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Interview

with Terry Bayliff, Global Leader, Oil & Gas, Laing O’Rourke

07.12.2010 / Energyboardroom

Laing O’Rourke has chosen to centre its global oil and gas organisation here in Brisbane. What were the factors behind this decision?

The oil and gas sector is a new sector for Laing O’Rourke, but we are fortunate that we have a couple of projects already: we were contracted by LNG Ltd. to build the first train of their 1.5 tonne Fisherman’s Landing LNG plant. That project was moving along in partnership with LNG Limited until the point when Shell took over Arrow Energy, and part of that deal excluded the gas being made available for LNG Limited, so the LNG Ltd. project went into suspension. I came on board when that project was live and was the executive sponsor of that project.

Laing O’Rourke also have a utility project on Gorgon, and in the upstream marketplace in Queensland the company has recently been awarded the contract for the Kenya water treatment plant for BG, and we are active in this area. Earlier this year we completed the Dalby power project for Origin, which is powered by gas from unconventional gas fields. Laing O’Rourke today is very much active in the gas industry, and in terms of development opportunities there is nowhere in the world that has as many opportunities as Queensland does right now.

The level of opportunity in Queensland for Laing O’Rourke’s offering is quite unique. The company specialises in multi-discipline, self-perform construction work, and within Australia there are not many general contractors like that. Most contractors are single discipline: they are either civil, mechanical, or they areelectrical disciplines, whereas Laing O’Rourke offers a full suite of packages.

Laing O’Rourke is also an international organisation, so it was relatively simple to move people like me here from other locations. The company has continued to do that: we have moved around 300 people into Australia over the last couple of years.

Laing O’Rourke sees great opportunities in the CSG to LNG market: we have got other businesses such as building construction and rail that are complementary to these new developments. I look after the oil and gas business, but the company also has power and water businesses, which are both a part of the coal seam gas to LNG process: this means that the company has an opportunity for all of its business lines to be involved in the bidding process.

How smooth was the transition into this new sector for Laing O’Rourke?

We have already done several projects in the sector: our power project at Dalby was very similar to the type of work required on these projects. Although there are some unique oil and gas skill sets that a company must have in order to compete for these projects, 80% of the skill sets are the same as any other type of construction. As long as a company has the processes and procedures, and the welders and the pipefitters, you only need to bring in the few specialists that will be able to manage the business. The industry in Queensland is slowly taking off, but Laing O’Rourke is making progress and being awarded projects, and we hope over the coming two to three years we will be even more successful.

Do you feel like you have already done the hard work by getting your first contracts on these LNG projects?

These projects were really just a toe on the foot of the ladder. Real success comes with the multiple awards that set you up as a competitive operation. It is demonstrating superior safety performance that is going to convince customers to keep on giving us work. So it is getting repeat orders and developing the work that we already have that will make us a viable business here. It’s not enough to get a sporadic award here and another in 18 months: we want consistency so we can build up our organisation, and that will attract people. People won’t come to join Laing O’Rourke in oil and gas unless we have a significant amount of projects. By having multiple awards we will get the right people.

Your experience working on the Darwin LNG project for Bechtel must have been invaluable for starting Laing O’Rourke’s operations in Queensland. What were the new challenges that you had to face here?

There were two major challenges. The first was customer recognition: customers understanding the business that we are in and what our capabilities are. Customers like to go to the companies they have dealt with in the past, or people whose names they can see on the side of buildings. To introduce Laing O’Rourke and the idea that the company has a global capability has been the biggest challenge: getting onto everyone’s bidders lists and having credibility.

The second challenge is attracting the right level of talent. If you are not perceived as being in an industry, then the top performers from that industry are unlikely to join your company. With my background we have been able to convince some senior talented people to come on board and help us grow the business.

What is your growth strategy? For how long will you concentrate on the Queensland market?

I expect that there will be a period of up to three to five years of growth here in Australia: winning projects and demonstrating excellence in execution. We have set up an operation in Toronto, and there are other areas around the world that we think will provide opportunities, but to go to those areas you have to take something with you. We need to demonstrate our suite of capabilities. This is the offering we are going to take around the world and it has to be grown here in Australia initially.

We also have a senior Oil & Gas sector manager, Andrew Tan, based in Perth and we are hoping to follow up our win on the Gorgon project Utilities contract, with success on the major conventional gas projects in WA.

So where do you see the biggest opportunities for Laing O’Rourke to develop that name in the next couple of years here in Queensland? Which are the projects that you are really focused on?

The projects that work well for Laing O’Rourke are mainly in the upstream coal seam gas market, because more than anything they require project management skills, logistics, community and stakeholder management; all the things that we have a proven track record of doing in other parts of our business We see here in Queensland vast tracts of coal fields and their landowners, who all have concerns that this industry will leave a lasting impact. We have to make sure that the lasting impact is positive. We want to be seen as a presence of good, so local employment and using local services is extremely important to Laing O’Rourke. Unconventional gas means that the industry needs to be closer to the community than in conventional gas projects, and this means the industry has to act responsibly.

Queensland will see the world’s first CSG to LNG projects taking shape over the next few years. How will this new technology impact Laing O’Rourke’s business here?

