Linssen – Managing Director, Keppel Verolme – Netherlands
The managing director of Keppel’s Rotterdam shipyard discusses its role and focus in the wider scheme of the company, and the challenges of operating a shipyard in the context of the oil and gas and offshore industries today.
You became managing director of Keppel Verolme just after Keppel acquired the shipyard in 2002, but you had been working for Verolme for a number of years before this. How has the company’s relationship evolved with the oil and gas industry during your time here?
There is a cycle in the oil and gas sector that’s quite difficult to explain, because simultaneously, some companies follow the cycle, while others invest to be anti-cycle. This has been a constant since the very early days of the business, and makes it difficult to show a consistent curve of ups and downs, but there have certainly been some trends and evolutions in the past couple of decades.
Influencing all of these trends is a change in the way we do business that has happened over the last 20 years: back in the 1990s, you had to put together deals for projects with no up-to-date data. You got on a plane with a pile of information and had to rely on that information until the deal was made. This led to a much more collaborative mindset: we would cooperate together, design, develop, install, get it approved, and everybody was happy. Over time, with the introduction of email, smartphones, and so on, the speed of doing business improved, but at the same time, it overtakes everything else – there is constantly updated information that affects your projects and your contracts – so in some sense there has had to be some adaptation.
In the 1990s, Verolme started taking on larger projects because new builds were either too expensive or took too long, which led to lots of conversion projects, which is where we are focused as a shipyard. In the early 2000s though, more money was unlocked, with structures being financed in a variety of new ways. It was at this point that we saw the influence of the Keppel name on the types of projects we were getting, and once we worked out how to best capitalize on this, we had some excellent years: 2008 and 2009 we were managing projects up to EUR 300 million in annual revenue. When the oil price dropped in 2008, it was a natural reset of the market in many ways: it made us more conscious of what projects we were taking on, and where we were.
Today, companies are closer to their cash than ever before. Either cost savings or dividend policies are often priorities for large organisations, which means capex available for infrastructure projects is less, but this is always in flux depending on the supply and demand of natural resources. Given the current situation, I believe caution is the watchword.
Keppel Verolme is in the maintenance and repair business: what we see is that the new builds that came into service five to ten years ago are coming into the yard today, either because they are not specialized enough and need refits, or because they are over-specialized. The trend is definitely towards smaller assets for niche jobs today: again, because of this shifting trend, we have work to do, and having five smaller jobs instead of one large one which allows us to reduce our risk exposure. It’s important to be optimistic and find the arguments for why you should have work: if you fail to find the argument, it’s time to rethink.
It’s this type of thinking that has led us to find new business at every stage of our development. One good recent example of this was our move into the cruise ship business: it started off as a thought, an idea identified by a colleague, who was given budget and space to develop it. In 2005 we secured our first ship lengthening project, and as a direct result, we won the Oasis of the Seas project last year.
How did the ‘Keppel advantage’ change the nature of the business you are doing today in terms of the types of projects you are working on and where they are coming from?
The client portfolio and customer strategy that Keppel had when they acquired us in 2002 is still valid: the North Sea is an area where assets built by Keppel are being deployed, and as clients move their assets from the US, Europe, or the Far East, they pass through Rotterdam and have access to a Keppel shipyard. From our perspective, the acquisition gave us some tranquility. We were very proud to become part of this Singaporean group. It turned out the branding gave us just the leverage we needed to move to the next level. Additionally, the new resources from the group allowed us to grow: we could call in expertise when needed from all over the world. This was the base layer – the top part is done by us, alone: we do our own marketing, acquisition, and are responsible for our own visibility in our home markets.
Backed by the Keppel brand name, we are able to assure the client of our capabilities when they hear our reputation in the industry, meet up with us, see the yard and do their audits.
To what extent are you still a North Sea-focused yard today?
We have conducted jobs that come from Brazil especially to our yard, back in the era where big assets were upgraded. We have seen units that were being built in China come to the yard on their way to Brazil, but if you look at our client base, vast numbers of companies from the local region operate from here and manage their assets from here. Many of these companies operate internationally, but have their offices in the Netherlands, Norway or the UK, and the day rates make repairing and upgrading vessels close to home very attractive. This is why we look for new opportunities with companies that have similar situations: from new business in decommissioning, for example, to diversification into cruise ship repairs.
