Eric Jas – Managing Director, Atteris, Australia
The founder and managing director of Atteris, Eric Jas, describes the changes in Australia’s oil and gas industry since the construction boom and how engineering consultancies such as Atteris have needed to diversify their core capabilities into more brownfield-type services to stay competitive.
Eric, when we last met, Australia was at the peak of the construction boom, with many of the large-scale LNG projects having just reached FID, coupled with a favorable pricing environment. How has the industry landscape changed since then from your perspective?
Firstly, Australia went from a single operational LNG plant back in early 2000s and will have eventually increased that capacity to ten plants by 2017. In the space of 15 years, the number of gas plants has increased from one to ten, of which one will be floating LNG. That’s a phenomenal capital investment over a relatively short period. In that time, if you look at it as a percentage of global LNG production, Australia was producing less than 5 percent in 2000. Next year, Australia will represent approximately 25 percent of the world’s production – placing the country at least among the top three leading producers. While the majority of the global economy collapsed in 2008, planning, designing, and building all these LNG plants have significantly contributed to Australia’s boom – effectively helping the nation weather the global financial crisis. In retrospect, we’ve been very lucky, as a lot of businesses have grown on the back of these projects.
That massive pipeline of capital investments has since abruptly come to an end, and the first to suffer were engineering consultancies because the design phases were completed and the volume of work began rapidly diminishing. Now, the construction industry is also starting to suffer with the majority of the sector shifting into the operations phase or leaving the country.
That is one big change that occurred that has affected Australia. The other change that has drastically altered industry dynamics, and purely by coincidence, is the recent steep drop in oil price. This has resulted in a lot of the future projects being deferred. Our clients – the oil and gas operators in Australia – are quite cash-strapped now, in turn, reducing the amount of work available to engineering service providers. To make matters worse, the decline in commodity prices have also consequently reduced the expected returns on investments on many of these mega projects – effectively tacking on more layers of industry-wide grief.
How has Atteris adapted to these two major changes?
We’ve been anticipating the end of the boom for some time. The scope of our work has gradually shifted from primarily servicing mega greenfield projects, where we designed new-for-new infrastructure, to engineering support for existing infrastructure, also called asset integrity, and also to smaller brownfield and greenfield projects.
In 2000, there were approximately 700 kilometers of subsea pipelines around Australia. Today, there are about 7,000. So, the number of pipeline kilometers has increased ten fold in the span of just over 15 years. Similar to automobiles, pipelines and associated subsea infrastructure need to be inspected, monitored and maintained, and sometimes repaired. Compared to onshore pipelines, asset integrity management for subsea pipelines and equipment is much more complex. Onshore hydrocarbon pipelines typically transport fairly friendly products such as dry gas, where subsea pipelines often transport multiphase products including water, liquids, and condensate (plus other corrosive by-products) that can more easily cause internal corrosion issues. These pipelines are further impacted by storm conditions (hydrodynamic loading), and pressure and temperature changes – all of which should be accounted for in the design phase. However, it can sometimes occur that the design is not 100% compatible with the actual operational conditions. Pipeline operators normally hire engineering consultancies such as Atteris to review specific data from surveys which are undertaken regularly or after an extreme event, to ensure that the pipelines and subsea equipment are still in an appropriate condition to operate.
On a different front, we’ve also now begun to re-expand our geographic footprint. Before the boom we were doing work in Australia and America, as well as many countries in Asia including Taiwan, Singapore, Malaysia, Singapore, and Indonesia. However, the boom in Australia caused the value of our national currency to rise sharply, precluding us from being competitive outside of Australia. Our direct costs also increased (salaries, office costs, third party service providers; everything went up – a very unsustainable situation). At the same time, we were flooded with work, with our clients here in Australia constantly providing us with new requests. Our biggest concern during this period was actually acquiring more talent to accommodate the workload. But now, the situation has completely changed and the need to look abroad will serve an increasingly greater role in our business development efforts moving forward. The recent devaluation of the Australian dollar assists in driving these efforts.
Does the fundamental engineering approach differ when looking at asset integrity versus greenfield design?
In principle, yes; but in terms of the engineering work, it’s not much different. A good pipeline and subsea engineer should be able to do both – design a pipeline and subsea infrastructure while accounting for the variety of operational circumstances which will occur at a later stage. The operational conditions may deviate from the original designs, so a good pipeline and subsea engineer will allow for that margin of flexibility and adaptability in the design. Typically, most engineering consultancies have siloed business groups between greenfield, brownfield, and asset integrity management. What we offer here at Atteris is a truly integrated service. We have the same people doing engineering design for new projects and engineering support for existing pipelines and subsea infrastructure. So, our staff members can learn from the typical things that may occur in the operational phase that they may not otherwise foresee by solely working on new projects.
