Pierre Leretz, CEO of Litwin ME reveals how plant engineering services are in huge demand.
Litwin, an engineering and manpower service provider to the hydrocarbon and power process industries, recently announced the launch of its new, dedicated headquarters in the Mussafah Industrial area of Abu Dhabi.
The company is pursuing its growth under the management of Pierre Leretz, the CEO of Litwin Middle East.
What is Litwin's background?
Litwin boasts strong regional performance through a client base including ADNOC, ADCO and GASCO.
The company has grown steadily over time to become a multi-discipline, full service engineering company with over 200 employees.
EMDAD, which offers high-end technology solutions to the oil and gas sector, has recently been selected as the local partner of Litwin to extend their service to the wider UAE oil and gas sector.
The company started as an engineering procurement construction company for the downstream hydrocarbon refining business, and that remains the heart of the company.
The power, energy and environment side of the business has grown up out of the wealth of experience the company has in the sector.
How would you characterise market opportunities in the region?
Our forecasts in all of our principal sectors are extremely bullish through to 2010. Around 2010 we expect activity to reach a plateau, but that plateau level is still very different from where investment was in 2005.
The largest projects we have in execution stage right now in the Middle East are in Saudi Arabia.
We are currently working on a US $530 million plant for Maaden. Of course, at the moment Saudi Arabia is the dominant market for power stations, and both the hydrocarbon upstream and downstream sectors. What projects are dominating the Middle East hydrocarbon agenda?
Right now there is a lot of capacity increase projects underway. De-bottlenecking is also something pressing we are being employed to address. The capacity increase work also incorporates new field developments around the region.
However, the environmental projects are also very significant now, it's not just a buzzword, but also a reality that national oil companies and supermajors alike are very keen to develop their environmental credentials.
A good example is zero-flaring, which is technically feasible now, and bringing flaring close to zero is a major consideration on a great deal of the projects we're undertaking in the Middle East.
Have you seen an increase in demand for offshore work?
Right now we're doing a detailed engineering project for Abu Dhabi Marine Operating Company (ADMA OPCO), which is addressing the replacement of offshore automation equipment.
We've certainly seen a significant growth in offshore requirements in the Middle East, but globally deepwater extraction is now extremely viable too, and that's becoming a huge business sector.
In the Middle East, some shallower water extraction costs are probably around the US $8 a barrel mark, so there is a lot of profitability there. Regionally, I would estimate that between 2005 and 2009 there has been a 50 % increase in investment in this sector, which is a hugely significant sum of money.
What other areas are oil and gas companies focusing on right now?
I think obsolescence is a major issue for regional producers now. Plants have been up and running for decades and now upgrades and replacement projects have reached the end of their natural cycle.
This obsolescence isn't just the heavy equipment involved in the plants, because process control and automation has seen some very significant developments in the last decade. Asset integrity analysis has become a much bigger part of process control management than ever before.
Also, the major oil companies are undertaking studies and trials with wireless process control now and I think, depending on the satisfaction with these, we will naturally see more use of these solutions in the near future. Which markets are you targeting?
Our strategy is to focus and concentrate our efforts on three countries principally, and be opportunistic with business in the rest of them.
The United Arab Emirates, Qatar and Saudi Arabia is where we see our main business growth. It is key to have people on the ground where we operate, so opening an office in Qatar will be a pre-requisite to successful business there.
More and more people in the engineering sector want to see a permanent presence wherever you are offering your services.
What sort of investment do you consider adequate to operate in a new territory?
Engineering services require proximity. Right now we are negotiating a frame agreement with Total in Qatar and I think we will see our office there open by the end of this year.
It requires a fair amount of planning because you can't open with one figurehead engineer. We would not look to open without a capacity of 2-3 000 man-hours direct from that office annually.
Typically, that sort of presence illustrates the level of commitment the oil company would expect and demand out of such a relationship.
Proximity is the key issue here, and if you sign general service agreements customers want and expect the ability and flexibility to utilise those services, almost like an in-house department.
How do you operate in challenging markets?
In the Middle East, Iraq and Iran both pose opportunities but very specific challenges. We don't have any restrictions on working in Iran, but there are certain risks involved there, mainly finance.
What we do is usually engineering work on almost a cash basis. We would typically be paid up-front for a certain amount of work, minimising our exposure.
We don't have any assets in the country, so we keep well insulated from operating risk. For Iraq we have the capability to work there, and we've been approached to do just that.
However, dealing with the security risk isn't something we have experience with, and that has to be addressed before we consider working in such an environment.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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