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Interview

Javier Cuevas Martin – Managing Director, Burckhardt Compression Spain

10.07.2017 / Energyboardroom

Managing Director Javier Cuevas provides an honest and thorough account of both Burckhardt Compression’s successes and the industry’s latest developing trends. Having produced machines fifty years ago that are still functioning today, Burckhardt Compression certainly has a story to tell.

Burckhardt Compression is a leading figure in reciprocating compressors. Could you please start by detailing the scope of your business here in Spain?

As a group, we have been operating under the name of Burckhardt Compression in Spain since 2002 but were previously part of the Sulzer Group which had a strong presence in both Spain and Portugal since the 1980s. Certainly, Spain and Portugal are very important markets for us. It has therefore been nearly 70 years that we have been working in the Iberian Peninsula.

Given you service the oil and gas, energy, industrial gases, and petrochemical sectors, what is driving the majority of your business revenue today, and how have you seen demand change with Spain looking to become an energy hub for Europe?

“In downstream we are growing very well and we are also seeing positive results in gas storage and transportation.”

As you mentioned, we have a variety of different sectors we can do business with and every industry provides different opportunities. Upstream is not as valuable in the Spanish market although companies such as Repsol are conducting exploration and production activities in other countries. We try to take advantage of companies who have headquarters here in Spain but it is true upstream is not the main focus. However, in downstream we are growing very well and we are also seeing positive results in gas storage and transportation. Traditionally, Burckhardt Compression was a pioneer in the production of plastics from oil. Outside the oil and gas sector, we have other clients and interests too. But all these sectors are changing rapidly.

We have seen different trends in the last two years that have changed both the industry and strategic investments. On top of that, Spanish companies are consistently growing, taking different directions. All these successful Spanish companies have understood the need to reach a wider audience and become increasingly international.

One trend we noticed recently was the rapid increase in demand for natural gas in Japan and how the Spanish sector took advantage of the opportunity. We are obviously in a great position to benefit from this demand given Spain’s long-standing gas and LNG history. This was a unique situation because import demand was very low in Spain due to the ongoing financial crisis. There were ships offloading and then loading again so this was quite an interesting and prosperous scenario for companies in the sector, but of course it presented plants with technical challenges as they had to operate in a completely different way. I think this transformation of import LNG plants into hubs in countries with a global outlook will happen more and more in the future. Spain being geographically situated between America and Asia, and with significant capacities here, can play a leading role. Spain always appears close enough to conduct business but also far away from significant political problems. For example, with the ongoing difficulties between Russia and the Ukraine, the European Union sought Spain’s capacity to store gas in form of LNG and to access gas from the Maghreb countries.

In another temporary trend, the Spanish government decided to change gas regulations and transfer the cost of inefficiencies in LNG plants to the actual operators. The technical challenge therefore was to find ways how to cope with the volume of excess boil off gas. Burckhardt Compression managed to utilize products from our LNG and the marine product portfolio that were combined into a customized technical solution. For example, we are about to start up a new machine in the Sagunto terminal which will allow our clients to pump to the grid boil off gas that otherwise could not have been treated. It is certainly true that it is quite a dynamic market with lots of new challenges for our products.

Aside from the gas sector, Burckhardt holds a leading position on the marine industry. We have been developing unique products which allow the ship to pump and use the same gas that they transport to fuel the engines. Thanks to our products the motor manufacturers are delivering systems with new record low emissions. Obviously, the personnel who work in the industry are aware of its innovative nature but onlookers are often surprised when we explain for example that we design and supply machines which can handle gas at approximately -170ºC and pump from an atmospheric pressure to up to 300 bars. It is quite a challenging application and we are happy that we have helped our partners to set the new standards in the efficiency of ship propulsion.

Strategically, how important are your Spanish operations to your overall business?

The business is split between services and systems, which essentially means new machines. With regards to new machines, Spain and Portugal have not been the final destination of compressors in recent years. But on the other hand, what has proved very significant is the fact that global Spanish EPC firms are expanding their international presence. We have a permanent sales team who deal with all the key local players successfully competing for bids all over the world.

