TECHNIP:Engineering for growth

24 October 2003
Do an internet search for major hydrocarbons and petrochemical projects and the one European name to appear time and again will be that of Paris-based Technip. For in the 45 years that have elapsed since the company was founded by the Institut Francais du Petrole, Technip has amassed a raft of major references from around the globe to become one of the world's leading engineering contractors.

For many years the Technip group had focused its activities on onshore and downstream activities in the hydrocarbons and petrochemicals sectors. However, two years ago the company acquired the operations of the French/Norwegian Coflexip, and expanded its product portfolio to include offshore field development. With the consolidation now complete, a new logo unveiled and the 2,700 Paris staff united under a single roof in a gleaming tower in La Defence, Technip is embarking on a new growth cycle - in which the Middle East will focus prominently.

'The Middle East is the primary area of activity for Technip,' says Jean Deseilligny, senior executive vice-president for business and operations. 'It accounts for 30 per cent of our overall backlog and we are working on some of the largest and most important engineering projects in the region.'


Given its heavy emphasis on refining and petrochemical activities, it is hardly surprising that, time and again, Technip is selected by the region's major clients. One of its most loyal customers is Saudi Aramco, which earlier this year selected Technip for a lump-sum turnkey (LSTK) contract to install diesel hydrotreating facilities at the Riyadh refinery. The award is the latest in a long line of major hydrocarbons development projects. They include the expansion of the Berri gas plant at Qatif and construction of the Haradh gas plant, a project Technip completed in September, three months ahead of schedule.

Abu Dhabi is another fruitful market for the company, with recent major contracts including phase 1 of North East Bab (NEB) for Abu Dhabi Company for Onshore Oil Operations (Adco), onshore gas development (OGD) 1 and OGD 2 for Abu Dhabi National Oil Company (ADNOC), the Ruwais gas plant expansion and the Ruwais refinery expansion for Takreer. Ruwais and NEB were bid and won by Technip's offices in Rome and Paris respectively. 'The decision on which office takes which project is based primarily on workload,' says Deseilligny. 'There is nothing systematic about the allocation. Middle East projects tend to be very large, so it is important to balance the workload in Paris and Rome. You can't have the same team working on two different projects for two different clients. However, we are able to benefit from internal synergies in terms of a comprehensive knowledge of the markets and suppliers and in terms of preparing estimates.'

Technip is also able to draw on the expertise of its affiliate in Abu Dhabi. Established in the 1980s, the office there has grown beyond merely assisting larger projects run out of Technip's European offices to taking on engineering, procurement and construction (EPC) projects of up to $100 million independently. 'We are very proud of our office in Abu Dhabi,' says Deseilligny. 'Last year, having been qualified by Aramco, it won and undertook a sulphur refinery unit at the Riyadh refinery - the location was particularly beneficial as it meant that Aramco personnel did not have to move all the way to Paris for the project.'


One area in which Technip has been notably less successful is in the development of the region's liquefied natural gas (LNG) plants. 'It is true that we are not one of the main actors in the LNG field in the Gulf,' says Deseilligny. 'We have bid for LNG projects in the Gulf, but each time we have lost to the Japanese.' Nevertheless, its rivals consider the company to be a valid partner, as its joint venture with Japan's Chiyoda Corporation on the Qatar Liquefied Gas Company (Qatargas) debottlenecking project shows. 'In future there will be further expansions of the Qatargas project and we will certainly follow those projects with a partner,' says Deseilligny. 'At the same time we are in a joint venture with JGC Corporation in the FEED [front-end engineering and design] for LNG plants to be built in Iran. We have already agreed with JGC that we will partner them when the EPC prequalification for the first project is called.'

The decision to partner other major contractors for LNG work is indicative of Technip's cautious approach. 'Obviously, it is easier to work alone than in a joint venture,' says Deseilligny. 'However, when the projects are very large ones, as is so often the case in the region, it is prudent to join forces in order to share the cost of proposals and the risk, which can be high in some of these LSTK projects. More often than not, it is Technip that is approached to partner another contractor, rather than the other way round.'

One project for which Technip was happy to take the full risk was the landmark Oryx gas-to-liquids (GTL) scheme, for which the company was awarded the $675 million EPC at the start of the year. Having already worked on a small GTL plant in South Africa for Sasol, which is partnering Qatar Petroleum in the Oryx plant, Technip's Rome office ensured it was well placed for the contract. 'This is a very important project for us,' says Deseilligny. 'It is the first major GTL plant in the world and it is being built in a country and with a client we know well. GTL could be as important in the future as LNG, and we want to position ourselves as a pioneer in this field.'


Despite its obvious success in the region's downstream and petrochemicals projects, Technip is keen to diversify into the non-hydrocarbons sector. 'We plan to expand our total industrial activities to around 15 per cent of revenues in future, from a current base of 10 per cent,' says Deseilligny. 'However, the increase will not be easy because with projects such as fine chemicals and pharmaceuticals, the contracts are carried out on a reimbursable basis and are often engineering or services contracts, which means that important activities are not necessarily reflected in revenues.' But opportunities do exist, and the company plans to follow up on smelter projects in Qatar and Oman which, if successful, should contribute to increased receipts for Technip's Industries branch.

With the offshore field development capabilities gained through the merger with Coflexip, Technip has been able to reduce its dependence on the Gulf region and focussing attention more closely on Egypt - now one of Technip's priority markets. The new Mediterranean push was rewarded in July, when Technip won the $550 million contract to develop Egypt's offshore Simian/Sienna and Sapphire gas fields. 'This is our first significant offshore project in the Middle East,' says Deseilligny. 'Strategically, it is a very important move and one we certainly hope to build on in the future. We missed out on the first wave of LNG developments in Egypt, but the offshore projects signal our return to the market, and we hope it will be followed by equally important projects onshore in the future.'

Further down the line, Technip is looking forward to the possibility of returning to two other key markets in the region, Iraq and Kuwait. 'Many of Technip's employees have happy memories of working in Iraq before the first Gulf war, and we are ready to open an office in Baghdad as soon as the security situation allows it,' says Deseilligny. The combination of the company's background knowledge of much of Iraq's infrastructure, and the good relations Technip has forged through partnering many of the main US contractors in the region, means the company could be well placed to help in the reconstruction effort, should the political issues of French participation be overcome.


While Technip's departure from Iraq was driven by security concerns, it was commercial issues that caused the company to withdraw from Kuwait, as cheaper Asian competitors consistently undercut European prices. 'It is pointless to go against firms that see engineering contracting as a sport to gain market share - it is a costly and unsatisfactory exercise,' says Deseilligny. But, he adds, the market is finally evolving. 'Contractors are discovering that they cannot consistently dump prices, as shareholders do not like to pay the bill too often. We are seeing fewer competitors prepared to commit suicide on a given project.'

Even without a return to past markets, Technip is facing a bright future in the Middle East. 'We have a constant stream of projects coming out of the region,' says Deseilligny. 'Added to which, one of our major customers - Aramco - is talking of investing several billions of dollars every year for the next 10 years in projects that are very accessible to Technip. With fewer and fewer US contractors prepared to bid for LSTK projects, the number of experienced firms in the region is shrinking. Business is booming for good contractors - and Technip is one of the best.'

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