Ian PRESCOTT Senior vice-president for Asia-Pacific SNC-Lavalin

Gas on the go

April 5, 2017

Ian Prescott, senior vice-president for Asia-Pacific at SNC-Lavalin, talks to TOGY about the benefits of prefabricated and modular solutions and the growing preference for build-own-operate-transfer (BOOT) models in LNG. The company provides global engineering, procurement construction, completions and commissioning services, with a range of sustaining capital services in the oil and gas industry and power generation sectors.

• On Indonesia projects: “We are working on a very interesting project in Indonesia, which if it is realised by our client will significantly benefit the country. The project includes a jetty, LNG regasification, LNG storage and truck loading facilities.”

• On optimising in the oil slump: “While the oil price over the last two years has made for a challenging industry environment, it’s not all doom and gloom, and actually has some positive benefits. It’s led our clients to demand even more cost-effective solutions from us.”

• On modular efficiency: “Our clients are rapidly seeing and understanding the value proposition of moving to modular. Some of the major IOCs are showing willingness to consider international standards and pre-engineered solutions. It is clear to me that there is a real drive for changes in approach that will improve cost and overall project efficiency in oil and gas.”

Ian Prescott went in depth about the SNC-Lavalin recent projects in South East Asia and the growing acceptance of modular project implementation. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of the interview with Prescott below.

Could you briefly describe the company and highlight its involvement in the global oil and gas industry?
SNC-Lavalin has annual revenue of around CAD 10 billion [USD 7.46 billion], with almost CAD 12 billion [USD 8.95 billion] in backlog. While it is listed on the Toronto stock exchange in Canada, SNC-Lavalin is a global engineering and construction company with offices distributed throughout 50 countries.
In late 2014, SNC-Lavalin acquired Kentz [Engineers & Constructors], a specialist engineering and construction company, which delivered a very significant boost to our oil and gas portfolio around the world. As a result, more than half of our employees are now working in the oil and gas sector and we are able to provide a diverse range of services, backed by a talented and experienced team.
Currently, we have more than 4,000 people working on multiple contracts across the Asia-Pacific region. In Australia, we have been working for many years on the high profile LNG developments such as the Gorgon and Ichthys projects.
Within the oil and gas sector, we have a unique ability to provide modularised production equipment for the upstream oil and gas sector. Our production and processing solutions division is primarily focused on designing, developing and delivering modular equipment for the upstream sector. However, we can apply modularisation techniques across our entire portfolio of projects and industry sectors, enabling us to improve the planning and delivery of our client’s projects around the world.

How has the environment of low oil prices affected your activities?
We’re privileged to have a broad range of clients, from the small independents to the oil majors, international and national oil companies. A large part of our order book is based on repeat business from those clients, which is a great endorsement of our team and services, as well providing a good level of financial security and confidence to our business and shareholders.
While the oil price over the last two years has made for a challenging industry environment, it’s not all doom and gloom, and actually has some positive benefits. It’s led our clients to demand even more cost-effective solutions from us. They are also critically evaluating their own standards and practices, and considering international standards and regulations. They have been looking for more efficient processes and more economical ways of streamlining and executing projects.
All this is leading to a lot of creativity and innovation within both our business and our clients’ operations. We are all seeking clever and collaborative ways to reduce [our client’s] design, construction and ongoing maintenance budgets, and speed up their ability to complete projects of all shapes and sizes.
Our production and processing solutions division is delivering on this new need through tried-and-tested modular solutions that can significantly improve cost and schedule outcomes for our clients. In most cases we already have the inventory in stock and we have the flexibility to fabricate in our facilities or other pre-qualified third-party facilities as required.

Could you give us an example of a modular solution?
Our team here in Singapore was recently asked to look at a project for a client that wanted to improve the execution and cost delivery of a project. Both execution and cost delivery are obviously critically important in the current economic environment for the oil and gas industry. The onshore project required module design and fabrication, so we were asked how we could optimise the design while reducing the costs.
We were able to draw directly on our teams’ offshore expertise to help the client reduce the cost of this project component by nearly half. We applied our offshore design principles to an onshore application in order to reduce space, weight, volume and the amount of steel required. In doing so, we reduced the project cost from USD 90 million to a little more than USD 40 million, without compromising the future operation and maintenance of the plant. The creative use of design principles is a key element of the skills and service we offer to clients.

How extensive are your holdings in inventory?
We hold about USD 100 million in inventory equipment so [that] it is always ready for our clients.
In 2015, we were approached by a client that needed a 30-mcf-per-day [850,000-cubic-metre-per-day] gas processing facility, and wanted to bring it on stream in a fast-track manner. We already had a 35-mcf-per-day [991,000-cubic-metre-per-day] gas plant pre-designed and fabricated in our facility. Our client was willing to consider the benefits of a pre-engineered solution that complied with local and international standards. We signed a contract in November 2015 and the plant was operating by January 15, 2016.
A project of this nature would normally take 18-24 months to deliver, but it took us four months from the first discussion to production. I personally think that is an outstanding result for everyone involved, and I know of very few examples of that speed of delivery for a client by any company in our industry.
Our clients are rapidly seeing and understanding the value proposition of moving to modular. Some of the major IOCs are showing willingness to consider international standards and pre-engineered solutions. It is clear to me that there is a real drive for changes in approach that will improve cost and overall project efficiency in oil and gas.

