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Interview

with Haakon Sannum, CEO, Multiconsult

08.06.2009 / Energyboardroom

Multiconsult is a large consultancy group in Norway that is also present abroad with the joint venture Norplan. Could you introduce Multiconsult to our readers, in Norway and abroad, as well as give us some historical aspects of the company?

Multiconsult is a consulting and engineering company, with major interests in civil engineering. The company operates in six business areas: Building and property, Industry, Oil and Gas, Transportation and Infrastructure, Energy and Environment and Natural Resources.

For building & property, our group is involved in projects such as schools, hospitals, shopping centers and offices, and has for example been heavily involved in the development of the new area around the new opera house downtown Oslo.

Multiconsult decided to separate the “industry” area from the “oil and gas” one – even though both relate to industrial activities – since there are different types of clients and needs in each area. Within the industry area, Multiconsult has been involved in the development of the aluminum and solar industries in Norway. For example, our company performed all the civil engineering work for the new Elkem solar factory development in Kristiansand, where they produce solar panels.

The Oil & Gas segment accounts for approximately 20% of Multiconsult’s turnover, and is divided into 3 areas. The first includes all onshore terminals, where Multiconsult did all the civil engineering work, but no process engineering, with the examples of Ormen Lange, Snøhvit, the Kollsnes terminal that takes gas from the Troll area, among others. For Snøhvit, Multiconsult had a subcontract with Linde in Germany, and for Ormen Lange was a direct contractor for Hydro and Aker Solutions. The second area is the design of concrete platforms, where we have long track record of cooperation with the Aker group. We have built a joint venture with the other Norwegian players to provide concrete engineering services to Aker Solutions. At present this joint venture is involved in detail engineering of a concrete platform in Russia. The last area is linked with Multiconsult’s work in the foundation of subsea installations for Aker and Vetco Gray on a worldwide basis.

Multiconsult’s energy business area is divided into 2 parts: Energy production and energy consumption. The first area is basically hydro-electric powerplants, since Norway has longstanding activities within this domain. The second deals with maximizing energy usage within buildings. Altogether, the energy business area accounts for 10 to 15% of Multiconsult’s business.

The transportation area is represented by roads and railways and also accounts for some 10 to 15% of our activities.

The last segment is environment and natural resources that calculates our impact on nature. As an example, for international projects of power plants, a typical task in this division will be to carry out social impact analyses.

There is an historical reason to why Multiconsult is known as Norplan on the international scene. At the start, many small Norwegian companies wanted to offer consultancy and engineering services, especially in the field of hydro-electric powerplants, to the international market and in particular under-developed countries. They numbered about 15-20, put their resources together to work under the umbrella of Norplan, and Multiconsult was a part of them. As a result, and after 38 years of activity, Norplan is a brand name recognized by the World Bank and e.g. The Asian Bank, who don’t know of Multiconsult individually. However, as the Norwegian consultancy and engineering companies have grown and become bigger, the small companies that were part of Norplan have withdrawn their resources from the common pool. Today only two of the biggest engineering consultancy companies in Norway, namely Multiconsult and Asplan Viak, have remained under the umbrella of Norplan.

When it comes to Oil & Gas, the company’s clients (Aker Solutions, StatoilHydro or whomever we have worked with in Norway) know the name Multiconsult and not the one of Norplan, hence the company is marketing its services under Multiconsult internationally in the Oil & Gas industry, whereas in other areas it is known under the name of Norplan.

Over the past year, we have seen tremendous changes in the price of the barrel of oil, which has now risen to around $70. How has this volatility affected Multiconsult’s business?

