with Brenton Euler, Director, Pipe & Civil
You were responsible for establishing Pipe and Civil along with your partners Jim Campbell and Tom Dermody. What was your vision behind the creation of the company, and how has it developed since that time?
We saw an opportunity in the market around the boom of the water grid. We believed that we had the intelligence and resources to put a team together that could successfully compete against what was being offered at the time. Due to the boom, resources were short and those that were being provided to fill the gap were not always of a high quality. We believed that we could provide a niche service with a compact and high quality pipeline installation crew. This came along with the usual business goals of making money, the reward of seeing things come together, and building good teams. It was due to the market environment at that time which allowed the entrance of new participants. It was this situation that enabled us to gain a foothold in the industry.
From the start we wanted to develop Pipe and Civil as a strong company in its own right, which could trade through the lumpiness of the pipeline industry. To do that we had to reach a certain size, and over the last through years we went through an unbelievable period of growth in order to achieve this, even winning the Lord Mayor’s business award for growth. While we were growing we wanted to maintain excellent service to our clients, deciding at the point that we could no longer meet the needs of our clients, we would stop the growth and consolidate. But because Tom Dermody has years of industry experience, he was able to draw on a lot of resources and contacts, and Pipe and Civil was able to keep putting good quality pipeline teams together.
Pipe and Civil laid its first pipeline in Brisbane and did a very good job. After this we won a key project in Victoria. At this time the global financial crisis was looming and there were only a couple of large projects on offer. We knew that if Pipe and Civil won this contract in Victoria the company would be fine, and our competitors would begin to drop away.
This was a really crucial moment for Pipe and Civil, as the project entailed over a year’s worth of work. Our initial $30 million AUD contract turned into nearly $50 million AUD of work. The project also served to consolidate Pipe and Civil’s reputation as a serious player in the pipeline industry around Australia.
It was whilst we were engaged on this project that the financial crisis hit, and there were no projects on offer at all in Queensland. This period gave us some breathing space, and time to decide the future strategy of the company, which was to stick to what we know and what we are good at: pipelines. Our unique selling point was the quality and motivation of our people, and is something that sets us apart from our larger competitors. Taking this basis, our aim was to diversify the business by attacking new opportunities in the pipeline industry.
This organic growth came straight away. We started building pump stations for our clients, which meant that we could offer more services on the same pipeline. After this we started looking at oil and gas, and at opportunities in mining.
It is very hard to get into oil and gas because its something of a closed shop – there weren’t a lot of opportunities for Pipe & Civil to enter the market. It’s a big step to go into laying high pressure steel pipeline, so we started looking around for opportunities and saw that some of the biggest lay in the gas gathering systems that companies would need to install. It was the same situation as the water grid: there would be so much demand for participants that it would be possible for new companies to enter the competition.
We made this decision long before other companies. Even the big pipeline companies had their eyes on the big trunk lines, not these gas gathering contracts. Pipe and Civil spent a considerable amount of time looking for an innovative way to enter the market. We searched around the world for something new to bring to Australia, and that’s how we came across Spiderplough.
Where were you looking for inspiration, previous coal seam gas projects around the world?
No, we were looking at polyethylene pipe installation. We knew that companies wanted to put high-density polyethylene (HDPE) pipes in the ground at these projects, and so we looked at different methods around the world for installing these pipes. That brought us to Spiderplough. Pipe and Civil is at least twelve months ahead of every other company competing for these contracts in Queensland today. We kept our new technology under very close wraps, and secured an agreement with the manufacturer a year prior to the Australian market even knowing about Spiderplough. The technology has been around for 30-40 years: its not new technology, just new down here.
By bringing this new technology to Australia, Pipe and Civil placed itself in a key position with the gas industry. It is now that the wheels start turning and the long and arduous process begins of getting to where you need to get be in order to provide a service, because the work itself is easy.
Pipe and Civil has grown enormously over the last few years, but today, where are the company’s specialties? Where do you want to compete today?
The really interesting dynamic about Pipe and Civil has come because when you go through unprecedented growth, your clients soon become your competitors. When we started, companies like McConnell Dowell and John Holland were our clients, and were our clients a year ago. But today Pipe and Civil is a much larger company and is considering a partnership with a leading civil engineering and construction group, which means that we are now coming in over the top of our former clients.
At Pipe and Civil we have spent a lot of capital in anticipation of becoming a bigger, better and stronger company. Traditionally a subcontractor would have a small office staff and no accreditation systems. Pipe and Civil is triple certified, has excellent safety management procedures and safety teams, and everything else that principle contractors have including cost containment policies and excellent IT systems. We know that ‘Tier One’ status is a long way down the road, but to the goal is to compete at that level on projects through partnerships and joint ventures. Today we have reached the stage where ‘tier one’ contractors are actively approaching Pipe and Civil to work with us, which is exactly where we want to be.
Gas is one of the cleanest burning of all fossil fuels, which is why so many countries today are encouraging its use as an energy source. However, Queensland has gone one step further, and is attempting to make this CSG development one of the cleanest, greenest and safest that the world has ever seen. Your new technology addresses all of these requirements: was that intentional?
When we looked for the solution for the industry we soon realised that not everything is about money. The best solution is the one the client wants. That’s why we felt Spiderplough would be a success here, firstly because gas companies have an ever-increasing demand for safety. Spiderplough wins hands down in this regard: it gets rid of the trench, and it stops the nuisance factor of snakes and cattle getting into the trench, which is a huge benefit for landowners, many of whom are farmers.
