with Paul Clarence, Owner and Managing Director, Global Spec
Can you elaborate to our readers on the environment when you first created the company in 1991? Additionally, what would you say have been the key challenges that you had to overcome in that period?
1991 has been a significant year for us for two reasons. Firstly, it is the year that Nelson Mandela was released from prison and that South Africa was put on a path of freedom and democracy. Secondly, it was the year that we founded the company. When we started Global Spec, the inspection industry was still very small. In essence, there was only one inspection company in Cape Town consisting of only two people.
To us, it was clear that an opportunity presented itself. Established in 1965 for the purpose of oil and gas exploration in South Africa, PetroSA discovered its first viable gas reserves in 1980. This led to the Mossgas project. Oil was discovered in 1989 and brought into production in 1997. During the initial phases of the project, the government selected a few people from each province for training purposes. My partner and I were fortunate enough to be selected and received funding from the Western Cape government. This enabled us to be trained over a period of 2 years and take various courses in Cape Town, Johannesburg, Durban, France and the UK.
At the time, inspection was relatively new. The main difficulty we had to cope with was to convince the client of the importance of inspection in the first place. Their main argument was always the same: “We have never done inspection before, so why do it now?” Fortunately for us, several engineering certification societies such as Lloyd’s Register, Bureau Veritas, DNV, the American Bureau of Shipping, RINA, etc, imposed quality standards which forced engineering companies to comply. This, in turn, created an opportunity for us to provide NDT (non destructive testing) services to the engineering industry. Over time, all the engineering companies gradually complied allowing us to clock up valuable experience and build capacity in this sector.
Since the creation of Global Spec in 1991, the number of inspection companies in South Africa has been on the increase. The majority of the industry is also more educated now, and they generally comply with the international standards such as ISO. South Africa is now manufacturing for big international players such as Total, which require our local companies to comply with their quality standards too.
With the 2010 offshore exploration disaster in the Gulf of Mexico and the subsequent oil pollution, standards and control levels became stricter again. Inspection became more vigorous. Consequently, more and more people are being trained to conduct NDT inspection services. There is still a great need in the market place for these specialist skills.
Can you please elaborate on how last year’s oil spill reshaped the industry?
After the Deepwater Horizon blowout, classification societies placed increased pressure on vessel owners to ensure that they comply with the required standards. We, the inspection companies, often get caught in the middle – between the demands of the classification society and the owner of the vessels and/or oil rigs.
You mentioned how there was only one company in the market when you started, while now many more players are present. It must mean a real change in the competitive landscape. Has it become more challenging?
Yes and no. While we provide general NDT services to the industry, we have come to position ourselves as experts with regards to the inspection and recertification of mooring chains. Since 1991, we have already inspected and repaired 2,5 million meters of chain. We do the repairs and complete logistics of the mooring chain, a service no one else on the African continent offers.
We have the skills and equipment to do so, and are able to do this type of inspection anywhere in the world. Another unique niche we have developed is in the area of radiography. We are one of the first companies to have introduced and operated a 24/7 real time radiography, and actually the first company in the world to have offered that service to one of the largest manufacturers of pressure vessels in South Africa.
We are very fortunate to be operating in both the industrial and marine sectors. We have adopted a collaborative approach with other service providers in the industry. For example, in the marine and oil & gas sector, we have entered into an alliance with one of the larger oil & gas service and repair companies known as DCD Dorbyl Marine. Together, we try to secure every oil and gas vessel for repair work in Cape Town.
How successful is this partnership, and what are the elements that make both companies complementary?
I certainly think that with our engineering background and our 20 yearlong relationship in the industry we complement each other by providing full turnkey solutions for any client. While DCD does the repair work we do the inspection work. We therefore form the two sides of the same coin.
I am also one of the founding members of the South Africa Oil & Gas Alliance and it is our goal to bring such work to Cape Town. We speak to DCD and other parties and we try to attract the work here. It is important that we share information freely so that we can offer the best solutions to the client. It is in this way, at the level of information sharing, that we complement each other. This may explain why we have managed to sustain this relationship for such a long time.
On the industrial manufacturing side, we work very closely with our clients too. Their manufacturing plants are very specialized as they manufacture high pressure vessels for clients across the entire African continent. The personnel we have working on these niche products are highly skilled. In fact, they are so highly specialized that you will not find them assigned to the more general NDT services which can be more readily found in the marine industry.
Premier Helen Zille stated that South Africa has the opportunity to challenge service hubs such as Singapore and Aberdeen. Would you say that the level of inspection standards is matches the standards we find in these other locations?
Our services, including those of my competitors, are world class. A classification society certificate issued to a company in Singapore is no less or more than the same certificate issued to a company in Cape Town. We all have to comply with the same international standards demanded by the classification societies. So we are on par with the rest of the world. We meet vessels in Singapore, Namibia, Brazil, etc. and we constantly travel around the globe.
