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Interview

with Dave Hutchinson, President Asia Pacific, Aker Solutions Malaysia

01.03.2010 / Energyboardroom

The Crown Prince and Crown Princess of Norway just ended their visit in Malaysia to strengthen the ties between the two countries. What were your expectations for this event, and how do you think Norway can help Malaysia develop its oil and gas sector?

The original intentions were to synergise the links between both countries. Both Norway and Malaysia are very strong in fishing and agriculture, and they require a lot of tunneling, but obviously the main discussion was about Oil & Gas. Norway is far ahead of South East Asia in general in terms of technology and experience in deep water, led by company such as Aker in the search for improved ways of getting hydrocarbons out of the ground. Today our technologies, abilities and capabilities are perfectly suited for this environment.

Where can each country learn from each other?

We can cooperate a lot in deepwater. We drill, explore and produce from 1300 meter depth in general, up to 2000 in certain specific cases. There are few areas in the world doing this, Mexico being one, but Norway has a strong experience in deepwater, and was the one driving the technology. The biggest link between the two countries is technology. This region needs the technology developed in Norway.
There are sixty one Norwegian companies working in Malaysia, including one baker, and PETRONAS is extremely keen on working with them.

To what extend can we consider Aker Solutions is an ambassador of Norway in Malaysia?

Norwegian companies in general bring certain qualities to the table. Quality is one, our technical expertise, and the way we run projects since we are firm and systematic in the way we deliver projects. Asia Pacific in general and not only Malaysia can learn from the way we deliver the projects.

Why did you chose Port Klang, and to a bigger extend Malaysia, to set up a facility that is unique in the world in terms of subsea production system?

The first driver was PETRONAS’ vision for Malaysia to become the deepwater hub of Asia, which impressed us and in which we truly believe. The second reason was the strategic location, as Malaysia feels very Asian and is central for the region. Aker Solutions also felt it could embrace the culture of the country and the education of its people; this has been further demonstrated by the signing of an agreement between Bergen and Stavanger universities and Kuala Lumpur University earlier last week. Last but not least Port Klang itself is the seventh deep water port in the world, and we needed to take logistics into account since some of the structures that we deliver have an excess of one thousand tones.

You said Port Klang is “a Wallmart for subsea production”. What does it offer for your clients?

Our Port Klang facility is unique in the world. It is a true one-stop shop that offers Aker’s clients the understanding and knowledge that all their products are getting done under one roof. This is a significant advantage logistically, it saves them costs in terms of supply chain, the testing is also done in the same facility, and transit time is cut down as everything is being done under one roof.

You have had massive achievements in Malaysia, signing frame agreement with Shell or the REAL contract with India. What would your dream project be for the Malaysian facilities?

To have what we call a major subsea project in Asia Pacific to be delivered from these facilities. It would not impact our operations in Malaysia, but bring us to the next level and increase our recognition within the industry.

Since you open your offices in Malaysia in 1998, and Port Klang in 2007-2009, you have had many achievements being involved in Kikeh but also working for Vietnam, Nigeria, Mexico etc. What do international activities represent in Aker’s Malaysia portfolio?

The facility was not built purely for Malaysia or Asia Pacific, but it was built with the world in mind, and when we decided to invest $100 million in Port Klang we envisioned serving the global industry. When fully manned and fully producing the plant has great capacities, and the best is still to come. Clients now start taking the opportunity to manufacture here in Malaysia. We delivered subsea trees and controls in a record time for Eni’s Oyo field development in Nigeria, and the same track records were achieved for the Reliance project with India. There are few companies in the world that can accommodate that size of capacity and deliver it in such a short time.

How come Aker is the only one to have this kind of facilities?

We have a small problem in Norway: we like to constantly challenge ourselves with new products and services, which made Aker grow outside of our original portfolio of products and into all areas of the subsea industry. When some companies tend to restrict their growth to certain markets, Aker seems to have the ability and capability to take on new products and in the end build a complete system. As a result we are the only ones in the world able to build a complete subsea system, including umbilicals.

