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Interview

with Carlos Lozano, General Manager, Wood Group Peru

24.03.2011 / Energyboardroom

When Focus Reports interviewed Ian Wood two years ago, he highlighted that one of Wood Group’s major strengths was its decentralized structure where foreign offices depended very little from their headquarters. How much is this applicable to the Peruvian case?

The ‘act local, think global’ approach is still very much Wood Group’s strategy and Peru is no exception to that. Even though the Peruvian operations have total support from our international operations, we are very tuned with the local market and its internal dynamics in order to better understand the market and always stay ahead of its needs.
As the local representative of the group, the advice we give to our sister companies is that they cannot arrive in Peru thinking as an American or British company and apply a copy of the strategies they are using in their home markets. The Wood Group has to customize all the knowledge acquired oversees to the local environment.

The Wood Group has participated on Peru LNG – Peru’s major Oil and Gas project ever – since its inception in 2007, first providing personnel to COLP and then striking a major long-term service agreement worth US$150 million for the following 18 years. What’s your strategy to keep on increasing your penetration on the Peruvian market?

One of the strategies we are using now is to make Wood Group Peru a hub, or umbrella, for all our sister companies. We want to have a single face for all our clients. As a group with many companies, this has become one of our main goals. The idea is to make the Wood Group Peru the focal point for all sister companies and gathering them all under one single identity.
Regarding the fact that we already have the contract with Peru LNG, it is important for us to fulfill the expectations not only of Peru LNG but also of Pluspetrol and all other clients. Having said that, it is true that this project in conjunction with the contracts with Pluspetrol and BPZ has had a snowball effect for Wood Group’s local business and it will now be easier to further penetrate the local market.

What’s your strategy to make the Peruvian market identify the Wood Group as having only one identity and not a myriad of companies?

The Wood Group Peru is working closely with its sister companies to get them all committed to present themselves to their local clients as part of a bigger and stronger group that offers a wide array of integrated services.
What the Wood Group Peru is pursuing at this moment is to revise its relationship with existing clients and assess whether some of our sister companies can add value to our current services or can satisfy an unattended need for the client. The idea is that instead of having three or four companies targeting the same clients, we can work together to offer a single company portfolio.
Thanks to that, the Wood Group Peru now offers a complete portfolio to the local market, being able to provide engineering solutions, gas turbine technologies and operation & maintenance not only for the oil & gas sector. Same technologies are able to support the biofuels, petrochemical industries. Our motto is ‘all the knowhow of our group under one umbrella’. This is the main strategy the Wood Group is working with in order to increase its market share and capitalize on the presence of our sister companies.

The appetite for major infrastructure projects in Peru is huge. For instance, the Camisea Gas Pipeline, which was expected to reach its full capacity in 2020, did so in 2008. Looking at Wood Group’s wide service portfolio, what are the most promising areas you are targeting in Peru’s fast growing market?

Operation and maintenance, engineering and EPCs are definitely very promising niche areas in Peru, With world class companies such as Mustang Engineering, JP Kenny and Wood Group Gas Turbine Services to support us in Peru we can open new opportunities in a wide range of areas, from engineering to heavy and light industrial turbines. The Wood Group has unbeatable knowledge and experience on operational maintenance and construction. For instance, part of the expertise we have from Wood Group Colombia is the ability to dismantle a piece of equipment or plant overseas and install it somewhere else in the world, performing the engineering, installation and commissioning after the start-up and, if the client wants, the maintenance.

The Oil and Gas industry is Peru is not as new as some imagine, for instance the Norperuano pipeline has been around for more than 30 years. Mustang has understood that and hit another important deal for the group. What were the main guidelines of this project?

