Achmad Zakky Ridwan – Country Manager, DNV GL Indonesia
The Country Manager for DNV GL Indonesia highlights the synergies created by DNV and GL’s merger in 2013, making them a powerhouse in the certification industry. Moreover, he highlights how an enhanced local presence and R&D competence makes DNV GL’s Indonesian operations well placed to capitalize on new developments in the region.
DNV and GL merged in September 2013. You’re now the world’s leading classification society providing certification services to the oil and gas industry. Previously DNV held some 2 decades of experience in Indonesia and enjoyed a strong track record, so how has this merger affected your local offering?
The merger brought together two giants in their fields that, when combined, have around 300 years of experience. Now we have over 15,000 dedicated experts, but the most positive by-product was actually the blending of competencies. Neither company was competing directly against each other, but instead presided over very complementary capabilities. DNV was renowned for its abilities in the hydrocarbons and offshore domains whereas GL was greatly respected on the shipping and renewables sides, so by fusing the two it was possible to create a real powerhouse in the standards and certification industry.
Our customers are facing technological, regulatory, social, and operational challenges that are becoming ever more complex. Success will depend on new ways of working: reducing complexity and streamlining processes for greater quality and cost efficiency, while analyzing increasing volumes of data to manage risks and generate safer, more sustainable, operations. From project initiation to decommissioning, DNV GL is able to give customers the broader view on risk management, combining global expertise with experience in local markets to solve complex technical issues. At the local level, the coming together of the two entities has enabled us to broaden the service offering and tap a much deeper pool of expertise.
You now rank as one of the top five pipeline network infrastructure players in South East Asia and there have been headline developments in recent years such as your opening of a deep-water technology center in Singapore and new branch offices in Batam. Just how significant is the Indonesian market to DNV GL’s regional and global operations?
We have actually been involved in the pipeline industry in Indonesia since about early 2000 and our portfolio comes from both legacy companies. We have been involved in some major pipeline projects onshore and offshore in the country, including the Batam to Singapore gas transmission line. The Indonesian market is particularly exciting right now because developments in the local energy and shipping domains are accelerating. In the central to western side of the archipelago we identify massive potential for connectivity, supply and distribution. As the country places more emphasis on gas, the pipeline market is gathering pace and therefore we are strengthening our cooperation with major pipeline operators such Pertamina and PGN. The freshness of the market also lends itself well to applying tried and tested formulas that we have successfully deployed elsewhere across the region. Now that we have meshed the two businesses together, it makes a lot of sense to embrace this sort of ‘plug and-play’ approach for a relative latecomer in terms of energy infrastructure implementation like Indonesia.
With our Batam office and the reorganizing of the Deepwater Technology Center to become an Oil & Gas Technology Center (OGTC) we will be even better positioned to support the Indonesian sector and provide foresight of upstream pipeline developments that meet deepwater requirements. At the same time we are well placed to support the continuing expansion of the downstream pipeline distribution networks.
2016 has begun with the lowest oil price for more than a decade, unrest between major OPEC players Saudi Arabia and Iran, and increasing concern around the state of the Chinese economy. What is the outlook for the oil & gas industry in Asia Pacific in 2016?
We recently conducted research among over 900 senior oil and gas professionals globally and the findings in our report, “A New Reality: the outlook for the oil and gas industry in 2016”, shows that Asia Pacific respondents are preparing for a sustained period of low oil prices. Sixty eight percent of respondents have a ‘lower for longer’ view on the pricing of oil, compared to three quarters globally. Nearly nine out of ten (86 percent) of Asian respondents saw cost management as a top priority for the year ahead. Unfortunately it is impossible to predict when the current oversupply situation will catch up with demand.
In this current period of cost cutting, it has been suggested that ‘standardization is fast becoming the new innovation.’ Do you agree?
In the current cost constrained environment, there is a great opportunity to remove inefficiencies to create a simpler eco-system. This calls for collaboration across the value chain. In the current business environment, the purpose of innovation becomes even clearer – it is all about bringing on smarter and more efficient solutions, not bigger and more complex ones. Standardization can drive efficiencies while still enabling flexibility and innovation. For example, we are currently running a joint industry project to reduce new build cost in South Korean yards. The implementation of a standardized approach will be an opportunity to significantly reduce the general cost level of offshore projects without compromising on quality or safety. It could potentially cut project costs by 15 percent, or approximately USD 500 million for a typical tension leg platform (TLP) project, for example.
There are many quick wins to be had through application of solutions that have been proven to be highly effective elsewhere across South East Asia. You have to remember that many of these energy infrastructure projects that our customers are implementing are capex intensive so you don’t want to be trying to reinvent the wheel, unless it’s strictly necessary or guaranteed to produce additional value.
At DNV GL, we are continuing to invest 5 percent of our revenue in R&D as we see this as a key enabler for sustainable long-term competitiveness.
