Exclusive Interview: TOPAZ CEO Fazel Fazelbhoy

Topaz Energy & Marine chief executive talks up ambitious growth plans

Topaz Energy and Marine has maintained a workforce of around 6000 people despite the downturn.
Topaz Energy and Marine has maintained a workforce of around 6000 people despite the downturn.
The Mobile Offshore Production Unit has the finishing touxhes applied at the AdYard facility.
The Mobile Offshore Production Unit has the finishing touxhes applied at the AdYard facility.
Specialist vessel fabrication for the TOPAZ Energy & Marine group has always had a strong association with the upstream oil and gas industry's needs.
Specialist vessel fabrication for the TOPAZ Energy & Marine group has always had a strong association with the upstream oil and gas industry's needs.
Fazel Fazelbhoy is Topaz Energy and Marine's chief executive officer.
Fazel Fazelbhoy is Topaz Energy and Marine's chief executive officer.
A topside unit ready for delivery to RAK Petroleum from the Abu Dhabi yard.
A topside unit ready for delivery to RAK Petroleum from the Abu Dhabi yard.
The MOPU is destined for Norwegian waters and will leave Abu Dhabi in July.
The MOPU is destined for Norwegian waters and will leave Abu Dhabi in July.

Topaz Energy and Marine CEO, Fazel Fazelbhoy, says a renewed focus on the UAE is keeping his team of 6000 busy on a diverse portfolio of exciting upstream projects..

Sixty two stories above the coastal hub of New Dubai, the panorama from Fazel Fazelbhoy’s office is quite humbling. The Topaz Energy and Marine CEO’s vista overlooks the UAE’s main artery, Sheikh Zayed Road, which splices the new marina developments and the sea from the corporate hub offices opposite. Though impossible through the intense summer haze which shrouds the region in June (and because of the immense distances involved), it is almost as though an office which could deliver views of the company’s activity hubs of Fujairah and the Caspian out to the north and east, Abu Dhabi, Jebel Ali and Qatar out West had been sought.

The view doesn’t quite reach, but the massive regional map which dominates the wall space shows where the company’s strategy man is clearly focused today. “Topaz Energy and Marine is a company at the cutting edge of the marine services and oil and gas fabrication business in the Middle East and much further beyond. It is true we’ve stayed loyal to our marine base, but we are not a shipping company – we are an oil and gas service company, whether that’s onshore EPC work, or oil supply vessels and anchor handling tugs in the Caspian,” enthuses Fazelbhoy.

In 2009, Topaz Energy and Marine delivered the best financial results in its history, generating net earnings of $65 million, up 38% on the previous year. Revenue for the year was $448 million, up 7%.

Delivering strong figures in a tough year for upstream companies was possible, Fazelbhoy says, because the company has been through a rigorous reorganisation from 2008 onwards, all of which was geared around streamlining its upstream service offering.

“We went through a period of convergence in 2008 and 2009 and reconfigured the entire company into two separate engineering and marine divisions. Topaz has developed a new business architecture, which is built on the natural synergies of aligned core capabilities and resources,” he explains.

“We wanted to see all the Topaz subsidiaries share capabilities, knowledge, resources and facilities to build stronger client value propositions,” he adds. The convergence was followed by the launch of the new divisional brands; Topaz Engineering and Topaz Marine.

The Topaz business units BUE Caspian, BUE Kazakhstan, Nico Middle East and Doha Marine Services operate under the banner of the Topaz Marine division. Adyard Abu Dhabi and Nico International operate under the banner of the Topaz Engineering division.

“The marine division is geographically split with a general managers in Kazakhstan, Azerbaijan and MENA region and now in Turkmenistan, all headed up by a chief operating officer. Each one has its own profit and loss sheet to manage, but also overall they have been amalgamated into a distinct operation,” explains Fazelbhoy.

On the other hand, the engineering division is split around functional capabilities. Topaz Marine Repair encapsulates the ship repair and dry docking activities of Nico International and Adyard while Topaz Shipbuilding merges the steel boat building capability of Adyard with the aluminium building capability of NicoCraft. Topaz Fabrication and Construction represents the offshore fabrication capability of Adyard and the onshore tank farm and terminal capability of Nico International Hydrospace in Fujairah. Topaz Maintenance continues to operate out of Abu Dhabi focusing on the expansive petrochemical activities of the Emirate.

Plain Sailing

The company’s marine operations for the MENA region represents around 30 vessels throughout its vast geographical coverage area of UAE, Qatar, KSA, North Africa and Southeast Asia. The diverse fleet features cable layers, multipurpose supply vessels, workboats and numerous AHTS and PSVs. Major clients include Total, Maersk, Dolphin Energy, Occidental and Dubai Petroleum.

