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Interview

Ravi Natarajan, Regional Manager, Process Automation, South Asia

17.07.2014 / Energyboardroom

Ravi Natarajan, Regional Manager Process Automation South Asia at ABB, discusses the company’s forward thinking investments and strategy in Singapore, which the company realized since 2007 was at the heart of the global oil and gas business. ABB has created a global centre of excellence in Singapore and offers information integration services to companies, thus providing the right information at the right time.

ABB has enjoyed a market presence in Singapore since 1971. What’s the strategic importance of Singapore to group’s global operations?

ABB in fact enjoys a history that predates the 1970s with more than fifty years of operation in the city-state. We had initially started as a trading entity and gradually expanded across the value chain in terms of engineering capabilities, marketing, sales, and so on.

Today, ABB Singapore has evolved to be the center of excellence for a variety of our business regionally and globally. Singapore is therefore a very important part of ABB’s value proposition to customers, especially in the oil and gas space. In 2007, we took a specific initiative to relocate our global drilling operations to Singapore. Seven years down the line, it’s safe to say that that decision has paid us rich dividends. Because of Singapore’s leadership in the global jack-up, submersibles and FPSO conversion markets, as well as the significance of Keppel and Sembcorp’s shipyards, it was clear that being that much closer to our customers will instill the confidence in partnering with us to successfully execute projects at the highest quality levels. The offshore projects that Singapore’s industry takes on are highly complex and time constrained and being close to our customers allows us to better support our clients.

Today, we are globally responsible for drilling vessels and their entire electrical package. We have multiple offices across the island-state that work in close collaboration with the leading players in the industry. For instance, we have a project team based on Jurong Island which is at the heart of Singapore‘s marine, energy and chemicals industry. We also have a team of engineers located close to Keppel’s yards. Our proximity has helped us gain some significant projects like the Pemex jack-up rig project through Keppel, and another Azerbaijan project also through Keppel, among many others. Looking outside of the domestic players, Singapore is a base from where we also work with the other global giants in the industry including Samsung, Hyundai, Daewoo, and more.

Our forward looking strategic initiative of placing Singapore at the very center of the broader oil and gas map, which we accurately sensed at an early stage, helped us to really dig into the market and become an integral player in the industry. We now have a tremendously experienced team of approximately 350 people dedicated to the oil and gas sector who are able to provide solutions across our value chain. Our ultimate goal is to consistently create and add value to our customers in Singapore and afield. We are well positioned to achieve that and ABB continues to invest in Singapore and the region to take advantage of the upcoming opportunities.

To what extent can Singapore maintain its offshore leadership in light of increased competition from China and South Korea?

Like many other, these are cyclical industries that are also highly capex orientated. There is unfortunately a lack of an applied scientific approach to the construction of offshore assets and over extended periods of time, we tend to see consecutive durations of under- and oversupply. The entire industry is essentially spurred on by the given financing conditions and whoever offers the cheapest financing terms wins. That’s what allowed China, for instance, to gain traction on the rig construction business, among others. The name of the game is to capitalize on low cost financing that hinges on interest rates which happen to be at a five-year low. The only way they can go now is up. Hence, there is also a lot of speculation built into the asset construction business. It is not an industry that is governed by supply and demand.

Over the medium term, we expect the marine shipping industry to reemerge from its slump over the past few years. Some shipyards will therefore revert building those assets. Similarly, following Petrobras’ 26 deep sea drill ship shopping spree we see deep sea drilling taking a back seat while the orders for shallow water jack-ups and submersibles remaining steady. However, people seem to have overlooked the fact that for every drill ship, you need an accommodation vessel, driving the demand now for these assets. Singapore’s offshore heavy weights are therefore diversifying their product portfolios to fill the unmet demand in the market. For instance, almost 20 to 30 percent of Keppel’s inquiries include accommodation vessel conversions as well as other assets like OSVs and PSVs.

I am confident that Singapore will maintain its leadership in the global offshore sector. It is simply the mix of assets it produces that will change. The question is how much can China invest in technology, manpower and its management philosophy to climb up the value chain? Similarly, how much efficiency can South Korea build into its processes given the high cost of labor there? Samsung or Hyundai are not going to give up, neither will Keppel and Jurong or the Chinese players. Everyone will compete but they will each find their own space.

What are some of the most interesting developments characterizing the region now?

In terms of technology, FLNG is on top of many people’s agenda. One of the biggest NOCs in the region, Petronas, is working towards their 2nd FLNG vessel. This is very exciting, and we are all pursuing this project, although it’s still up in the air. Having a floating facility that can liquefy gas is a game changer by any measure. It will make pipelines from offshore gas fields obsolete, while resolving a variety of geopolitical issues. It’s a strategic shift in the business paradigm.

Compared with the IOCs, Asian NOCs generally lag in terms of capabilities and technology. What role is ABB playing in supporting their efforts to enhance their know-how?

Although the NOCs of the region have come a very long way in a short time, they do indeed lag behind the world’s IOCs that developed their expertise over many decades. Regional NOCs acknowledge the fact and are pursuing strategic tie-ups with international players, as is Petronas with Shell technical services and Thaioil with Statoil, for instance.

Because we partner with all these companies, we help to bring a high degree of technology and expertise to them all. In addition, we also demonstrate the advantages of ABB’s remote diagnostics and how we can help them service their offshore locations – a critical aspect of the industry. We also provide training services to operators in leveraging the latest technologies and optimization packages as well as advanced process control.

Assuming key roles such as maintenance responsibilities, remote diagnostics and service packages, we can really help operators focus on their core activities. The shortage of talent in the industry has led to a high turnover of skilled engineers which also means that operators have to continuously invest in developing and training their staff. By taking over these responsibilities, ABB frees up a lot of their resources and allows them to focus on extracting resources from the ground. Another aspect of what we do is continuously training our clients to demystify technology, thus helping our clients understand the latest technologies and what it means for them.

These are just some of the basic measures we take on a regular basis to connect customers to technology and demonstrate their potential value. In its most basic form, our value proposition is information integration. Today’s world is flooded with information, and ABB helps to get the right information, at the right time, to make the right decision.

Change is never easy. How do you convince your clients in adopting the latest technologies?

The oil and gas industry is among the most conservative industries in the world. Changing mindsets is very difficult but still possible, but doing so requires going to the end user and investing a lot of time in educating the customer. This is precisely why it is important that companies like ABB go directly to the end user and demonstrate to them how our innovations can be a source of value.

What does the future hold for ABB in Singapore?

Our mission is quite simple. Focus on developing our core activities and adapt these to the prevailing market trends. Our ability to anticipate the future, at least as fast as others, is critical. As mentioned earlier, we caught the wave of offshore investments in 2007 and correctly identified Singapore as being the focal point of offshore developments. Similarly now, we are bullish on emerging trends including FLNG, among others and developing the technologies needed to make that a reality while helping customers generate value for their stakeholders. In doing so, we will continue to dedicate significant resources to Singapore and the region in order to capture future opportunities and support the development of our own talents.

To read more articles and interviews on Singapore, and to download the latest free report on the country, click here.

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