The oil and gas industry is cyclical but the industry doesn’t seem to have learnt from previous downturns. What can be done differently in this current climate to ensure recovery?
Nearly half of sector professionals in Asia stated in our research that the oil and gas industry is repeating the mistakes of previous downturns compared to 56 percent globally. The oil and gas industry has seen dramatic reductions in its workforce and Asian respondents are more concerned than respondents globally (15 percent compared to 11 percent) that the industry may be cutting back too fast on headcount and experience
Our report shows that four in ten (41 percent) of Asian industry professionals expect job reductions to continue to some degree into 2016, compared to more than half globally (51 percent). Companies need to carefully consider where the cuts occur to ensure the resources and talent is in place when the turnaround comes. Meaningful change is needed now – cutting complexity, increasing collaboration and driving standardization. These measures will enable the industry to adjust to the new reality and put it on a sustainable growth path for the long-term.
DNV GL has just appointed a new CEO in Remi Eriksen. How high does Indonesia rank on the global management board’s list of priorities?
At DNV GL Indonesia is considered an important country. The regional office for SE Asia is based in Singapore, but a high degree of autonomy is devolved to the local level with country offices familiar with their local markets driving the decision-making. We maintain between 85 and 90 staff at our Jakarta office and enjoy a high-profile local project pipeline. The Onshore segment has a lot of scope for servicing the geothermal, LNG and renewables segments. The maritime part of the business has a more conservative outlook but nonetheless has been experiencing stable growth for some time.
What are the emerging trends that you are noticing in Indonesian oil and gas?
The drive to control costs and optimize procedures is gaining traction as the impact of falling global oil prices is more sharply felt. Efficiency in the operation and maintenance sides will be more of a focus for customers to maintain their production level; however, aging assets will bring more challenges in this situation. We also see opportunities to play a role in helping better integrate the Indonesian oil and gas value chain. Right now, certain parts of the value chain tend to be segmented and apportioned out to different actors, while other parts appear quite scattered. None of this is particularly efficient and cost-effective and lessons could potentially be learned from Singapore’s structuring of LNG supply and distribution. I believe we can play a valuable role here in applying international best practice to the Indonesian context. The future trend for exploration and production in Indonesia is towards deep water operations, so subsea facilities and offshore pipelines for deep water areas can be expected to play a bigger role.
Given its geography as an archipelago of scattered islands and the dislocation between where the reserves and population are situated, how should Indonesia best be supplying and distributing gas?
We’ve been talking to both Pertamina and PGN about this. There is no single solution. Given the idiosyncrasies of Indonesia’s geography, you could say the country represents ripe terrain for testing out different concepts. There are broadly two schools of thought. One is in favor of developing floating units that could be deployed at stranded offshore gas fields and then redeployed elsewhere once the supply has been depleted. The other advocates more permanent base solutions such as the laying of fixed pipelines. On the distribution side, looking at small islands scattered along the archipelago far away from the gas terminals or existing pipeline infrastructures, one feasible option could be to develop small scale LNG transportation.
Our recommendation is to conduct in-depth concept and feasibility solutions prior to selecting either option. This is because one solution might look very good on the CAPEX side, but actually end up as very expensive to maintain on the OPEX side. For a 40-year development, that sort of scenario can quickly degenerate into a white elephant project. Already there are a few around. There is a lot of excitement in the unchartered east, but more attention needs to be paid to executing feasibility studies and joint investigatory projects as a way of determining optimum solutions for a given case.
We have noticed a tendency for technical advisors working in the maritime sphere to chase the money and extend their activities into the oil and gas sector. What makes you the partner of choice?
We bring to the table a deep reservoir of expertise and experience accumulated over many years that delivers positive end outcomes for our customers. Importantly, we understand that the risk exposure in the oil and gas sector is different from the maritime domain and can thus deliver tangible and effective solutions that take into account those fundamentals. Clients opt for us because we have proven time and time again that projects that are safer, smarter and greener are also often cheaper to operate in the long run.
What will be the next steps for DNV GL in Indonesia in terms of growing the oil and gas side of the business?
Although we are currently in a challenging situation, we still see opportunities in the industry. We will be looking at both the upstream and downstream sector of the business with more activity on the Opex than Capex side at the moment. We have our risk management advisory, Noble Denton marine services, and especially our strength point in pipeline services such asset integrity, risk based inspection and failure investigations that will help customers to maintain their assets operability and maintainability. Our ISRS services which already widely adopted by Pertamina Group will help them to maintain their safety and sustainability level. We also optimistic about the Government’s plan for the development of gas infrastructures that will provide a basis to grow our gas value chain services. We are also well placed to assist the ministries in developing the country’s regulatory regimes for the energy sector and given our track record on LNG projects in Singapore we naturally also identify fresh opportunities in that space. In short, the future looks very bright.