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Interview

with Ron van der Schalk, Managing Director, Uhde Shedden Australia

03.05.2011 / Energyboardroom

Having recently assumed the position of managing director of Uhde Shedden Australia, what was the professional trajectory that led you here and which you are leveraging to grow and develop the company?

I first joined Shedden Pacific after overseas experience working with Shell as a process engineer and project manager in the 1980s. In the mid 1990s Uhde took over Shedden Pacific to become Shedden Uhde. It was around this time that I briefly left the company only to rejoin in 2000.

After rejoining I spent a year in Germany and returned to Australia in 2001 to build up the company in a business development role. Although Clough Engineering bought a 50% of Shedden Uhde in 2002 we still functioned here as a relatively independent organization. Working alongside Russell Scott, the managing director at the time, we were very successful in the refining side of the business and for international oil and gas projects.

Russell and I identified and explored several key growth opportunities in Asia. Uhde had a company in Thailand that they were planning to close down which was solely associated with petrochemical activities. We bought the company at the end of 2004 and I spent a lot of time marketing Asia for both companies. We were able to grow the company to approximately 400 people and in 2006 I took over as managing director of Thailand.

In 2008 Uhde decided to buy the rest of Shedden Uhde and therefore the name flipped to its present Uhde Shedden.

I also spent 2 years managing Uhde’s company in Mexico after my assignment in Thailand. Having managed companies in both Thailand and then Mexico, I came back to Australia to assume this position at the end of last year with Russell Scott becoming the head of Uhde’s global Oil and Gas Business Line.

To date, the company has had a fair bit of success in various areas internationally. We won a contract for a large Pemex project in Mexico; we are engaged in FEED work for a large refinery in the Middle East; and we have been doing quite extensive work with Sasol in South Africa.

What is the present role that Australia plays amidst Uhde Shedden’s integrated global network?

While we are not particularly strong in the LNG arena we have a talented group of engineers who possess tremendous expertise in gas processing.

In many respects Australia functions as a hub for expertise and talent which we move to different locations. The success of our work in Thailand came from being able to shift human resources from Australia to lead projects in Thailand. Similarly, we excelled in South Africa because of our talented people who led hydrocarbon processing projects there. Finally, we won our project with Pemex with the support of our Australian specialists. We very much benefit by utilizing Australia as a skills base from which to move smart people around the region for various projects. That will always be the case because of the country’s quality education system and industrial strength in resources and energy. Our goal as a company is to foster and engender talent within the organization for global and local projects.

With the growth of the energy industry in Australia and its associated projects, doesn’t the reverse process now need to occur for Uhde Shedden – global talent drawn here locally?

There is an element of truth in that since many people in our organization have come from all over the world. We indeed have people from England, South Africa, and Latin America for example, all of whom bring their knowledge and expertise in the oil industry. In many respects, the whole issue of talent becomes interesting since the growth of the petroleum industry will increasingly demand the right set of expertise. Australia is now moving towards an ambiguous area of experienced industry veterans on one end, young graduates at the other end, and a dearth of talent in the middle. The issue is partly “baby-boomer” related, but it also stems from the way the industry has evolved over time. Admittedly, it has been difficult getting people to take on engineering as a career compared to other industries such as finance and information technology.

Uhde Shedden is based here in Melbourne, with a sales and marketing presence in Perth. Oil and gas service companies in Australia are increasingly gravitating towards Perth to be closer to customers and their projects. What accounts for this set up?

Part of it relates to historical decisions made in the past. On one level it is unfortunate that we did not open up an office earlier in the area. Perth is a parochial place that is very much about what you can do locally. However, the market is dominated by a few players. After Chevron, Apache, and Woodside, the major players quickly disappear. Our strategy will be to develop our office in Perth and grow the business there. We also have an office in Queensland where we are also trying to establish a stronger presence.

