“Crude-oil-to-chemicals is a watershed technology”

Linh Austin, senior vice president, Middle East & North Africa, McDermott, elaborates on the advantages that the combination between McDermott and CB&I brought in for the new entity, in an interview with Martin Menachery.

Linh Austin, senior vice president, Middle East & North Africa, McDermott.
Linh Austin, senior vice president, Middle East & North Africa, McDermott.

On 10 May 2018, the combination of McDermott and CB&I brought together a global upstream and subsea EPC company with an established downstream provider of industry-leading petrochemical, refining, power, gasification and gas processing technologies and solutions, thereby creating an organisation that spans the entire value chain from concept to commissioning. Currently, the combined firm – known as McDermott – has the integrated technology, engineering expertise, construction experience and global reach to design and build the energy infrastructure of the future. 

McDermott’s combination with CB&I was proclaimed as a transformational initiative. Can you please explain the transformational changes that are brought into the combined organisation’s core competencies from a refining and petrochemical point of view?

Looking at the way the two businesses were operated earlier, the McDermott legacy offshore was very geographically based, and the CB&I legacy onshore was very product line based. For the combined McDermott, it is important that both the onshore and offshore businesses are client focused.

In the combined McDermott, we want to make sure that our teams are closer to the clients – that is a major transformational change in the way we run our business. Being closer to the client allows us to serve them better in terms of understanding and fulfilling their needs.

Our technology business is more integrated today than it was prior to the integration. Lummus is a leading technology and brand, which is very much integrated into the core areas our business. Lummus underpins everything that we do technology wise across our organisation.

Can you explain three key changes in your onshore capabilities as a result of CB&I combining with McDermott?

What is fundamentally different for us after the combination is how we approach the market. It does not change any of the technology that we offer. The intent is to give the clients one-stop solution from the well-head all the way to the storage. In the Middle East, sometimes we see offshore and onshore projects that have integration and synergy with each other. The combination allows us to facilitate those kind of projects, which have the onshore and offshore elements together.

A prime example for this is a project that we recently won in the United States. It is an onshore project; but, we took some offshore thinking in it by using the modularisation concept. It facilitated in making the footprint much smaller and allowed us to be successful. It will lower the cost for the client because the footprint was reduced by 30%, which is something that is very applicable to the offshore market.

In this project, we will be able to modularise an onshore facility, using one of the McDermott fabrication facilities around the world. The combination allows us to utilise our fabrication yards to support both onshore and offshore projects in the future.

Has the combination reflected positively in securing new business, post 10 May 2018?

The project in the United States that I mentioned earlier is a precise example for this. If we were the McDermott and CB&I before the combination, neither company would have won this project. The combination gave us a solution that is different for the client, which was originally thinking in a very traditional onshore way of doing the project.

There were a series of different bidders for the project. While bidding for the projects, we were able to bring in a different set of thinking, whereby we were able to show how to reduce the traditional footprint by ~30%. Rather than the stick-building concept for the facility, we were able to explore using modules. We will be able to modularise at one of our facilities and ship the modules in to the project site.

We have yards that do modularisation around the world. For example, we have one yard in Jebel Ali, which we set up in 1984, primarily catering to the GCC region’s requirements. It could be used globally as well. Other examples are our fabrication/modularisation yards in Batam in Indonesia and Altamira in Mexico. Those facilities as well as the Qingdao McDermott Wuchuan facility in China are used to support our global projects.

What we are aiming at is how does the cost of fabrication used with modularisation compare to the stick-building concept? In the traditional process, at the peak time of the previously mentioned project, we may have 4,000 to 5,000 employees on the site, doing the whole integration. In the mentioned project in the United States, we capped out at closer to 300 people by going for modularisation.

This is only possible because we are bringing in modules at the project site, and all that we are doing at the site is just the tie-ins. It gives us massive logistics savings, and safety savings to the clients. Again, the combination allowed us to do this, which we would not have been able to do before.

We are opting for modularisation wherever it makes sense, like in LNG and ethylene facilities. We are applying modularisation to reduce safety issues and cost involved, and to be consistent in quality. When we build a module at a fabrication facility, it is like building anything in a factory. We have much tighter control on quality compared to stick-building at a project site.

Wherever it makes sense, we are trying to push the boundaries for the modularisation concept. At petrochemical facilities, when you do site work, sometimes you can run into issues that extend the schedules. Modularisation gives the client more certainty about schedules. It also gives additional safety, and ensures quality.

We can definitely claim that modularisation gives more certainty on project schedules. Using modularisation concept in more projects and thinking that way as the basis of our design, may eventually provide data to suggest you can see an improvement in schedule. We cannot quite make that claim today.