Topaz Marine Kazakhstan operates over 40 vessels, providing the services of its ice-breakers, tugs, barges, crew boats and ERRV’s to support offshore projects in the Kashagan, mainly for Agip KCO and Saipem. Topaz Marine Azerbaijan owns and operates a fleet of 13 vessels in Azerbaijan and Turkmenistan, comprised primarily of anchor-handling tugs (AHTS), DP 2 platform supply vessels (PSV) and emergency recovery and response vessels (ERRV); focusing above all on serving the main operator in Azerbaijan, BP. In 2010, Topaz will operate seven vessels in Turkmenistan, three anchor-handling tug supply vessels, two barges for pipe lay support, one fast crew boat and one towing vessel.

Topaz’s modern fleet will make a considerable impact in the local market since the Turkmen sector of the Caspian has been dominated by older tonnage.

Fazelbhoy explains that prudence and patience have proved the drivers for the marine operations solid economic performance. “We have had a maintained a 70/30 split between vessels being deployed on long term contracts (seven to ten years) and the spot markets. Whilst longer-term deals may have a lower profitability rate than spot markets can offer, it is continuous reliable business and a steady and consistent source of income and profitability over time,” he says.

Engineering success

On the engineering side a major success has been the Mobile Offshore Production Unit (MOPU) which has taken the bulk of the backlog from 2009 into this year. The unit will load out as soon as the barge designated to take it to its North Sea destination has been adequately reinforced to carry the 12,500 tonne behemoth.

“While the rest of the market slowed down significantly the MOPU project became the core activity of the engineering team. The contract was won when business was progressing as normal, pre-Lehman Brothers, and before the world economy fell off a cliff, and it’s been fantastic to have such an important project to focus on during an otherwise tough period,” says Fazelbhoy.

Winning the contract for the MOPU ultimately for Talisman Energy is clearly a source of pride for the CEO. “We’re talking about a company operating in the Norwegian sector of the North Sea, in an environment with the highest technical specifications in the world. They have a 20 year-contract with SBM who is leasing the unit. SBM conducted a worldwide search evaluating capability, delivery schedules, quality and safety and eventually honed in on us and we won the deal,” Fazelbhoy beams.

“This is significant because if you are talking about how competitive an operation is, I can’t think of a better example of sitting in Abu Dhabi, producing 12,500 tonnes of steel in one monolithic structure, with 7.5 million man hours without a lost time incident, for a destination which is all the way up in Norway.” The company has a long pedigree in building modular units and topsides, and LNG berths, which pose their own engineering challenges, but Fazelbhoy sees the MOPU as a real step up in terms of project scope for the group.

“Previously, within an overall EPC context we have done significant niche contributions. However, I’ll make no secret about that for the engineering side of the business we want to be regionally dominant and respected as a premier EPC contractor, and we absolutely have the capability and capacity to deliver that.”

Local Focus

Strategically the company will be refining and honing its efforts on the business potential in its own back yard, with a tremendous project pipeline in Abu Dhabi taking centre stage. This process has already begun in Fujairah, and the local focus is paying dividends for the company, explains Fazelbhoy.

“If you look at the regional map then you can see that almost all Arabian oil passes through the choke point at the Straight of Hormuz. Fujairah is the only location within the UAE which has access to the Indian Ocean. So a couple of years ago Fujairah took it upon itself, with the full cooperation of Abu Dhabi, to become a strategic oil reserve. This involved a plan to go from around 2 million barrels of oil up to 20 or 25 million barrels of oil storage capacity,” explains Fazelbhoy.

The project involves building more oil terminal berth facilities, oil handling and distribution facilities as well as massive storage facilities.

In response to this vision Topaz set up a custom facility in Al Hayl in Fujairah to handle that projected growth in the tank farm business. “We bought a farm which was being redesignated into an industrial area and then built a custom facility exactly for this purpose. We invested in the infrastructure, from the paving through to the sheds and the cranes all designed around safe and efficient production.”

What differentiates companies bidding falls into two main areas, says Fazelbhoy. “Efficiency is absolutely key, as is intelligent procurement. Our production line process was designed so that the cutting and rolling, right through to the pre-fabricated assembly is done in a manner that was conducive to really gearing up production efficiencies.”

