south korean company strategies for overseas...

THIRD ANIMP CONSTRUCTION CONFERENCE & ECI AUTUMN FORUM

Milan. Italy, October 12th, 2012

PUSHING THE LIMITS OF ENGINEERING CONSTRUCTION

SOUTH KOREAN COMPANY STRATEGIES

For

OVERSEAS CONSTRUCTION

A.COLADARCE (ABB)




INDEX

• Foreword

• Who are the «magic» five Koreans.

• GCC projects awarded for Oil & Gas onshore.

• Artificial reasons for Koreans competition success.

• Reality.

• Subcontracting strategy & matrices.

• What future?




VERSUS

Years 2009 onwards: the

attack to ROW EPC!!




FOREWORD

For last year ANIMP Conference, BAIN & Co. compared Italian EP&C

Contractors and Manufacturers competitivity vs Koreans for the Oil & Gas

business.

I guess more than one guy present here has enrolled somebody to «spy»

Koreans working side by side to his organization or out of the fence of one of their

mega projects where they are completely alone….to grasp some secrets of their

winning execution strategy.

In the following slides I’ve collected findings of this watching activity from their

outside construction or plant fences; opinions of final Owners and PMCs; data

from Project Control specialists mobilized on site; Subcontractors judgements,

etc.




GCC O&Gas ON SHORE PROJECTS (Chrono) 1/6

Country Project name Package

Value

(Billions

Euros)

EPC Contractor EPC based in

K.S.A. Manifa Oil field

Utility 1,32 JGC Japan

Process 1,32 Snamprogetti Italy

Kuwait Al Zour Oil Refinery

Offshore facilities 0,76 Hyunday Korea

Process 2,72 JGC/GS Japan/Korea

Desulphurization 1,36 SK Korea

Tank farm 0,82 Daelim Korea

Utilities 1,36 Fluor USA





Country Project name Package Value EPC Contr. EPC based in

UAE Habshan Gas Gas processing

3,37 JGC/Tecnimont Japan/Italy

KSA Jubail Export

Refinery (JER)

Aromatics (#3) 0,50 Samsung Korea

Utilities (#5B) 0,30 SK Korea

Interconnecting (#5A) 1,00 Technip Italy

Process Unit #2A 1,22 Technip Italy

Process Units #1 0,86 Tecnicas Reunidas Spain

Tank farm port 0,53 Rotary Singapore

Tank farm plant 0,18 Punj Lloyd India

Process Unit #4 0,57 Chyoda/Samsung Japan/Korea

Process Units #2B 0,65 Daelim Korea





GCC O&Gas ON SHORE PROJECTS (Chrono) 1/


UAE Habshan gas

Offshore facilities 1,22 Hyunday Korea

NGL Recovery 1,51 GS / Petrofac Korea/UK

Tank Farm 0,38 CB&I USA

UAE Das Island Project Gas processing

0,72 Hyunday Korea

UAE Ruwais Refinery

Expansion

Utilities 1,96 Samsung Korea

CDU 1,52 SK Korea

RFCC 2,23 GS Korea

Crude Oil Storage 0,84 Daewoo Korea

Offshore facilities 0,37 GS Korea

UAE Ruwais LNG NGL Recovery

1,43 GS / Petrofac Korea/UK







Qatar Barzan Gas Proj. Gas processing

1,72 JGC Japan

K.S.A. Wasit Gas Plant

(onshore)

Inlet & Gas Processing 0,73 SK Korea

Power Plant 0,45 Samsung Korea

NGL Fractionation 0,23 SK Korea

SRU 0,45 Jacobs / SK USA/Korea

K.S.A. Shaybah LNG

Inlet & Gas Processing 0,75

Samsung Korea

NGL Recovery/Utilities 0,75

Power Plant 0,30

Increased Gas Process. 0,27

Residential 0,11 MMG K.S.A.







UAE Ruwais Clean Diesel Process unit

8,59 GS Korea

K.S.A. Yanbu Oil Refinery

(YERP)

Process Units #1 0,58 Tecnicas Reunidas Spain

Process Units #2 0,45 SK Korea

Process Units #3 0,90 Daelim Korea

Process Units #4 0,53 Daelim Korea

Tank farm 0,30 ENNPI Egypt

Pipelines 0,08 Punj Lloyd India

Solids Handling 0,19 Techint Italy

Interconnecting 0,17 MMG K.S.A.

