients will treat us fairly.”
• On areas of growth: “Offshore is an area that could pick up. Petrochemicals is also another area where we anticipate growth. There are other opportunities for us, such as a continued increase in providing training services. But looking at current growth and the next few years in Kuwait, our core business will likely remain predominantly around delivery in the EPC sector.”
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How do you remain competitive in this market?
We have been here for such a long time that, when it comes to new projects, there is less of a learning curve. Typically, for an EPC project, the procurement element plays a major role in the overall project cost. If you are strategic in your supply chain and have developed the relationships and necessary agreements with your suppliers, you have leverage. You also need to leverage the relationships you have built in the local industry.
On top of that, we have ongoing automation initiatives within Petrofac. Looking at the design phase of an EPC project, the “E” costs the least, but it adds the most value to the “P” and “C” stages. Learning from our previous projects, introducing improvements and understanding what we can do differently so that we are able to plan our construction work properly allows us to manage costs and make a big impact in the subsequent phases. Getting it right the first time is key, and our engineering expertise is our competitive edge.
Our focus on safety is also one of our competitive advantages. We say that safe delivery is a licence to operate. If we do not deliver safely, our clients will not come back to us.
What are your company’s key activities and projects in Kuwait?
We have been in Kuwait since the late 1990s, so it is almost our 20-year anniversary. During those years, we have executed a string of successful projects, mainly for KOC.
In terms of current activity, a major project in the refinery sector is the Clean Fuel Project [CFP] for KNPC. We have the trunklines and manifolds project feeding gathering centres (GC) 29, 30 and 31. They are the arteries that are feeding these centres. In addition, we have the heavy oil project, which we like to call a large-scale pilot plant because it utilises new technology. It supports KOC’s 2020 production capacity target. Finally, we have recently been awarded the GC-32 project, which is an important milestone.
The GC-29 and the manifold projects are in very advanced stages. The gathering centre took in oil, in early April.
The heavy oil project is now in a very advanced stage of construction, and the overall project progress is above 85%. It is due to come on line later this year, with the start of the commissioning.
Can you tell us about the five-year deal you signed with KOC in 2017 for the provision of specialist training services?
The programme trains KOC’s maintenance and operating teams. Petrofac does that in many parts of the world, but now we have the opportunity to bring this to Kuwait.
Where do you see opportunities for Petrofac when it comes to the USD 114 billion that will be disbursed over the next five years on hydrocarbons projects?
The money will be spread over a number of different areas, but there will be a proportion of work for the EPC space, which is Petrofac’s main area of strength. With our excellent track record for safe and timely delivery in the region and Kuwait being a core market, we would hope to be in a good position.
Are you interested in the Kuwait Bay offshore development?
We are definitely interested in participating in such projects. We know the clients, the market and the players very well and have the expertise.
What other elements can you point to that make Kuwait an attractive market to the company?
We have a good track record and expertise in-country; thus we are a very strong player in this market. Our target is to either keep or increase our market share and build on our long-standing client relationships. We see that solar power and other sectors could come into play. It is still early, but we are definitely going to be looking at such opportunities.
How is Petrofac Kuwait managing to do “more with less”?
There is pressure to reduce project costs, and to be competitive, but sometimes you get players who can be extremely aggressive in their pricing model.
The whole chain needs to step up and see how everyone can contribute. It cannot just be one party that contributes to lowering costs. Clients have to do their part, we have to do ours and the entire supply chain has to do theirs as well.
Over the years, Petrofac has grown globally and executed many large-sized projects. This experience has helped us forge relationships, and we can expect our suppliers and contractors to give us the most attractive and competitive pricing. That only happens if they trust they will be treated fairly, just as we feel clients will treat us fairly.
How have technological developments influenced Petrofac’s vision for growth?
The market right now demands that you think outside the box. We are introducing greater automation to get things right the first time, and to be more cost efficient in our delivery.
There is a focus on digitisation within Petrofac. We have a huge database of projects that we have executed, so we look at what can we replicate or reuse without reinventing the wheel. That cuts costs. This is the kind of thing the company will be increasingly looking at going forward in order to continue to be competitive.
To what degree do you think Kuwait is receptive to new technologies?
There is a tendency to feel that if something is working, you should not change it, this applies everywhere, not specifically in Kuwait. This was often considered the right thing to do in the oil and gas industry because safety is of such focus. Introducing something without it being fully tested can bring major risks, not only for the asset but also for the environment and people.
There has to be a balance. We have moved from analogue to electronic, to smart instruments. Many improvements have occurred that have increased the reliability and availability of facilities. Advancement will not happen all at once, there will often be some slow improvements that will continue to take place and ongoing change is inevitable.
What will be the market climate over the next two to three years?
The industry experienced a period in which there was a bonanza of projects. I do not think we will see that level of activity in the coming years, but we will certainly continue to see a steady stream of projects.
We also see some projects for which the K-companies are taking a BOT-type approach. That is new, and will be an opportunity for Petrofac since we can respond to such kinds of needs having done similar in other parts of the world. We can bring that knowledge and experience. The next couple of years will be a very interesting time.
Which lines of business do you expect to see grow in the next few years?
Offshore is an area that could pick up. Petrochemicals is also another area where we anticipate growth. There are other opportunities for us, such as a continued increase in providing training services. But looking at current growth and the next few years in Kuwait, our core business will likely remain predominantly around delivery in the EPC sector.
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