Most of our activity has been to grow organically. The balance of hydrocarbon production certainly favors Western Australia and we have had a number of projects there over the years. But the philosophy of management over time has been to do projects from here in Melbourne given the hub of engineering expertise that we have established. Since I have been back I have noticed a shift in the industry presumably due to rising costs in Australia. The trend amongst many of the large LNG projects is to move the engineering and construction work offshore.

Every engineering company prides itself on a differentiating factor in its project execution. What does Uhde Shedden bring that is different in a competitive landscape?

We focus our attention on being very cost effective in delivering our outcomes. When looking at how we do our engineering, we have demonstrated high quality delivery over a number of projects. Quality is something that we never relent on in our organization. A focus on quality means delivering exactly what the client wants for their project as cost-effectively as possible. We spend a lot of time trying to get the scope and the concept correct before we start the execution phase so that both parties understand what they are going to get. We are keen to do everything in a lump sum so that there is certainty of outcome and price. However, this can be a very mixed bag in Australia. Many customers do not prefer the lump-sum approach, choosing instead to get involved in the details of what we do and how we do it; controlling that scope can indeed be a challenge.

We also pride ourselves on being very technologically oriented. Above all, our internal mantra is being cost-effective while meeting scheduled targets. Our focus is on delivery so that when we say we will deliver on a certain date we do so.

Viewing our future, we are all about being a solutions provider to the processing industry. A good example of that is the work that we did several years ago for Vietnam. We designed a gas plant but its initial gas production was a little bit dry and did not have much condensate. Because the client built a large pipeline to the plant in anticipation of future expansion, we were able to show how they could run the plant and produce much more gas than they would have under the traditional view. We were able to increase their production by about 50% over a 24 month period just by investing a minimal amount of cash. That is the technological knowhow that we bring to projects. We can find smart ways to do things better to reduce cost and increase production. We constantly try to apply that expertise for our clients and look for an edge where we can add more value than would otherwise be the case.

Where does Uhde Shedden typically find itself in the innovation process? Early phase engagement or later stage bespoke solutions?

We are disproportionately represented in the process engineering area leading us to get involved very early on in the projects. We can influence designs and the way clients develop their projects to increase their return on investment. At the end of the day a customer wants to get a project for either lower cost or more reliability. We get involved early on in the process to help our clients find appropriate solutions for their plants.

What are the new R&D initiatives or areas of focus to continually enhance your solutions?

We have proprietary IP in gas processing and gas clean-up through our parent company which centralizes our research and looks for new technologies. Our expertise then comes into play in our ability to combine different processes. A lot of the processes in the gas industry are open art and there are few areas where people have patents for proprietary areas. We understand those processes pretty well and are able to identify how we can fit them into opportunities for companies to use. Typically for natural gas, the issue – depending on the gas composition – boils down to efficiently stripping more propane or ethane out of existing gas. In other areas it is about getting rid of contaminants and what to do with excess mercury. We understand these issues very well and, subsequently what their different solutions are. Our people continuously perform studies on how to improve certain processes. In terms of innovation, we use very sophisticated dynamic modeling software to help us determine what could happen. Modeling these different gases and liquids is as much an art form as a technical science.

The gas cleanup processes seem to build a good technological bridge to clean coal and alternative energy, another area of focus for Uhde Shedden. What inroads have you established in this sector in Australia?

We have done a lot of work on clean fuels and the company has been involved in gasification for some time now, particularly with gasification studies in Queensland. There is a lot of interest in underground gasification. The up and coming area of interest will be shale gas given its high liquids composition and potential feedstock for the chemical industry in Australia.

Most of what we have been doing with clean energy has involved utilizing a carbon rich energy (coal) and turning it into something light such as hydrogen or methanol. Some of that technology resides with our parent company and we have been successful in looking at how to use it on a project basis here in Australia. We have also done work in China having designed the basic FEED package for a coal gasification development. Our people have strong expertise in that side of the business. When looking at clean energy, much of it is really around conventional gas replacing dirty energy, or using coal to come up with a clean solution.

As a tax on carbon gains momentum and engineering companies increasingly shift their resources and IP into clean energy processes, how would you rate your level of preparation for this industry shake-up?