How do shifts in offshore innovation affect your business?
I’m a Dutchman within the Keppel group: when trying to explain the success of the Dutch, and Europeans in general, in the maritime area, I generally point to entrepreneurship and a non-conforming approach that separates us. We’re proud to be shipbuilders: this yard is a great example of that. However, the flip side of this is that we are a model to be replicated, and done better in countries in different stages of development, that can learn from our past mistakes.
Although we now have to compete with shipbuilders all over the world, that Dutch innovative spirit still exists. It has shifted into small companies, in general, that are driven by their ideas and the desire to create the next big thing. In this part of the Netherlands, there are many companies like this.
How do you capitalize on these companies?
These companies can help us because they bring in new technology and ideas. They can be small engineering offices, equipment or service providers, and we use them by bringing them into tender processes with us, allowing them to quote with us and bring in their expertise. As an industry in Holland, we always like to work together as a cluster, and you cannot dictate a cluster. So why does this one work? First, because we have divested many of our services over the years: in the past, shipyards like ours had carpentry, painting, electricians, all kinds of trades working in house. Today, that’s just not feasible, and we subcontract as much as 70 percent of our work out to other companies. That makes us dependent, but the trick is not to be afraid of that dependency: to work together in certain niches and learn how to be successful together.
This allows us some space to work on disrupting the industry, thinking in new ways, which we try to do with our R&D group that is based here. We are currently developing projects like modular rigs, and various energy-saving innovations that could help our customers reach better levels of efficiency.
Do you see your role in the Keppel group as being disruptive, taking on projects that Singapore can’t?
Everyone has a drive to survive, and if you have low-hanging fruits then you probably pick them instead of climbing the tree; here in the Netherlands, though, we always have a ladder leaning against our trunk. As I explained, we have always had competition, but that has shifted over the years from Japan to Korea, to China and now Vietnam. Being told that manufacturing and industry is not the right fit for modern Holland for so long makes me yearn to prove people wrong. Even in the down times, we still make a huge contribution to the Netherlands.
What impact do sudden market changes like a low oil price or a weak euro have on such a long-term, asset-driven business?
When events like this happen, they do affect everyone in the industry: the question is whether, in these circumstances, you are still able to make a proper judgement call, which is what I am struggling to assess right now. If a company’s share value decreases dramatically, shareholders and debt holders will react, so you need to take the time to properly assess the situation. I believe the best way to do this is with a strong management team that balances experience with drive, and led by someone that can manage both.
How does your current yard match your ambitions for the company?
Quite well – we are blessed in Rotterdam with deep water, free entrance, easy access, and being very well supported by the Rotterdam Port Authority, who increased the entrance to the yard last year, not only because of Oasis of the Seas but because average ship size is increasing. However, you have to think positively: the founder of this yard was not allowed to build a yard in Rotterdam, and was pushed as far as possible to the west, thinking he would struggle. He struggled maybe for a year, and now our location is to our advantage. While we will never be able to accommodate vessels the size of the Pioneering Spirit, the fact is that we have docked some of the largest vessels in the industry in our yard, including the Saipem 7000 and the Thialf: in fact, some of these vessels were designed to the size of our dock.
How has your job description evolved over the years, and what do you enjoy most about your position today?
In recent years, I am increasingly focused on being the Keppel man in the Netherlands, working as a liaison with my colleagues that are looking into future developments, different issues with their clients, and discussions with suppliers – which I do on top of the day-to-day running of the yard here. I really like the fact that I work in the Netherlands for a Singaporean company: when I’m in Holland I feel Singaporean, and when I’m in Singapore I feel Dutch. It’s a check and balance. I like the fact that someone somewhere in Singapore can always pull on my ear and make me think differently about a project or a decision. Being that local voice is what I’m doing now for Keppel, and my position on the board and various supervisory positions on behalf of Keppel also help me to do that in new and interesting places.