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Cover Story: Contracting expertise

Alan McLean, executive vice president of the oil & gas business of SNC-Lavalin says an order book replete with energy engineering projects in the MENA region is helping the Canada-based EPC contractor survive the prevailing downturn in the energy industry

Alan McLean admits that KSA is where SNC-Lavalin has its biggest regional operation, followed by Qatar and the UAE.
Alan McLean admits that KSA is where SNC-Lavalin has its biggest regional operation, followed by Qatar and the UAE.

In nearly four decades that SNC-Lavalin has operated in the Middle East and North Africa region, the project engineering major has predominantly worked on oil and gas projects. Although the Canada-based company, which provides exhaustive services to four key industrial segments – infrastructure, oil and gas, mining and metallurgy, and power – it is the oil and gas segment which has allowed SNC-Lavalin to express its engineering and project management capabilities, accounting for 41% of global revenue in 2015.

The company has been successfully delivering projects across the entire oil and gas value chain, ranging from onshore and offshore production, gas processing and handling to refining and petrochemicals, pipelines, utilities and infrastructure, and non-process infrastructure. The contracting company relies on its ability to deliver comprehensive services, from feasibility studies through to construction – something that allows the organisation to firmly hold the reins over project schedules and costs in an era of below par crude oil prices.

“I believe our core strength is as an EPC (engineering, procurement and construction) contractor in the traditional sense because if you think about it everything kind of flows from that,” Alan McLean, the executive vice president of SNC-Lavalin’s Oil & Gas division in the EMEA region, tells me. SNC-Lavalin was ranked No.3 in Oil & Gas Middle East’s Top 30 EPC contractors list in 2016.

“And within that (EPC category) we have strong engineering and construction capabilities. We often use our own construction people for example rather than sub-contracting and we have got a very strong management of that in the supply chain as well. I would suggest that is our core competence within the spectrum of services that we offer. But we do like to pack off other things as well,” McLean, who has been with SNC-Lavalin since 2013, says during an exclusive interview at the company’s regional base in Abu Dhabi.

The “other things” that McLean mentions is in reference to SNC-Lavalin’s capability to support its clients at any stage of their project, by virtue of a multi-disciplinary engineering portfolio that includes aspects such as pre-feasibility and feasibility studies, front-end engineering design and other technical support to get a project ready for the Final Investment Decision (FID). The Toronto Stock Exchange-listed company’s profile is also elevated by its experience of project management consultancy (PMC) roles in the region and long term in-plant engineering globally.

“Furthermore, our capability in fast-track modular design for gas processing facilities sets us apart from the competitors and brings a new execution approach to the region. We are recognised locally and worldwide for our completions, commissioning and start-up expertise that ensures a safe, clean and tight handover of facilities. In addition, we are increasingly able to offer clients new commercial and engineering models,” the Scottish engineer from Glasgow, says.The Montreal-headquartered company’s oil and gas offering received a boost in 2015 when it acquired Kentz, an Irish firm specialised in hydrocarbon engineering, and its subsidiary Valerus. The addition of Kentz expanded SNC-Lavalin’s regional footprint. In terms of its workforce, the company has almost quadrupled in size in the MENA region, especially in Saudi Arabia – with 14,000 employees spread across 11 regional offices, accounting for almost a third of the group’s global labour strength of 39,000. It’s also given the enlarged company the ability to self-perform multi-discipline construction and inject an additional level of technical competence.

“I remember when I was with my last company (British EPC company Amec), we were bidding a lot against Kentz in Qatar, for example, for its engineering work. So, already at that time it was expanding. It has been a great addition to SNC-Lavalin’s business,” McLean recollects. “The rationale (behind the acquisition) at the time, and these things are time bound, was to grow our process in hydrocarbons business. And we looked around the world and looked at a number of companies. Due to its geographical presence and types of services, it was felt that Kentz would be a good target to actually go after.”

Reflecting on the acquisition of Kentz episode, the executive with almost three decades of engineering experience, continues: “I think that it has been a very good move for us actually to take over Kentz. I feel it (Kentz) has given us a critical mass and I think that it has allowed us to put some really good engineering together with some really good construction project management skills. It has allowed us to contract with both national oil companies and international oil companies. It has expanded what we already have in places like Saudi Arabia where we already had a good footprint.”

Display of engineering acumen in MENA

SNC-Lavalin has executed over 300 projects in Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Iraq, worth an estimated $12bn in the last decade. The company’s contracting work has been enhanced by its engineering centres in Saudi Arabia, the Abu Dhabi and Dubai in the UAE and Qatar, supported by a high value engineering centre in Mumbai, India. In 2016, the enterprise has announced winning contracts worth more than $1.1bn in the MENA region, mostly from oil and gas projects, including an $800mn-worth EPC contract, the details of which was withheld by McLean as part of SNC-Lavalin’s confidentiality agreement with its client.

The company has been doing significant work in Saudi Arabia, and has very recently won a 5 year extension of its General Engineering Services (GES+) contract from Saudi Aramco. “So we have been working with Saudi Aramco for the last five years on this contract. It is something that we are doing in partnership with Zuhair Fayez, a very reputable engineering company in Saudi Arabia. We partnered with Zuhair in 2012 for the purposes of contracting with Saudi Aramco for the GES+,” explains McLean. “Now, we have just renewed that again for the duration of another five years. We are delighted to be doing all the front end engineering in not just oil and gas facilities but also everything else from wellheads to housing within a contract.”

