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Interview

with Triharyo Indrawan Soesilo, President Director, PT Rekayasa Industri

21.11.2007 / Energyboardroom

How dynamic is Indonesia for engineering and construction projects today? To what factors do you attribute the current EPC trends?

Fortunately, the EPC industry is growing very rapidly at the moment in Indonesia. Even though this is a very open and competitive market, with all of the big names in the business present, Rekayasa is currently enjoying big contracts and high revenues. This is in part thanks to the global boom for EPC business, which has made many international companies focus on some of the most dynamic regions such as the Middle East, therefore leaving more space for local companies like us to take on projects in Indonesia.

Our activities are still mostly focused on upstream energy projects such as geothermal and coal-fired power plants, as well as facilities for gas compression and distribution. In downstream, Rekayasa is working on several projects with Pertamina on revamp of existing refineries and lube oil blending plants. In addition, the company is participating in biofuels projects with Medco (biodiesel) and Wilmar (bioethanol).

How has Rekayasa evolved over the years in terms of the type of projects and sectors it targets?

Originally, Rekayasa was mainly involved in the fertilizer sector, and this is where we developed technology and experience. This also has allowed us to later apply our technological expertise in other fields such as refining, gas compression and power plants. Thanks to our background and proven capabilities, we have grown and improved our positioning with the different players in the energy sector.

Rekayasa has been very involved in downstream O&G projects. The initial expertise the company developed as contractor for fertilizer projects has allowed us to get involved in areas like LNG and refining plant construction and revamps. Over the years, we have helped Pertamina increase capacity and improve energy efficiency, through projects like the Balikpapan refinery revamp and the Blue Sky interconnection initiative. Pertamina is currently looking to embark on very big revamp projects in Cilacap and Balikpapan, by the name of RSCC that will entail investments of over US $1 billion and US $3 billion respectively.

For the moment, however, I see the upstream sector–including gas supply–more promising for Rekayasa’s business. We do not have the economies of scale for massive downstream projects in chemicals or petrochemicals, which is why I doubt there will be a boom in those sectors any time soon. Another area the company is focusing on is agribusiness, in industries such as natural rubber and sugar for ethanol production.

When Rekayasa was created as a fully state-owned enterprise its main mission was to develop the local engineering know-how and capacity. Now that the company is mostly privately-owned, to what extent does the commitment to the country remain a priority?

Rekayasa is still in part government-owned (5%), but for the most part our shareholder is a private fertilizer group (95%). Pending on approval from the shareholders, the company may go public next year. Still, we have the vision and mission to provide solutions to the country and contribute to its development. For example, Rekayasa has helped solve cement and fertilizer shortages by building plants in Indonesia. In the energy sector, we have built and revamped refineries for Pertamina, developed gas pipelines and compressors, and constructed the first geothermal power plant.

What is your track record in international projects? How are you taking your success story overseas?

Projects in Indonesia remain the bread and butter for Rekayasa. Nonetheless, we are now also very active in overseas projects. Some examples are fertilizer plants in Qatar, a lube oil blending plant in Malaysia, and an ethanol project which Rekayasa has recently been awarded in Brunei. We are also acquiring a company in Spain, through which we can participate on projects in Europe and Northern Africa. So although providing solutions to Indonesians remains our main agenda, Rekayasa is executing and implementing projects outside of the country in order to further grow. We are accomplishing this through a strategy of both organic and external growth. Our philosophy is that we will do projects directly from our home operations in Indonesia when the location is within a range of 2-3 hours from Jakarta, so this basically means the Southeast Asia Region. As for more distant opportunities, Rekayasa will work through subsidiaries and acquisitions.

The record high oil prices of late have created opportunities but also enormous challenges to some in Indonesia like the government who must cope with expensive fuel imports. How has this phenomenon impacted the type of projects Rekayasa is involved in?

Rekayasa is helping to find solutions to this situation that Indonesia is facing in several ways. One of the areas is biofuels, with partners like Wilmar Corporation which is developing the biggest biodiesel complex in the world, and also with Medco on bioethanol projects. Another interesting alternative is geothermal energy, a sector in which Rekayasa is the pioneer in Indonesia and is currently involved in the construction of four out of five plants in the country. There are many projects coming up in the geothermal sector, and for the first time private banks such as Bank Central Asia (BCA) are providing financing for them. In addition, Rekayasa is working a lot on gas infrastructure projects such as compressors, pipelines and other facilities.

