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Interview

Hong Namkoong – Vice President & Managing Director, Samsung Engineering UAE

Samsung Engineering UAE’s Hong Namkoong reveals the strategic importance of the UAE to their global operations; the company’s contribution to the UAE´s Emiratization initiative by providing vocational training, education and internship programs to nationals; and their decentralized strategy, increasing the level of interactions with global operation centers.

Mr. Namkoong, in January 2016, you became Managing Director for Samsung Engineering in the UAE. What mandate were you given upon your appointment?

Given the inherent volatility of global oil prices, I have, since January 2016, been focused on the successful completion of our ongoing projects by providing preemptive support, with a focus on professionalism and teamwork. Samsung Engineering has been present in the UAE since 2007 and has worked on various large-scale projects and biddings throughout the Middle East and North Africa (MENA) region, including countries like the UAE, Oman, Qatar, and Kuwait. In the UAE, we have thus far executed nine projects worth USD 10.2 billion within a diverse business portfolio. We also need to expand and diversify our business portfolio in this region.

For 2016, we have a target of winning USD 2.5 billion in projects, another key priority of mine me. In order to achieve such an ambitious target, our focus is on finding the most cost-efficient way of executing projects so as to drive value for our clients. We will do this by achieving a globally competitive cost structure, optimizing the costs from all Samsung Engineering’s centers of execution around the world, and targeting the entire supply chain management from vendors to subcontractors.

Currently, Samsung Engineering has substantial operations in around 40 countries worldwide. What is the strategic importance of Samsung Engineering’s UAE activities in relation to regional and global operations?

Samsung Engineering was founded in 1970 as the first South Korean engineering-design firm, initially for domestic projects but it quickly began to expand its businesses overseas. Since 2000, the Middle East has been Samsung Engineering’s primary market. In the current low oil price climate, the UAE has become one of the most resilient markets in the global oil and gas industry with a relatively low breakeven price and production cost. As the MENA hub, Samsung Engineering UAE plays a crucial strategic role in overseeing projects spanning North Africa to the Gulf Cooperation Council (GCC).

Naturally, the UAE is also a market with significant competition. Samsung Engineering is looking to enhance its competitive edge by maximizing the interactions between our global operation centers: the five Centers of Excellence (COE) and nine Local Support Centers (LSC). Each center has a distinctive role and a responsibility to increase the efficiency of project executions. In this respect, Samsung Engineering UAE (SEUAE) plays a vital role as a middle office, managing risks, controlling profits and responsible for business developments.

What is your strategy to ensure that the UAE remains a center of Samsung Engineering’s global operations?

As Samsung Engineering has grown and expanded internationally, we have followed a couple of basic strategies and principles to ensure that we remain a truly transnational company.

Paramount among these is our emphasis on “localization”. SEUAE has been concentrating on responding immediately to the needs of our local clients, most notably through the achievement of a high level of local content. Building a strong local presence gives us the ability to respond quickly and flexibly to local opportunities.

To demonstrate our commitment to the UAE, we also strive to contribute to the holistic development of the country. For instance, in support of the Abu Dhabi Economic Vision 2030, we contribute significantly towards the Emiratization initiative by providing vocational training, education and internship programs to future generations of Emirati engineers and university graduates. The Samsung Engineering Internship Program (SEIP) is offered in various MENA countries, such as Iraq, Algeria and since 2010, in the UAE. The SIEP is a one-year training program focusing on training university graduates to develop the skills and knowledge of a professional petroleum engineer. Beyond engineering skills, it also focuses on building self-confidence and professionalism. These programs develop valuable human capital, which are not only of great value to Samsung Engineering but also to our local partners like the Abu Dhabi National Oil Company (ADNOC), for which many of our young talents go on to work subsequently.

In addition, we are also pursuing a decentralized strategy, where we increase the level of interactions between our global operation centers. This allows us to minimize regional risks, such as the fluctuation of exchange rates, and to maximize our competitive edge. The goal is to have a flexible workforce across our functional activities, such as detail engineering and supply chain management, to maximize operational efficiency.

Samsung Engineering’s capabilities extend across the full range of EPC services, for a variety of industries, e.g. hydrocarbon offshore facilities, wastewater treatment, initial financing, and operation and management. What are the key services that are crucial to this region?