About 35% of Aker’s global deliveries are expected to come from Port Klang in the coming years. What is your roadmap to achieve this?

First of all we need to reach the capacity needed, which has already been done thanks to our investment in Port Klang. The second thing we need is a market, and when it will be ready to turn – which is we believe happening right now – Aker will be ready to serve it and increase resources in order to run at full capacity. This 35% excludes the Brazil facility that operates in its own market. Nevertheless in the future this particular facility will certainly have what it takes to deliver what the world needs, and we had the vision to create it five years ago!

What do you think makes of Aker today the partner of choice for its clients in subsea?

The wording we use in Aker is to be “the preferred partner”, it doesn’t matter whether it defines Aker Solutions in general or its subsea business area. We want to be at a stage in bidding where the clients would view us as a trusted source to deliver the products on time, at the right quality and with the right services attached to it. We want to position ourselves ahead of our competition when it comes to product quality and delivery.

Malaysia has depleting gas reserves, and is looking towards being a deepwater hub for Asia. Where do you see the most opportunities for Aker to develop?

Today Aker has the right portfolio to develop the deepwater portfolio not only for Malaysia but for the Asia Pacific region. But we never stop and we follow our CEO’s message to go into deeper waters, harsh environments and getting the most out of existing fields. We will not only develop new fields but invest a lot in Brownfields, which is where the future of our company lies.

What is the importance of the Malaysian activities and how will it evolve?

The importance of the Malaysian activities to the group comes from PETRONAS’ vision, Malaysia therefore playing an important role in Aker’s overall strategy. We will support PETRONAS as originally said, which will take to come to flowering. So far Aker have achieved what it promised with hard cash, creating a unique one-stop shop in the world in Malaysia.

In the past year E&P companies have reduced their Capex, but in the past weeks majors such as Exxon or Shell announced profits again in Malaysia. How will this impact Aker’s operations and order book?

During this turbulent period Aker’s backlog has been quite steady from our existing contracts and clients continuing to do investments. Moving forward all we can see will be an upturn, and 2009 is actually the lowest point that you will see in our activity. To give you an example, historically four hundred subsea wells and trees were delivered before 2009 in the market, and in 2009 half of this amount were delivered. This proves that independents had troubles find the financing and major operators, who had the financing to do so, reduced their investments. Now there seems to be a change in attitude with a little more bullishness in the market, and Aker and the region are looking at a bright future.

How do you successfully manage the Norwegian way of operating in a Malaysian business context?

We take our experience in the country, and invest in huge training programs. Recently we sent seventy to eighty Malays and sent them to Norway to learn about our technology and expertise, and then brought them back in their region. Aker believes in local content, and this is not only talks but real actions. For example we have no expatriates in Brazil, in Angola we have less than five percent expatriates, and our Indonesian surface product plant operates with two hundred and eighty people, among which two hundred and seventy nine are Indonesian.

When is Malaysia going to be a complete Malaysian run company?

We have to remember that the plant is still very young as well as the technology is very new to the region. Our final goal is to be fully run by Malaysians, and our goal is to increase local content gradually. Today about ninety percent of our human resources is Malaysian, but we still need a backbone of expatriates with experience and knowledge in the product and system lines. We have to make sure that we delivered what we promised to the clients. This is a never ending challenge to try to have our Malaysian people comfortable with deep water environment and products.

In a few years time, will we be able to say that Aker Malaysia is a Malaysian company with Norwegian roots or a Norwegian company with facilities in Malaysia?

I think that Aker will never forget where its backbone lies, which is Norway, but you have to integrate the Norway way in the culture where you operate. There is a balance to find in between being a Norwegian company or a Malaysian one.

How is Aker accompanying the move of Malaysia toward becoming a deepwater hub and transforming the nation into a knowledge based economy?

The key to this particular products and services to the energy sector is experience. You cannot train on deepwater and subsea systems on a classroom board or with videos etc. Only by working with the products, understanding the site integration and testing that you get a vision of what happens on the sea bed. Unfortunately because of the nature of the products and the systems as well, you do not get to see the after product, the finished field, other than illustrations. A company needs people comfortable with the tool they work with every day, and this comes with the time.