Offsites & Utilities 0,75 KBR USA




GCC O&Gas ON SHORE PROJECTS (Chrono) 6/ 6



UAE Borouge

Petrochemical

Ethane Cracker 0,81 Linde Germany

PP PE 1,24 Samsung /Tecnimont Korea/Italy

Utilities 0,71 Hyunday Korea

UAE Shah Gas Proj

Offshore facilities 1,13 Samsung Korea

Gas Processing 2,64 Saipem Italy

The «Magic 5» got 33,0

Billions Euro out of 55,9 Bl. in

GCC (2009-2010)




WHAT RESTS TO THE REST OF THE WORLD IN GCC




ARTIFICIAL REASONS FOR KOREAN COMPETITION

SUCCESS.

• KOREANS HAVE HAD A VERY FAVOURABLE KWON DEPRECIATION

AGAINST USD.

• YOU NEVER ENCOUNTER ONE KOREAN ONLY, AGAINST ROW

CONTRACTORS:

o MULTI ATTENDANCE TO TENDERS

o PRE-AGREEMENT TO WHO WILL BE THE WINNER OF THE FLOCK

(I.E. NO DIRECT COMPETITION BUT MUTUAL SUPPORT TO

VARIOUS TENDERS LIMITING ALSO THE ACCESS TO ROW

CONTRACTORS

• K. EXPORT OVERPRODUCTION OF DOMESTIC MANUFACTURERS.

• KOREANS DO EVERYTHING ON DIRECT HIRE OR UTILIZE DOMESTIC

SUBCS HIDDEN UNDER THEIR HATS.




REALITY

• KOREANS MEET THE FINAL OWNER GOALS: SIMPLE & CHEAP PLANTS

IN A SHORT SCHEDULE.

• THEY COMPETE EACH OTHER AND BEING LISTED IN SEOUL, THE

FINANCIAL MARKET EXPECTS THEM TO CONTINUE TO REPORT

STRONG REVENUES GROWTH AND GOOD MARGINS FROM ONE YEAR

TO THE FOLLOWING ONE.

• THEY COMPLETE PROCUREMENT (60%-95%) EARLIER THAN ROW AND

THIS APPLIES BOTH FOR PROCESS OR INTERC. UNITS: FROM 2 TO 5

MONTHS >>> Some evidences from JERP or YERP.

• THEIR SITE CONSTRUCTION IS VERY STRONG IN THE PROPOSAL DEP.T

(DURING TENDERING PHASE) AND IN THE EXPEDITERS/INSPECTORS AT

HOME/FABRICATION PLACES.

GRAPHS for ECIANIMP PROCUREMENT.pptx














REALITY (continued 2)

• KOREANS SELDOM RE-SCHEDULE CONSTRUCTION: COMPETENCY &

PRAGMATISM MAKE THEM VERY ADHERENT (WOULD SAY «BONDED»!) TO

PLANNED CURVES.

• STILL AT SITE:

o THEY START ACTIVITIES ON A RECORD TIME (RARELY AFTER M. 5).

o THEY RAMP MANPOWER PEAKS FASTER THAN ANYBODY OF ROW .

o THEY VERY SELDOM ARE WRONG ON EFFICIENCY (MANHOURS SPENT

VERSUS MANHOURS PLANNED). KOREANS SUBCONTRACT TO LOCAL

ENTITIES AS MUCH AS THEY CAN, NEVER UTILIZE A GENERAL

CONSTRUCTION CONTRACTOR FOR THE ENTIRE CONSTRUCTION

EFFORT, OFTEN SUBCONTRACT TO SPECIALISED (& FIDELISED)

KOREAN FIRMS WITH BOTH DOMESTIC AND INTERNATIONAL

EXPERIENCE.

GRAPHS for ECIANIMP BONDED TO SCHEDULE.pptx

GRAPHS for ECIANIMP BONDED TO SCHEDULE.pptx

GRAPHS for ECIANIMP_RAMPING MANPOWER.pptx




REALITY (continued 3)

• THEY PREPARE ONE HELL OF A WORK DURING TENDER

PHASE.

• THEIR SUBCONTRACTORS ARE HAPPY TO WORK WITHIN

THEIR ENVIRONMENT (UNIT PRICES BASED, WITH

STRONG COMMITTMENT TO DELIVERABLE AND

DELIVERIES ROS DATES).

• ONCE KOREANS WANTS TO GROW IN COMPETITION THEY

ARE NOT RELUCTANT TO HAVE AN HIGH PROPORTION OF

FIXED COSTS LIKE ROW: THEY BRING THEIR OWN

CONSTRUCTION EQUIPMENT FLEET OR PREFER TO

DIRECTLY HIRE MANPOWER.




