Giancarlo Maccagno, CEO, Wasco Energy, Singapore
Giancarlo Maccagno, CEO of Wasco Energy, explains the rationale behind an international business model: “for a company operating within the oil and gas industry, globalization is imminent. This is due to the fact that the nature of the oil and gas industry is fluid: it moves around to where opportunity presents itself.”
Since its inception in 1990, the company has evolved from humble beginnings to become an international pipeline services provider. What has this evolution been like and what are some of the key management characteristics that have helped shape the company?
My journey with Wasco Energy has been colorful and is one that happened quite by chance. Wasco Energy came about as a 50:50 JV between Wah Seong and Italian-based pipeline coating company called Socotherm, whose stake in the JV was eventually acquired completely by Wah Seong in 2009.
I actually came from Socotherm. Following a 4-year stint as Project Manager for Socotherm S.R.L in Nigeria, I was briefly seconded to Wah Seong’s subsidiary Petro-Pipe Industries (M) Sdn Bhd (PPI) to assist in the setting up of PPI’s coating plant in Kuantan, Malaysia. On arrival, I could already see the immense potential of Malaysia—this was way back in 1990, and it was a time when there was a lot of activity surrounding the gas pipeline network in Malaysia. Even so, the early years were very challenging; a situation that was further compounded by the fact that the biggest pipeline company in the world was already present here and had the means to be aggressive. For us, resources were scarce; we started from scratch, with little human and financial resources. The first three years was extremely tough, but we survived as a company and came out stronger for it. It also helped that the initial support we received from PETRONAS gave us a platform and track record that we could build from.
The past two decades have seen Wasco Energy transform itself from a small-player into an international oil and gas services provider through organic and inorganic means. Today, the coating plant in Kuantan is the largest pipe-coating plant in the world and we are now the world’s second largest pipe-coating company. Although the pipeline coating business was and remains the heart of our business, we have diversified our business to also include engineering and E&P services.
This transformation can be attributed to the cultural diversity the company thrives on—we are, after all, a culmination of East and West. Having come from a small outfit with the need to prove itself has also resulted in Wasco Energy becoming more ambitious. This is also a testament to the management style adopted here, where two fundamental traits have driven the company forward from the very beginning: energy and passion. We would not have weathered the storms that we faced had we not had an energetic and front-foot mindset.
How do the three core divisions (Pipeline Services, Engineering and E&P) complement one another?
The beauty of the areas of businesses we are involved in is that they are independent of each other and do not cannibalize one another’s market share. While we do not focus on servicing the entire value chain in the oil and gas industry, each division serves very different markets in the appraisal and production phases of the sector.
By doing this, Wasco Energy avoids risk by relying on just one market which can lead to exposure to market vulnerabilities. For example, it can be said that there is an inverse correlation between the FPSO market and the pipeline market—a Floating, Production, Storage and Offloading unit eliminates the need for pipes to be laid for the transportation of oil and gas. Therefore, in the event the pipeline market sees a decline and thus reduces businesses for the Pipeline Services Division, there may be an increase in FPSOs, which is under the purview of the Engineering Division as they have the capabilities to package modules needed on these vessels.
Due to the very project-based nature of our business, it is important that we diversify and minimize our reliance on any one area. The decision to venture into these three areas is therefore a very strategic and conscious effort on our part to ensure business sustainability.
What is the rationale behind an international business model?
For a company operating within the oil and gas industry, globalization is imminent. This is due to the fact that the nature of the oil and gas industry is fluid: it moves around to where opportunity presents itself. Therefore, it would not make sense for us to sit in Malaysia and wait for business to come knocking at our door. With this in mind, we seek to follow the trend and capitalize on market potential.
Understanding this, we have made concerted efforts to expand our footprint and increase our presence, not only in countries within the region, but also in the United States and Europe. In the past two years we have commissioned plants in the Gulf of Mexico as well as Norway—both areas where oil and gas activities have been steadily increasing.
We had harbored the dream of being a global company right at the inception of the company in 1990 and this was symbolized in our first logo, which was based on an image of the globe. It is nice to witness our dream becoming reality.
Wasco Energy recently won a multi-million dollar pipe-coating contract in Norway with Statoil. What is the significance of this project?
The deal with Statoil is extremely significant for the company. Working in the North Sea and Statoil, elevates us to the very top of the industry because these entities are considered the benchmark of the industry in terms of quality and safety. As such, to have secured that contract and at a size of USD 200 million, it is a significant and proud milestone for the company.
The securing of the deal also provides us with that global edge we have been working so hard for. Not only does it provide us the track record we need to expand globally, it is also a bold statement that shows we are able to compete against larger companies outside of our comfort zone.
For a long time, North Sea companies have expanded internationally providing R&D capabilities and technical sophistication to the oil and gas industry. As Southeast Asian companies like Wasco navigate internationally, what qualities do they bring to the international industry?
We always try to be a step ahead of the competition. For example, we started investing in deepwater coating five years ago, before any of our competitors. We brought in specialized individuals and built up our R&D and subsequently developed the necessary materials. As the market moves towards the deepwater sector, we are well poised to ride this growth trend.
Wasco Energy is also responsible for bringing in new technology to the west. A couple of years ago we came across a company in the US that provides similar pipe-coating services that we do but without any deepwater specialization. We showed them our deepwater capabilities and they were so impressed, we ended up entering into a joint venture with them by which we provide the technology. Consequently, the JV has been the gateway into the Gulf of Mexico market.
The fact that we are relatively smaller than our competitors is also an advantage, as we have proven to be more nimble and flexible—characteristics that are important to our clients. We are seen as an agile player in the international industry, and this is something that clients value.
Are you lured by the attraction of a spin-off from Wah Seong Corp and towards going independent through a separate IPO?
As you know, our parent company is the listed entity and it also manages other subsidiaries that are involved in different industries—oil and gas is just a part of what Wah Seong is about. However, from an investor point of view, Wasco Energy is the most interesting part of the entire equation due to its involvement in the thriving oil and gas industry. As it is, Wasco Energy is the subsidiary that contributes the most to the Group and much interest has been placed on its business.
Taking into consideration the market’s interest in following Wasco Energy much more closely than the Group as a whole, a few years ago we actually did seriously consider chartering our own path through a potential spin-off from Wah Seong. However, ultimately, timing is everything and it has to be done right. At this point in time, what we are doing is ensuring that the non-oil and gas business is of a sufficient size to stand on its own two feet. Otherwise, we would be destroying shareholder’s value since Wasco Energy is the major contributor to the Group.
To reiterate, yes, a separate listing is on the table and it is something that we are constantly working towards. But there is still a lot of consideration to be made as part of our duty to ensure all parties are well positioned.
What is the next phase of growth for Wasco Energy?
Today, we are the second largest company in the pipe coating business, so it is only natural that our long-term aspiration is to become number one. There is no reason why we cannot usurp our competition. Their advantage is that they started earlier and have a presence in more countries than we do. Nonetheless, we are steadily proving to be a strong competitor, and are continuously building global strategic partnerships in an effort to secure more deals.
Even as we speak, Wasco Energy has started to make inroads in the global market. In the past two years we have seen our aggressive partnership strategy come to fruition—not only do we serve the US and European market, we also have a physical presence by way of our newly commissioned plants in the Gulf of Mexico and Norway.
This new development is clearly the way forward for us, as it has set the stage for our next phase of growth, which is going global.