As you know, costs in China are getting higher, but compared with the costs of materials in Western countries, the Chinese market is still very competitive.

LU Yaming General Manager FLUOR CHINA

Fluor flourishes in China

May 17, 2017

Lu Yaming, general manager of Fluor China, talks to TOGY about opportunities created by the One Belt, One Road initiative and collaborations throughout the region with global chemicals producer BASF. Fluor has operated in China for nearly 40 years.

Fluor established its Beijing office for North China operations in 1978 later shifting its centre to Shanghai. The company now covers projects across 20 provinces and municipalities where it provides integrated EPC services to upstream, downstream and chemical industries. Fluor also offers fabrication services and leasing of administrative and field construction offices, warehouses and equipment yards. Moving forward, Fluor expects to benefit from the implementation of China’s One Belt One Road initiative that will span from China to Europe once completed.

• On One Belt One Road opportunities: This has presented exciting opportunities for us, as the Chinese entity of a large international engineering company. We are already seeing the first opportunities come to fruition.We have been awarded a project for a gas-fired power plant in the Middle East, and we’re working with a Chinese EPC company on it.

• On Fluor’s organic approach to engineering growth:
In order to do engineering here, you must have a license or certificate. Fluor China is still the only wholly owned foreign enterprise to obtain a Class A license through organic growth. The others obtained their licenses by acquiring a local company or entering into a joint venture. Our license is entirely a reflection of our in-house experience and the capability of our team.

Yaming also discussed trajectory of Fluor’s presence in China and the new fabrication facility for large-scale modules in Zhuhai. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Lu Yaming below.

Could you highlight some of Fluor China’s recent achievements?

In recent years, the client we’ve most frequently worked with is BASF. For the company’s joint venture with Sinopec, we aided in the completion of the IPS [Integrated Petrochemical Site] 1 and 2 projects in Nanjing. We also executed a chemicals complex in the Shanghai Chemical Industry Park in the early 2000s.
In 2011, Fluor became BASF’s engineering partner for petrochemical and chemical projects across Asia, which is now a global alliance. Our Shanghai office has since worked on a number of BASF’s pre-front-end engineering and design (FEED), FEED and engineering, procurement and construction (EPC) contracts throughout China, including the Ultramid® polymerisation project in the Shanghai Chemical Industry Park. This project was named a finalist for the 2015 Construction Project of the Year, by Platts Global Energy. We also recently finished a project for BASF in Maoming, Guangdong province, a world-scale isononanol plant.
Based on our success in China, we have been able to continue our partnership throughout the Asia-Pacific region. One such project is the Citral plant for BASF and its partner Petronas in Kuantan, Malaysia. That project reached mechanical completion in September 2016.

 

Could you describe any of your ongoing projects?
[Fluor’s ongoing works] include a polysilicon project for TianREC, a joint venture between Shaanxi Non-Ferrous Tian Hong New Energy Co. and REC Silicon. The anticipated total investment cost is more than USD 1 billion.
The Shanghai office is leading the execution of this project, with the support of four other Fluor offices: an office in the USA, our New Delhi office in India, our Cebu office in the Philippines and our Beijing office.
This collaboration is a typical execution strategy for our company. Led by a 100% local Chinese team, we have shared the detailed engineering work with our New Delhi office to help cover capacity. Our Aliso Viejo, California office in the USA has a long-term relationship with REC, so it was involved in the FEED stage to help us better understand the client’s requirements and expectations and to ensure that those were reflected in the detailed engineering.
We are also currently executing a FEED project for a manufacturing facility for Chevron Oronite in Ningbo, Zhejiang province.

What are some areas of growth for Fluor in China?

First, China is a very important market for Fluor. We have been able to grow and develop our local team to the extent that Fluor is now the market leader for the delivery of EPC services, particularly for mega-projects with a total investment of more than USD 1 billion.
We’re also leveraging Fluor’s experience with refining technology, particularly that related to heavy oil upgrading. We will collaborate with Fluor’s offices in the USA and Europe to develop projects requiring heavy oil hydrocracking technology, primarily for privately owned businesses in China. We are executing a project for a client in Shandong province, and we generally see a real thirst for the latest technology and the best in engineering and design from these types of clients.
Additionally, we have just completed a major expansion in China, forming a joint venture with COOEC (Offshore Oil Engineering Company), which is a subsidiary of CNOOC (China National Offshore Oil Corporation). We will jointly own, operate and maintain the Zhuhai Fabrication Yard.

What are the facility’s specifications?
The facility is state-of-the-art and designed for the fabrication and assembly of large-scale modules. It is one of the largest fabrication yards in the world, at more than 2 million square metres. We can fabricate modules of more than 50,000 tonnes.
Zhuhai has a central, ocean-front location, which shortens the shipping time to the global market as well as to the remainder of China. The region is easily accessible for the region’s major, cost-competitive suppliers and vendors, which will result in savings for our clients. At the moment, we’re primarily fabricating here and shipping to projects overseas.
As you know, costs in China are getting higher, but compared with the costs of materials in Western countries, the Chinese market is still very competitive.

What type of overseas projects will you target for the fabrication facility?
We are targeting a range of projects. A lot of oil and gas companies, including the leading oil and gas companies in China, are looking to invest in the USA and take advantage of the advantaged shale gas.
The cost of labour in the USA is more expensive and there is a high demand for skilled craft labour. By fabricating modules for projects in China, you can reduce labour costs and construction time, and provide an increased level of predictability.
I think there is a lot of demand for modularisation for the same reason in Canada. Canada has higher labour costs. In addition, the weather in Canada can also be extremely cold, particularly in areas with oil, so there aren’t many opportunities for outdoor construction. This is also the case in Russia and Europe, and it encourages the use of modularisation.

How has the One Belt, One Road initiative impacted your business?

This has presented exciting opportunities for us, as the Chinese entity of a large international engineering company. We are already seeing the first opportunities come to fruition.
We have been awarded a project for a gas-fired power plant in the Middle East, and we’re working with a Chinese EPC company on it. We’re reviewing the design and ensuring that it complies with local standards, as well as aiding in communication with the turbine manufacturer and provider.
We’re also working on a project in Indonesia that has been fuelled by the One Belt, One Road initiative and we have a number of very exciting prospects in the pipeline in other countries. All of these projects have Chinese investment or use Chinese financing, so we’re in a good position to chase them.

Could you describe the trajectory of Fluor’s presence in China?

In many ways, Fluor’s trajectory mirrors the development of the Chinese economy. We opened our first office in Beijing in 1978, to support the rush of foreign direct investment into the country. Still, our local team was mainly employed in supporting Fluor’s offices abroad, where the majority of the engineering and procurement were done. Over time, the capacity of our team expanded and we began to execute projects in China lead by a predominantly local team.
In order to do engineering here, you must have a licence or certificate. Fluor China is still the only wholly owned foreign enterprise to obtain a Class A licence through organic growth. The others obtained their licences by acquiring a local company or entering into a joint venture. Our licence is entirely a reflection of our in-house experience and the capability of our team.
Fluor is also the only foreign engineering company to have obtained a Class One construction licence. These licenses are the highest-grade qualifications in China and allow us to take on projects of any size on the Chinese mainland.

For more information on Fluor in China, including the company’s work at CNOOC’s Penglai oilfield project in Bohai Bay, see our business intelligence platform, TOGYiN.
TOGYiN features profiles on companies and institutions active in China’s oil and gas industry, and provides access to all our coverage and content, including our interviews with key players and industry leaders.
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