Raphael Siri, Senior Vice President, SapuraKencana Drilling, Singapore
Raphaël Siri, senior vice president of SapuraKencana Drilling, provides insight into the newly formed company’s growth trajectory and its ambitions to increase its international footprint following the acquisition of Seadrill’s tender rig business. From its Singapore HQ, SapuraKencana Drilling offers premium end-to-end solutions with flexible, focused and customized offers.
Having been appointed as Senior Vice President for SapuraKencana Drilling for a year now, what were the objectives tasked to you?
First and foremost, my primary responsibility at the beginning of my new assignment was to ensure the seamless integration of SapuraKencana Petroleum Berhad’s (‘SapuraKencana’ or ‘group’) acquisition of the majority of Seadrill’s tender rig business. The US$2.9 billion transaction was completed around April of last year and included 18 tender rigs. Although SapuraKencana already had three rigs in its portfolio, the acquisition represented some risks in terms of the groups venture into a relatively new business line. We wanted to ensure our clients and employees experience nothing less than a smooth transition. With the transition from a recognized international company – Seadrill – to a recognized Malaysian company that is expanding globally, we wanted everything to be business as usual, or better, for our clients and people.
Further down the line, another objective I was tasked with was to expand our business and grow. Following the 2012 merger which saw the formation of SapuraKencana Petroleum, as well as the 2013 acquisition of Seadrill’s tender rig business and subsequently Newfield Exploration Co.’s oil and gas assets in Malaysia, SapuraKencana truly became an end to end solutions provider across the oil and gas value chain. In fact, The Newfield deal made SapuraKencana among the very few players in the world that are both field owners and support services providers. We have the capability to construct, install and drill on platforms, while also installing the pipelines connecting these platforms and finally extracting the resource.
Evidently, SapuraKencana has demonstrated its commitment to industry leadership and we are fully focused on further developing our business domestically and internationally. The incorporation of Seadrill’s tender rig fleet was a significant step in that direction as we now operate six rigs in Malaysia, and another fifteen in international markets.
As a fully integrated services and solutions provider, the SapuraKencana group is now composed of four main entities. These include offshore installations (OCSS), onshore fabrication (HUC) with a yard in Lumut Port Industrial Park, Malaysia, as well as SapuraKencana Drilling represents the drilling unit of the group. Finally, we have established a strong presence on the development and production side through the Newfield asset purchase completed earlier in 2014. At the time of the deal, Newfield was the fourth largest oil and gas producer in Malaysia, with interests in nine production sharing contract (PSC) blocks spread over the country.
What more can be inferred about the groups acquisition of Seadrill’s tender rig business in terms of its long term strategy?
This acquisition is integral to our focus on becoming a fully integrated services and solutions provider. It was also a significant stepping stone towards strengthening our international recognition while gaining access to a wider and more diverse client base. In Malaysia for instance, most oil and gas service providers are centered on PETRONAS. Whereas for SapuraKencana, they are our fourth largest client since we also work with some of the world’s largest IOC’s. Today, SapuraKencana is one of the world’s leading tender rig owners and operators with more than 50% market share, with operations in South East Asia, West Africa and Central America.
Looking at the financial side, given the nature of the tender rig business, the group is now characterized by a steadier stream of revenues. Because business predictability is attractive to investors, SapuraKencana is potentially exposed to a broader range of capital resources.
For SapuraKencana Drilling in itself, the acquisition saw the consolidation of both Kencana’s and Seadrill’s tender rig business. As an entity solely focused on that domain, we are able to fine tune and customize the services and solution we provide towards any specific niche market. Rather than being a jack of all trades and a master of none, we see this move as a means in which we can focus exclusively on the tender rig business in a bid to provide an even higher level of customizable yet flexible services than has ever been seen before.
What does the positioning of the drilling entity of the SapuraKencana in Singapore tell us about the strategic importance of the country to the group?
Singapore per se is a recognized hub in the drilling business, among many others. The acquisition of the Seadrill tender rig fleet in effect gave us access to the knowledge base associated with that which was primarily based in Singapore.
Indeed, our units’ corporate office is here as is the competency base of the drilling business. Being a rather ‘top-light’ organization with few layers or management running the group, we work in close collaboration with one another. This allows us to operate our business with fewer people and means that everyone carries increased levels of ownership and responsibilities. On the other hand, if the company were to relocate the drilling unit to Malaysia, that would take a great deal of planning to ensure we have the right capabilities. Because of the inherent knowledge base in Singapore, this might mean we would have to take on a larger number of people while still losing the credibility one gains from being here as a drilling business. Operating out of Malaysia would without a doubt be cheaper, but we must look at the real added value we would derive from being located Singapore, Malaysia, or anywhere else. Most of rigs were constructed in Singapore and this is where they would generally return for servicing. The knowledge base for the tender rig business is concentrated in Singapore with a host suppliers and customers.
