Technip-Coflexip merger creates fifth-ranked upstream contractor
By Jeremy Beckman
Editor, Europe
Thrust toward deepwater, FPSO solutions
Often oil industry mergers are driven by costs, as much as ambition. Last year's union between the French-owned cont-ractors Technip and Coflexip was unusual, as asset stripping was not on the agenda. There was virtually no overlap between the offshore activities of the two groups, and no niche business of peripheral interest. Moreover, Coflexip, unlike Technip, worked entirely upstream.
The resultant super-contractor, however, can now manage all facets of field development except for the drilling. Capabilities include pre-engineering of offshore facilities through onshore power generation or refining of the subsequent product. Technip-Coflexip, headquartered in Paris, claims to be the world's fifth ranked engineering and construction group in hydrocarbons and petrochemicals, with annual revenues of weird5 billion and a global workforce of 18,000.
In Europe, the group's main engineering centers are based in six countries, with others in the US, Abu Dhabi, Australia, Brazil, China, India, and Malaysia. It also owns manufacturing plants for flexible pipelines and umbilicals, spool bases, and platform construction yards in Europe and the Americas, serving offshore projects in all water depths. It owns a fleet of 15 pipelay, construction, and intervention vessels with associated expertise in remotely operated vehicles (ROVs).
Chain of events
Assimilation has been under way since late last July, when Coflexip's board decided to accept a takeover offer by Technip directors. The move had been expected, following Technip's decision to buy 29.7% of Coflexip's shares in April 2000. From Coflexip's standpoint, it followed close on a period of further upheaval caused by the integration of Aker Maritime's deepwater division, acquired in January 2001. A new operations matrix had just been drawn up, partitioning global activities into four regional divisions.
Most of these organizational changes have been transferred to the new structure, says Thomas Ehret, President of the Offshore Branch of Technip-Coflexip. "So far, integration has proved relatively simple. The two groups did not have a major overlap, apart from Technip Upstream, which represented only 8% of Technip's activities. In any case, Technip Upstream was focused on its own solutions for the offshore sector, namely the TPG 500 and 3300 platforms and the Unideck floatover technique."
Within the newly integrated group, there are now three main branches of activity. Life Sciences, Chemicals, and Industries (LCI) is an engineering operation devoted mainly to specialist chemicals and fertilizers, as well as manufacturing industries and power generation. This provides 10% of the group's turnover.
Onshore and Downstream incorporates Technip's traditional business, i.e., lump-sum engineering, procurement, construction, and installation (EPCI) contracts for gas treatment and liquefaction complexes, onshore pipelines, refineries, and petrochemical plants. This constitutes 50% of the group's business.
- Subsea Umbilicals, Risers, Flowlines (SURF), including manufacturing plants and vessels
- Floaters (including fabrication yards)
- TPG platforms/floatover operations.
"The product lines are responsible for maintaining and expanding their technology bases," says Ehret.
Globally, branch services have been split into five regions, of which three are managed by offshore services:
- North Sea, Caspian Sea, Canada
- Gulf of Mexico, West Africa
- Brazil.
"There are also two 'hybrid' regions in Asia-Pacific/Australasia and the Middle East because here the levels of offshore and onshore work are comparable. These two regions report to both the offshore and onshore-downstream, management teams. The regions in turn liaise with the product lines for expertise and resources.
"We have also set up transverse 'functions,' such as that of Chief Technology Officer. CSO, Aker Maritime's Deepwater Division, and Technip Upstream have built up positions through technology. As we get bigger, and become more multi-product oriented, we must sustain our focus on technology. That is what is driving our solutions in order to reduce costs to our customers," Ehret said.
"Overall, within the group, our R&D budget is level with that of previous years. We're a little down on our past budget in the SURF area, but up in the Floaters/TPG area. During 1996-2001, Coflexip increased its R&D spending to develop deepwater technologies, such as that related to the Deep Blue pipelay/construction vessel. That spending reached its peak in 2001. Now we've finished developing our deepwater product range and will continue to upgrade our fleet.
"Aker Maritime, by contrast, had been starved of R&D money by its previous owners. We want to beef that up. So it's a re-balancing exercise."
Last November, CSO Aker picked up the engineering, procurement, and construction contract for a truss Spar for Kerr-McGee's Gunnison development. The field lies in three blocks in 950 m water depth, 155 miles southeast of Galveston. The hull is being built at CSO Aker's Mantyluoto Works in western Finland, with engineering for the hull, mooring, and riser systems performed in Houston and Rauma, Finland.
