The past two years have been a period of change for the region’s national oil and gas companies as they consolidate and restructure their operations amid lower oil prices. As their clients adapt to the new market realities, contractors are responding by enhancing their capabilities to meet modern national oil companies’ demands.
“As clients consolidate they become more focused on getting global solutions,” says Dennis Karapiperis, CEO, Archirodon. “Since the beginning of our involvement in the oil and gas sector we have seen how important risk is for our clients. The oil and gas market has suffered with outsourcing critical elements of projects, so what we wanted to do as a player was to do such acquisitions and direct our growth in a way that these critical project elements are controlled.”
On 19 April this year, Archirodon enhanced its global engineering and project management capabilities with the 100 per cent acquisition of Technipetrol Hellas from France’s TechnipFMC.
The 35-year old Greek company will add to Archirodon’s capacity with more than 150 specialists in engineering and project management in the oil and gas sector that will support its global operations, including projects in the Middle East.
“It has synergy with the work that our energy division does in oil and gas,” says Karapiperis. “It enhances our engineering capacity, it adds specialist expertise, especially in the downstream, especially as most of our work in oil and gas is upstream.
“For TechnipFMC the company was serving a specific region. For us now it will serve our global operations.”
The company will also help further develop Archirodon’s engineering, procurement and construction (EPC) capabilities in downstream oil and gas and brownfield activities.
Technipetrol Hellas was established by Technip – now merged with FMC to form TechnipFMC – in Athens with the main purpose of serving the needs of Greek refineries, one of which was built by the French firm.
“The company grew outside of Greece and into the Balkans, and today its activities are in two categories, EPCM [engineering, procurement and construction management] and engineering services with the refineries in the region,” says Karapiperis. “It is also doing the PMC [project management consultancy] for the Trans Adriatic Pipeline.”
The Technipetrol Hellas acquisition follows the purchase of EKME in Northern Greece, which specialises in fabrication for oil and gas and chemicals projects.
“There is always an element of critical fabrication,” says Karapiperis. “There are certain items you cannot buy from the shop around the corner, so we acquired EKME, a company that specialises in pressure vessels, reactors, heat exchangers and exotic alloys.”
In addition to the EKME acquisition, Archirodon has also established a unit in Ras al-Khaimah known as Arcomet, which specialises in modularisation.
“This has become very important for the upstream and offshore oil and gas industry,” says Karapiperis. “It is critical for the success of the project and allows you to be price competitive also.”
More acquisitions could follow. “There are other initiatives we are still working on, that cannot be disclosed yet,” says Karapiperis.
As clients and contractors review the way they operate, there are indications that the market conditions are improving after four years of limited investment in new projects.
“We see positive signs of a recovery in certain countries and some sectors towards previous levels,” notes Karapiperis. “It is important to say this is in terms of volume. In terms of margins it is not the same. Yes there is more work, but not enough to result in a healthy market.”
Contractors need to be disciplined when markets recover. As cash flow businesses, there is a temptation to take on work without properly considering the ultimate profitability of the contract.
“Since Spring 2017 we have placed the highest importance on our selection criteria,” says Karapiperis. “We made the selection process stricter, and we added resources to make sure we do it in a more efficient way.”
Being selective means engineering and construction companies have to temper their desire to build projects.
“Many times as engineers we look at what we are building and don’t see the risk that goes with it,” says Karapiperis. “Our job is creative, but it is mainly about managing risks and you manage risk before it happens. Which means to be ready, be prepared.”