For the environment the technology also has potential, as it allows the operator to plough straight through the grass and leave no footprint at all. However in reality, these projects will all require roads to be laid in parallel to the pipelines for logistics, so inevitably there will always be some clearing. But because there is no trench and stock pile, Spiderplough is able to drastically reduce the width of the easement. Not only is that an economic benefit, it also has a large impact on the farmers. If we go through 6m instead of 30m, farmers will be much easier to deal with.
These benefits mean that Spiderplough is definitely the most cost-effective alternative: we believe that its use will mean at least a 20% saving on conventional methods, and maybe even more than that. It is a shining star for us.
Couldn’t your competitors adopt this technology as well?
Pipe & Civil has secured exclusivity on the technology in Australia. There are three FSP 220s in the world. One is in northern Europe, one is in north America and the third one belongs to Pipe and Civil. The next six will also be delivered to the company. We have three machines landing in Australia this year. According to the manufacturer’s specifications, this is the only plough that is capable of pulling a 315 line in all conditions.
Even though we have only an exclusive agreement for new machines, Our competitors will not be able to secure any of machines second hand because they are all in use. We have the market covered with six machines on order and an exclusivity agreement that ranges out until mid-2012, with the opportunity to extend it. We took a gamble on this technology, and it’s starting to pay off.
Pipe & Civil recently started its first gas-gathering project with QGC. How was it get this first tender?
It is a wonderful feeling. It was inevitable that we were going to be there. If you trust the market, and trust the fact that there are over 20,000km of pipeline to be built over the next 10-15 years, and trust the technology to be cheaper and more effective, then at some point it was inevitable that we would become involved in the gas industry. We knew that we would be there, it would just be a question of when.
I understand that each of the big four gas companies in Queensland have their own different ways of operating: some prefer to leave everything to an EPCM company and let them subcontract out the work, whereas others prefer to keep a closer eye on what’s happening with each of the companies working under them. Which situation do you think Pipe and Civil will work best under?
There are two answers to that. The first is which would be best for Pipe and Civil, and the other is which would be best for the whole system. I have always believed that the people with the knowledge should be in direct contact with the client. Whatever contractual mechanism you need to come up with that, they should be there. When you put someone in the middle like a managing contractor that doesn’t understand the technology, things can get lost in translation and efficiency is then lost.
We would rather sit at the main discussion table, and that is why we have looked at bringing about a partnership with Murphy Group. We believe that Pipe and Civil will be better off, and we also believe that the solution will be better for the client, and that’s good business.
Tell us a little more about this partnership that you have initiated with Murphy Group. Why did you choose Murphy, why do you think the collaboration between the two companies will be successful? What are your timeframes and expectations for the partnership to come together?
Murphy Group is a perfect partner for Pipe and Civil. They are privately owned, as are we. With that goes a different feel to a company, and an appreciation of cost: you don’t end up with a lot of principal-agent problems. Pipe and Civil’s biggest weakness is that it is a new company with some debts as a result of the speed of our growth. However, we have a strategic advantage in the market at the moment – that may evaporate over time, but we have a way in and we are communicating with people at the right level, because of the plough.
The key to our success is quality people and quality resources. At the moment we have between 150 and 200 employees, but soon we may grow and this number may need to double. At this point, we need to focus on bringing in quality staff. By bringing Murphy Group into the equation, Pipe and Civil instantly has access to people at the supervisor level and above with more than thirty years’ experience in the industry. To draw on those resources whilst Murphy’s business in Europe is slow is a perfect complement.
At the moment the two companies are exploring with the intention of forming a partnership, I would imagine that if we were to form this partnership it would be in the next four months. This is really big news for the industry. We’re snapping at the heels of our competitors.
On top of this, the gas industry is Queensland is about to explode. We’ve been in this ‘going to happen’ phase for a year and a half, and a lot of companies have suffered as a result of ramping up too early. Timing is the key.
Pipe and Civil has achieved a lot in a small amount of time. From your perspective and input into the business, what do you want to achieve with the company over the next few years?
I want to build a business over the next three years that is going to be here for the next thirty. This is a period of wealth creation for the industry for everyone. The trick is not to come out at the other end of it and not have a solid substantial company with a good balance sheet. Inevitably all booms end, and smart business is to come out with a company that is rock solid.
Our core competency at Pipe and Civil is our flexibility and our innovation. Just as we have become involved in this new gas market, we will be flexible and innovative enough to get into the next new market, whether it is overseas, or whether it will come through organic growth, or a little bit of diversification, that is where the company be going. The moment you are not looking for new opportunities is the moment that the company is not looking forward.
What do you think you bring to the dynamic of the management team at Pipe and Civil?
Hopefully I’ve just been part of a really successful team. I’m not one to try and take any credit – together we all bring the different aspects necessary. I came with more business skills than the rest of the guys. Tom came with an amazing amount of operational intelligence and Jim came with a lot of technical experience. I like to think that as a team, we have the right combination of elements to make Pipe and Civil a success. We all think similarly in the way that we are willing to take risks. But I believe the core of our success is that we value our employees right down to the last, and we value their opinions. A culture of innovation isn’t a few people in the office coming up with smart ideas, it’s a holistic approach.
It’s a very difficult culture to maintain though, especially with such high growth rates.
I believe that when it comes from the directors, it flows through the company. Being a small and flexible company, It’s a challenge, but we are fighting hard to maintain it. We want to find the best way of doing our job and stick with it.