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Interview

with Benno Lueke, Managing Director, Uhde India

11.05.2011 / Energyboardroom

Uhde has a lot of experience in India. The company has been present in the country for over four decades and successfully completed over 500 global contracts. You became Managing Director in 2009. What did you see as your mission when you took over here?

The company grew first as a combined service provider for Uhde itself, but mainly for Indian projects and subsequently for international projects. It turned out quite quickly that Uhde could only avail of 30% of our engineering man hours for such services. What is interesting to understand is that, Uhde India is doing business upto almost 70% on an average on their own, without involvement of the parent company.

Therefore, Uhde India developed its own business which commenced directly from inception and grew first with the inherited processes of the parent company. Within the first decade itself, Uhde India diversified into engineering services for Petrochemicals business followed by Oil Refining business in the Indian market, which was not the main forte of the mother company, at that time. When ThyssenKrupp acquired Uhde, the operations of the Indian office became part of the ‘core’ business, which gave the company a further boost to grow.

Earlier, in terms of utilisation of man power of Uhde India, almost 70% was dedicated for projects with EPCM Services Contracts. The ambition of Uhde India has been to increase the portion of their portfolio for EPC-Lumpsum Turnkey (LSTK) project. Therefore, Uhde India focussed and strengthened the Procurement & Construction aspects of EPC business, as they already had a reputation of performing first class international quality engineering work. Their earlier expertise of Project Management, Procurement Services & Construction Supervision Work was very much useful for the transition to EPC Contracting business.

The slogan we developed to upgrade ourselves in this direction was “move up the value chain”.

Uhde India accounts for 20% of Uhde’s global workforce. How did this come about? What were the factors that led to the Indian subsidiary of Uhde becoming so large and independent?

There are several factors for this ! One of the factors is that over the years Uhde has transferred to Uhde India some of their technologies, for instance Caustic Soda / Chlorine. Since Uhde was willing to transfer technology, the Government of India even allowed them 74% of the equity shares in 1977, when the protection policies were very much in place, in India.

Due to the high standards of engineering already in place, Uhde India really excelled in the fields of Petrochemicals & Refining, especially after the liberalisation of the economy in India, when public sector companies started availing the Indian Engineering Services from the private sector companies. Such plants were built by Uhde India based on technologies of internationally well known Licensors like UOP of USA, CB&I of Netherlands, BASF, BAYER of Germany, etc. To illustrate the point, a major project was handled by Uhde India in the field of Petrochemicals for the manufacture of Linear Alkyl Benzene (LAB), based on Process technology from UOP, in 1987. On today’s basis, such a plant will warrant an investment of around US$ 300 Mio. After several such variety of Petrochemical Complexes, Uhde India also excelled in the Refining Sectors, when this field was opened up for private investments e.g. the Visbreaker Plant for Mangalore Refineries. Since then, Uhde India has performed engineering services for almost all the existing and new Refineries in India, covering complex Process Units. This is the competency that Uhde India has developed on its own and it has been instrumental in driving the business here.

How does the order book look today in terms of projects with the oil and gas industry ?

Uhde India is very strong in the engineering for midstream units and downstream units of Oil & Gas. Two years ago, almost 60% of our man- power was engaged in refining projects, especially for M/s. Indian Oil for their Upgradation projects, to match the standards of their products conforming to Euro-3 & Euro-4 norms. We are still engaged in projects for IOC-Paradeep Refinery, which is a grass-root plant and is also closely associated with the Nagarjuna Oil Refinery project.

How much of a priority will oil and gas remain ?

Today, Uhde is in the process of restructuring its business, adding to the technology oriented organisation, additional non-technology- contracting portfolio in a matrix structure and also the company wants to enhance the business volume for “oil and gas”, which includes upstreams. This means that Uhde wants to focus all its forces in business of the total Uhde group, for projects worldwide. Presently Uhde’s “Oil and Gas” business is predominantly concentrated in Germany / Europe, Australia and India. Combining forces, we hope that we will be qualified for more projects in India, and enhance our “oil and gas” business significantly. I believe that we can start from this base, and by showing qualified and successful projects on our reference list, we will be able to go international.

In the “oil and gas” sector, you mentioned that you are now trying to move more to EPC-LSTK projects. In general, what do Uhde’s partnerships look like here in India? What are clients looking for?

Classically speaking the engineering business in this country was services dominant following the route of only EPCM contracts for almost three decades. EPC-LSTK in the public chemicals sector was introduced over ten years back. We have now a mix of both the types of services, EPCM and EPC-LSTK. Indian Oil for example offers tenders for both: one kind of project they do purely on LSTK basis, and next time (at Paradip for example) they offer service contracts.

These things keep on changing, but at Uhde India we can handle both types of projects. However, as stated, the company’s focus is to move more to LSTK projects. We have a chance of doing that in India mainly in the public sector. The private sector by and large is not prepared to go yet for EPC-LSTK route. The typical strategies in the private sector are to purchase equipment and construction work themselves by better negotiations and contribute as much as possible for the project’s development. So this concept for LSTK is taking some time; but looking at the massive investments and the paucity of available manpower, I believe the tide will turn in favour of EPC-LSTK projects. This is going to make India a very attractive field for companies like Uhde.