We have been having internal discussions about this issue for quite some time now. The major Tier One players are all aware of the issue of carbon, the need to reduce their carbon footprint, and the impact of a carbon tax on their business. To be quite honest, based on the stories that we have gathered, a $25 per ton price on carbon will not change their behavior by much. Only a price of $40-$50 per ton would trigger significant action. Many companies have been trying to improve their efficiencies and drivers through internal policies. We understand what is required of companies and have a model to determine carbon footprints for major industries. We have our own way of accounting for various ideas and for modeling the right technologies to apply in certain economic situations. We are positioning ourselves to participate with the clients to solve these problems.

Australia has a very diverse geographic spread of its hydrocarbon resources: LNG and upstream processing in Western Australia, coal seam gas (CSG) in the east, and shale gas largely concentrated in the central basins. Given the geographic spread, what are your priorities and strategic outlook for further growing into the hydrocarbon market?

We of course want to play a more dominant role in the entire hydrocarbon area. We were one of the first companies involved with CSG development when we worked with Origin Energy to develop Spring Gully. We see the potential of CSG as being fairly significant.

However, the problem that I have when looking at the future is the sustainability of resource development. How much can we really develop and ship overseas? Part of the “tragedy of Australia” is that we do not have a robust national chemical complex to turn our energy from natural gas to downstream projects. Thailand, for example, had a lot of natural gas and turned it into specialty chemicals through a series of processing stages. A couple of dollars per gigajoule of gas were converted to several thousands of dollars per ton of chemical product. We do not do that here in Australia; instead, we ship it out. However, the development of shale gas in the US can ultimately lead to smaller export market for Australian LNG than originally conceived. We are a stable country but the growth may not be as great as people believe.

A hidden problem and potential Achilles heel of the CSG industry is what to do with all of the salt in the water that is co-produced with the gas. We are interested in finding those solutions since part of our business involves understanding how to turn salt into chlorine through the technology of our parent company. We are looking at how to develop solutions that deal with salt and convert it to a potentially marketable product. In additional to sodium chloride, salt also contains soda ash, barium, and other exotics which can all be efficiently extracted at competitive costs. We are interested in becoming a big player in the game not only in the hydrocarbon sense but also in dealing with the waste product.

On the upstream side we have been looking at different ways to improve equipment that is currently used to separate water and gas whereby reducing the cost of wellhead facilities. We have looked at strategies of how to rearrange the collection and separation of hubs and alternative methods to put gathering systems together. Through our expertise in plastics we can perhaps apply polyethylene in different ways for gathering systems.

Additionally, we can design and build dehydration units and central processing units fairly cheaply through our links with fabrication companies in China to develop skid modules much more cost effectively. Because we are part of a larger conglomerate we are looking at how to integrate other “family company” expertise into our solutions. Manufacturing becomes interesting because of our presence in China. The ThyssenKrupp group produces specialty steels which we can apply in our offerings to reduce cost and extend the life of equipment for a particular application. We are always trying to look for a unique problem and determine the issue at play.

With a huge human resources shortage in the resources and energy industry in Australia, what does Uhde Shedden offer to engineers looking challenge themselves and develop their capabilities?

My experience is that people will come to a company when there are projects that are complex and interesting to work on. We look for the type of projects where we can use the talent. The process becomes self reinforcing from there: our talented staff works on complicated projects and provides complex solutions which brings in more projects and people. We really strive to challenge peoples’ minds. Our people here prefer to be involved in larger projects that require the fullest extent of their expertise.

What can we expect from Uhde Shedden over the next 5-7 years?

I expect that Uhde Shedden will be a strong partner in the Uhde Company which belongs to ThyssenKrupp. And with this backing we are well positioned to develop Uhde Shedden as a leading provider in the oil and gas industry.

What would be your final message to our readers about Uhde Shedden?

Our aspiration and aim is to be the #1 service provider for the processing industry, which certainly includes oil and gas.

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