The 2015 award of two engineering, procurement and construction packages for KNPC’s new Al-Zour Refinery is a major win, AL COLLINS, president of Fluor’s Energy & Chemicals business in Europe, Africa and Middle East, tells K S SREEKUMAR

Despite the low oil price environment posing challenging times for doing business across the entire Middle East resulting in a reduced number of projects, engineering procurement and construction (EPC) major Fluor has been winning contracts and improving its bottom line thanks to its focus on capital efficiency and cost and schedule certainty.

Fluor, which has a diversified project portfolio serving the energy, chemicals, government, industrial, infrastructure, mining and metals, and power market sectors, is currently undertaking a wide range of projects across the region including front end engineering design (Feed), engineering, procurement, fabrication, construction as well as operations and maintenance services for clients in Qatar, Saudi Arabia, Kuwait, Iraq and the UAE.

"Fluor is proud of our 65-year history in the Middle East as well as our involvement in landmark projects in this strategically important region," says Al Collins, president of Fluor’s Energy & Chemicals business in Europe, Africa and Middle East.

"Fluor is leveraging this era-spanning knowledge with our innovative integrated solutions approach to improve capital efficiency and cost and schedule certainty on clients’ projects," he says.

The company secured more than $6 billion in new awards in 2015 in its Europe Africa and Middle East region. The 2015 award of two engineering, procurement and construction packages for Kuwait National Petroleum Company’s new Al-Zour Refinery is a major win. Fluor, in JV with its partners, is executing the project which has a contract value to the JV of $2.6 billion. When completed, the new complex is expected to be one of the largest refineries in the world, he says.

Awarded in 2014, the Kuwait National Petroleum Company’s Clean Fuels Project is the largest Fluor project currently under construction in the GCC. Construction is well under way with 12,000 craft workers expected to be employed at peak. The lump-sum turnkey project is a major upgrade and expansion programme of the Mina Al-Ahmadi (MAA) and Mina Abdullah (MAB) refineries to increase capacities and provide low-sulphur fuel.

Fluor undertook its first project in the Middle East in 1947 working for (Saudi) Aramco on the expansion of a major oil and gas facility in Saudi Arabia. We have more than 65 years of continuous operations in the region and established our first headquarters in 1978 in Al Khobar, Saudi Arabia. "To date, we have completed more than 600 projects in the region, valued at more than $150 billion," he says. Fluor has more than 4,000 employees located in the Middle East, with offices in Al Khobar, Saudi Arabia; Al Ahmadi, Kuwait; Abu Dhabi, UAE and Doha, Qatar. Fluor is also managing more than 14,000 construction workers on current projects in the Middle East, a number that will continue to increase with the ramp up of site activities related to KNPC’s Al-Zour Refinery project in Kuwait.

At the global level, in 2015, Fluor reported new awards in the oil and gas segment worth $11.3 billion. The backlog was $28.7 billion for 2015. Profits rose from $670 million in 2014 to $765 million in 2015. Active across six continents, Fluor is diversified both globally and across markets.

Referring to the current economic situation brought about by falling oil prices, he says: "Our clients are focused on per-unit costs, such as dollars per barrel, and are therefore cautious about deploying capital through new projects. However, this provides an opportunity to be innovative and identify ways to make oil and gas projects more cost efficient. Through our integrated engineering, procurement, fabrication and construction solutions model, we provide clients with more cost and schedule certainty. For example, on one recent project, we reduced capital costs by more than 30 per cent from initial estimates. This new approach has had great resonance with our clients in the Middle East and we look forward to helping our clients move forward on projects that would otherwise be uneconomic for them."

The continuing economic volatility and market uncertainty are creating challenging conditions and the lower commodity prices, such as crude oil, are impacting Fluor’s customers’ cash flows and their ability to fund projects at the same pace as they’ve done previously.

Fluor executing a project in the region

However, this challenge is creating opportunities for Fluor to engage with its clients as a strategic partner. "Our focus on capital efficiency and cost and schedule certainty is resonating with them and is a true differentiator for Fluor in the marketplace.

Our ability to offer innovative, integrated solutions to our clients enables them to move forward on projects that would otherwise not be economic for them. This approach includes our global supply chain, 3rd Gen Modular Execution and growing self-perform construction and fabrication capabilities. Our integrated engineering, procurement, fabrication and construction approach delivers the cost and schedule certainty our clients are demanding in this market.

"We also need to ensure that we continue to develop the future talent to provide a global pipeline of capable and experienced employees who can lead where growth occurs. We are investing in both craft and professional training globally to ensure we have the skilled talent to lead our company into the future."

On the competition posed by Korean EPC contractors, he says: "The EPC industry has a history of being highly competitive but that fierce competition can make you stronger. Fluor’s focus on lowering a project’s total installed cost and delivering improved capital efficiency for our clients’ projects allows us to be competitive anywhere in the world. We leverage our integrated solutions, including our global procurement sourcing strategies and innovative design and construction approaches, to deliver cost and schedule certainty.

"We focus on providing the best solutions to our clients, and in some cases, that means developing partnerships with companies whose skills and capabilities complement ours. For example, Fluor has established joint venture partnerships with two industry-leading Korean companies and is working in a team with them on several oil and gas mega-projects in the Middle East."

On what determines excellence in procurement in an EPC company, he says excellence in procurement on an EPC contract is determined by the ability to deliver fit-for-purpose procurement solutions that provide cost savings and delivery certainty to the projects. Fluor has more than 1,700 procurement and supply chain personnel located around the globe who deliver this excellence through our strategic sourcing efforts. The firm’s team monitors global supply and demand trends, utilises market intelligence, optimises currency exchange, and uses global sourcing approaches, among other tactics, to provide cost savings and deliver certainty on its projects.

"We leverage our $16 billion annual global spend on equipment, materials and services to deliver capital efficiency to our clients. In fact, we delivered more than $100 million in cost savings on one mega project through our global sourcing strategies," says Collins.

Building an effective local vendor supply chain is critical to Fluor’s ability to operate both successfully and cost effectively in the Middle East. The company truly believes that to be sustainable, it has to execute projects in ways that are also beneficial to the communities in which it works. "We are currently supporting some of the region’s largest projects and are developing several centers of excellence for projects in the GCC. In the past five years, we have used local execution teams to source nearly $1.6 billion of material and equipment from vendors across the Middle East. Providing these types of opportunities to local teams and vendors goes a long way toward building effective local supply chains," he says.

On Fluor’s strategy for growth in the medium to long term in terms of industry segments, business models and diversification, Collins says several years ago, Fluor began its strategic journey to become the integrated solutions provider of choice for its clients, improving capital efficiency and cost certainty for their projects and delivering sustainable, profitable growth for its stakeholders. The company has taken deliberate steps to add to its capabilities in areas that significantly enhance the ability to provide solutions across the full life cycle of a project. Fluor has focused its efforts to develop capabilities that clients are telling it will most increase the value it brings – through fabrication, self-perform construction and supply chain and procurement. Fluor also acquired Stork, a leading global operations and maintenance provider base in The Netherlands to expand its O&M capabilities. Fluor has a diversified project portfolio serving the energy, chemicals, government, industrial, infrastructure, mining and metals, and power market sectors. With more than 60,000 employees worldwide working from a global operations network, Fluor can design, build and maintain capital-efficient facilities for clients on six continents.