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Interview

with Matt Gavin, General Manager, PSN Australia

03.03.2011 / Energyboardroom

In addition to the corporate profiles of the companies we interview we also like to feature the personalities of the industry. What has been your trajectory that led you from New Zealand up to the North Sea and back down to Australia as the managing director of PSN?

I have worked in the engineering service sector for the last 20 years and have always enjoyed the contracting side of the business. After working for many years in the North Sea region I moved back to New Zealand in 1997 to raise my family. I got involved with a small company that was just stepping out in 1998 and subsequently grew it to a 700 man operation over 10 years. This opportunity with PSN came up in 2007. Bob Keiller described a pretty exciting management buyout and outlined his vision for the company. I joined nearly three years ago and it has been wonderful ever since.

PSN is very consistent with the North Sea know how that is converging on Australia. What is the strategic importance that Australia has come to play amongst PSN’s global footprint?

Australia has been called the “lucky country” for a reason. When I joined we had about 700 people and were turning over revenue of approximately $150 million. We have managed to grow here in Melbourne, diversify into Queensland, and pick up work in Papua New Guinea as well. Our success has been a result of being able to draw in the PSN global expertise, but combine it with an Australian “can-do” approach. If you we see an opportunity, then we go after it hard. We are fairly selective with what we say “yes” to and pursue, but are very determined when we do go forward. We get well supported as a result.

Today we turn over roughly $300 million and have 1,400 people in Australia. We have gone from a fairly small operating unit to one of the larger contributing ones in our global network. We see that continuing because of all the opportunities within Australia. Our formula for hiring locals but supplementing it with European expertise has worked well.

Remarkably, you have doubled your staff and turnover in three years. What were the projects that enabled you to do so?

It has all been organic growth. We have had some big projects here in Melbourne and also picked up three new contracts with Caltex, Oil Search, and QGC late last year.

When PSN talks globally about our “hot” areas, Australia is always up in the top three or four territories. The opportunities we see are on the west coast and in the northeast in Queensland. While Victoria will continue to be a very important territory for us, our next wave of growth is likely to be coming from out west and up east.

This is somewhat consistent with Victoria’s reputation as an “old player” in the oil and gas industry…

For a brownfield services company we see growth in all areas. From a greenfield development area, I share that view. But Victoria has been producing oil and gas for 40 years and probably has another 40 years to go. There is still a lot of exciting brownfield work coming up and Melbourne will always be important to us. In addition we see other opportunities, particularly in Brisbane and Perth where we do not have a presence as large as we have in Melbourne.

We tend to grow everywhere there are operators. Woodside has been dominant in Western Australia, but that landscape is changing with other companies such as Apache and Chevron coming on the scene. But we have recognized that Western Australia cannot be serviced from Victoria. So having a presence locally in each state is very important to us, and has been central to our Australian strategy.

Brownfield services buy a reliable flow of work, which prove extremely beneficial in cyclical downturns. Was PSN insulated from the global financial crisis (GFC) because of the nature of its business?

The GFC was actually a positive experience for us, but not for the normal reasons. The market was so heated and we – along with all major contractors – were really struggling to get resources. The GFC took a lot of that heat out of the market which gave us much better stability and the breathing space to consolidate our growth. From that point of view we saw the crisis as a benefit. In terms of impact, we doubled our business during the crisis which speaks for itself. However, things are starting to heat up again so we understand that the next few years will be very busy.

How specifically did you capitalize on the downtime to better strategize going forward?

The main thing that we did was stabilize our staff to bring high talent into the business. We have had a couple of programs running to do this. Firstly, we have a Design Academy programme that brings in tradesmen and cross-skills them into designers. Secondly, we have also had a very active recruitment policy to bring more women into the business. When I first joined PSN, my observation was that women were under represented across the company. We have therefore been quite focused on getting more female participation, not just at the working level but also at the management level. It was a pretty straightforward thought process for us: women need more flexibility in hours if they are bringing up children so we offered it to them. We found that it has created a much healthier team dynamic and instilled stronger loyalty. The key going forward when we go through another heated period is to be an employer who can think more laterally and engage good, quality staff.

What stresses are you encountering as a manger with the potential merger with Wood Group? What type of mindset are you trying to instill amongst your staff and how does one successfully manage through a takeover?

Whereas mergers can typically create anxiety and nervousness, the reaction in Australia to the Wood Group merger has been universally received as good news. When talking to our staff, we find that there is not much overlap with Wood Group, so people see it as a genuine opportunity to increase our geographical and business spread. Also, the cultures of the two companies are very compatible. Both companies have very similar core values so it feels like we are just expanding the family.

For our business we have an almost “ready made” geographic dispersion which saves some growing pains that we would have otherwise gone through. The only market with some overlap is Brisbane and even there it is very modest.

Everything looks pretty exciting from our side and feels like a genuine merger of capabilities and cultures.

Australia is not renowned as being a center of engineering excellence like Houston or London, for example. How do you leverage PSN’s global network to the benefit of local operations?

I am not sure that I quite agree with that as there are centers of excellence in Australia. But it has been a relatively small market so getting continuity of work to develop those centers can be difficult. The “network” is in our name, and there for a very good reason. We have a project that is being executed in Melbourne with some overflow and being completed in Aberdeen and Runcorn. The reverse also happens: we currently 100 people doing engineering and procurement for Russian projects in our Melbourne office.