Did the company already have those capabilities in-house, given that the majority of the company’s work since its conception had taken place during Australia’s construction boom?
Yes. I started the company in 1999, and I was lucky enough to have had exposure before that to all phases of a pipeline system – design, construction, and operation, both onshore and offshore. At the time, I noticed there were many engineering consultancies that had individually specialized in each phase, but had rarely collectively boasted all expertise integrated under one roof – which is what in part motivated me to create Atteris. My philosophy has always been that the industry needs more integration between the disciplines, rather than a siloed approach, because the differences are quite distinct, albeit sometimes very subtle.
We have always trained our people here to give them exposure in all aspects of the pipeline and subsea equipment lifecycle. This also includes decommissioning, which I believe has been largely overlooked. While many see decommissioning work happening much further down the line, it should be a consideration during the design phase. Decommissioning is happening now. Several fields around Australia have been or are being decommissioned. The industry is now coming up to speed with this, but there is little guidance for the unique Australian conditions. I feel privileged that Atteris has actually been pinpointed to write the decommissioning guideline for subsea and pipelines in Australia.
Given the current state of the industry, how will you go about maintaining a competitive edge over your peers as an engineering driven consultancy?
By delivering quality work, focusing on the development of our people and by leading the technology curve – that’s the way we’ve always been able to maintain a competitive advantage. We also spend a lot of effort on R&D; we have been industry leaders when it comes to innovation – certainly in Australia, but also globally in the realm of pipeline and subsea engineering. We have demonstrated that in the past by coming up with engineering innovations that have had a massive positive impact on projects in Australia, as well as overseas.
The key component of the company’s continued success, especially given its engineering focus, is its people. How have you gone about attracting and maintaining the best talent available with the current state of the industry?
Indeed, as an engineering service provider, the most vital attribute you can possess is your people. In all areas, if your primary focus is on developing your people, in the broadest sense, you will always perform well. Looking at developing people in the professional engineering skills, but also in developing the softer skills such as the way they interact with other teammates and clients.
We’ve never had a problem attracting or retaining our talent. The biggest challenge is creating that level of collective dynamism and synergy among your staff members to generate greater value than if they operated individually. But I think that applies to any business. It takes a lot of effort to arrive at that level of precision and excellence, but it’s something we’ve managed here through years and years of experience, training, and collaboration.
On the same note, can you elaborate on any previous projects in which you are particularly reminded of the value that you ultimately brought to your client and the process of working with your team to get the job done?
There was one project that we did for Woodside on their Pluto LNG project, where we delivered a number of innovative engineering solutions in relation to pipeline stabilization and protection design, and the crossing design of a major shipping channel, that helped them to eventually go on and win an engineering excellence award. So, I’m very proud of the contribution we’ve made to Woodside, especially given the relatively small size of our company.
The other project I’m especially fond of is the Wheatstone project for Chevron, in which we provided some very innovative and practical design solutions for their offshore pipeline, flowlines and umbilicals. We hope to assist Chevron in also winning an excellence award, which we are currently helping them prepare for.
Those are two recent instances where I believe we’ve truly made a name for ourselves.
In your previous interview, you had actually forecasted the eventual commodity cycle downturn and anticipated the need for preparation. With that hindsight in mind, how is Atteris best structured to drive value for its stakeholders from this point forward?
I think the future is bright in Perth. We have a fantastic city to live in. We have some great projects that are delivering great work. They will ultimately be operational projects (some of them already are) with some future extensions that we call tiebacks, which will give us on-going work. The boom that we experienced will not return. People will remember it as the boom of the early 21st century, and it will never return with the same scale or impact in my opinion; well not anytime soon anyway. However, we will begin to see a more sustainable volume of work with more realistic salary and other cost levels. Furthermore, many of the businesses that came here or originated strictly for the boom will either wind up, or exit the country or even the industry, leaving the better, more competent, wiser, and long-term thinking professionals to service the oil and gas sector, specifically targeting asset integrity management and smaller tieback projects for the next 20 to 30 years.
As the founder and managing director of Atteris, where would you like to have positioned the company in the next three to five years?
Atteris has always been in it for the long-term. We constantly receive offers of buyouts and unhealthy long-term partnerships, but those options are simply not within our scope of consideration at the moment. We are a very attractive business, but I don’t believe in selling to a larger player and being swallowed up. It doesn’t help us or our clients. The oil and gas operators like to engage us because we can come in with a unique perspective and provide tailor-made solutions. We’re fine with tightening our belts and buckling down as long as we get to keep our competent staff members for the long haul. We’ve even maintained our recruiting efforts despite the current environment. We’re not afraid to invest in talent when we see it, and we look forward to maintaining that same level of optimism and perseverance moving forward, as a truly independent engineering service provider upon which the oil and gas operators can rely.