The price of oil hasn’t highly affected the activities of Multiconsult and the company has had constant engagements within oil & gas for the period 2002 to 2008. In 2002-03 Multiconsult was awarded several important contracts such as Snøhvit and the LNG plant in Hammerfest. Then the company had the same assignment in the Ormen Lange project, which involved a high level of activity for us, especially since we worked at the same time on the two platforms on Sakhalin 2 for the Shell-Mitsubishi – Mitsui joint venture as a subcontractor Aker Solutions. Right after these projects, Multiconsult was involved until 2007-08 in the construction of the LNG receiving plant for ExxonMobil outside Venice – receiving LNG from Qatar, degasifying it and then sending it to the Italian grid. Multiconsult has been heavily involved in the Shtokman field since the company had a close relationship both with Statoil and Hydro before they merged. The frame agreement that Multiconsult had with StatoilHydro before the company started to work on Stokhman enabled Multiconsult to work there from moment zero, similarly to our arrangement with Aker Solutions. At the same time, we’ve had constant smaller and medium sized jobs in Norway.

When planning the Goliath platform, $60 we understand was the oil price needed to start realisation of this development. Multiconsult have recently been awarded a contract for designing part of the onshore facilities for electrification of the platform by Eni. According to Wood McKinsey reports, a price higher than $70 would bring more projects, but it’s only speculation. Nevertheless, if oil companies are paid less per barrel, it obviously generates less cash than if the price is $150 as it was two years ago. Cash is of course very important for launching a project and the associated investments. But a development is also heavily dependent on the oil price when the project comes on stream. This means that we need to know what the oil price is likely to be in four – five years ahead of commencement of the project development. When the price of a barrel of oil went up to $150 per barrel, the so-called mosquitoes popped up and based their business model on high oil price, borrowing to finance their activities such as drilling. Our main clients, the big companies such as ExxonMobil, Shell, StatoilHydro, etc., are not affected in the same way.

We have during the last year been approached by our clients to cut costs in the same way as other players in the oil and gas market. It is understandable that our will use the uncertain times to cut costs. During the last years many of the players have priced their services according to the marked demand which also is understandable. The engineering companies, however, have not priced in the same way. Statistics show that the raised prices for the engineering companies basically compensate for the increased costs. The requirement for cutting cost poses therefore a challenge to us and also a dilemma since most of the consultancy companies in Norway similar to Multiconsult are very busy.

If the oil prices stabilize on $70 per barrel or more, and the cost have stabilized at a reasonable level we believe there should be no reason for the oil companies not to start investing again. The only problem will be that at present, there aren’t that many prospects available in Norway.

You mentioned StatoilHydro, and several projects in which you have been involved such as Ormen Lange, Snøhvit, as well as Shtokman. How fundamental is your relationship with StatoilHydro, and how much of a risk is it for Multiconsult to be dependent on them in Norway?

Multiconsult is a small company on the international scene, but relatively big – with its 1100 employees in the domestic market. Multiconsult has been deliberate in not establishing cost centers for international business, but would welcome international and national projects to account for a higher level of the overall revenue. Therefore, Multiconsult has been very careful to approach the international market and only enter areas where profit was possible. For Oil & Gas, Multiconsult has piggy-backed on Norwegian companies, and in doing so wants to further develop our international activities, along with cooperation from bodies like INTSOK, whose strategy is to lift up the collective Norwegian industry. Norwegians like individualism, but when talking about oil & gas we can no longer be individualistic.

Multiconsult has a frame agreement with Aker Solutions, and have renewed the existing one with StatoilHydro. StatoilHydro has worked with Multiconsult for a long time and brought the company with them e.g. in Shtokman, and one can say that in some areas where they works, StatoilHydro’s capabilities are matched to Multiconsult’s; they rely on us, which we appreciate. That is why it is important to have good relations with companies like StatoilHydro and Aker Solutions, and why we try avoiding entering a market on our own – especially for the first time.

In Aberdeen I recall interviewing Atkins, where we spoke about the importance of their identity as a technical consultant, and how in essence they hire out their brains. What is Multiconsult’s identity and why are you the partner of choice for the StatoilHydros and Aker Solutions as they move internationally?