How is the completion of the South Sumatra West Java a milestone for Rekayasa and an example of the type of complex projects you are ready to undertake?

This is a very significant step because it is the type of project that is traditionally always being done by foreign contractors. The 168km of underwater pipeline linking Sumatra and Java has been successfully completed in July 2007. Rekayasa worked together in a consortium with an Iranian company on this ambitious project, managing to deliver on time and remain cost-efficient.

What kind of projects is Rekayasa developing in the Indonesian market with foreign companies, and what kind of international partnerships to you seek to establish?

Rekayasa cooperates with foreign companies on projects that use Indonesian resources in a way that is beneficial for both the country and international markets. For example, we are the partners of the Australian mining company Orica on an ammonium nitrate plant in Bontang. There are also Australian companies such as Insitech interested in converting the abundant low-rank coal resources into gas, for fertilizer production purposes; so Rekayasa is hoping to be a partner in constructing the coal gasification plant. In brief, most of our international partners in Indonesia are interested in raw materials and energy resources, booming sectors in which the country has enormous potential. Some of our main foreign partners include Chevron, Hess Toyo Engineering, JJC and Orica.

Rekayasa has undergone a significant transformation in its organizational structure since 2005, towards the establishment of strategic business units. What is the rationale behind this decision?

Rekayasa is learning from international success stories in order to develop the highest standards and best practices. Rekayasa is becoming an international company, and even in the local market we are facing global competition. One of the main elements we have learned thus far is the importance of establishing a customer-centric organization. To this end, the company has developed three specialized groups for business, technology and program management. Each one is under the responsibility of a special vice president, and is in charge of single clients. For example, a single client like Pertamina is split into three groups– geothermal, upstream & gas, and refining–according to specialties.

What is the scope of EPC services that Rekayasa can offer its clients?

Rekayasa offers a complete package of end-to-end service. This means not only EPC, but also feasibility studies, operation and maintenance services. However, we are also ready to respond to our clients’ specific one-off needs for consultancy or spare parts, for example.

How would you rate Rekayasa’s human and technological resources when compared to the other players on the competitive Indonesian EPC market?

Rekayasa’s priority is to develop our human resources, which is why we have established a university with a master program and scholarship opportunities. We offer our engineers the opportunity to pursue a part of their post-graduate studies in the best institutions around the world. The program consists of mandatory courses and training during the first semester, and then the second semester gives students the chance to choose electives and attend speeches by experts in fields like economics and business. We also pride ourselves on the frequency and transparency with which management communicates with all of the stakeholders on issues about the company and the direction in which we want to take it.

As for research, Rekayasa relies greatly on innovation to remain competitive in this globalized market. We develop in-house technology and collaborate with universities on research projects in order to come up with the best solutions for today’s challenges.

What are the determining factors that make Rekayasa the partner of choice for EPC projects in the O&G sector?

The key for an EPC companies is the level of its engineers, and this is where Rekayasa excels. The challenge we are facing is keeping them with us, at a time when they are being tempted by offers from other companies and countries, but we are making efforts to maintain our engineers. Another one of Rekayasa’s strong points is our track record on quality and timely delivery of projects. For all of these reasons more and more companies are looking at us as partners for their business plans.

Rekayasa has been the Indonesian EPC pioneer in so many areas like refining, geothermal, biodiesel… what’s the next milestone?

In my view, there are two big remaining frontiers for Rekayasa in Indonesia. The first is in offshore construction, which is a very challenging sector still dominated by foreign companies. The second is related to the machines and equipment that we must import in order to develop local projects. Industries and engineers in Indonesia should work together so that the country can become more self-sufficient in terms of its capital goods for oil and gas projects. Of the roughly US $7 billion in annual O&G expenditures, about $2 billion are absorbed by the procurement of foreign equipment.

What is your final message to OGFJ’s readers about Rekayasa and Indonesia?

There are huge opportunities in Indonesia today, from geothermal to low-rank coal and agribusiness. For any of these endeavors, Rekayasa is ready to be the partner of choice.

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