In 2009 Mustang Engineering a Wood Group Company had completed the feasibility study for the upgrading of the Oleoducto Nor Peruano (ONP), which considered various options for exploiting the heavy oil fields in the northern Maranon Basin. The study involved looking at future production from Blocks 67, 39, and 1 A/B, which had considerable issues related to high viscosity and flow assurance. Several methods of moving the heavy oil were analyzed, including installation of heating stations, emulsions, chemical treating, diluents blending, and upgrading technologies in the jungle. In addition, Mustang studied the marketing strategy for the oil, looking at futures and trends for diluted crude, Naphtha supply, and heavy oil market. Mustang performed a technical and economic feasibility study for the project based on certain cost and tariff parameters as well as test well data from Block 67. Mustang provided assistance with the economic model for the pipeline, which would bring in diluents from Bayovar and export diluted crude from Andoas to Bayovar. The results of the study indicated positive results for technical and economic feasibility to install a diluents blending system by looping the ONP and possibly installing an Upgrader close to Station 5 in the long term as production levels increase. A closed loop system proved to be economic for lower production rates; however, it was concluded that installation of an Upgrader along the ONP was the more economic solution for higher production rates. The technical study concluded that the existing ONP and Pump Stations would be adequate to use for the new exploitation scheme. Mustang believes that oil production will eventually rise from the Maranon basin, and wants to be an integral part of the overall solution.

Now that Peru is set to build even bigger gas pipelines than the existing ones, such as the 1000km long South Andean Pipeline, how is the Wood Group positioned to be the partner of choice in the engineering and maintenance of such projects?

The advantage we have over the competition is clear. It is difficult to find a company in the world with all the capabilities the Wood Group has as a one-stop-shop. But that is not enough. The Wood Group tries hard to be tuned with our client’s needs.
For instance, the most difficult issue faced in Peru is that clients might feel they are losing control over their operations when signing a long-term maintenance agreement. At the end of the day, the credibility of the company is what counts, and with Wood Group’s history of participating in Peru’s two major projects, Peru LNG and Camisea Gas Pipeline, we have already gained that credibility.
Even so, the Wood Group is clear about what exactly we are providing and we ask our clients to be very clear about their needs. This open communication is essential when we are talking about 18 years long-term contracts. As in any long-term relationship, trust, confidence and open communication are essential in order to have a successful relationship. So now that we have gained wide recognition as a trustworthy partner, we are expecting many new successful relationships in Peru.

How much added-value can the Wood Group still bring to the Peruvian market and continue its contribution to the development of the local oil and gas industry?

Firstly, I’d like to stress that the Wood Group team is very proud to participate and contribute to the major projects in the Peruvian oil and gas industry and we are confident we have a lot more to do for their development.
As the Peruvian oil and gas industry develops and matures, it has a lot to learn from the Wood Group’s international knowledge and experience. We have tremendous experience in the North Sea, USA, Colombia and the world over, which can add great value to Peru’s fast growing hydrocarbons industry.

Mr. Allister Langlands, your global CEO, has mentioned in an interview to Focus Reports two years ago Wood Group’s successful endeavor of developing its human resources in Latin American countries like Colombia, where you’re from. Now that the company is developing so fast in neighboring Peru, are we about to see the same happening here?

Definitely so. The Wood Group sees the Peruvian market as an important base for its present and future operations and consequently the company is investing heavily in its people. In Peru, as in most places around the world, around 80% of the cost of our activities involves people, so being a people-oriented company is not only a choice, it is a matter of survival.
We currently supporting two of the most important projects in the Oil Gas; such as Camisea and Perú LNG, we have 500 employees for the Camisea Gas project based in Malvinas. At this project, the Wood Group is in charge of maintaining all the key equipment plus the whole plant. We have also 5 employees’ continuously working for the Peru LNG plant, with peaks during overhaul of around 80 people The Wood Group is investing heavily on our workforce because we know that issues such as HSE are primarily dependant on how well trained people are. And even if the company has reached the highest level of expertise, clients will always expect more. Therefore, Wood Group’s main focus and objective is to improve the capabilities and performance of our people in order to increase the safety and satisfaction of our clients. This is how we managed to develop a large pool of experts in Colombia, and I am sure the same is now happening in Peru.

What is your final message to the readers of the Peruvian special report to be published on the Oil and Gas Financial Journal?

Wood Group is a company committed to Peru and we are betting heavily on this market. The company believes in the Peruvian success and it wants to be part of it. In the end of the day, that’s why we are here, to help with the development of Peru’s greatly needed oil and gas infrastructure, bringing new technologies and expertise to this booming but still greatly unexplored market.

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