Replumaz – Managing Director, SBM Offshore Malaysia
The managing director of SBM Offshore Malaysia discusses the company’s long-standing history in the country, its work on Malaysia’s first deepwater FPSO, and Kuala Lumpur’s role as a regional center for the group.
SBM Offshore has been active in Malaysia since the 1960s. What is the evolving strategic importance of Malaysia to SBM Offshore’s global operations?
SBM Offshore’s history in Malaysia goes back over 50 years when SBM supplied the world’s first CALM buoy to Shell at Miri, Sarawak. In 1960, Gusto designed the first oil drilling jack-up for Shell which was located offshore Malaysia. Since that time a total of 13 CALM buoys and four large mooring systems have been supplied to various clients in Malaysia. SBM Offshore was mainly active in Malaysia for buoys and terminals from the 1960s to the early 2000s.
In 2003, we entered into a partnership with MISC for the award of the FPSO Kikeh lease and operate contract. The FPSO is owned by MDFT and operated by MDPC, both joint ventures between MISC and SBM Offshore. In early 2006, SBM Offshore decided to open an execution center in Kuala Lumpur, as a new engineering and project center was needed to meet growing global market demand. I joined SBM Offshore at this point with the mission to develop the Malaysian office because it was decided that strategically Kuala Lumpur would be an ideal base for the company’s regional hub. Although we knew the Malaysian market alone would not be big enough in terms of FPSO and FSOs to support our offering, we were confident that the larger region would be well served by a new engineering center. Additionally our Malaysian Regional Centre serves other markets; for example we project managed the EPC for N’Goma FPSO and in December 2014 we successfully delivered the vessel offshore Angola, where is now producing and is operated by SBM’s Operations division.
The Kuala Lumpur office has the project management and engineering capabilities to execute large EPC projects such as a complete FPSO and other turnkey work. SBM Malaysia is able to hire experienced engineers and designers due to the large reservoir of highly qualified professionals in Malaysia with oil and gas experience and to draw on the pool of talent within the SBM teams from around the world. We enhance FPSO skills, with extensive training by in-house technical specialists. SBM Offshore’s Corporate Group Technical Standards (in place over 10 years) provide solid support for the engineering teams in Kuala Lumpur.
SBM Offshore maintains a key long-term partnership with Keppel Shipyards in Singapore. Given this relationship, what factors made SBM Offshore chose Malaysia as its hub for Asian project execution rather than neighboring Singapore?
SBM Offshore has a partnership with Keppel built upon years of collaboration, and we appreciate Keppel for their expertise. In Singapore, you do not find the same number of oil and gas specialists as in Malaysia, which is the main rationale for setting up a Regional Centre in Malaysia. Kuala Lumpur was selected to host this center for a variety of reasons. SBM Offshore maintains a strong strategic relationship with PETRONAS, while the country is investor friendly and costs are reasonable compared to other locations considered.
Overall, Singapore is a good location for construction, and, in Singapore, we work with Keppel on FPSO conversions and turret construction, Dyna Mac and Exterran for topside. If we decide to convert a FPSO or to build topside in Singapore, it is very straight-forward to pull together a world-class project management team in Kuala Lumpur.
In order to increase falling production rates, Malaysia has been looking into new frontiers for E&P such as deepwaters. How has deepwater exploration evolved in Malaysia, and how is SBM Offshore poised to advance deepwater horizons in Malaysia?
Petronas has wanted to deploy a full spectrum of floating solutions in Malaysia for its deepwater efforts – from FPSO, SPAR, Tension Leg Platform (TLP) and semi-submersible. The Kikeh project was Malaysia’s first deepwater venture and included both an FPSO, supplied by SBM Offshore, and a SPAR platform by another supplier, while the second deepwater project was Gumusut for which a semi-submersible floating production system was installed. Finally, the Malikai development for Shell is a (TLP). Our FPSOs constitute an ideal solution to move forward deepwater exploration in Malaysia. We believe FPSOs are well suited to the characteristics of offshore Malaysia and we look forward to future opportunities for FPSOs locally. However, there have been few discoveries recently in deepwaters of the size of Kikeh, Gumusut or Malikai. The oil price may also dampen the local market.
SBM Offshore constructed Malaysia’s largest FPSO for the deepwater Kikeh field off Sabah. How did this project advance SBM Offshore’s expertise for complex projects in the Malaysian market?
Malaysia is an interesting market for SBM Offshore because of the possibilities in terms of deepwaters. Kikeh represents the first deepwater project in Malaysia, and the associated FPSO Kikeh was indeed Malaysia’s largest FPSO and a major undertaking when completed in 2007 and a success story for MISC and SBM Offshore as partner in the FPSO Kikeh. Although most of the engineering for the project was completed in Europe, the FPSO Kikeh was constructed in Malaysia with MMHE. Furthermore, the midwater GAP solution delivered by SBM Offshore to connect the FPSO and SPAR was the first technology of its kind in the world and has remained the only such development in the industry. We also completed works for the Siakap North-Petai development, a brown field assignment on board FPSO Kikeh; oil production began in late 2014.
