Linh Austin – Vice President & General Manager (Middle East), McDermott, Abu Dhabi
Linh Austin discusses McDermott’s long-standing presence in the Middle East region, the defining hallmarks of safety and quality that have established the company as the EPC partner of choice, and the way McDermott is leveraging its international offshore technology and expertise to the conventional shallow water context of the Gulf region.
McDermott is a leading engineering, procurement, construction and installation (EPCI) company focused on complex offshore oil and gas projects worldwide. What do McDermott’s Middle East operations entail?
McDermott is the longest-standing EPCI company in the region, having first established ourselves in the early 1960s. Our first project was in Saudi Arabia over half a century ago. The world’s largest offshore oil field, Safaniya, is operated and owned by Saudi Aramco in Saudi Arabia and McDermott has essentially executed all the major installations for that project.
Even in the UAE, before most of our competitors arrived on the scene, we were doing the installation for the Umm Shaif oil field in 1974, which was the first place oil was discovered in commercial quantities in the UAE and hence a very important production facility for Abu Dhabi, both historically and today.
The petroleum industry in the Middle East is still very much driven by the National Oil Companies (NOCs). For all intents and purposes, there are only about a couple of major clients in this region: Saudi Aramco, Kuwait Gulf Oil Company (KGOC) as a joint venture between Kuwait and Saudi Arabia, Qatar Petroleum (QP) and Abu Dhabi National Oil Company (ADNOC) in the UAE. They all have their own affiliates but the customer set is essentially fixed.
Our three core markets are Saudi Arabia, Qatar and the UAE. As the largest single oil producer in the world, Aramco is our single biggest client here and they provide the lion’s share of the work as the scale of their operations mean that a lot of attention is required. Qatar has maintained a steady pace in the past few years after massive production efforts in the North Field with Total and Dolphin Energy, but as production starts to drop off with the maturation of those fields, we anticipate a new surge in investment over the next three to five years, for instance, in terms of more compression projects.
As for the UAE, we are currently finishing the 4GI project for Abu Dhabi Marine Operating Company (ADMA-OPCO). The UAE is a very exciting country right now because they are embarking on a strategic plan to seize advantage of the current low oil prices; they want to build up the supply chain infrastructure in anticipation for when oil prices rebound.
How does this long-standing history help differentiate McDermott from your competitors in the region?
What our history in the region means at its core is certainty. We provide the security and peace of mind to our clients – long-standing, new or potential – because we have a proven track record of quality and commitment. No one else has been in this market as long as we have, and this demonstrates our commitment to the region.
The Middle East is a cost-conscious region and with the current climate, there is increased pressure to reduce costs. Certainty is an important element of cost-efficiency, because when you are executing major projects in the neighborhood of USD 600 million, USD 1 billion, etc., the last thing a client wants is for projected costs to increase throughout the life cycle of the project. McDermott’s experience and expertise in the region guarantees delivery of a project on established terms. This is how we have managed to establish ourselves as one of the leading players in this region.
Overall, our history in the region and the stability of the clientele base mean that McDermott has built deep and long-lasting relationships with the major stakeholders in the oil and gas industry in this region. We are an established name and I cannot imagine that a single person in the offshore sector here does not recognize us.
What is the positioning of McDermott’s Middle East presence within its global operations?
The Middle East is the most resilient market for the oil and gas industry today, particularly in light of the low oil price, because of the lower lifting cost here. Markets everywhere else, from the Far East to the Americas and even Africa and Russia, are struggling with the low price of oil. Many projects that had been slated are being postponed or cancelled because the economics no longer work in the new price environment. While it would be unrealistic to say that there is no slowdown in this region at all, it is definitely small compared to other regions: we are talking about a single-digit contraction, from 4 to 5 percent, compared to 30 to 40 percent in Africa and the Americas.
That said, while the market is – and remains – remarkably stable, there has undeniably been evolution in the past decades. Most noticeably, in the early days – from the 1960s up to even the 1980s, the region was dominated by big greenfield projects and we were working mainly on first-of-its-kind, new developments. Now, as the fields mature, the focus is shifting to brownfield work: returning to the installations and revamping them. McDermott is excellently positioned for this because in many of the cases, we were the original executors and we are already well acquainted with these projects.
Overall, the market dynamics in terms of relationships with the NOCs and the opportunities available have not changed substantially but they are evolving along with the life cycles of the major oil fields in the region.
McDermott is known for its expertise in offshore petroleum projects. How are you leveraging that in the very different context of the UAE?
As a global company, one of our core strengths is that we have a reservoir of technology and expertise we can draw upon in different contexts, be it work in deep water in the Americas, Africa or the North Sea.
This region is essentially a conventional shallow water market, but we commonly find that we can repurpose and adapt our technology and know-how to the particular needs and problems that arise here. On the ADMA 4GI project, for instance, which is a high-pressure, high-temperature project, we were able to adapt a North Sea technology to local circumstances. For this project, the concern was that a lot of their processes involved welding, which generated sparks that were a major risk in a high-pressured gas environment. Our solution was to replace welding with clamps, as much as possible – for instance, with cable trays and pipe racks in lower-weight pipe racks and pipe lines – in order to eliminate the potential fire and explosion hazards.
Another area in which we’re hoping to leverage our expertise is through the recent joint venture we formed with General Electric (GE) Oil & Gas in 2015, IO. It is a new model of offshore consultancy that will manage and deliver full field development plans, which will give our clients even more certainty and security regarding their projects, e.g. in terms of projected costs and delivery timelines. Often, what happens now is that companies would do a reservoir study and only realize later during the project lifecycle that their expected costs are completely different. IO is a solution to that problem.
What do you envision for McDermott in the Middle East over the next few years?
First and foremost, McDermott has a global reputation of being an industry leader in Health, Safety and Environment (HSE). For instance, at our facility here, we have reached two years or 30 million man hours without a single lost time injury (LTI), which is when someone is injured to the extent where they cannot show up to work the next day. This is a fantastic achievement. As another example, one of our vessels here, DV 27, which does high-pressure, high-temperature, fast-paced work, has achieved 12 years without an LTI, which is virtually unheard of in this industry. Our failure rate for pipe welding is unmatched in the industry – I could go on. Safety and quality are our defining hallmarks and my top priority is to maintain this outstanding record.
I would like to continue to expand McDermott’s operations in the region, for instance, in Saudi Arabia and Qatar, I would like to maintain, if not grow, our presence. As for the UAE, the rulers have always had a very long-term strategic development plan. They have a lot of vision and foresight, and it is clear that they are considering the best way to position themselves in order to take advantage of the current oil price environment. No one else is talking about increasing oil production when prices are USD 30 per barrel. I spent two years working with ADMA-OPCO in Abu Dhabi and it is my personal ambition to build up McDermott’s presence here. We have participated actively in the UAE for the past few decades but I envision a greater role for us in the future. Undoubtedly, the UAE is a very exciting country to be in right now.