Linh Austin – Vice President & General Manager, Middle East & Caspian, McDermott, UAE
Linh Austin, Vice President & General Manager, Middle East & Caspian for McDermott, discusses the company’s 50-year history in the region and how over time they have adapted their services and products to better meet the evolving needs of their clients. He also discusses the company’s new strategy “One McDermott Way” and outlines the benefits it brings to both the organization and the clients.
David Dickson, McDermott’s Global CEO, was pleased to announce that 2016 was a relatively good year for the company. Was that true for the Middle East segment of the business as well?
“The irony is that, amidst the oil downturn, we have actually continued to grow our business in the region.”
The Middle East was quite fortunate, as globally the challenge for EPC companies has been very tough, even for us in McDermott. That being said, we have had some real successes in North America with our work in Mexico and Pemex as well as in India. However, the stability has really come out of the Middle East; as a region we have been consistent in terms of booking work, and 2017 will be our single busiest year on record. The irony is that, amidst the oil downturn, we have actually continued to grow our business in the region. Some of the big accomplishments that have helped us get there, in addition to booking all of this work, include opening our new 300 person Al-Khobar office in Saudi Arabia and our Dammam fabrication facility. This is a very important component for us, as it helps us get closer to Saudi Aramco, who are a very important client.
One of McDermott’s strategies in the region is to focus on the National Oil Companies (NOCs). What is the rationale behind this strategy?
We have been in the Middle East for over 50 years and so have extensive experience in the region. We have been working with Saudi Aramco for over 50 years and with ADNOC before the UAE was even a country in terms of working and developing the fields in Upper Zakum and Lower Zakum. In Qatar we have built over 80 percent of their offshore infrastructure. So our history in the region is working with NOCs, that has been our staple. Over the years we have seen some changes in the NOCs, for example there is a much more local presence now, as opposed to expatriates, supporting the organization. I think that is correct, the focus should be on promoting local content.
What has the experience been like working so closely with NOCs, and how do you attract them to McDermott?
Having been here so long, we are used to working with the NOCs timelines in terms of how they make decisions around projects. For us, there are three things that we are always going to deliver – quality and health, safety and environment (QHSES), difficult projects delivery and innovation, that is a hallmark of McDermott. We believe that we deliver difficult projects better than anybody else, and in a region where the first, the biggest or the longest is always important, our ability to innovate is also a differentiator. If you look at the first float over installations in the Middle East, they were all done by McDermott, the biggest cable lays were all done by McDermott and the longest pipelines were also done by us. We have done all of the biggest and boldest projects, and that is our calling card. Irrespective of how the entities have evolved, and who our competitors are, if we continue to stick with those pillars – quality HSE, difficult project delivery and innovation – we will continue to be a big player in the game.
Over the past years, the priorities of the NOCs have changed dramatically. How have you adapted your services to meet their needs?
When oil prices were at 100 USD per barrel there were some bigger and bolder projects, and we had to innovate to execute them. Now that the price is low, the challenge in terms of production is still the same. If you look at Abu Dhabi, they plan to increase production to three million barrels per day and Aramco wants to maintain their production profile of 12.5 million barrels’ capacity even though their production is around 10.5 million barrels now. To be able to accomplish this, you need to continue to reinvest back into the fields. The challenge now, unlike before, is not necessarily bigger and bolder projects, but it is about projects that are more cost effective. We are coming up with solutions that allow customers to extend their dollar, some of these solutions are around supply chain but some are focused on helping them sequence their work. Given our history, our feed capability and our ability to bring in front-end engineering to the NOCs, sequencing assistance is starting to pay some real dividends. As we like to say, we bring global expertise to the local market.
Could you expand further on the company’s recent strategy “One McDermott Way”, and the benefits this is bringing to the organization and your clients?
One McDermott way is simply about making sure that the way we execute globally is consistent. Whether you get engineering from us from India, from Mexico or from Kuala Lumpur, you know that you have a McDermott standard. No matter the location, we have the ability to be flexible and work anywhere. For example, recently we were able to execute some work for a Middle East client out of our Asia yard. That has never been done before, we had always worked the Middle East out of Jebel Ali. We faced resistance toward this approach initially, but we have since proved to our clients that the One McDermott Way will provide the same level of quality and safety.
In terms of our EPC, we are very vertically integrated, unlike most of our competitors. We do all of our in-house engineering, all of our own procurement, our own fabrication and our own installation with marine vessels. By having that all underneath one house, we can control the supply chain and the timing and this gives our clients more certainty. Whether the job gets built in Jebel Ali or in Batam, it is still McDermott, and you know what you are going to get as a result of it.
Do you think this strategy runs counter to efforts in the region to promote local content?
No, not at all. This is about how we continue to support the localization initiatives but at the same time recognize that capacity has to adapt and grow according to market needs. What you do not want to do is build 100 percent capacity locally, because what happens is that when the market comes down, what do you do with the capacity? You want to build to 60 or 70 percent capacity and then adjust from there, that is what our model is.
Last year the goal for the Middle East segment of the company was to remain stable, and this year it is to grow. What are your strategies to accomplish this?
What we are seeing is that the Abu Dhabi and Kuwait markets are starting to open up, Saudi Arabia is pushing a lot of business, and Qatar, who had been in a relatively dormant state for the past 5 years, is also now starting to pick back up, because compression in the field is becoming an issue and they need to start development again. So we see a very big and healthy pipeline of work, and we are making sure that we grow to support that capacity.
In the past few years, people have gone back to fundamentals and refocused on the Middle East. How is this putting pressure on pricing and delivery?
This is the only place in the world right now that is issuing a lot of work, so we have seen a lot of new entrants to the market. However, if we stick to the same tenants of delivery, quality, HSE and innovation, we feel that we will continue to hold an important place here.
Prices, without a doubt, have been impacted all across the supply chain, everything from the commodity pricing to all of the services. This is obviously causing challenges, and countries are being very strategic with this situation. If you look at Saudi Arabia, they are getting projects at about 25 percent less than what they were paying for 3 or 4 years ago. It is very strategic for them to continue to reinvest at this stage.
Recently McDermott partnered with GE Oil and Gas to form the consultancy io oil and gas. Has this gained traction?
Yes, absolutely. io is a business that we see having long-term value here in the Middle East, especially if you consider the long-term regional plans governments have for field development. This is where io excels because it brings far-thinking, leading-edge expertise to the table to help meet these long-term goals.
What trends do you see in the coming years for McDermott’s offshore, deep water activities?
One of the subjects that is getting a lot of air time at industry conferences and events lately is around the price of deep water having come down quite dramatically in the past few years – the lifting cost off shore is very profitable at USD 50-60 a barrel.
We believe that long-term the deep water market is going to remain robust, and with that in mind we recently purchased the Amazon vessel a newly built pipelay and construction vessel. Our plan is to upgrade the Amazon to a state-of-the-art J-lay vessel to expand our ultradeepwater capabilities.
What do you hope is your contribution to the greater McDermott family in 2017?
We will continue to deliver, and make sure that we are well positioned to help the NOCs as they issue more work. We know there will be a lot more work this year, and we just need to focus on being price conscious and making sure that we are very clear on our execution strategies, and deliver the same value that we have been delivering over the years.