In addition to managing major projects such as N’Goma FPSO, Ichthys Turret and Siakap North-Petai Development for FPSO Kikeh, SBM Offshore Malaysia has also supported other SBM Regional Centers through engineering on specific projects.
How have you cultivated your relationship with Petronas?
Our relationship with Petronas operates on several levels. Firstly, we collaborate through our partnership with MISC to jointly operate FPSO Kikeh, while also operating in Brazil the BC-10 FPSO and a FSO in Myanmar (SBM Offshore alone). Secondly, we develop direct contact with Petronas to promote our technology for future projects and are in regular contact with them to understand their needs and plans and where SBM Offshore could offer solutions.
SBM Offshore maintains a significant IP portfolio including patents, trademarks, and copyrights, ensuring we maintain our technological edge, as well as an offshore laboratory in Carros, France. What has been SBM Offshore Malaysia’s local contribution to R&D for the region and the Group as a whole?
Globally SBM Offshore spends 1 percent of revenues on research in development. In the past all R&D efforts were centralized in Monaco, however, in 2011 we decided to create a dedicated technology and development team in our four Regional Centers – Kuala Lumpur, Houston, Monaco, and Schiedam – to better serve the technological needs of the various regions and better deploy our resources. This has created synergies and resulted in the development of pioneering technologies. More than 20 dedicated professionals are employed in Kuala Lumpur on a permanent basis to undertake extensive R&D work, particularly in the area of FPSO topsides.
The world’s first operational FLNG, the PFLNG1, is slated to start operations at the end of this year in Malaysia. SBM Offshore is also focusing on the FLNG market as a main contractor for medium sized projects. How are you positioning yourself to take advantage of this market opportunity in Malaysia?
The PFLNG1 and PFLNG2 will represent a major step for floating LNG in the region -at the time when contracts were awarded in 2012, our strategic focus was on the FPSO market. However, our technology teams were busy perfecting SBM Offshore’s pioneering Floating Liquefied Natural Gas (FLNG) concept. SBM Offshore is ready to embrace opportunities in FLNG and our strategy is now clearly in this direction. Our mid-scale FLNG (1.5-2 mtpa) solution is ideally suited for the 700-plus stranded gas fields between 0.5 TCF and 2 TCF and is also a good fit with SBM’s current FPSO product line, in terms of project scale, risk and investment while leveraging our expertise in conversions – a factor that is very relevant in today’s market impacted by low oil prices. Our FLNG conversion offers a favorable alternative to more costly new-build options which take longer to construct. SBM Offshore would certainly be interested in working on future FLNG projects in Malaysia.
Many of the technologies and capabilities that SBM has in-house are applicable to the FLNG concept. For example, the same turret mooring systems used for FPSOs can be used for FLNG. Notably, SBM is providing the turret for the first new build FLNG project.
SBM Offshore undertook a strategic restructuring plan late last year. How has this exercise impacted operations in Malaysia and the wider region?
This restructuring had two main objectives. Firstly, we aimed to have greater specialization of each Regional Center. This means that the Monaco center now focuses on large turret projects, while the Malaysia center is more geared towards FPSOs. Secondly, we also had to adapt to market changes with the lowering of the price of oil and were forced to reduce some staff, while maintaining our core competencies. It is currently a difficult moment for the industry with many oil companies cutting investment budgets. In this regard, we hope the market will pick up in 2016 and return to a more healthy state in 2017. SBM is using this slow period to focus on managing our cost base in order to be able to offer clients the advantages of those savings.
How do you ensure that you recruit and retain the right talent at SBM Offshore Malaysia?
Since Malaysia is a hub akin to Houston or the North Sea, a large number of companies compete for the same talent pool and create a tight job market. SBM Offshore makes sure to properly remunerate, incentivize, and train our staff to retain the talents in our organization. We invest in their professional development. As a result, SBM Offshore in Malaysia has thus far maintained a reasonable turnover given market conditions.
One of SBM Offshore’s main HR focuses in the promotion of Malaysian talent. When we arrived in Kuala Lumpur in 2006, expatriates comprised most of our technical staff as we needed to integrate the SBM way of working and transfer the company’s FPSO expertise. Today, we have begun in earnest to transfer responsibilities to local talent, and two of our six head of departments are Malaysian. Our objective is to have Malaysian only heads of department and to have Malaysian project managers for larger projects in the coming years. Nonetheless, it is still difficult to find Malaysian project managers, as they are generally loyal to companies they work for or work outside Malaysia. As such, we recruit younger talents and gradually train them and develop them for management positions.
How do you see the role of MNC services providers like SBM Offshore in the country’s path to become an oil and gas hub by 2020 as per the ETP?
SBM Offshore has promoted Malaysia on its path to being the regional oil and gas hub since day one. Over 500 staff work diligently to translate Malaysia’s hub potential into a reality – this is a clear objective. On average, eighty percent of our staff are working on projects outside Malaysia – not only in Asian markets like Vietnam or Australia but also in Brazil, West Africa and even Canada. Malaysia is thus a global hub for SBM Offshore, and we continue to grow our competencies in Kuala Lumpur to push the industry forward.