Jose Ramon Tiemblo – CEO, TECNA, Argentina
The CEO of Tecna, one of Argentina’s leading EPC companies, explains their current strategy of consolidating their businesses and highlights Argentina as strategic growth spot of the future for the company.
Could you please give us an overview of Tecna’s footprint today?
“Given the new oil and gas reality after the landslide in commodity prices, we are currently diversifying our capabilities in the nuclear sector … and the mining sector.”
Incepted in 1974, we are historically an engineering firm and later evolved into a fully-fledged EPC contractor, hence why engineering excellency is still the core of Tecna today; one of our outstanding specialties is to use our expertise in conceptual as well as basic engineering designing as method to reduce the capex of our clients. In 2005, the shareholders of Tecna decided to sell 50 percent of the company in an effort to generate natural momentum to internationalizelooking for a partner with excellent commercial network, a spotless balance sheet and was until that time not participating in the oil and gas market; naturally the perfect fit for our ambitions. Ever since, we changed our approach to the market thus positioning ourselves as fully fledged EPC company striving to win the large projects within the hydrocarbon industry, without losing our genes as engineering firm to add value to EPC contracts. At that time, we had a turnover of around USD 40 million, and last fiscal year we were a bit below USD 400 million—a tremendous growth in only one decade. Today we are recognized as an EPC company with a genuine successful track record in the oil and gas industry; moreover, given the new oil and gas reality after the landslide in commodity prices, we are currently diversifying our capabilities in the nuclear sector – we have already worked in all Argentinian nuclear plants – and the mining sector.
Is geographic expansion still part of your current strategy?
Our strategic focus has shifted away from geographic expansion towards consolidation and diversifying the client profile. As of now, we have two HQ’s; the first one is in Buenos Aires, where we also have our main engineering center. From here we operate the different clusters we have created within the Latin America market; South cone, Argentina and Bolivia; Pacific region, Colombia and Peru; Brazil and last but not least Mexico. Our second HQ is in Madrid from which we control our activities in the EMEA region. This is ‘the new’ region for us as until 2006 we did not have any presence in the region. Today, however, we have reference projects in Saudi Arabia, Oman, Algeria, Angola, Spain and more—a glistening portfolio! As highlighted before, we are now seeking consolidation of these markets by anchoring ourselves in the market through a strong focus on delivering excellency. So, current strategy for the next five years is to focus internally to achieve the “operational excellence” in our projects. But at the same time, we want to use our presence in the current markets to diversify into the nuclear and mining industry, in which we are already well underway to become a fully recognized partner, just as in the oil and gas industry. In the nuclear industry we have already significant experience in the Argentinean market; currently we are the main EPC contractor with Siemens as turbine supplier to build the Balance of Plant (BOP) of a new experimental nuclear power plant in Argentina. In this industry we plan to export our know-how and services into Europe where we identify unfolding opportunities both in extension of life projects as well as implementation of new safety requirements. Indeed, after the Fukushima disaster in Japan, many of the European nuclear plants are being identified to implement new safety systems. We chose to diversify into the mining industry because it is highly complementary with the oil and gas industry. The procurement, construction and most of the detailed engineering phases are highly similar. To assure the process performance, we already joint a partner in Australia who will complement us with the technology knowledge and together approach mining sector in Latam. Although we will provide excellent services to these industries as well, I am confident that the oil and gas industry will still account to about 80-90 percent of our business in the future.
You have been working in leadership positions in many different countries, what can you tell us about the characteristics of Argentinian market in comparison to some of the countries you have worked previously in?
Argentina has had the image -especially in Europe- of one of the best quality/price ratio engineering centers in the world for many years, in the context that the engineering capacity was well developed and engineering firms are able to deliver complete packages with little to none supervision. This is the result of an excellent university education which has –and still does—create a comparative advantage from its regional neighbors. This concept is quite different that to be a low-cost center. For instance in Asia region in countries such as India, companies still need certain degree of supervision in order to be sure to receive the product on specification. As company, we have exported Argentina’s engineering and management services across the world with huge success— of almost 500 employees in Argentina 300 are working in our engineering center in Buenos Aires with 1 million hours of engineering capacity per year
Latin America has several countries with growth opportunities in the oil and gas industry. Where do you identify the current growth spots for Tecna in the region?
In Latin America we identify in the short term Argentina and as the growth spots of the future for Tecna; Argentina will become an astonishing market within the next five years; it has lots to offer within the oil and gas industry and opportunities exceed ‘just’ Vaca Muerta as Argentina’s rich conventional resources and some refining and petrochemical new investments will offer plenty opportunities for development as well. The Bolivian oil and gas industry is developing splendidly now and we see many oil and gas majors investing into the country; we have been active in Bolivia for almost 15 years now, not only as pure EPC company but also in operations and maintenance of some plants and we are in the pole positon admits its development. Brazil has been for many years an interesting country to settle operations, but as of now we need to hold still and watch its development carefully and how they solve definitely their current crisis.
In what we call Pacific region, we expect Peru and Colombia will reactivate projects in the mid-term. In the last two years just few opportunities have been launched.