India is looking to increase its refining capacity through both greenfield and brownfield developments. How will this impact the workload at Uhde India?

There are almost ten refinery projects currently being planned in this country. Some of them are expansion projects, and some of them are greenfield. There is a plan to increase capacity of crude oil throughput to 230 million tons per annum. But knowing the paucity of the investment funds as well as the skilled manpower, I think only 50% of these projects will materialise in the next 3-5 years. This itself will serve as a very big scope of work for all companies involved in the sector. We foresee that the refining sector is going to grow at a rapid pace, as well as the connected petrochemicals and fertilizer sectors. There are going to be a number of opportunities and we want to focus on them !

Because we also offer niche engineering services, there are requests to work with EPC construction companies, who have a tendency to opt for engineering companies as a subcontractors. But normally Uhde India has stayed away from this kind of work. It is not that we are averse to it, but the standards we apply and the system of engineering we have is different to the EPC construction companies. Their focus is construction, but we value engineering as important as the construction. In the past we have of course completed such jobs with EPC construction companies, so it is possible, but we have not found the need so far.

How efficient are Indian construction projects in terms of reaching deadlines on schedule?

It was very clear to us today that in India the final bottleneck occurs on site with construction. Despite having a population of 1.2 billion people, India simply does not have available continuously enough skilled and unskilled construction workers to fulfil the infrastructure requirements of India’s rapid development. Therefore, first of all, there are tendencies for EPCM type contracts to get delayed. EPC-LSTK projects definitely happen faster, because we can take decisions during project implementation ourselves, as EPC Contractors.

For example, the tendency in India has been to utilise concrete to the maximum extent possible for the plant buildings, as it is cheaper and perceived to be stronger, especially at project sites near the sea. It takes of course longer time and requires a large amount of man power, compared to buildings with steel structures. In the past, we have changed material from concrete to steel, when we have seen that there are ‘bottlenecks’ for early completion. As an EPC-LSTK Contractor, this decision can be taken very quickly, after consulting with the client, by providing at a slightly higher cost, but with faster schedules. For EPCM mode of contracting, such a decision may take longer and therefore may not be attractive.

Dr Lueke, you became Managing Director of Uhde India one and a half years ago, having been with Uhde since 1981. The previous Managing Director of Uhde India is now Chairman of the global business. What do you think it is that makes India a training ground for global management?

International companies ensure that the right types of people are deputed to India, not only for learning but also for managing and improving the business taking into consideration especially the cultural differences. It is not correct to impose ideas of the Western world and put them directly into practice in India. To get the best out of the people here, who are very intelligent and enterprising, appropriate managerial skills need to be applied and can be sometimes very challenging. For me, it has been a very interesting experience. The earlier Managing Director of Uhde India, Dr. Michael Thiemann has now been elevated to Chairman of the Uhde group. He had an opportunity to stay here for more that 15 years. He contributed a lot in the shaping up Uhde India, in the last decade.

Is it easy to reconcile the German business style with the Indian?

It is possible ! Completing tasks on time is possible in Uhde India. Of course, the company here has been exposed to the German way of doing business for a long time, and the culture of engineers is also something that helps to keep things moving efficiently.

Here at Uhde India, we easily comprehend and utilise our ‘workflow’ ideas. We have started to do a lot of innovation in our workflows, for instance by introducing ‘control centre meetings’ in order to create a culture where people are encouraged to speak out their problems in the workflow. We want to create a culture where people feel comfortable to admit that they are running behind schedule, and work together to understand why this is the case ! If these issues are not addressed in the early stage, it becomes difficult to recover the delays in project implementation. So for the last few years we have implemented these ‘control room meetings’ and now our culture in this regard is very strong.

Does Uhde take advantage of the engineering potential of India on a global level?

Definitely. People from Uhde India are present in the group all over the world. We have also started to exchange higher-ranking people. For example, one of our Indian colleagues has been deputed to Germany into my former Chlorine business; the CFO of Uhde South Africa is from Uhde India’s commercial department, and the manager of engineering over there is also from our office. Today it is much easier to bring people to Germany than it used to be ! Ten years ago, we could not get any licenses to bring people to Germany, but today Germany is short of highly qualified people, so working visas can be easily obtained ! Today we have a number of former Uhde India employees working in our Dortmund office. We want to enhance this kind of exchange now through geoportation programmes, especially as the company is now reorganising to a more “matrix oriented view”.

Performance of our people is also appreciated at various international sites. They have been to European Sites, Egypt, Saudi Arabia and have earned very good reputations. In this way, good international relations are built.

Uhde is not immediately known for its strengths in the oil and gas sector, but the Indian business has built up some very strong competencies. What would you like our readers to know about Uhde India as a final message?

As you know, the “oil and gas” industry is divided into upstream, midstream and downstream, and Uhde India is currently focusing very heavily on “midstream”. We are not really present in the “upstream” so much, but we will be slowly embarking upon this development as a group. At Uhde India we will continue to focus on the midstream, in the future. We have built impressive skills in the midstream (and downstream) sectors and we now want to enhance our skills in new directions i.e. “upstream”.

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