with Mike Collins, Regional Director North East Asia, AMEC Growth Regions, AMEC
AMEC boasts a 70+ year commitment to the Chinese market, having taken its first steps in the region in the 1930s when it built towns-gas plants based on coal gasification for cities including Shanghai. How has this company’s presence historically developed in this region?
Firstly, I would note that we have built some of our capability in China via acquisition. A major milestone occurred in 2002, when we took a Secco contract for an ethylene plant in South East China. This undertaking marked a new level in our ability to deliver projects in the oil & gas and petrochemical industries in the China market. With the execution of the project, we were able to broaden our customer base and begin to provide similar services to other customers.
As the market has evolved, AMEC has also had to evolve. We see that the model of delivery that we used with Secco is not a model that we can any longer use today. We have adapted to reflect what the market—which, today, has markedly matured—needs. Our customer base has matured, and expresses a different requirement.
I believe that one of our most notable responses to the changing environment is the way that we have nationalized our workforce. The number of expats that we had on the Secco project was far greater than the number we employ today. In fact, we are quite proud of the fact that the majority of our contracts are manned purely by Chinese nationals. I myself am the only expat working in our Shanghai office, and I feel extremely privileged to be able to say that.
We are a different AMEC now.
As part of the evolution of AMEC’s implementation framework known as the AMEC Way, in 2011 the company instituted a project delivery policy that mandates a common global approach to the process. How would you describe your understanding of this approach, and its implementation in China?
Essentially, this framework provides a great degree of consistency in the way in which we provide solutions around the world. This global implementation program looks at all aspects of what we offer as core services, and provides a common approach not only toward our development of competencies, but also toward project management systems. We ensure that there is consistency and integrity in our approach globally.
AMEC was the first-ever foreign company to receive a project management contract from Petrochina—for consultancy services on the $3.5Bn Dushanzi petrochemical expansion project in 2005. Neil Bruce, managing director of AMEC’s oil and gas division, commented at the time, “The fact that this is the first time that PetroChina has awarded work of this type to a foreign company is a testament to our project management capability and our reputation in China.” You have since worked with PetroChina again—as well as with companies like Shaanxi Yanchang Petroleum. What value do you believe these firms see in employing AMEC?
We are able to bring a global approach to a local project, and apply a local workforce. We take the best practices from our projects around the world and share them with the local organization for application. As AMEC, we also have a common competency management system, known as the AMEC Academy. If we look around our Shanghai office, many of the desks have certificates from this training program. We are quite pleased with the way we have been able to advance the capabilities of our staff here in China—and this, in turn, provides additional value for our customers.
Does AMEC localize its training program as well? Or are all Chinese participants sent to receive training abroad?
I believe in any situation of this kind, you must look to achieve a good mix. There has to be an adaption to suit the local environment: in our case, we have an overall training program, but we include some local elements as well. We continuously modify and assess whether the program meets the needs of not only our organization, but those of our customers.
AMEC has recently formed a joint venture with Shanghai Zone Petrochemical Engineering Co. Ltd (SZPE). The new venture will allow AMEC to undertake detailed engineering in China for the first time. How does this venture illustrate your broader development strategy in this market?
I mentioned previously that we needed to evolve to reflect changing market requirements. For instance, it became obvious to us during our strategic reviews that we needed to broaden our offering in order to give our customers a better continuity of services throughout the project.
We are pleased that, through extensive due diligence, we were able to find the right partner. The JV has delivered upon our targets, and now provides a platform from which we can grow and give our customers a more comprehensive solution to compliment the consultancy and project management services that we offered in the past.
We are looking to do more of the ‘EPCM’ spectrum, and to look beyond, as well. Every asset that gets built must be maintained, modified, and enhanced throughout its lifecycle. We are now able to provide the relevant engineering support in this sense to our client base.
AMEC’s Vision 2015 goal is to achieve earnings per share of greater than 100 pence in 2015—more than double the starting point in 2009. And indeed, AMEC has reported a very strong order book for 2012: globally, the company has a backlog worth £3.7Bn, and expects double-digit growth in 2012. What is the role of China in helping to drive this growth?
Our targets in China mirror those of the broader Group. There is opportunity now, through our investments in China, to grow our business according to a similar growth profile to that mentioned in our Vision 2015. China provides us with a strong market of domestic clients, and the country increasingly has a market that looks quite international, as well—this development connects well with AMEC’s global offering. Asia Pacific as a whole is a very high-profile growth region for us.
What do you believe your clients in the China market think of when they hear the name AMEC?
I believe that the clients that know us in China associate our name with quality, consistency in application, and value for money. We spoke about our efforts to increase our service portfolio—the fact that clients demand a greater continuity of services from us is proof in itself that we provide a valuable service to our customer.
You have held your current position for only two months. What are your immediate impressions of the market? Mr. Dolman of Baker Hughes China, for instance, remarked that he was most struck by the ‘sense of urgency’ he felt as China works to develop limited resources in the face of climbing energy demand.
It became pretty obvious to me quite early on that China has a significant role to play in the oil & gas industry—as it does across all of the other sectors where AMEC operates. The opportunities across the various sectors differ, depending on the maturity of the relevant local supply chain. However, it is a fact that consumption of energy is only going to increase, and this reality has an automatic effect on the demand for additional infrastructure in the home market — one need only look at the five-year plan for shale gas to become sure of that. Such demand creates opportunities for companies like our own.
If you can position yourself in the right place, China can be a very lucrative market. We have already started doing some work in areas like unconventionals. I am speaking of very early stages at the moment, but, strategically, we see this as a targeted growth sector.
We have the global capability, the local execution, and the local partnerships in place. We certainly have a plan to bring value to this territory.
With that said, as a service provider, we see that the Chinese have done a fantastic job in developing their own capability. To position ourselves in the market, we need to have a very thought-out, strategic approach.
The rise of China’s domestic engineering companies is quite interesting: they have gone from non-participation in complex international projects built in China, to participating in such projects as joint venture partners, to actually being utilized exclusively on many major infrastructure projects.
I believe this story is similar all over the world. The local supply chain fraternity evolves and becomes more competent over time. International competitors must evolve with it. If we stand still, it becomes very threatening indeed. Our investment in SZPE makes sense for this very reason—we are partnering with a local player, to create what we would like to think is a Chinese offering.
What does AMEC need to achieve in China over the next five years?
I believe that we must lessen our dependency on Oil & Gas. While we will continue to grow this segment of our business, there are competencies that we can take from this niche and implement across other sectors. AMEC is not purely an oil & gas company: we have offerings across four key markets and eleven sectors. In five years’ time, I hope that AMEC in China will be known as more than a downstream Oil & Gas service provider. Of course, concurrently, Oil & Gas will continue to be our foundation.
What advice can you offer to a fellow expatriate manager parachuted into Beijing?
From my little time spent here, my immediate response would be to take a step back, understand the culture, and understand the environment before you form your opinions. The Chinese have a truly fantastic culture. I am privileged to be working with an excellent team that have a real sense of pride and a real desire to achieve.
What is your final message to the international readers of Oil & Gas Financial Journal?
China, as a global influence in the Oil & Gas industry, will only continue to get larger. To be a global player in the service industry, if you do not recognize the significance of this market, you do so at your peril.