Finally, in Mexico we are still in the commercial development stage, but without any doubt the market itself offers recurrent opportunities in the O&G industry. However for a mid-size company as Tecna is, we should study carefully and balance all the risks to enter into a new and competitive market. The strategy to associate with some local constructor to complete our process engineering knowledge with construction workforce seems to be the most appropriated for us.
The drop of commodity prices in late 2014 has changed the face of the global oil and gas industry. How has this development impacted your operations?
We have been affected by the landslide in commodity prices just as much as any other company in our industry; our backlog was strongly reduced as many projects were stopped, especially in Brazil, Argentina and Mexico where we had some significant projects in the pipeline. Quite frankly, I believe it is impossible to avoid that the with the slide in oil prices affects your operations. However, we used this crisis to improve internally even stronger. We recognized the need to implement different methods of how to work, therefore, we reinvented ourselves internally by reviewing our business processes and created what we call ‘the Tecna method’. Every individual willing to work for us needs to perfectly understand the way we work now; in order to succeed, the whole team needs to perform rather than the individual. Apart from enhancing efficiency internally, we changed our business model in order to create more added value to our clients –shortening schedule times for instance. We also focused on integrating our suppliers into this new business philosophy in an effort to have all arrows pointed at the same objective: reduce capex and schedule time for our clients. It took us two years to complete the reshaping process of our company and I can pronounce that we have completed it without compromising on the quality we are renowned for. Our engineering capabilities play a significant part in providing benefits to our clients, so much so, that we have an additional technology department whose main mission is to scrutinize the engineering decisions from the outside, trying to improve the engineering plans wherever possible; either by changing equipment or introducing new technology, all with the aim to either save time, costs or both. This strong focus on capex and time reduction allows us to create win-win situations for our clients and ourselves.
Argentina is currently in a phase of transformation as the newly elected government is opening up the country to the world. How have you perceived these developments thus far?
Most recently we have had some of the largest companies in the global landscape of our market come to Argentina and analyzing our business. These companies are urged by their clients to come to Argentina and support their client’s developments, thus they come trying to define the ‘ifs’ of investing into Argentina. This is one of the most significant changes which have happened in the first year of the new administration. However promising, the main concern of these companies is still the investor history of Argentina; they are interested but are also worried as it is unanswered how new politic and economic measures are going to be maintained in long term independently of the government’s profile at each moment at the Casa Rosada. Investments in the oil and gas industry are typically long-term investments of around 30 years, therefore change needs to be long-lasting and investors need to be assured that these policy changes will last. Dow Chemical’s CEO, Andrew Liveris, expressed it best when he said “We want to invest, but if we do we also want return on our investment”! The issue at hand is not what the current government is doing –which is on the completely right pathway—but the persistence of these changes.
Due to the government’s efforts to attract investment, opportunities are unfolding across Argentina’s hydrocarbon industry. How do you position yourself in order to tap into these opportunities?
We have strong references in the oil and gas industry worldwide –and the nuclear sector locally. As such, we are open to companies seeking partnerships in Argentina. If a company seeks a reputable mid-sized EPC firm with a genuine spotless track record and emphasis on delivering excellency, we are the right partner, whether this be a joint venture, strategic partnership or a case by case project approach. I am convinced that, as country, we need some of the large multinational companies to come to Argentina because the amount of unfolding opportunities—as great as they may be—cannot feasibly be stemmed from the domestic market alone. Understanding this scenario, we are more than prepared to receive companies from abroad wishing to join us in developing these opportunities.
Why is Tecna the right partner for those companies?
Frankly speaking, if one of those companies analyses the Argentinean market, there are not many Argentinian companies with all the capabilities to approach medium-large EPC projects so, we naturally become the partner of choice. The landslide in commodity prices in combination with the administration of the past has driven most of our foreign competitors out of Argentina; among the few that are left, we have 40 years of experience, a genuine spotless track record of delivering excellence, in-depth know how of the country, its different stakeholders and an excellent customer base.
Could you please highlight one of your flagship projects which showcases your expertise?
I would argue that we excel in all of our sectors. Nonetheless, we have had a stronger track record of projects related to upstream surface facilities; pretty much everything related to treatment of oil and gas from the well to the refinery. That means, when Vaca Muerta booms, we will be one of the companies in this area in Argentina.
You have mentioned earlier, that Argentina’s workforce is one of its strengths. Nonetheless, the workers’ unions seem to be a big challenge in Argentina. How can a solution to this problem look like?
The country needs to establish frame agreements in between the unions, the employers and the public sector to establish long term visibility, define rules and enable long term planning. Such an agreement needs to foresee and incentivize to work productively or in other words to link the increase in salary to the increases in productivity. This is one of the largest challenge the country needs to solve, however, this needs to start in changing the way society behaves and acts at large.
How would you like Tecna to be known around the globe?
Our mission is to position Tecna as the company known for excellent performance in all the markets we are active in. We also want our employees to be recognized as crème de la crème in their specific area; always delivering the utmost quality of service. We want to remain a midsized company consolidating in our markets as much as possible