As an Asian based owner and operator, that is part of an integrated end-to-end services provider, how would you define the organizations competitive advantages in comparison to the more established international players?
Looking at it from a purely investment point of view, the group has an inherent value that it maintains as the owner of its own assets. Should everything go pear-shaped, SapuraKencana will still have a significant asset base which ensures its shareholders a certain value level.
On the operational side, owning your own assets significantly improves the decision making process and enhances our operational flexibility. With less links in the decision chain, the entire process become less complex and we are able to respond to our clients or the market with greater speed.
With significant operations in Asia, SapuraKencana benefits from being a Malaysian-based organization and arguably a better recognition from regional clients. Just as with any other NOC, PETRONAS in Malaysia will tend to favor sourcing its services locally assuming we are able to provide the same services at an equal cost. Having said that, we are now working on branding SapuraKencana as an international organization as we continue to develop and expand our business.
In March of 2014, SapuraKencana announced it plans to allocate about US$1.5 billion to acquire more oil and gas projects over the next three years. Given the groups internationalization ambitions, how is the drilling unit looking to position itself in global markets?
Given the generally long terms contractual nature of our business, SapuraKencana Drilling operates in a sustainable market segment. We work in partnership with clients and invest in long term relationships with them. In Thailand, for instance, we recently concluded work with one rig which has been continuously working for Chevron for just over three decades.
As we enter the growth phase of our business after having consolidated our business, we are looking towards regional markets where the tender rig business presents attractive opportunities. These include a number of areas in Africa and the Americas. Closer to home, although there are still opportunities in Asia, the tendering business in the region has matured. A majority of our growth opportunities will increasingly stem from other markets to the west of Asia.
Despite forecasts of significant investments, Asia’s upstream producers have paid little attention to the region’s deepwater potential in recent years. Why is that?
I believe the lack of deepwater activities in Asia linked to risk-based consideration on the part of major operators.
In the so-called ‘golden triangle’ made up of the Gulf of Mexico, Brazil and the Gulf of Guinea, the probabilities of striking oil there are generally higher than in this region. In addition to this, the golden triangle already has a deepwater infrastructure in place that would support the development of such projects. Whereas in Asia, we are not quite there yet.
Moreover, Asia is still characterized with less-challenging deposits that are closer to shore. Since developing deepwater projects involve investment outlays that exceed by far those (semi-)shallow projects, it is understandable that deepwater projects have not yet received much attention. As the less challenging fields become depleted over time, investments will without a doubt flow to deepwaters.
What apprehensions do you have as you steer the company forward and simultaneously, what are you most excited about?
Our ability to consistently deliver on our promises is a key strength of our organization and we do not intend to change that. Thus our biggest concern would be to maintain our ability to do so.
In addition to this, we have seen how disruptive and catastrophic even a small mistake in our industry can be. As the world’s largest tender rig owner and operator, we should never be complacent and should always strive to achieve operational excellence that exceeds the highest safety and environmental standards. By focusing on the tender business alone, I believe we are ideally position to achieve this level of excellence by reaching that critical mass, and mastering our business.
In this regard, we never negotiate any given contract for the sake of winning another contract. Rather, we only negotiate a contract if we are confident that we are able to successfully deliver our promise to the client and stakeholders at large. We believe such a philosophy is key to gaining repeat business and that is what we are aiming at.
These are truly exciting times for us at SapuraKencana as a whole. Indeed, the group has announced its plans to invest US $1.5 billion over the short term to support its growth ambitions across international markets. SapuraKencana is on a steady path towards becoming a globally well-recognized integrated oil and gas services provider and I am delighted to be a part of that.
Having started your career as a rig trainee before climbing up the ranks, how do you feel this has contributed to your leadership?
I am humbled by the experience I was able to gain having worked on the decks of various rigs in my time. That is truly a priceless experience. Every time I visit one of our rigs and speak with its crew, they can see and appreciate that I too worked as they did and understand all the different aspects of the job. In this regard, not only am I able to effectively communicate with financiers and business managers, but also with our teams and crews allowing me to gain a detailed insight into our business and its potential challenges and opportunities.