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Interview

with Shri A K Purwaha, Chairman and Managing Director, Engineers India Limited (EIL)

11.05.2011 / Energyboardroom

Engineers India started as a an engineering company focused solely on the oil and gas industry, but today has diversified its services not only into different segments of the hydrocarbon value chain, but also to completely new sectors such as airports and infrastructure. Today, how much of a priority is the oil and gas sector for Engineers India?

Engineers India has a core focus on hydrocarbons across the whole value chain. In the upstream segment, EIL started in the 1970s partnering with ONGC, building the required infrastructure for Bombay High. Before that, we had already taken our position in the downstream by building the country’s refineries, starting with the Madras Refinery in 1967, now run by Chennai Petroleum.

EIL as it stands today began its journey in 1965 with Bechtel. The Government of India decided that this was the right time for India to begin building its capability in the hydrocarbon sector, and identified the downstream sector as the place to start, particularly the refining sector. Within two years, EIL was able to build its competencies to an appropriate level, and transformed into a Government of India undertaking. The company took on its first refining project in 1967, and in 1969 we started working on petrochemical projects.

Today, to EIL’s credit, there are 20 of 24 refineries in country 9 of which were grassroots refineries built by us and another grass root refinery at Bathinda is close to completion. In this sense, Engineers India is unique, being probably the only company in the design engineering and project management consultancy segment who have more than 50 large refinery projects to its name. In the petrochemical segment, there are 8 completed plants, 7 of which were built by EIL, with two more grass root plants with dual fuel capabilities are in the construction phase.

EIL has been very active in continuously upgrading the refinery performance & hence profitability. With increase in crude prices, residue upgradation became an inevitable option for the refineries. EIL has been associated in setting up residue processing facilities at all the refineries. Further when we started building India’s refining capacity, there were no Euro emissions standards, but today practically all the refineries operating in the country have been upgraded to either Euro 3 or Euro 4 standards. This has been a major source of work for EIL over recent years, and today the drive for high emissions standards is present in all our work, including in the Bathinda refinery, currently being constructed, which will adhere to Euro 4 standards. This work has done wonders for EIL’s knowledge bank, skill sets and experience, having worked with practically all refinery operators in India and with many different licensors. EIL is a technology neutral company: we have no fixed relationships with any licensors, so we are able to present and recommend to our clients exactly what is best for them and their projects. This is definitely one of Engineers India’s greatest strengths.

EIL repeated its success with refineries in the gas-processing sector. All the C2+ recovery facilities in the country today passed through the offices of Engineers India, and today we are putting those facilities in place. We have also had admirable success working on LPG recovery facilities.

The KG basin, off India’s east coast, is a gas find comparable to those found in the North Sea. EIL is now working with GSPC, one of the major operators in the basin after Reliance Industries, in order to build up their facilities there. EIL is involved in the project as project management consultants, providing jackets, well platforms, a process-cum-residential platform, offshore pipelines, and onshore processing facilities. Apart from the drilling aspect of the project, EIL is handling everything.

You have been director since October 2009, after having worked with GAIL for nearly 25 years. Gas is obviously an important area for the future of India’s energy security – what does it say about the priorities of EIL today that it has a gas expert as its CMD?

I have been associated with many different aspects of the hydrocarbon sector during my 35-year career. In the initial stages of my career I worked at ONGC for 9 years, before serving for over 24 years with GAIL. With GAIL, I saw the evolution of the entire gas sector. EIL has its core strength in the hydrocarbon sector, from upstream to midstream and downstream. We will continue to look towards that space.

The development of gas infrastructure in India will play a key role for EIL in the future, because today natural gas is only available in small pockets of the country, and in the future we fully expect it to reach across the whole of India. In order to achieve this, there is a vast need for more cross-country pipelines, connecting different communities across the country and bringing gas to the end-users. City gas distribution is another aspect of gas infrastructure that is currently only happening in a few places around the country, but in the years to come will play a much more important role in the Indian energy basket.