Regarding SNC-Lavalin’s involvement in the Saudi market, McLean says: “When Aramco does a development, it is an all-encompassing project that includes roads, houses, camps, and even airports. So being an engineering contractor having a one-stop-shop is pretty key. So we were delighted with our partner support on this project. We are delighted to be working with Aramco and Sabic and Ma’aden and basically all the major Saudi players we are involved with at the moment. And we are keen to keep that relationship going forward.”

It is perhaps in Qatar where SNC-Lavalin has been most successful in its regional oil and gas business. The contractor is currently working on a five-year engineering consultancy framework agreement for the landmark Oryx GTL (gas-to-liquids) project. As part of its mandate, the company supports various engineering requirements at the facility, including general engineering, feasibility studies, modelling, drawings and documentation.

SNC-Lavalin has completed a number of major contracts at Pearl GTL over the past five years, from initial site works to commissioning activities. In 2014, Qatar Shell awarded the company an EPCM contract for brownfield engineering services at its onshore and offshore Pearl GTL facilities. Moreover the firm is now in the final stages of completing a water recycling facility at Qatargas’ Laffan Refinery 2 plant where it is providing engineering, procurement, supply, construction and commissioning services.

“This has been a great project to be part of given its sustainable nature with the treated industrial water being recycled back into both Laffan Refinery 1 and Laffan Refinery 2 thereby improving the environmental footprint of both facilities and contributing to Qatargas meeting its environmental commitments,” McLean states.

When compared to its operation in KSA and Qatar, SNC-Lavalin’s involvement at its very own regional base in Abu Dhabi appears limited and not much is known about the company’s relationship with ADNOC beyond the fact that it has standing contracts with GASCO and ZADCO. McLean attributes SNC-Lavalin’s secrecy clauses with ADNOC as the reason for their work in Abu Dhabi not being in public light.

“We are quite involved with the ADNOC Group of companies. We can’t always publicise the ways in which we are involved with them due to confidentiality agreements. We have been doing EPC, front end services, PMC, and commissioning for the ADNOC Group. It (Abu Dhabi) still forms a core part of our projects in the region and it is a highly competitive part of the Gulf. We are set up here in Abu Dhabi as well as Dubai, doing work for a variety of companies and clients. In the midst of that, we have got ADCO, ADOC and GASCO. With Zadco, we are doing more field work,” McLean explains.

On being asked about the details of the company’s work with ADNOC, the University of Strathclyde alumni says, “These projects tend to be pretty specialised. Within Abu Dhabi, we do EPC work more on things like gas turbine control replacements, E&I (electrical & instrumentation), refittings, control room upgrades, rather than what we might see some of the other providers doing. We tend to really focus on things. We also do quite a bit of engineering front end here, and we obviously do PMC services.”

McLean admits that Saudi Arabia, brimming with projects operated by the world’s largest oil and gas company is where SNC-Lavalin has its biggest regional operation, followed closely by Qatar and the UAE. In Kuwait, which McLean describes as a “beautiful market”, the engineering firm is providing project management services to the Kuwait National Petroleum Company (KNPC) and is on the verge of beginning work on a 10-year-long EPC contract, which McLean fell short of mentioning.

“We definitely want to grow our Kuwaiti operations as well as our work in Oman. In these two, we want to grow not just in oil and gas but also in other things like construction, infrastructure, power, and mining. We are also looking at Oman and hopefully will be able to announce something in the near future,” says McLean, whose role in the organisation has been recently elevated to a larger oversight of the vast EMEA region, in tandem with a restructuring the corporate approach.

The EPC contractor is also engaged with IOCs such as ExxonMobil and Shell in the vital market of Iraq on projects that have now been ongoing for a few years and range from small engineering services jobs to EPC contracts, which are managed from its Abu Dhabi centre. Despite interest expressed by international oil and gas majors to enter and/or resume operations in Iran, McLean rules out SNC-Lavalin making any steps towards the Islamic Republic citing Canadian economic sanctions, saying only that the company is “going to watch other players from the sidelines.”

In North Africa, SNC-Lavalin is nearing completion of a $1.2bn-worth EPC project for Sonatrach in Algeria. Expanding further on the company’s work in North Africa, McLean says: “We were also in partnership with Mubadala there (in Algeria) on a power station that we both own. We also have an engineering office in Egypt, which is quite interesting. We are following some of the interests and some of the stuff that is happening there, whether those are projects that BP or Dana Gas have taken up onshore. And I think that the gas reserve offshore in the Mediterranean is quite interesting as well, because it is full of offshore gas all the way from Egypt right up to the Levant and Cyprus, which could be instrumental to the gas market I guess.”

The prevailing downturn hasn’t had too much of a detrimental impact on SNC-Lavalin, and the company has been able to withstand the harsh impact of the slump in oil prices thanks to an order book replete with backlog contract works. “I guess that we have been pretty lucky in that we had a lot of backlog into this particular downturn. It’s the longest, more protracted downturn that I have experienced, even though it’s No 4 for me,” McLean tells me with a smile.

The composed gentleman further says, “I think having a lot of businesses in the Gulf has kind of helped us through this particular downturn. Our published order book hasn’t changed much in the past few years actually. That’s because of the mix of our business. We still have a large backlog of projects that we are working on in the Asia-Pacific region. We still have quite a nice business in the GCC, where the cost of (oil) production is the lowest.”

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