Orpic’s Liwa Plastics Industries Complex EPC 1 – steam cracker unit with offsite work and utilities in Sohar, Oman.

McDermott’s portfolio includes more than 100 licensed proprietary technologies, supported by more than 3,500 patents and patent applications. Can you please elaborate on how these technologies have helped refining and petrochemical industry to remain competitive in the current challenging market environment?

With Lummus, we have the leading technology on ethylene and heavy crude processing. How does that help our clients? As demonstrated in the plants and facilities that we have built around the world, the technology offers high yield and fantastic operating costs, and generates a better return on investment.

Now, with the combination, we can not only give our clients the technology but also all capabilities in constructability. We can give the clients an integrated solution. Many times, a project might have the right technology, but if it cannot be integrated and built in to the other elements, the project might end up with hiccups in the start-up itself. We provide a one-stop solution to project owners, which we are really proud of.

We have signed on in a number of projects for the crude-oil-to-chemicals (COTC) technology. In-house, we have most of the COTC technologies, which are based on refining and petrochemical integration. We can ensure that, by integration, all those technologies pass through a common platform.

In January 2018, Saudi Aramco, through its wholly-owned subsidiary Saudi Aramco Technologies, had signed a three-party joint development agreement with CB&I and Chevron Lummus Global to scale up and commercialise Saudi Aramco’s Thermal Crude to Chemicals (TC2C) technology. Can you please explain the status of the TC2C technology, post McDermott-CB&I combination?

As you know, the actual COTC agreement between Saudi Aramco and SABIC is confidential. Our early trials suggest that the technology is going very well. McDermott of offshore had no play, or footprint in the COTC technology. The COTC technology is with us after the combination of McDermott and CB&I. With our portfolio of technologies and capability to integrate those technologies, the early trials have been very positive. I think it is fair to say that COTC is in fact a watershed technology, and we are really excited about it.

McDermott’s technology portfolio includes a broad range of complementary ethylene production technologies. What is the role of this portfolio in keeping McDermott as a premier fully integrated provider of technology, engineering and construction solutions for the downstream industry?

When we consider our Middle East business and the demand for many mixed feed crackers in the region, our history clearly demonstrates that we dominate that position in terms of the technologies and the number of projects that we have won. An example of this is our flagship project for Orpic in Liwa Plastics Industries Complex in Oman, which takes us all the way from FEED to licensing, and finally to the EPC.

The fully integrated solution – from technology all the way to execution – is what McDermott brings in as a unique offering to the market that others cannot. And, we are in a dominating position for the mixed feed crackers, which seem to be a prominent factor in the Middle East right now.

What is the significance of the Middle East region in the business portfolio of the combined McDermott?

The largest volume of global business for the combined McDermott originates from the NCSA (North Central South America) region, which accounts for approximately 40%, followed by the MENA region, making for nearly 30%. The Middle East business was very prominent for the McDermott offshore. For the CB&I onshore, it was much more opportunistic – it was not a big business in terms of the volume. When we look at the Middle East, the onshore market is actually bigger than the offshore market here. For us, we have to be quite selective because there are so many projects going on in the region in the onshore business. It is a massive market. But, we will be selective based on our technological capabilities.

The projects that we are going to select for participating are those for which we have the key technology that can actually make sure that we can provide a differential value to the client. Going forward, the combination of the onshore and offshore business in the Middle East should be our biggest market.

Which are the major downstream projects currently managed by McDermott in the Middle East?

The major onshore projects that we are working on right now are Liwa Plastics Industries Complex project of Orpic in Oman; the refinery revamp project of SATORP in Saudi Arabia; the clean fuels project of KNPC in Kuwait; and the crude flexibility project of ADNOC in the UAE. We also have the Duqm Refinery storage project and a number of other storage projects in the region.

Can you envision three key achievements that will be the realised by end of 2020 by McDermott in its downstream business in the Middle East, which would not have been possible without the combination with CB&I?

First and foremost, it has to be synergy. We see a number of projects, not just in the Middle East but around the world, for which we have the ability to provide combined solutions for onshore and offshore, which is better for the client. That is the fundamental element of the combination between McDermott and CB&I – the synergy and the one-stop solution that takes away all the associated risks. This is a key advantage of the combination.

The second prime advantage is the concept of how do we take our onshore and offshore thinking around the LNG and ethylene plants, where modularisation makes sense.

The third advantage of the combination is being closer to the clients by leading our onshore and offshore businesses from each of our key markets – Middle East, Americas, Africa, Europe and Asia-Pacific.

If you look at the onshore business of CB&I before, we have done very little work in Southeast Asia, while we have very good presence in the offshore business in the region. We would expect Southeast Asia to be a very important and emerging market for us, which would not have been possible prior to the combination.

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