SUBCONTRACTING STRATEGY

PROJECT ORGANIZATION (Home Office)

FULLY EMPOWERED SITE ORGANIZATION

LOC

SUBC 1

LOC

SUBC 5

LOC

SUBC 2

LOC

SUBC 6

LOC

SUBC 3

LOC

SUBC 7

LOC

SUBC 4

KOREAN

B.UP

SUBC 2

KOREAN

B.UP

SUBC 1

PROJECT ORGANIZATION (Home Office)

SITE ORGANIZATION

LOCAL/INTERNATIONAL

GENERAL CONSTRUCT.

SUBC.

LOC

SUBC 1

LOC

SUBC 2

LOC

SUBC 3

LOC

SUBC 4




SUBCONTRACTING MATRIX

PK 1

EC/DMC

PK 2

DPC

PK 3

Tank Farm

PK 4

PC

PK 5

HDPE

Piling BOWON LEE CHUNJO BOWON LEE

Civil Works

AL SUWAIDI

KETTANEH

Buildings (Arch) AL MISHAL

Underground KETTANEH

Tank

Fabric/Erection DOOSAN MECATEC NOT APPLICABLE NOT APPLICABLE

Piping Shop Fab

AL SUWAIDI TCC AL SUWAIDI TCC

Steel Structure /

Equipment

Erection

A G Piping

Electrical

Instrumentation

Heavy Rigging CHUNJO

Insulation AL SUWAIDI TCC AL SUWAIDI

BINZAGR

Painting TCC

SAUDI KAYAN construction execution period Feb 2007 - May 2010 (HDPE Aug 2008 - Oct 2010)




SUBCONTRACTING MATRIX SATORP JERP

PK 1

TECNICAS

REUNIDAS

PK 2A

TECHNIP

PK 2B

DAELIM

PK 3

SAMSUNG PK 4

CHIYODA/S.SUNG

PK 5A

TECHNIP

PK 5B

SK E&C

Piling not applicable

ASTALDI

not applicable KELLER DYWIDAG JEC not applicable

Civil Works

SIN

OP

EC

(HP

& L

P H

DS

/CD

U/V

DU

/H2)

NS

H (C

DU

/VD

U)

NSH

KCC KETTANEH N

ES

MA

(CO

KE

DR

UM

S

/FU

RN

AC

ES

)

DY

WID

AG

(PR

OC

ES

S

AR

EA

S/L

PG

/M

ER

OX

) CCE

AMANA Buildings (Arch) SARCO

Underground

NSH

Piping Shop Fab SIN

OP

EC

(MH

C /D

HC

)

NE

SM

A (F

CC

/AL

KY

)

MMG

SA

MS

UN

G

(AR

OM

AT

ICS

)

SU

NG

CH

AN

G

(PA

RA

XIL

EN

E)

NESMA

AMANA /

L&T

Steel Structure /

Equipment

Erection NCC

A G Piping AIC

Electrical

JAL CARLO GAVAZZI CARLO

GAVAZZI

CARLO

GAVAZZI Instrumentation

Heavy Rigging MAMMOET MAMMOET ALE

MAMMOET

MAMMOET SARENS MAMMOET

Haulage/

transport FAGIOLI FAGIOLI FAGIOLI FAGIOLI FAGIOLI FAGIOLI

TOTAL 4 SUBCs TOTAL 5 SUBCs TOTAL 6 SUBCs TOTAL 6 SUBCs TOTAL 6 SUBCs TOTAL 6

SUBCs

TOTAL 9

SUBCs




SUBCONTRACTING MATRIX SHAYBAH LNG

PK 1

Inlet & Gas

Treatment Plant

PK 2

NGL Recovery &

Utilities

PK 3

Power Plant Pack 4a Gas Handling

GOSP 1 & 4

Pack 4b gas Handling

GOSP 2 & 3

PK 5

Residential &

Industrial

Civil Works

GUSAN

GUSAN

KAMCO

Mohammad Al Mojil

Group (MMG)

Buildings (Arch)

Buildings

(Precast const) Ranco & Zamil Ranco & Zamil

Underground GIWI TCC PTS Chelsea

Piping Shop Fab Hajri

Samsung Saudi

Arabia

Fabrication Shop

ARCC not applicable

Steel Structure /

Equipment

Erection GIWI TCC SUNGDO E&C JCC Sung Chang

not applicable

A G Piping not applicable

Electrical

SAMYOUNG SEJONG MIDONG Carlo Gavazzi

not applicable

Instrumentation not applicable

Heavy Rigging Mammoet not applicable

Insulation RB Hilton Bin Zagr RB Hilton TBD not applicable

Painting RB Hilton Hajri RB Hilton TBD not applicable




WHAT FUTURE?

• KOREANS DIVERSIFYING INTO REGIONS AND FIELDS?

• FEED EXPERTS?

• WHAT ELSE?

Q & A SESSION

south korean company strategies for overseas...

Documents