Multiconsult does two things: as a consultant the company rents brains, but it is also a civil engineering contractor company that wants to do more engineering. The group has a close cooperation in Norway with Barlindhaug Consult that is specialized on Arctic technology, and both companies worked closely on Snøhvit and Ormen Lange. But the main reason for a company like StatoilHydro to choose Multiconsult (and Balindhaug Consult) is that we previously worked with both Statoil and Hydro, and the newly merged company knows what Multiconsult stands for, and what it’ll get from cooperating with us.

What case study could you highlight to demonstrate Multiconsult’s competences to work in these extreme environments and harsh climates?

Indeed climate is a great challenge, especially in Russia where we may have ice and harsh environments. Barlindhaug provides Multiconsult with the keys to understand specificities when it comes to having operations in cold climate and arctic areas*. A counter case study would be of when, on Snøhvit, structures were designed without taking into account that it would be full of ice – not because of the cold, but because the polar lows coming with lot of humidity. Indeed even though that was not on the North Pole, it was up on the Arctic; and Multiconsult and Barlindhaug Consult know how to deal with these challenges even in other environments.

Multiconsult has also worked very closely with Aker Solutions, among others, and understands how these constraints should be integrated into one plant, and how important it is for its job. Multiconsult has developed its own efficient and integrated working methods which are also matching with Aker Solutions project execution models.

You mention Aker Solutions, where we spoke of the difficulties in bringing outsiders into harsh environments, and the difficulty in ensuring local people abide by Norwegian HSE standards. What are the challenges from an engineering point of view when working in such harsh environments?

Basically preparing a field and moving a lot of stones and soil, making sure it doesn’t slide out, etc., is not different from normal buildings. Where Multiconsult brings a difference is in understanding specificities and adapting them within requirements for a special plant. Talking about HSE, Multiconsult contributes by building the plant in a way to help it work properly and avoid risks during construction and operation. For example, with Oil & Gas plants, we should make sure that buildings are designed taking explosion loads into account.

Looking towards the future, you mentioned going on the back of larger entities internationally, but also a big focus on Norway. What is your ambition for Multiconsult in a 3-5 year time horizon?

Multiconsult will continue to go international with its unique capability that may be of interest for the international community. The company has some specificity in Oil & Gas thanks to its working methods and competences in Arctic conditions, which we believe Multiconsult understands better than its competitors. Multiconsult’s focus will be on water power and energy generation, in the few countries where the Norwegian Oil & Gas and Energy industry is already present. Multiconsult has been in Iran in the past, but the political conditions are now not favorable to endorse any agreement in the country. StatoilHydro has been there as well, and Iran used to be a focus for the Norwegian Oil & Gas industry. Multiconsult still maintains good relations with one Iranian engineering company, and when the climate improves, you can expect to see our company return. Russia & Kazakhstan are also of interest, partly because the technical challenges there are not so different from the ones in Norway. StatoilHydro isn’t present in all these areas as such, but Aker Solutions is. Multiconsult foresees 20 – 25% of its turnover to remain in Oil & Gas projects, and in the long term there may be a 50-50 division between domestic and international engagements.

As a final message to Oil & Gas Financial Journal readers and the international community, what would you like them to know about Multiconsult and why should they choose you as their partner of choice as you move into their territories?

Multiconsult has strengths in water power, energy and Oil & Gas, in addition to broad capabilities to support whatever may come up in the wake of such projects. For example, on any Oil & Gas project, this may include satellite tasks on roads, pipes in the ground, etc. Multiconsult does not have unique capabilities on roads, bridges and so on compared to our international competitors, but can do it as a part of a plant that Multiconsult supplies – we won’t use it as a parachute on the international market. Multiconsult has special skills in underground, storage of Oil & Gas in hard soils and rocks, and tunneling – we can give clients the whole package and know what is important, from Oil & Gas plants to completing hydro power plant development.

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