Today sixty percent of the subsea wells are in shallow waters, and it will be ninety percent in the coming twenty years. What Aker’s technology is the best adapted to support this move towards deepwater in Malaysia?

Technology wise all our main competitors have certain products that can be used in deepwater fields, but Aker is the only one that can combine everything under one roof and do the complete field development, like we did with Reliance’s KG-D6 for example. As of today we are probably the only company in the world that can undertake such a project and deliver it as we did. As for the future, we will continue in the same line. Aker is constantly challenged to make the projects run smoother, products more reliable and competitive on a market that needs to develop more marginal fields. The shallow water fields will continue to go on as planned but the “low hanging fruits” will become rarer, which is why Aker is going towards deeper water segment. Product wise, we can handle such a sector but the installation is sometimes a bigger challenge for us.

What is your personal management style?

For the region I need to have the correct management beneath me and put more responsibility down the line, to the locals. In ten to fifteen years I would like to see Aker be deeply anchored in Malaysia and run by a local and not myself or another expatriate. We need to have succession planning in place and over time create a true Malaysian back bone through the company.

When we met with Simen Lieungh in Norway, he mentioned that the challenge for Aker Solutions was not to establish itself outside Norway, but more to compete with international companies in its home market. What is your main challenge in Malaysia?

Our challenge in Malaysia is to get the facility to the recognition it should have in the world. We do not want to be only the biggest investment but the number one delivering and executing facility in the world. To achieve this we need additional market upturn and support. To be true, the more products we deliver from this plant in Port Klang, the better we get at it. Today my challenge is to increase the backlog of the company and get the efficiency of the company to its maximum.
To do so you need the support of PETRONAS, but also to establish strong relations with smaller independent players who develop smaller fields. What is your strategy to approach them and how is Aker going to organize its client portfolio in Malaysia?
Our goal has not changed since we entered the market and it will remain the same in the future; we want to be here for PETRONAS and our other clients to support their deepwater developments. For outside of Malaysia and in Asia Pacific we have similar targets: we aim for the fields that suit our products, technology, people and capacity. The plant in Port Klang is also there to support other Aker companies throughout the globe with deliverables when they have had successes.

Looking at 2010, what will it be like for Asia Pacific and Malaysia?

2010 will be the year of growth. It will be a growth year in terms of resources for the future and tendering. We see a lot of budgets being released, projects moving forwards, and subsea tenders going over longer periods of time. This year we are looking at strengthening our resources even further, delivering accordingly to our promises, with the right quality and on schedule, and prepare for the future.

Why is Aker a good company to work for?

Our core values are taken seriously. We are probably a front runner in terms of HSE: we have been ten years Lost Time Accident free in Thailand, and our plant in Port Klang, since the day it was born, has not had any LTA. Our core values and the vision around them, as well as the people following these values make Aker the company it is today.

Norway has very high HSE standards and Malaysia has inherited of a “cheap” reputation from the textile industry. How do you reconcile both?

Again it is a question of finding the right balance with the available technology. We had to understand the culture of the country before moving in, as well as the people working here. Bringing new technology to such area as Asia Pacific does not mean getting “cheap and cheerful” for deep water and subsea development, but we get an actual cost. It is mostly about understanding the culture of the country and how our product portfolio fits within this frame.

If we look at the coming 3-5 years, where do you want to bring Aker Malaysia?

I would like to see us grow by two in three years, and by three in five years. I would like our manufacturing facility in Port Klang to be recognized not only for being the highest investment in the world for subsea production systems, but also with the highest quality and the most reliable to deliver on time. I want to see our portfolio of project delivered increase tremendously, not only within the region but also outside the region.

What would you like to tell the Malaysian oil & gas industry regarding Aker’s ambitions in Malaysia?

We are here to stay. We have invested in the region and will continue investing in Malaysia and in the region. We will without doubts achieve our main goal to make of our facility not only the biggest investment but also the biggest executor of subsea production systems in the world.

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