McDermott special: The offshore ace rides the wave
Linh Austin, the man leading McDermott International in the region, talks about how long-standing relationships with major clients are helping the American EPC contractor to maintain a healthy order book in the Middle East
McDermott International is one of the oldest Western engineering, procurement and construction (EPC) contractors to be operating in the region, and stands out from the multitude of industry competitors by virtue of its work for the regional oil and gas industry. The company bagged the number 11 spot in Oil & Gas Middle East's annual rankings of the Top 30 EPC contractors in the region and globally.
The Houston-based company, which has been operating in the Middle East out of its headquarters in JAFZA, Dubai, for more than 30 years, works on key offshore oil and gas projects for the regional giants. Recently, McDermott announced winning a large contract in the region from an unnamed upstream oil and gas operator for an offshore project. The scope of work includes engineering, procurement, fabrication, transportation and installation of offshore pipelines. Engineering and offshore mobilisation of McDermott’s in-house vessels has commenced for this fast-track assignment, with project completion expected by the end of 2016.
In an exclusive interview, Linh Austin, the vice president of Middle East and Caspian operations for McDermott, opens up about the company’s expansion plans in Saudi Arabia, its projects in Qatar and Abu Dhabi, financial results, and the sort of oil and gas contracts the company is keen to secure in the future.
McDermott has shot up the list from number 18 to number 11 in Oil & Gas Middle East magazine’s annual rankings of the Top 30 EPC contractors. As someone leading the company in the region, how does that make you feel?
The year 2015 proved to be a good one for us. McDermott began an aggressive turnaround phase before the market downturn, which played a pivotal role in our recent success. We booked significant backlog for our Middle East area through multiple contract awards in Saudi Arabia and Qatar. This includes a lump-sum award from Saudi Aramco under a new long term agreement (LTA), which was the largest award in McDermott’s history in the Middle East.
Our longstanding relationships with clients in the Middle East, and intimate knowledge of field conditions and requirements, allows us to provide innovative solutions to execute offshore EPCI projects in the region. We were pleased with our performance in 2015 but have not relented in our efforts to make 2016 even more successful. We have secured a number of contracts this year and will continue to bid on upcoming tenders.
McDermott has been working on offshore projects for Aramco in Saudi Arabia for years now. Could you tell us about some of the other projects on which you have worked previously – and that you are currently working on – in KSA?
McDermott has been executing offshore EPCI projects for Saudi Arabia and the Neutral Zone for more than 50 years. During this time, we are proud to have achieved several industry and world records, such as for the installation of the world’s longest 230kv subsea power cable, EPCI of Saudi Aramco’s largest offshore platform using the float-over method, and installation of the longest and heaviest single-piece 115kv subsea cable in the Middle East.
We are making consistent progress on all of our current projects, with several projects ahead of schedule. For example, the lump-sum scope of the LTA award was able to commence fabrication activities ahead of schedule, and the 12-jackets project was fast-tracked, with 11 jackets now already installed, and the remaining one to be installed once we’re given the window to do so.
We always strive to improve our project execution and look to accelerate delivery wherever possible, in order to support our clients’ production goals.
McDermott recently opened its second fabrication facility in the Middle East in Dammam, Saudi Arabia. Tell us about this new offshore yard, and how it will help the company to meet its objectives in the kingdom.
We inaugurated the Dammam fabrication facility in February, which is one element of our overall strategy to increase our in-kingdom operations. We are also expanding our engineering capabilities in Saudi Arabia, and have opened a second office in Al Khobar as we continue to recruit and train more Saudi nationals.
McDermott supports Saudi Arabia’s In-Kingdom Total Value Add (IKTVA) programme, and we have further expansions planned in the near future.
McDermott is pursuing major offshore projects in Qatar, for Qatar Petroleum and RasGas. What can you tell us about your work in Qatar and your contracts in the country?
Qatar continues to be a growth market for McDermott. Over the past 20 years, McDermott has fabricated more than 80% of North Field gas infrastructure. Presently we are nearing completion on the EPCI of a wellhead jacket in the North Field Alpha for Qatar Petroleum. Furthermore, we expect major EOR projects to be tendered out of Qatar in the near future, and we are confident of our prospects for upcoming work, based on our longstanding relationships with our clients, our ability to provide execution certainty, and our successful track record in offshore field developments for Qatar.
McDermott has been working with ADNOC subsidiary ADMA-OPCO for several years now, most notably on the Zakum offshore project.
What plans do you have for further ADNOC projects in Abu Dhabi?
We recently completed the final installation of two oil production decks as part of the 4 Gas Injection project in ADMA-OPCO’s Zakum West field. We anticipate that activity in Abu Dhabi will pick up in 2017-18, and believe we are well-positioned to take on multiple projects, including field life-extensions projects with significant brownfield modification scopes. With the right people, assets and technology, we are able to provide innovative solutions that work to minimise the downtime of production facilities, without compromising on our industry-leading performance in safety, and commitment to quality.
McDermott has registered a healthy financial result for Q1 2016, despite other construction companies catering to the oil and gas industry struggling to maintain profitability. What are your thoughts on the company’s first quarter results, and to what would you attribute your insulation from the effects of low oil prices?
Our first quarter results reflect a positive start to the year, and it is clear that strong project execution across our entire portfolio has been a key driver in our operational profitability. McDermott began an aggressive turnaround phase in 2014, which included critical changes to our internal cost structure. Today, we believe we are more cost-competitive than ever, and will continue to scale our business to match customer demand, while maintaining our commitment to the highest standards in safety, quality and ethics.
How would you say McDermott’s logistics and transportation capabilities in the Middle East are being boosted by its existing vessels? What new vessels are the company currently working on for this region?
In addition to McDermott-owned and -operated vessels, we currently charter over 65 vessels in the Gulf. Our Marine group has a strong talent pool from which to draw. They manage a versatile global fleet that stands ready to meet demands in the region and around the globe. We also have the capability to mobilise additional vessels to the Middle East from our global asset base, depending on future project requirements.
Is there anything else newsworthy that you would like to share with our readers?
The Middle East market is proving to be more resilient to the lower oil prices as bidding activity remains high, with outstanding and targeted projects valued at more than $6bn. However, as a consequence – and as expected – we are seeing more competition in the region, both in the form of aggressive pricing from our existing competitors, as well as from new entrants to the market. Despite this, we continue to build a healthy and robust backlog. Our discipline and project execution history has allowed us to maintain and grow our market leadership in both Saudi Arabia and Qatar.
National oil companies in the region are concentrating on maintaining production capacity, and we anticipate a large portion of projects in the foreseeable future to be brownfield, which we are well-positioned to execute. What our clients look for is certainty, which is something we are able to provide given our more than 50-year history of working in the region. In addition to our competitive offering, McDermott maintains a resolute commitment to safety, quality and ethics across all our operations. We recently celebrated 35mn man-hours of LTI-free operations in the Middle East, which is testament to our QHSES culture.