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Mr

Scott Cummins & Hugh Cuthbertson Executive Vice President, Offshore and Vice President & General Manager, McDermott, Asia Pacific

23.07.2014 / Energyboardroom

Img1Mr Scott Cummins and Hugh Cuthbertson, respectively the Executive Vice President, Offshore and Vice President and General Manager, Asia Pacific for McDermott discuss the company’s restructuring and ambitions in the area. Featuring comment on the business’ interaction with key liquid natural gas projects in Australia, this interview gives holistic impression of the capabilities of this company.

What is the importance of Singapore and APAC to McDermott; to what extent has this changed since your restructuring?

Scott Cummins (SC) – Singapore is one of the key operating units in our global organisation; it is the regional diversity and breadth of opportunity here which means that our whole business offering is applicable and relevant to this region, whether it be work in the subsea, deepwater or in the offshore business, McDermott’s historic central offering. Asia-Pacific (APAC) has opportunities for all of these sectors.

McDermott is able to use the experience gained in the APAC region in order to promote its business elsewhere by drawing on our extensive track record of project experience as well deploying / transferring APAC skills, experience and capabilities elsewhere in the organisation, enhancing our capabilities in new market areas.

Hugh Cuthbertson (HC) – The business requires a broad range of technical abilities here in order to tackle the multitude of operational challenges that may arise. To give a few examples highlighting the diversity of contracts McDermott is working on, these include significant Engineer, Procure, Construct and Install (EPCI) subsea solutions, floating solutions, shallow water transport and installation (T and I) jobs and delivery of a diverse range of engineering products.

SC – McDermott’s recent restructuring into Subsea and Offshore product lines has changed the focus of our efforts on delivering our clients’ projects. By specializing in these two divisions we help to ensure that the best resources are engaged on the specific delivery requirements for each type of project. Ostensibly we expect that our clients will see the same dedication to safety, quality, constructability and on-schedule delivery from McDermott worldwide but now with a more specific focus on their bespoke project needs.

Geographically we have also made a minor change to how we work with respect to projects offshore east India – which as well as being closer to our APAC operations, are predominantly Subsea in nature. Accordingly the specialist engineering and project execution capabilities in APAC will be used to execute these regional projects.

In terms of fabricating and producing equipment you have facilities at your Batam fabrication facility and also at your joint venture yard in Qingdao in China. What is the right model for profitability here in APAC?

SC – There is no single solution for delivering all the projects in the region. APAC is a big place and multiple solutions are required to engage fully with all the markets present here. The McDermott Batam Island fabrication facility is our major construction hub within APAC region for EPIC projects and has been operational since the early 1970s and is almost entirely operated by Indonesian professionals and specialist craftsmen. Having said that, we have also recently created a joint venture with a Malaysian partner in that country which will provide McDermott with new construction capabilities that better meet our clients’ requirements. This joint venture helps provide much higher local content for the Malaysian projects and our offshore installation capabilities will complement our partner’s fabrication capabilities. This collaborative effort is also creating a great project management and engineering centre in Malaysia.

In Qingdao, China we operate a joint venture fabrication facility. This offers another means of delivering onshore modules, or FPSO topsides as well as subsea structures. Collectively, McDermott has three prime means of fabrication solutions in APAC – to deliver high quality custom-built products to meet specific local client requirements.

In terms of your current projects, what are your key offerings which are exciting investors and delivering to clients at the moment?

HC – The Ichthys project offshore Australia is one of the largest EPCI subsea projects globally. It is currently moving through the fabrication phase with offshore operations expected to commence later this year. The project is of such scale that it has required teams working in multiple locations around the world designing solutions to many technical challenges. McDermott has a large and competent technical team leading this effort in Perth devoted to delivering this project successfully. This initiative is a flagship effort for McDermott and will demonstrate our ability to complete EPCI Subsea projects on a very large scale. I am looking forward to Ichthys moving into the offshore phase later this year.

Within South East Asia, we are really pleased to be working again in Brunei. This is the first operation in the country for our company since the 1990s. This project is progressing very well and is being carried out by our construction barge DB30.

We also have an EPCI project for delivery of an offshore platform in the final stages of construction in Indonesia and will perform an offshore float-over later this year to install the topsides.

SC – Completing the Gorgon PAU/PAR project including shipping a large number of these LNG modules to Australia has been a notable accomplishment. Subsea structures for the Gorgon project have also been fabricated by McDermott in Batam. These were completed recently and demonstrated the ability of the yard to support both Subsea projects as well as our traditional offshore work. More than 14,000 tonnes of structures were fabricated for this project and McDermott rose to the technical challenge of meeting the very high specifications of a 50-year design life for all structures and components.

HC – For the last month, the company has also been working in Myanmar on a fast track offshore installation project. This meant deploying a semi-submersible construction vessel equipped with high capacity lifting equipment suitable for working in monsoon conditions which can present challenging operating conditions for offshore operations.

What are the trends emerging in the APAC region and how is McDermott reacting to them?