The technology issue is not something that we have a great concern with, because we are not engineers. Our engineering skills are in EPC capability on mining and water packages, but in oil and gas customers tend to contract engineers who will work on engineering development: they bring things through to the point where construction contractors are brought in. By the time we get to a project, the remaining construction work is normally pipe, cable and compressors.

What does have an impact is recognising that on these vast quantities that we have to install, we have to look at new installation techniques and methods to make sure that we can meet schedules and be competitive and efficient. There is an execution issue for us in terms of technicality but it is not the engineering processes that will affect us.

On the water treatment project that you have with QGC Laing O’Rourke is partnering with GE. To what extent will you use partnerships like this to gain access to the market?

These partnerships are significant. GE was Laing O’Rourke’s partner on the Dalby power project, and we have partnered with them on several other projects: it is a partnership that is proving very fruitful. Many smaller coal seam gas players are looking for a one-stop shop. With LNG Ltd. for example, Laing O’Rourke partnered with SKEC, a Korean engineering company. Our company provided construction services and EPC for the LNG Tank: SKEC were involved in the engineering development for the process plant itself. With that combination we were able to give LNG Ltd. some certainty through a lump-sum proposal: their plant would get built and it would get built to the highest technical standards.

Without partnerships like these there are some barriers to entry to some projects. We are currently working on some proposals with Uhde Shedden, who are bringing their engineering skills to assist us with some of our upstream proposals, and we are bringing our construction skills to help them on some of their feasibility studies.

Customers like to see continuity. If customers see different partnerships every time they sit across the table, they wonder why the relationships didn’t work the last time around, and whether it is going to work this time. If you can sit across from your customer over the life of several projects, and let them see that there is a good relationship with your partner, this is extremely positive. QGC for example explained that Laing O’Rourke’s advantage on the water treatment plant tender was that the company and GE looked and acted and sounded like a team, like one company.

Everyone seems very optimistic about the way that the plans for four LNG projects in Queensland are progressing. What are your opinions on what the eventual outcome of these projects will be?

These mega projects all get built eventually, just not all at the same time. Could I see in twenty years time four plants at Curtis Island? Absolutely. I was in Qatar from 1987 to 1992, working for Bechtel on the original North Field development project, and at that time it was mooted that there were would be as many as twelve LNG trains. In 1995 they commissioned the first plant, targeting six trains initially and fifteen years later, Qatar Petroleum is the world’s largest LNG player.

Australia not only has conventional gas in Western Australia, but also Queensland’s coal seam gas industry and the potential for this to expand to New South Wales as well. Will APLNG get approved next year? There is a good probability. Will Arrow Energy combine with someone else? There is a possibility that it might happen: they may take a view that there is no need to build further LNG facilities when there might be the chance to buy into existing projects.

The point is that the projects as they stand at the moment do have the potential to come to fruition. There is even the potential for expansion of these existing plans: BG Group CEO Frank Chapman was recently quoted in the press as considering expansion plans. That is a sign of confidence to the marketplace.

What brought you from a very good position in Bechtel to come to Brisbane and to start this new project for Laing O’Rourke?

I had previously worked on the Darwin LNG project, so my wife and I had already lived in Australia for a few years and really enjoyed it. Professionally, I enjoyed the control that having your own workforce brings. I was extremely impressed by the labour productivity that you find in Australia. The Darwin LNG project finished six weeks ahead of schedule: how many mega projects would like to say they finished within six months! This was entirely due to the labour productivity onsite. Brisbane is a great city to live in. Not only does it have the best coffee, but it generally has a great climate as well. On top of that, this is a very exciting time for the state.

You worked for Bechtel for 32 years. How was it to come to a new company after so much time working for a company that you must have known intimately by that point?

When you work for Bechtel, companies will open the door to you: you are not knocking on doors to get on bidders lists. Rather, it’s the reverse. Your business development process consists of deciding which jobs you will bid on! With Laing O’Rourke in a new industry, getting onto bidders lists, getting companies to talk to you and to listen to what you have to say is a challenge, and you cannot just keep knocking on the door once a month: a company must have something to sell and something to offer. The biggest difference has been making an entrance, getting through the door with people. Also, being a smaller company than Bechtel means that Laing O’Rourke has to think carefully about what we bid and how we approach our projects.

If we were to come back and see you in five years, what would you like to have achieved with Laing O’Rourke’s oil and gas business?

If you were to come back in five years, I think I would like to have a significant workforce working on oil and gas projects; I would like to be able to take you round and meet some of our customers who would tell you that our safety performance has been exemplary, that we were a great company to work with, and to confirm to you that they had given us repeat business. That’s the key thing. We would absolutely love to be in a position where we were getting relationship awards rather than just transactional awards, but the only way you can get those relationship type awards is by performing, and if we can get some projects performing well, we will have enough work in the coal seam gas business to keep the company busy for twenty to thirty years, because the wells have to keep on being developed, so the customers here are going to look for tried and trusted performers. They don’t want to go through this whole bid cycle every time they come to do the same type of work. It just doesn’t make sense for them, and so if they can find people they can trust and rely upon to do a good job, then I would like to think we would end up being one of those companies.

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