According to Ehret, "Spars remain the preferred design in the deepwater Gulf of Mexico because the acreage under development is close to the continental shelf and the areas handily equipped with pipeline systems. Spars have limited storage capacity, but they are adequate for this area.
"As development goes deeper and farther out, floating production, storage, and offloading (FPSO) vessels will no doubt enter the Gulf in the course of time. That's good for us, as FPSO EPCI packages provide the volume business in which our group intends to grow. But even if we don't land the whole field development, these projects will still require umbilicals, flowlines, and subsea construction."
As for Technip Upstream, a TPG 500 jackup platform is in the running for BP's Shah Deniz gas field development in the Azeri Caspian. A decision is due in July. Refinements continue to the design of the deep draft semi TPG 3300, intended for use in large, deepwater fields with surface wellheads. No contracts; however, have yet been secured for this concept. Technip's proprietary Unideck floatover technique, on the other hand, is being employed on two major projects: for the 20,000 ton integrated deck for the Cakerawala process platform in the Malay/Thai joint development area, and for another giant deck for TotalFinaElf's Amenam project off Nigeria.
Engineering ventures
Regionally, Coflexip was one of few contractors consistently successful offshore Brazil. Technip was not present in this region until last October, when it acquired UTC Projectos e Consultoria, based in Rio de Janeiro. This company, which employs 400 people, recently worked on front-end engineering design (FEED) for the Albacora Leste floating facility. Coflexip historically maintained 800 employees in Brazil, working in its profit unit based in Rio, in its flexible pipe plant in Vitoria, and on its pipelay vessel Sunrise 2000, dedicated to the Campos Basin. "The merger means we can now supply FPSOs to Petrobras, which neither of us could do before," Ehret claims.
Also in October, Technip created a joint engineering construction company in Kazakhstan with TOG, the state oil and gas transportation group. Technip Kazakhstan, based in Almaty, will provide engineering services for the construction of off- and onshore oil and gas facilities, pipelines, refineries, and gas processing centers. One of its target projects will be the super-giant Kashagan Field development in the north of the Caspian Sea.
Technip-Coflexip also has a minority interest in a Socar-owned yard in Baku, which has a pre-engineering contract for the Shah Deniz TPG 500. Elsewhere in this region, the group has a design and engineering contract with NPCC/ NAFT SAZEH QESHM relating to seven platforms for Shell's Soroosh/Nowrooz oilfield developments in the Persian Gulf.
Genesis Oil & Gas was part of the package that came with Aker Maritime's deepwater division. It specializes in advanced field development concepts involving dry/wet trees, long-distance subsea tiebacks, stranded gas solutions, and others.
"Genesis is an autonomous entity focused on pre-FEED concepts or even what precedes pre-FEED," says Ehret. "We guarantee their staff autonomy. Their thinking should not be influenced by the solutions of Technip-Coflexip as a contractor."
There are plans to deploy Genesis personnel for projects in Brazil, as part of the group's general strategy to internationalize its resources. Technip acquisition CBS Engineering in Houston, for example, has also performed studies for West Africa, aside from its core business in the Gulf of Mexico. Technip-Coflexip also plans to increase its project engineering capability in Angola, via its existing joint venture with Sonangol. To this end, it has been moving Angolan personnel to Brazil and France for skills training. Technip-Coflexip has just signed a joint venture agreement with Sonangol to establish a new steel umbilical factory in Lobito, Angola, to serve the Angolan and West African deepwater sector.
West Africa is potentially the biggest market for the new group's services, but at the moment, the pace of new projects remains slow. The group is prepared to mobilize more vessels to the region as activity picks up, most likely the Deep Blue and the CSO Constructor. The former has three upcoming installation jobs in the Gulf of Mexico, including 160 miles of pipelines for Williams' Devils Tower development in 1,750 m water depth. The Constructor was recently converted to install flexible pipes and umbilicals in 1,500 m water depth.
Ehret sums up, "Our new joint company is willing to bid for big offshore projects everywhere. We bring top-notch, lump sum project management ellipse It's no accident Technip has increased its profitability every year while others haven't. This is because 80% of Technip's work has been in lump sum, fixed price contracts, whereas US groups are predominantly into reimbursable contracts. Large FPSO projects have had a checkered history precisely because their contractors didn't have lump sum project experience."