In terms of the Services Division, the Iberian Peninsula has a large number of compressors and we want to attend to all of them. We are very proud of the confidence given to us by our customer for so many years, and we try to return it by helping them to reduce their compressors’ operational costs. With the basis of our own compressors, we are both able and are actively seeking to expand our offerings to other brands of compressors. As leaders in the reciprocating compressor industry, we are looking to service other reciprocating compressors as we have the technical expertise and the local engineers to do the service locally. Customers more and more understand that an overall knowledge of the process is essential to provide a suitable solution.

The customer has always been our focus. A lot of our products have been developed to meet a specific demand from a customer. Long business relationships opened opportunities to provide additional services and potentially diversify. Our customers understand we are experts in this field and provide us with opportunities to grow through long lasting ties.

What is it about Spanish companies that allows them to thrive on the international stage?

This international focus was a necessity for Spanish firms. Our construction business was huge (approximately 50 percent of Europe) before 2007 so after the economic crisis that expertise had to find alternative markets to survive. It took some time before industries and individual companies realised that this was not going to be a two or three-year period of difficulty but a very deep recession. For the construction industry, it was obvious that this market would never come back to the size previous to the crisis. The whole nation virtually said we need to look abroad because our home markets are not prosperous enough. The increase in the exports was probably one of the strongest points that explain how Spain is getting out of the crisis.

Culturally, it is far easier for Spanish companies to do business in Latin America and build strong relationships there. Across sectors, various joint ventures have existed previously between Mexico and Spain for instance. Due to political reasons, Mexico could not always use the United States for oil and gas developments and therefore often turned to Spain. For Spanish companies, Latin America always seems like a possibility. Spanish companies usually have some contacts in various Spanish speaking countries and they can obtain the local market knowledge very easily. For example, when trying to open a new branch, that local knowledge is obviously crucial. Do not forget that South America is still quite a closed market due to the heterogeneous political and economic realities. This movement to embrace Latin America was initially based on necessity, but cultural aspects usually help Spanish companies facilitate this change.

Burckhardt Compression is a Swiss-based group, and can use the strong image of the “Made in Switzerland” brand. What are the pros and cons of operating with Spanish actors around the world with this image?

It is true that we have a strong reputation associated with the Swiss mentality and engineering skills. It is part of our DNA, and it is one of our pillars to overcome the increasing pressure for low investment cost for machinery. For example, in Spain and Portugal the average age of our compressors in the markets is over 40 years and we still received request from satisfy customers that after operating our machines for more than 40 years they want to relocate or revamp them. We have a great reputation for reliability and low operating costs with very long life cycles. Whilst finance professionals often calculate potential in five year cycles, obviously our relationships with various clients can last 50 years and beyond.

Yes, we are a Swiss-based company but in the process of becoming the world leader in reciprocating compressors we have become a truly international company with a world-wide network of our own workshops and service centers and are present in more than 80 countries. We have acquired the biggest reciprocating manufacturer in China, we have opened facilities in the US, and for forty years we had manufacturing facilities in India. In the past, 80 percent of our employees were Swiss-based, but now that figure is below 50 percent. So, are we really fully Swiss today? By birth we certainly are, but we grew to a worldwide reality.

Where do you see future competition coming from and how do you differentiate yourself from your competitors?

The idea of long-term relationships is key to our success. It means we stay close to our clients and provide a variety of services. There are more players in the market than before but customers appear to appreciate our proximity. Whilst local rivals have managed to set up prosperous outfits, our data still shows there is a desire for a long-term service and high quality. In the future, we will try to offer more and more services. Machines are going to run for 50, 60 or 70 years, so we need to offer something that is not only typical maintenance. For example, petrochemical plants require huge investments and their compressors that pump gas to 3500 bars are already 40 years old. There is therefore an existing challenge of how to adapt to this scenario. I believe we are well positioned to offer solutions to our customer’s problems thanks to our extensive know-how and services portfolio. At the end of the day, Burckhardt Compression is only focused on the customer, as that’s what matters the most!

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