 

How are requirements changing?
Our clients are seeking speed, cost-effectiveness and adherence to international standards, but they are also asking for more innovative commercial models.
SNC-Lavalin has great financial strength because of its global scale. We have a dedicated capital group within the company that is constantly looking for opportunities to help our clients develop their projects. This may involve BOOT structures, deferred payment schemes and even equity involvement. We have several billion dollars in assets that we own and manage, and we are able to bring this expertise to our clients who are experiencing challenges in terms of securing funding at the current time.

Could you elaborate on the role of the Asia-Pacific office?
The Singapore office opened in August 2015 as a centre of excellence for onshore and offshore modular solutions to support our production and processing service line. This significantly expanded our global footprint, allowing us to represent SNC-Lavalin throughout the region and support our key global clients wherever they may be operating or planning projects in Asia-Pacific.
Our core strengths have expanded to ensure that the office has a broad capability to support our entire offering in onshore and offshore oil and gas projects. The level of interest in our modular solutions has been very encouraging and we hope to continue to build upon this in the future.

What types of projects do you foresee in the ASEAN region?
In the past six to 12 months there has definitely been a trend emerging, with our clients seeking innovative commercial models and funding support, [for example] BOOT models.
Additionally, we are seeing several gas-to-power projects emerging, particularly in Indonesia, as a result of the need to support a growing population and consumption economy. The Indonesian government wants to bring on 35 GW of power in the next five years, which is a very ambitious plan, but certainly something we are keen to support.
The general forecast is that by 2040, demand in [the] ASEAN [region] will have risen by 80%. This is great news for SNC-Lavalin, because we have strong power capability and experience, particularly in this region, as well as strong oil and gas processing and EPC delivery capability.

Could you elaborate on opportunities in gas in the region?
The increasing demand for power throughout the region that is resulting from growing populations and national economies means we are seeing huge demand for clean energy in the form of gas. We are talking to many organisations and governments about delivering gas to power projects as a package.
Utilising our modular solutions and power capabilities, we can provide [a] full-service offering to our local clients. The alternative is having separate companies take care of gas processing facilities and power plants. We can see the potential for delivering projects as a complete package. We are tracking and tendering for several regional projects.
We are fortunate to have a very capable team with a broad range of skills and capabilities that allow us to look at onshore and offshore projects, as well as upstream, midstream and downstream projects throughout the region. We also work closely with our power group on power projects which [are] clearly part of gas opportunities in Asia- Pacific.
Clients are also changing their buying habits. One client recently asked us for two options: a lump-sum EPC price or a cost-per-kW-hour [price], basically a build-own-operate arrangement for the whole facility. It was clear from our discussions that they were carefully evaluating which was the best commercial way of executing such projects.
There are always business challenges in any part of the world, but we can see good growth for us in this region because of forecasted increase in power demand. We want to be a part of that growth story.

How is Indonesia planning to generate a total 35 GW?
As a large archipelago, Indonesia is geographically unsuited for huge power plants. Its population of 250 million is distributed over many islands, so it requires [a] distributed and localised power supply.
The country already has a thriving oil and gas sector, plus significant coal reserves. Indonesia is well positioned to take advantage of the lower cost LNG available in the region. These options give the country an ideal opportunity to have a balanced and well-diversified energy mix.
In terms of LNG, this has generated a number of LNG regasification opportunities, which are generally tied into or associated with a local power plant. Indonesia is also looking at innovative commercial models to meet its power requirements.

What are the benefits of LNG regasification over gas processing?
The fundamental difference is the flexibility in location afforded by LNG regasification. You look where the demand or potential demand is and consider the overall economics and benefits for a facility. While there are a number of opportunities for gas processing facilities in Indonesia, your location is dictated by the proximity to a reservoir.

Is SNC-Lavalin active in any projects in Indonesia?
We are working on a very interesting project in Indonesia, which if it is realised by our client will significantly benefit the country. The project includes a jetty, LNG regasification, LNG storage and truck loading facilities.

What other types of projects are you looking into?
We are looking at projects throughout Asia-Pacific and are very excited by the opportunities because it is such a dynamic part of the world at this point in history. The capabilities of our team mean that we can look at all types and sizes of onshore and offshore oil and gas projects as well as power projects in the many countries that need to support their rapidly growing populations and economies. We are looking forward to building on our success so far.

For more information on SNC-Lavalin in Indonesia, or the projects it is involved in, see our business intelligence platform, TOGYiN.
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