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Interview

with Valery Kaminskiy, President, SNG Alliance

05.07.2010 / Energyboardroom

Stroyneftegaz Alliance was founded in the early 2000s and quickly became one of the main Russian construction companies focused on the oil and gas industry. As the president of the company, could you briefly present Stroyneftegaz Alliance to our Oil and Gas Financial Journal readers?

Stroyneftegaz Alliance (SNG Alliance) was established in 2003 through a merger of construction companies mainly specializing in construction of oil and gas sector facilities. The origins of these companies date back to the Soviet Union’s oil and gas industry, with over 30 years of experience in Russia, including challenging projects in the Far North of the country. The merger worked as a holding of companies with relations established back in the Soviet era under oil and gas construction projects.

The integration of these companies happened under certain conditions: every construction enterprise, working independently within the holding, is consolidated under SNG Alliance on the major sites.

Nowadays the companies within SNG Alliance Group operate in many Russian regions – in the central part of Russia, in the north of the European part of Russia, in Western Siberia and so on. The total number of SNG Alliance employees is 7,000 and the scope of its services embraces reconstruction and construction of new compressor stations, pipelines, oil and gas refineries, metallurgical works and civil facilities.
As in other industrial sectors, SNG Alliance applies the strategy of engaging highly specialized companies, improving the expertise and introducing cutting-edge technologies, materials and equipment. SNG Alliance, as the leader company, is expanding through developing its network of subsidiaries and rep offices in order to coordinate the construction projects. SNG Alliance has opened its rep offices in the city of Noviy Urengoy and the Komi Republic, as well as construction and engineering branches (SMU-1, SMU-2 and SMU-3), auxiliary and operation facilities.

Once the integration and the building of synergies is through, what are the next steps for the development of SNG Alliance?

SNG Alliance is currently adapting the advanced European know-how in technologies, methods and documents in Russia in order to gain considerable competitive advantages.

Moreover, the attitude towards joint ventures (JVs) between the national companies and foreign groups has changed significantly, not only in Russia, but also in the main emerging markets of China, India and Brazil. The businesses from these countries are establishing industrial unions with the European companies to tap the growing domestic demand for services that require unique technologies and procedures. A growing number of joint ventures are successfully implementing Western technologies and training their people. Therefore, SNG Alliance decided to follow this trend and customize its strategy for the possible international partnerships.

This transformation started very recently, a year ago, but we can already voice a few details: SNG Alliance is preparing a JV with a major Western engineering company specialized in project development, licensing and procurement of equipment and technologies and turnkey projects. We are developing the conditions of this partnership and its legal basis. Since the Russian legislation is rather different from the European, it has taken time to harmonize all the discrepancies. However, it will take a year more for all the formal technical and operational arrangements. If we manage to settle everything by 2012, SNG Alliance will deliver projects for the supermajors and offer an open-book construction portfolio including design, engineering, construction, licensing, procurement and turnkey projects.

Today SNG Alliance works with Transneft, Gazprom and large metallurgical companies.

What were the main challenges you faced in implementing this integration in Russia and internationally?

The main challenge is headhunting. After the collapse of the Soviet Union, the construction sector was out of the game. Unfortunately, people age; the experienced generation is stepping down and the new generation is not yet ripe enough. Our main challenge is not the lack of equipment, but rather its about brains and expertise.

One of SNG Alliance’s main strengths is attracting more and more young people from the best Russian universities and transferring the know-how to them from the most qualified employees.

Regarding the internationalization of our partners, the main challenge is to integrate European and Russian standards. The formal differences and the differing mentalities slow down the integration. The solution is hard work, common goals and close cooperation.

As you mentioned, today SNG Alliance offers a wide range of services, including reconstruction and construction of new compressor stations, pipelines, oil and gas refineries, metallurgical works and civil facilities. Which are the most promising on the Russian market at the moment?

Today, in my opinion, Russia is really lagging behind in the refining sector, which therefore offers untapped opportunities for growth. There is also increasing demand for re-equipment and overhaul of the existing facilities. From an economic point of view, it is much more cost-efficient to produce in Russia and export end products, especially if the oil and gas fields are close to the final consumer who processes the raw materials.

My vision is that construction and reconstruction of big hydrocarbon refineries facilities will be in full swing in Russia by 2012. The objective of SNG Alliance is to be ready for the construction and overhaul of modern refineries by 2012, in order to capitalize on this promising market.

On average, the cost of constructing a refining and transport facility for hydrocarbons ranges from USD 1.5 billion to 10 billion. To be able to construct a facility like this, you have to be really prepared because most of the companies that have the necessary licenses, equipment and technologies are located in South Korea, Qatar, USA and Europe. We have to be able to find partners and suppliers there.

SNG Alliance is also adapting to foreign standards, developing high quality environmental programs and other aspects that have always been ignored in Russia.

SNG Alliance employs a great deal of new talent from Russia and abroad in order to tackle the more challenging projects. Having said that, it is important to note that SNG Alliance’s vision is not simply to increase volume; our current policy is based on set figures – projects worth USD 600 million to 1 billion annually – and on delivering the best value on time.

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