However, EIL will continue to focus right across the oil and gas value chain, because gas is not the only area where exciting developments are taking place. For example, petrochemical consumption in India is still only 6.25kg per capita. The world average is already at about 24kg; even China is talking about 17-18kg. We feel that there will be huge investments in the coming years in the petrochemical sector, as there is a lot of room for growth. As fertilizer production shifts to natural gas, there will also be a lot of potential in this segment for Engineers India, particularly as fertilizers have been highlighted as a priority by the government.

Outside the country, EIL will focus more vigorously and closely in two areas. Firstly, the hydrocarbon sector, where EIL has built its name, but secondly the non-ferrous sector, as the company is very strong in non-ferrous development, be it mining, refining, or smelting for the aluminum sector. We have already identified Middle East as one key region for expansion of our operations, because we feel the older assets in the region will very soon be coming up for refurbishment, debottlenecking, and general improvement of their production efficiency. We feel Engineers India can play a key role in these areas. On top of this, we will also look to Africa as a good source of future work.

Within the country, as well as focusing on the key segments already mentioned, Engineers India will focus on leveraging its knowledge banks, skill sets, and project management capabilities to diversify into other energy sector areas such as power. With power we are looking towards nuclear, where we hope to focus on providing services for the balance of plant, which account for about 40% of plant construction, as the company already has very strong competencies in this area, having built refineries, petrochemical plants and gas processing plants in the past. Nuclear, thermal power generation will also be an area that we will look to develop, as well as renewables. In the years and decades to come renewable energy will play a growing role in our country’s power generation, and getting involved at the early stages will stand the company well in the years to come. We will also look to diversify into wastewater management.

EIL has stated the importance of moving more into LSTK projects, something all engineering companies would like to achieve. We have heard that in general, the PSUs are more open to this type of project than private sector players in India. How have you found the market so far in this regard?

Every client today wants their projects to be completed as quickly as possible, as every day wasted between commissioning and completion costs the company an incredible amount of money. Engineers India has evolved based on this principle, and has developed a number of different solutions for every possible situation. It is not a matter of one solution being better than another; just a matter of tailoring a solution to each individual client, their organizational structure and their expectations. With its long association with Indian hydrocarbon industry, EIL has always been aspiring to provide value added services to clients for enhancing their experience into customer delight.
In the future, we expect rather than one solution becoming dominant in the industry, that it will remain as a mix of different project management styles. Those clients without initial infrastructure or an existing resource pool will inevitably prefer a project with one point of responsibility, leading them to LSTK projects. However, others with reasonable resource pools and their own project management capabilities will look to control costs and source their engineering and construction work from a variety of different offerings.

EIL is known as Asia’s leading design and engineering company, and you have successfully internationalized the business. How is EIL regarded in these markets, and what is it that the company is known for?

Last year, the Business Standard group rated Engineers India Ltd. as a ‘Star PSU of the year 2010’. Of course, achievements like this help our international reputation and standing, but our achievements also speak for themselves. With 46 years of experience, EIL has built more than 50 major refinery projects, seven grassroots petrochemical projects, all the gas processing projects in the country and built up over 60% of the country’s oil and gas pipelines. This is an impressive achievement for a single company. As a result, the company has a huge pool of knowledge and experience available in-house, and we have evolved and continuously improved our systems, processes and databanks, and most importantly our delivery of quality engineering services. Out of all the projects on which EIL has ever worked, we have always met every single deliverable that was required of us.

In 2009, EIL was appointed against global competition by the Oman Oil Company, for suggested solutions for value maximization of their existing Sohar refinery, which was originally built by a Japanese consortium. From day one of its commissioning, this project has not achieved stable, un-interrupted operation nor the design product yields. After trying for couple of years to address specific issues in the plant, in 2009 they invited different engineering consultancies to the plant. EIL was also qualified for the work and eventually we were selected. We completed the strategy for the plant in about 4 months, presented it to their government and the cabinet, who accepted it. Government of Oman & Oman Oil Company are proceeding with the implementation of the refinery modification plan as per EIL recommendation. That is the kind of quality of service and confidence of EIL.