HC – To talk about Australia first, the country has seen a significant shift in the market over the past few years. There is a heavy emphasis on subsea operations and companies are now studying how to deliver floating liquidified natural gas projects. In Perth particularly, many of our clients are looking to how they might develop the remote gas fields using this relatively new technology.

In the established fields, we see expansion plans underway now to be able to maintain the supply to the LNG plants. Our increased focus on subsea projects has us well positioned to participate in these projects.

SC – EPCI projects in Malaysia are becoming more common. Malaysia historically has followed a segmented contracting approach, but now we see engineering, procurement, fabrication and offshore installation being tendered on an EPCI basis. McDermott is able to deliver this full suite of solutions and has added to our extensive delivery capability in country by establishing our joint venture there. Together with our partner TH Heavy Engineering, we have a strong fabrication resource in the country as well as our traditional strength in offshore operations.

The other principle change is the scale of projects across the region. Ten years ago, many large projects would cost perhaps USD 200-500 million. Right now, you are speaking one, two or even three billion USD as the cost of taking a project forward. With this scale of project development we have had to ensure that as an EPCI contractor we have the requisite resources, skills and depth of experience across the organization to undertake such large projects.

The other good thing about the changes in APAC has been that in many of the countries in which we operate, attracting staff and resources to complete these initiatives is easier now that skills and experience have increased across the region in the energy sector. This has enabled us to offer more localized delivery solutions in each area especially in countries such as Indonesia and Malaysia.

Focussing on the increasing demands of these projects on your capabilities, how is Singapore a city which allows you to deliver for clients whilst also guaranteeing more stable returns for your shareholders?

SC – Singapore is central to the region, allowing the company to serve a number of countries in close proximity from here. It is easy to get to and travel from, the infrastructure is excellent and clients like coming here.

HC – From Singapore you can get to any of McDermott’s regional offices easily and safely within one day. The pace of business here is very fast and means that we can meet clients at short notice within the area.

The workforce here is very responsive and most clients are readily accessible from Singapore. The region we cover from Singapore is very broad and we could not do this if we were not based in a central hub location. Accessibility is a key forte of Singapore – it is central in this region.

With regard to McDermott’s restructuring, what will be your key objectives for the company’s offshore section following your move to London, Mr Cummins?

As an organisation, the key objectives will be to grow the company and to help to ensure profitability in the two main sectors – Offshore and Subsea. The company has two executive vice presidents who will be able to focus on these sectors entirely. We will work closely with the markets, partners and potential clients to deliver optimized solutions, drawing on the entire asset base of McDermott. This global resource is of particular importance and will be a powerful driver to secure further work for the company.

Some of these big projects are of such scale they need more than just assets available in APAC to complete them. McDermott can be trusted to deliver these projects reliably as we can draw on the resources of our worldwide in-house engineering expertise, fabrication capabilities and global fleet of multiple specialty vessels, including the Derrick Lay Vessel 2000 (DLV2000) – our ccombination heavy lift and deepwater specialty S-Lay pipelay vessel with 2,000 tonne crane currently under construction here in Singapore.

McDermott now has an organisational structure capable of delivering this cohesive world view yet also providing a structured, regional focus supported by the right local resources and expertise operating to world standards. The business is now seeking to grow in areas where it has not had a traditional presence, or where it has not been present at all. We have been quite strong in APAC and the Middle East, but are seeking to enhance our growth in the Americas, Africa and the North Sea.

Here in Singapore, there is a great deal of competition for human resources. How is McDermott ensuring it has access to sufficient talent?

If you win exciting projects, people will always be interested in coming to you and we have some very exciting projects in progress today including the Ichthys subsea project. On top of that, McDermott has a great brand, values and reputation, and there is an understanding that the company is an excellent place to work. By gaining the right projects, as we have, people will continue to be attracted to our business where they can in turn develop their own experience and careers.

Your tagline is ‘delivering certainty’; how is your business delivering certainty for investors?

HC – This is a challenging business. We focus on setting a plan and executing all the endeavours we pursue successfully. From time to time, achieving success can be challenging but our core competencies and focus are what we wish to offer our clients. This emphasis means that McDermott can be trusted to complete projects to the required schedule, safely and to a high standard.

SC – The restructuring that we have undergone is very significant, seeing the addition of a new CEO, two new business sections and the implementation of a strategy to help to guarantee growth. The degree to which the company has been transformed should not be underestimated – it has resulted in a leaner more effective organisation capable of delivering on our client commitments.

What would you like APAC to mean to McDermott in future, and vice versa?

HC – I would like to see APAC region become a significant growth area for the business. APAC clearly has great growth potential, and McDermott should move not only into the large complex projects available in this region but also into execution of other projects to deliver on our clients’ needs. This will further strengthen our position and deliver strong results for the company.

SC – From a corporate standpoint, I would like to see our global collaboration ensure that the business delivers APAC the resources it needs to complete the projects we are involved with in the region. We will have access to further assets currently under construction, including the DLV 2000 pipelay and heavy lift vessel, and we expect that their completion will see a much reinforced ability for McDermott to deliver challenging projects in this region.

To read more articles and interviews from Singapore, and to download EnergyBoardroom’s latest free report on the country, click here.

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