Subramanian Sarma – CEO & MD, L&T Hydrocarbon Engineering (LTHE), Abu Dhabi
LTHE’s Subramanian Sarma discusses the company’s formation as a subsidiary of Larsen & Toubro (L&T), with the ambition to sharpen the focus on the hydrocarbon business; the strategically important role of the Middle East; and how LTHE´s in-house expertise and experience, synergized with strategic partnerships, enable them to deliver a single point solution for every phase of a project.
As India’s largest engineering and construction company, what is the relative importance of the hydrocarbon engineering business?
LTHE is a fully owned subsidiary of L&T that manages one of its core businesses – Hydrocarbon EPC. Our slogan is “We make things that make India proud.” We are neither a public sector company nor a private company. A former Indian finance minister once described L&T as a company that did not belong to the public or private sectors but was somewhere in-between, a ‘national company´. Given the strategic national importance of oil to India’s economy, being active in the hydrocarbon sector is essential.
L&T´s infrastructure business, comprising the building and upgrading of roads, runways, and railways, and heavy civil engineering, encompasses more than 50 percent of our total business. The hydrocarbon sector makes up around eight percent of the Group’s total turnover and this will only increase in the years ahead. Indeed, LTHE was formed as a subsidiary of L&T in 2013, to sharpen the focus on the hydrocarbon business. We are recognized as a major player in the hydrocarbon space, with a growing international footprint.
When we met with Mr Venkataramanan, the former CEO & MD of L&T, in 2011 as part of Inside Oil & Gas: India, he told us how in the hydrocarbon sector, international projects accounted for ten percent of L&T’s business, and that, over the next five years, the ambition was to grow this to over 30 percent. What is the situation today?
International projects currently account for around 40 to 45 percent of our business. We did face some particular challenges in 2013 and went through an inevitable learning curve. Today we have stabilized our international business.
While India is an extremely large energy consumer, in terms of capital expenditure we are rather small. In the future, the ambition is to have LTHE’s international business account for up to 60 percent of total revenues. In light of this, the Middle East plays a strategically important role. The region has deeply embedded cultural ties to India, and there are strong government-to-government relationships. We see the Middle East as an adjacent market to India.
Indeed, this mission of internationalization was one of the primary reasons I was appointed as CEO and MD in July 2015. Through my 35-year career in the oil and gas industry, I have had extensive international exposure, the last 25 years of which were spent in the Middle East, with a reputed International EPC Company.
LTHC’s success has, to a certain extent, been built on working with National Oil Companies (NOCs), as opposed to many of your peers who tend to focus on International Oil Companies (IOCs). What is the rationale behind this strategy?
As an Indian company, we are used to collaborating with National Oil Companies. Traditionally our work has been done in the public sector, for example with Oil and Natural Gas Corporation (ONGC), an Indian government-owned multinational oil and gas company. It is therefore a natural extension for us to work with the likes of the Abu Dhabi National Oil Companies (ADNOC), or Saudi Aramco in the Middle East, who follow many of the same processes and procedures. This works immensely in our favor as NOCs are our most important clients in this region. While the IOCs and major oil companies are active in such markets, they are mostly present as partners. The one exception to this is the more emerging markets, the likes of Iran and Iraq and we aspire to service IOCs as well in the near future.
In January 2016, in consortium with McDermott, LTHE secured an offshore contract from ONGC for the development of the Vashishta and S1 deepwater fields, a major greenfield deepwater development off India’s East coast. What did this deal say about the future strategic direction of your business?
LTHE has long been a dominant player in the offshore business, primarily off Indian waters. Until recently, we were responsible for a quarter of ONGC’s offshore projects. We are ONGC’s service provider of choice in this field, with an excellent track record of delivering projects on time and to a high quality. It is true, however, that our expertise has been primarily in shallow waters. We were looking to build up our capabilities in deep water fields and McDermott was the ideal partner in this regard. Likewise, McDermott was interested in collaborating with a company with local expertise, which we could offer.
We are open to partnering with other companies to increase our product and service offerings and to generate synergies, where complementarities exist. We have also worked very closely with National Petroleum Construction Company (NPCC), an EPC company headquartered in Abu Dhabi, particularly regarding installations in India. We also have a Heavy Lift-cum-Pipelay Vessel (LTS 3000) built through a joint venture with SapuraKencana of Malaysia, which enables in-house installation of offshore platforms and subsea pipelines.
What is it that makes LTHE a partner of choice for oil and gas companies?
LTHE is a vertically integrated company, with in-house strength in engineering, both for onshore and offshore sectors. Our engineering centers integrate strengths in engineering, fabrication, modularization and construction to provide efficient designs and engineered solutions for hydrocarbon process plants meeting the highest safety and quality requirements. Our in-house modular fabrication and construction capabilities are complemented by L&T Heavy Engineering, which is one of the world leaders in manufacture of technology-intensive custom-made equipment. In addition to our modular fabrication facilities at Hazira and Kattupalli in India, we have a major modular fabrication facility at Sohar in Oman. Our in-house expertise and experience, synergized with strategic partnerships, enable us to deliver a single point solution for every phase of a project.
As a responsible corporate citizen, LTHE lays much emphasis on identifying and developing talent and suppliers from the region in which it operates. LTHE actively engages in development of local citizens through campus recruitments, skill development initiatives and sponsors training at its various Indian centers. Modular and heavy equipment fabrication yards in Oman, electrical & automation manufacturing facilities in Saudi Arabia and UAE are testimony to the group’s commitment in enhancing In Country Value Addition.
A broad range of capabilities and thrust on enhancing local content are our key differentiators over our competitors.
If you want to grow successfully in this industry, you must always think about the needs of your customer, who will always remain key. We are expected to provide a dependable, responsive and cost-efficient performance. The nature of the oil and gas markets change over time, and you need a contractor who is responsive to developments, with a set of core values consistent with what the customer requires. Ultimately, dependability comes from good execution.