It was a calculated investment based on expected return and it has paid off handsomely for the company. Indeed, just as Oil & Gas Middle East was going to press news broke of a major contract win for the facility. Topaz Engineering’s fabrication and construction unit, through its subsidiary Nico International Hydrospace, was awarded a $45m Gulf Petrochem EPC contract. The contract covers phase 1 of a major petroleum storage terminal in close proximity to the Port of Fujairah.

When completed, the terminal will have storage capacity of over 1.0 million cubic meters at single location. The facility, which is expected to take 17 months to complete, will feature dock pipeline connectivity to the Port of Fujairah, a pigging system for all dock pipelines, operational flexibility to handle Class A, B, C products in all tanks, a road tanker unloading and loading facility. Mott MacDonald has been appointed project management consultant and will oversee the entire development.

“This overall strategic oil reserve project is still a going concern. We are bidding for around $500m worth of work within this tank farm arena. Recently the first oil was delivered through some of the terminals we have worked on in Fujairah, and so that is a great cause of celebration for the team. It’s always special when you see a project come to life.”

The Fujairah instalment of the UAE country focus is just the beginning says Fazelbhoy. “Companies all over the world are dying to be part of the Abu Dhabi story, but to date our fabrication and construction divisions have actually been extremely busy with international orders, from Qatar through to Norway, so we weren’t really in a position to take on or competitively bid for much of the work in our own backyard.”

“However, I think we need to refocus and ensure that we really concentrate on Abu Dhabi and more on the onshore activity side. I’m certain we need to develop a stronger regional specificity to our engineering workload, which will help build even stronger ties with the local firms here. We have been extremely successful with ZADCO and carried out a lot of projects for them in the past, and we would be delighted to be part of the huge projects there going forward too.”

Future scope

Fazelbhoy says that whilst the company has always had an EPC division and is used to handling a lot of projects up the $100 million mark, now the ambition is to move to a more ambitious project scope. “We are looking at significantly larger EPC contracts. Today we have several individual bids each larger than $100 million. We know we can take the detailed engineering, procurement, fabrication and construction work, and in the past this has been done in conjunction with some of the world’s leading EPC firms, often as either a nominated sub-contractor or as a JV bid partner.”

The association with those firms is a win-win in terms of brand association explains Fazelbhoy.

“Both parties are well known for their strengths and that makes a very powerful combination at bid-level, and it is clear to me that in the future one of our defined goals is to enhance and develop that in-house EPC capability further.”

Looking ahead, the CEO says one of the driving principals behind keeping the company at the cutting edge is staying relevant to the upstream industry. “When we look at our future, it follows that we will need to be closely aligned with future oil. Ultimately that means deepwater.”

Fazelbhoy says there may be an immediate tendency to overplay the implications of the Gulf of Mexico for the wider industry as a whole. “It’s a dreadful accident no doubt, but it doesn’t change the fact that deepwater drilling is necessary to sustain production levels. If you follow the industry timeline we can see that there aren’t any huge easy onshore fields being discovered anymore and offshore shallow waters are also well developed. The future of oil is offshore and in deep water with key areas being offshore West Africa and offshore Brazil – These are truly giant fields.”

Fazelbhoy points to the fact that when NOCs and IOCs were pulling back around the globe, these deepwater markets remained active. “Brazil didn’t blink an eyelid during the global financial crisis. Nothing was shelved or delayed.”

These markets present an important opportunity for a company in our position. “We see companies which we would be interested in acquiring that would be suited to the deepwater market, and keeping the beachhead philosophy which has served us so well in the MENA and Caspian regions.”

“With the engineering capability we’ve got, we have a world class platform brimming with individual skills, and each of the functional business units has a best-in-class reputation. From a management team perspective, we are working to merge that capability into a consolidated delivery mechanism, coupled with the offshore organisations, which will propel us to being a genuinely world-class operations right through a very important, and growing oil and gas value chain,” he concludes.

Doha Acquisition

Topaz acquired Doha Marine Services (DMS), a Qatar-based offshore vessel company at a cost of US$124 million in May of 2008. DMS operated a fleet of 14 vessels including two vessels under joint venture with Jaya Holdings of Singapore. The acquisition of DMS helped create a strong foothold in the growing Qatar market and DMS now forms an integral part of the Topaz Marine MENA fleet.

This MENA fleet has over 26 vessels today. “This acquisition was done very much at the peak of the market, but strategically it was hugely beneficial because opened up the Qatar market with an existing fleet which was already there. We could also leverage our other Gulf support industries, such as our Marine Repair unit in order to capitalise on that,” says Fazelbhoy.

“Qatar is a future market in every sense and is growing rapidly. We always feel we have to be close to our customers, so we moved the Marine MENA operations centre and general manager to Doha.”

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