In this region, Samsung Engineering provides a wide range of services from EPC turnkey projects to FEED developments for ADNOC. Our EPC turnkey projects, the Fertil-2 Ammonia and Urea Fertilizer Project, has contributed immensely to strengthening the UAE’s position as a major player in the global petrochemicals market. The Fertil project has seen the country´s urea capacity increase from 800,000 tons a year (t/y) to 2.1 million t/y. In 2010, Samsung Engineering broke new ground by winning mega-size contracts from the Abu Dhabi Oil Refining Company (TAKREER), notably a contract worth $2.7 billion in March 2010, with Samsung Engineering as a contractor for utilities and offsite services as well as the leader for interface management of Takreer´s Ruwais refinery expansion project. The expansion of the Ruwais refinery is at the heart of Abu Dhabi’s plan to diversify its economy away from upstream extraction. Regarding FEED projects, we conducted the FEED development for the Borouge 4 project (a joint venture between ADNOC and the Austrian Borealis) based on the successful Borouge 3 expansion project, the largest integrated polyolefin site in the world, for which Samsung Engineering acted as an EPC contractor.

What is your strategy for engaging with the ADNOC Group of Companies and other international and local oil & gas industry players in the region?

Our expertise in engineering, supply chain management and construction capabilities, aligned with excellent project management know-how, ensures that Samsung Engineering is the number one partner of the local NOCs such as ADNOC and its affiliated companies. To remain a strategic partner of the ADNOC group of companies, we plan to further strengthen our positioning by offering new partnership models relating to the FEED development of petrochemical plants as well as brownfield works.

When it comes to petrochemical plants, Samsung Engineering is a leading EPC contractor in ethylene oxide/ethylene glycol (EO/EG) processes, for which we have successfully completed 18 mega projects worth USD 4.5 billion. We are recognized for our leading EO/EG technology as seen through our strategic partnership in FEED developments with companies such as SCIENTIFIC DESIGN COMPANY and SABIC.

For brownfield projects, Samsung Engineering and KBR have been conducting FEED developments for a number of projects, such as the Rustabi Azon Revamp project in Georgia and the Kaltim-2 Ammonia Plant Revamp in Indonesia.

Leveraging our expertise in project management, we have performed 14 mega projects worth USD 25 billion in the last seven years, namely in Saudi Arabia, Qatar, Bahrain, Kuwait, Iraq and UAE. The 2014 Premier Project Award for the Sonatrach Skikda Rehabilitation Project only served to demonstrate Samsung Engineering’s expertise in brownfield projects.

Furthermore, Samsung Engineering is very focused on our clients’ expectations and requirements, and we pride ourselves on building solutions in direct response to their needs. This is what makes us different, and what gives us a competitive edge. For instance, Abu Dhabi has set ambitious targets for its sour gas reserves. we can make a particular contribution given our expertise in sour gas processing. We have already proven our capabilities with a number of flagship gas handling projects in the Middle East, such as the Shah Gas Development Package, a new, large-scale green field gas project in Abu Dhabi for Al Hosn Gas, as well as the CO₂ Capture & Injection Project and the Shaybah CPF Expansion GOSP Project for Saudi Aramco. Our success in gas plant projects can be attributed to our process design and our analysis technology, which reduce the costs with high fidelity predictive modeling. Samsung Engineering also has special internal expertise allowing us to reduce replenishment costs and minimize energy use in gas processing.

What are your personal aspirations for Samsung Engineering’s future development?

Samsung Group’s business charter states that “we fulfil our social responsibility as a global corporate citizen.” For Samsung Engineering, the true meaning of social contribution is catering to the interests of all parties involved. Our plant engineering business inevitably has a significant influence on the economy and social development of the countries in which we operate, notably with a significant portion of workers and equipment coming from local communities. Consequently, the understanding, close cooperation and friendly relationships that we have with local communities is imperative to the success of our projects.

Samsung Engineering’s efforts have been rewarded with numerous awards, both domestically and internationally. In 2013, Samsung Engineering was awarded the Platts Global Energy Awards in the Corporate Social Responsibility (CSR) sector. Moving forward, we will continue to focus on developing systematic social outreach activities to achieve mutual and sustainable growth with local communities.

I envision a greater role for Samsung Engineering in the UAE based on the existing strong ties between us and ADNOC. Such ties have been built up through our collaboration on various projects. This partnership will be further developed in the future, contributing and assisting ADNOC with future business. Samsung Engineering will remain a long term strategic partner of the UAE, helping to build a more prosperous region. We will continue to deliver on our commitments to clients in the UAE, relying on our tremendous technical abilities, our extensive experience and our conscientious business manner, and in doing so, contribute to the country´s 2030 vision.

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