with Ian Prescott, Chief Executive Officer, Global Process Systems (GPS) – Singapore
How will the industry be impacted by Asia leading the global recovery, especially in terms of demand shifting to the region?
The crisis has had a significant impact on the industry, resulting in volatility in the marketplace and fluctuating oil price levels. 2008 was a record year for GPS as a result of orders taken prior to the financial crisis, and the company was hit fairly hard later on in 2009. Today GPS sees the industry at the tail-end of the downturn. In the last six to nine months, the company’s tendering has been at an all time high. We see that the market is picking up again which now results into new investments. Major events such as the oil spill in the Gulf of Mexico will not directly affect the industry in Singapore, where the industry is rather driven by the larger macro-economical factors of energy demand relating directly to oil and gas demand. This, in turn, impacts the oil price upon which companies make their decisions. Of severe impact will be the legislative requirements and technical standards that will be imposed upon the industry. These will filter through to the supplier market meaning that everybody has to raise the game in terms of safety performance and technical requirements. The resulting investments that have to be made will have a significant impact.
Where do you see a shift in the industry in terms of the need for higher QHSE standards and how do you see Singapore’s role in this?
Ironically, these standards are normally driven by the oil majors in the industry. The issues faced by BP are unfortunate as the company is known to maintain very high safety standards. Singapore also pushes for high standards but, like everywhere else, there is room for improvement. For example shipyards still experience fatalities. In addition to the high quality of its work, GPS has managed an outstanding safety record over the years. This is being achieved by profiling GPS as a local company. [This seems out of context?] The goal is to develop local talent under guidance of expatriates. In terms of HSE performance, GPS is locally driven but only because the company has the confidence in these people and sees that they are at the right level to manage the business.
The company was founded in 2000 and started activities in Singapore in 2006. Why did GPS choose Singapore at that point in time and not a more mature market such as the USA and how was the process to start up here in Asia?
Singapore is a very easy place to do business. The government facilitates the process significantly and the local business practices carry a very high level of integrity. The government manages corruption very strictly and firmly, which makes the set-up of any business very easy. The reason to choose Singapore was related to GPS’ engineering and fabrication capabilities that fit perfectly with the FPSO market here. Singapore has very much targeted this industry to do vessel conversion and integration work. They have some of the best shipyards in the world here to do so. It is a natural progression that there is also a demand for topside module design. GPS’ fabrication facility is only a 40 minute ferry ride away in Batam, Indonesia. GPS can thus do all the design in Singapore and have the fabrication done in Batam with finished products being easily brought back to the shipyards in Singapore for implementation. With standard FPSO topside modules weighing up to 2000 tons, the production facility in Batam allows for a safe and economic way to address the market. Moreover, there are some key clients present here, such as Tanker Pacific and Prosafe.
What is the rationale and uniqueness behind your business model and what will change with the recent reorganization?
The basis of the GPS business model is process engineering and small skid packages. Those skills then transfer into larger modularization of process technology packages up to the 2000 tons-type modules. This resulted in a natural migration into early production facilities. When oil companies strike a well, they need to move fast and look for flexible companies that can deliver quick results. Eventually, clients started to ask for more than just process technology. There was a demand for overall process solutions which led GPS into the MOPU market. While clients took up to two years to develop a project, GPS successfully managed to deliver all MOPUs within a year. The sooner GPS brings the realization of the project to the market, the sooner its clients can commercialize their projects. The dominant factor here is the supplier market and the need for compression facilities. In order to assist its clients with the development of these areas of the business, GPS started looking at commercial aspects such as lease facilities etc. Through its network of contacts in the region and back in the Middle East, GPS can finance and execute such projects and pull on its complimentary skills. As the company has grown, it has acquired many companies all over Asia, in Europe, the Cayman Islands, the UAE etc. The new business model refocuses the company on its core businesses. From a management perspective, the reporting structure is also being rationalized. This radical return to core business and rationalization of the business model will result in the divestment or shutting down of some other businesses. Recently GPS also suffered from a decision of its mother company, the Al Jaber group, to divest the company. The decision to divest was eventually turned around and there has been was a refocus instead on moving the business forward. This has resulted in the significant changes that have been implemented.
How can clients trust a company that is based in the UAE, manufactures in Indonesia and has offices in Singapore, to provide them with MOPUs that are mostly demanded in markets such as Norway or the USA?
The MOPUs GPS has are exclusively for shallow water operation, up to 65 – 70 meters of water. The majority of the demand that GPS sees is in the ASEAN region. This restricts their use in other deepwater regions, for example Brazil. The units GPS uses are pulled out from the Gulf of Mexico, where they operated as drilling rigs, before they are converted predominantly in SE Asia. There is a strong Asian focus within GPS, for example within Asia there is a strong need to be present where the market is, which is why GPS easily starts up an execution office whenever necessary. Some of the larger companies do not have this flexibility. Such decisions require a huge exercise. It is also important to understand that these different locations operate locally. Here in Singapore, GPS is a Singaporean company that does not try to push the Middle Eastern company culture through.
In view of this, when will you possibly be replaced by a Singaporean?
My role is to be the CEO of the overall Group. I love Singapore and would like to remain living here, but the company’s owners are in the Middle East and may require me to move to Dubai. As a result of this restructure, I will need to remain here in Singapore for at least the short term. There are very capable Singaporeans here that can take my role upon them so it will only be a matter of time. Probably 90% of GPS employees are local people and generally the company has low employee turnover, implying that most people are here for the long term.
What are your personal ambitions for the coming three to five years for GPS globally and in Singapore?
Like most companies in the industry, the last few years have been very tough. GPS has been driven to improve its efficiency and productivity and has been able to become much stronger out of this crisis. The refocus on the business strategy and the setting of clear targets need to reinforce GPS’ ambition to be seen as the number one process skid and module provider within the industry. The current markets of SE Asia and the MENA are expected to grow through this period and GPS are positioned to benefit from this growth period. There will also be the opportunity to explore new markets, namely Australasia and South America.