What are the best strategies for overcoming the logistical challenges of executing projects from very far away “down under?” Also, is there an inconsistency in HSQE given Australia’s stringent regulatory environment?

Australia is indeed at the bottom of the world and it always seems to be a 12 hour flight to anywhere. But you just get used to it and in the headspace that everything is only one plane trip away. There is minimal difference between traveling from Melbourne to Perth or to Singapore.

We are pretty mobile so we choose to not make it a problem. The only issue that can get taxing are different time zones, but any global operation faces the same challenge. We also find that technology has minimized the need for travel to a certain degree.

The thing we find with doing work for other regional operations is that their HSQE culture is as good as ours. We even find that some Asian countries are outperforming our Australian operations with regards to HSE; so we take the view we can always learn from them.

Coal seam gas (CSG) is a very green field business, yet you want to actively grow in Queensland – the heart of the CSG industry. What are the brownfield growth opportunities that you identify?

We have been very deliberate in our positioning for CSG with targeting the brownfield market. There is a huge amount of infrastructure being put in for wells and processing facilities which need to be optimized. The asset count is already large and will only continue grow. Furthermore gas deliverability and supply assurance will become critical.

A lot of traditional contractors are focusing on LNG plants and the greenfield side of the development. But there is just as much effort required on the upstream assets to assure a robust gas supply to the new LNG plants. For some reason this does not get as much attention, which we are happy about since this is our market focus.

It is probably natural that brownfield services for CSG do not get the focus at this stage since there are very challenging capital investment decisions to be made for the LNG plants themselves. But as they get solved, the focus will shift to the next link on the value chain, which is the existing asset base. These are not complex assets, but there are a lot of them and the logistics for efficient management of them can be complicated.

We are cross fertilizing some of our water expertise from West Australia where we have around 200 people maintaining water and waste water treatment assets. PSN maintains process plant across 300 sites that are spread over a huge geographical area. To be efficient requires a sound knowledge of how to integrate work with challenging logistics. We see this know-how being directly applicable to the CSG industry’s upstream assets. This is what PSN is very focused on.

Where does PSN like to sit on the cost vs. level of influence curve? Do you prefer to engage early when costs are low and level of influence high? Or do you pride yourself on being able to maximize influence in much later life-cycle stages?

We like to get involved at the conceptual stage. This is where the decisions are made on what the project t will look like and how it will perform, and this is where PSN can add enormous value by drawing on our asset knowledge to eliminate cost.

If you wait until after final investment decision, then the project is already decided, your ability to influence outcome is much more limited, and your impact is constrained to ensuring cost and schedule compliance. Our view is that not needing to build something and making do with existing assets often produces the better business outcome.

In 10-15 years Australia will very much be a brownfield market. What does the landscape of competitors and servicing look like to you?

I agree. When you consider the Bass Strait has another 40 years of production, the emerging CSG business in Queensland, and the new ventures coming to West Australia, there is a huge asset base being developed currently Also, the brownfield market is less-cyclical than the greenfield sector, which indicates that the brownfield market will expand more or less continuously in Australia.

You doubled your staff in three years. Given human resources constraints I doubt that you will be able to do the same thing again. But as company expansion continues what is your strategy for growing the human resources base?

Our strategy for growing the human resources base is simply to be the best employer in town – by giving people rewarding careers, challenging work, interesting projects, and treating them fairly.

We focused on being the best employer early on. I guess we have a culture of never being satisfied and are constantly wanting to improve with how we engage with staff. We are making good progress with over 75% of our people as full-time employees. Going forward, I believe poor employers will struggle to retain people and I question the durability of those who rely on a sheer manpower philosophy.

Even though you are never satisfied with where you are, what are you most satisfied with regarding how far you have come?

We finally have the confidence that we have a durable service here that adds genuine value to our client. Three years ago I put the challenge to the management team to make PSN a significant player on the east coast and be the best that we possibly can be. We surpassed everyone’s expectations by going from the east coast’s #5 contractor in 2008 to #1 in the hydrocarbon market by 2010.

We are focused on service excellence to our clients and you can only do that if you have excellent people. It really is that simple.

But we are not arrogant enough to say that we can do it all here. We draw on Aberdeen expertise when we feel that growing it ourselves would be inefficient or costly. The key is being ambitious enough to grow, but not so proud to the point where you lose humility. You must achieve that balancing act, and if you can manage, then you have success nailed.

When did that “eureka moment” of confidence occur?

It probably emerged early last year when we secured the Caltex refining work. It was a new industry for this PSN in Australia, and in most respects, globally. At the start we were seen as an outside chance. Converting that outside chance to a contract reality made the staff here believe that we have the talents and perseverance. There is nothing like a bit of success to breed confidence, but always looking critically at the things that are not going well is also important. Always being a bit worried about your business is a healthy thing.

What would be your final message about PSN in Australia to our readers?

We have a very simple business model that focus on people applying technical skills to brownfield issues. In some respects, we say we like to do the simple stuff, but do it extremely well. If you are very clear on what you are good at and the people who you need, then value can be delivered to your client and success will come.

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