In 2010, EIL was appointed detail engineering consultant against global competition by National Petroleum Construction Corporation, Abu Dhabi for EPC installation of their Qushawira Field Development Project for Abu Dhabi Company for On-Shore Operation (ADCO). Construction activities for the project at site are in progress now.
However, EIL does not yet have a major presence in many countries, because we have been very busy in our home country, developing the hydrocarbon sector. Going forward, we are looking to these countries much more closely. Today we are working in Abu Dhabi, Oman, Qatar, Venezuela, Algeria, and Ghana, and you can expect to see our presence in many more places in the years to come.

Financially EIL is a very strong company, being completely debt free and sitting on a large amount of internal resources. In which key areas will the company be looking to invest internally in the years to come?

EIL will be looking to invest in areas where there is a synergy with our existing business. Our prime role will continue to be design, engineering and project management, because those are the company’s core strengths. We will also be doing a lot of activities on a lump-sum turnkey basis, but as I previously stated, we do not expect LSTK to completely overtake EPCM contracts in India.

Other investments will be in related projects on the fertilizer and power side, or city gas distribution and pipelines. We will be looking towards these investments as the opportunities present themselves. In many places we may look be the operating partner on projects, but otherwise we may take a smaller stake if the size of the project is too large for us to handle.

I read that you were looking to reach a turnover of $1.1 billion USD by 2014. What are the biggest changes that you will need to make in the next few years in order to make this a reality?

Our strategy is based around reaching this target, and perhaps even higher, by continuing to focus on the hydrocarbon sector within the country, to look very closely and more vigorously at the overseas market in the hydrocarbon and non-ferrous sectors. We are also exploring opportunities to diversify into the areas of wastewater management, nuclear power, thermal and solar power, city gas distribution and fertilizers. Internationally, our aim is to find more work in relatively untouched markets like Venezuela, which we have already started to do. We are also studying how we can start working in countries like Brazil, which is another region with a lot of hydrocarbon activity. As our experience is predominantly in onshore projects, we see a lot of opportunity in countries like Brazil once the product comes back onshore.

We have seen from a lot of our previous interviewees that EIL is used something like a school for engineers in the oil and gas industry, and a lot of the organisations talent is now placed in the leading companies in the Indian industry. Do you feel that EIL has a role to play as a school for the Indian oil and gas industry?

Our prime role will continue to be providing services of an excellent quality in terms of the deliverability time and cost to the client. While doing so, human resource development plays a key role, because our people are one of our greatest assets. There is a very structured training programme in place, which includes teaching both in the classroom and on the field. Additionally, our training programme does not stop at fresh recruits; there are mid-level management training programmes, which means that our employees are constantly learning. EIL has a state-of-the-art R&D centre which also includes a training centre. At any given time we can house roughly 120 people there and provide them with training courses. As well as our own faculty, EIL also leverages on the expertise of different Indian institutions and companies in order to make sure our employees are as technically up to date as possible.

Attrition is always an issue for any successful company, but I am pleased to say that today EIL has an attrition rate of less than 2%, which shows that people get a lot of satisfaction by continuing to work with the company. Innovation does not only come from the top, it can come from any level. We give people a lot of space to innovate and encourage new ideas . Our employees can gain access to new skills and knowledge banks through working on the major projects EIL is involved in, and having a lot of documentation for learning available to them. This gives a lot of technical stimulus and keeps them professionally satisfied.

The PSUs have been responsible for building the oil and gas industry into what it is today, but in recent years there have been a lot of changes in India, from the liberalization of the industry the diversifying roles of the PSUs. Today the landscape is very different to when the industry first started in India. Given this situation, how would you define the unique role of Engineers India today?

Engineers India is unique in its partnering relationship with all of its esteemed clients, whether public or private sector. This has developed well since the company began. Initially, the company’s only interactions were with the Indian public sector, as these were the only companies involved in the oil and gas industry in the country. Today, we have seen that the market has been liberalized and the world has entered India, and EIL has learnt to deal with its new clients just as well as it did with its old ones, who are still very valued clients. Our recall value and return business rate are proof that we have managed these relationships very well, even in this brand new industrial and economic environment that we are facing today. As the years progress, we hope that the confidence our clients have in us will continue to be our greatest strength.

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