What do you see as the durable competitive advantage then?
When looking at technology and equipment, other hubs are way ahead of us. We think the reason lies in their infrastructure, which is better than ours. Unlike us, they actually build oil rigs whereas in South Africa we have not yet entered that space. But with the right government support I am sure that we will also get there.
Certainly, with today’s technology, the job has been made easier. Unfortunately, one risk posed by advanced technology is that you sometimes see unqualified inspectors on the job, because a lot of the modern equipment does everything for you. Nevertheless, training must remain and ongoing investment.
Talking about infrastructure in South Africa, many eyes have now turned towards the growing port of Saldanha Bay on the country’s West Coast. However, the general sentiment is that this location hosts a potential that has remained underutilized. Would you agree with this? If so, what needs to be done to get this potential unlocked?
For Saldanha Bay, the main advantage is the draft. This is a natural deep sea port with a natural draft depth of 15 meters, unique in the world. Nevertheless, most of the equipment or the fabrications are being transported from Cape Town. They do not yet have the necessary infrastructure and facilities in Saldanha Bay. Until recently, there has not been any serious investment to turn Saldanha Bay into a similar type of capability as Cape Town.
Fortunately, the Western Cape government has committed to invest in the infrastructure there but we are not sure when this will happen. We had one big project there last year, but had an issue with the labor resources. There are no skills readily available over there.
However, we do see that the future for ship and rig repair and upgrading will most probably lie in Saldanha Bay.
And if we looks at expansion opportunities for Cape Town itself, there is a clear problem of space. Do you see this as a serious challenge for the city?
I do not think so, as the only challenge is the draft. The simple thing to ask is “why wouldn’t they dredge?” That I do not know.
Nevertheless, the Cape Town facilities are world class. The infrastructure is here, the services, the skills are available and there is absolutely no reason or need why facilities such as A-Berth should not be used to its full potential.
If we take a look at Global Spec itself, you mentioned that you did many projects in various places, such as Singapore for example. Global Spec now also has offices in Walvis Bay, Namibia. How do you now see the company’s internationalization strategy evolving?
About 3 years ago, Walvis Bay was considered to be a real threat to Cape Town in terms of attracting work. For a number of reasons, clients who used to bring their rigs to Cape Town had a change of heart and decided to use the port of Walvis Bay instead. The obvious saving was on the sailing time from Walvis Bay to Cape Town, especially since most offshore exploration and drilling takes place on Africa’s West Coast.
Three big rig upgrades took place there, which unfortunately did not work out as desired by the clients. As a result, many clients chose to bring their rigs back to South African’s waters for their periodic surveys and repair work.
We initially opened a facility in Walvis Bay to capitalize on this increased activity. Furthermore, given the relationship between South Africa and Angola, it made sense to be as close as possible to the markets and overcome visa issues, i.e. it is very difficult for South Africans to obtain an Angolan visa, while such documents are far easier to obtain for Namibians.
We have seen an explosion in activity on the East Coast as well. Do you think that this is reshaping the ballgame for South Africa? Is this creating new opportunities?
Just recently, we had an inquiry from Schlumberger to set up an office in Mozambique. There are also opportunities in Tanzania, but the current focus is particularly on Mozambique. I am not too sure what the future growth is going to be, but for sure there have been a lot of talks about opportunities in these countries. Some companies, the same which moved to Walvis Bay earlier, now want to move to the other side of the continent. As proverbial entrepreneurs we will chase the opportunities where they present themselves.
Cape Town is very fortunate to be located at the tip of the continent. Consequently, we catch the west and the east traffic at the same time. Yet, Mozambique can pose a similar threat to Cape Town as Walvis Bay did a few years back. Companies may start reconsidering the additional sailing time to come down to Cape Town.
What would you like to achieve with Global Spec in the coming 5 years?
We are restructuring at the moment. We will be 21 years old in March 2012. It is time for additional skilled people, more quality engineers, and for diversification, for example into the wind energy sector. I would like to see our company double is capacity within the next five years and be active in at least 4 to 5 industry sectors – Marine, industrial, Oil and Gas, Wind Energy and possibly Power Cable Inspection. These are matters under discussion.
At present, our current skilled people do not have the skills that match our willingness to diversify into some other niches in the market place. Hopefully, we will have our own training school to cope with this shortcoming. This will certainly enable us to have the best people that correspond to our focus.
Do you have any final message you would like to share with the readers?
For some strange reason, Cape Town has always been seen as a city with no capabilities. But let me assure you that we do have the engineering capabilities. My message to the world is: We have the skills in our beautiful country, so just talk to us!