FOR EVERY PROJECT IN EVERY MARKET, IN-COUNTRY VALUE (ICV) IS A KEY PETROFAC PRINCIPLE WHICH BENEFITS THE COMPANY AND THE ECONOMIES IN WHICH IT OPERATES. ICV HAS A PRECISE DEFINITION, IT IS MEASURED IN A PRECISE WAY, AND EVERY PROJECT HAS PRECISE TARGETS – WHICH, IN THE CASE OF GHAZEER, WERE EASILY BEATEN. PETROFACTS SPOKE TO SOME OF THE GHAZEER TEAM MEMBERS TO FIND OUT MORE
HOW WE WORK
The support of local economies has always been important to Petrofac.
Wherever the company operates, it is committed to creating shared value, by supporting local supply chains, employing local people, developing local capabilities, and stimulating local economies.
As well as being the right thing to do, Petrofac sees the creation of in-country value (ICV) as a source of competitive advantage, helping the company to bid on challenging projects, keep costs down, improve the quality and availability of local suppliers, and build stronger relationships with local stakeholders. Although the principle applies everywhere, its implementation is at its most mature in Oman, where Petrofac agrees ICV targets with all of its clients.
BEATING THE ICV TARGET
In the case of the recently completed Ghazeer Phase 2 project in Oman, bp had initially set a demanding ICV target of US$275 million, equating to around a third of the total project value. As explained by Mohamed Ozoun, Contracts Manager for the Ghazeer project: “It was agreed that this would be made up of a combination of elements like the procurement of made-in-Oman goods and services, the use of local vendors, and the employment and training of Omani nationals. Our performance against these targets was then reviewed with bp every quarter and tied back with payment milestones.”
By the time Petrofac handed over the new facility, the true ICV had exceeded US$311 million – around 13% more than originally anticipated.
The creation of ICV helps Oman to support and diversify its economy, making it less dependent on the fluctuations of the oil and gas market, building the capabilities of locally-based businesses, and broadening the skills of the local population. It also helps Petrofac.
“The more we can work with local suppliers, the better it becomes,” explains Project Manager Alok Agarwal. “We save on shipping, we increase control, we build local capacity and, in the case of large components, we can also get more prefabrication done offsite, which helps with the speed and safety of construction.”
WORDS PETER HALLIDAY
PUBLISHED NOVEMBER 2020
A WIN-WIN SCENARIO FOR PETROFAC AND ITS SUPPLIERS
As an example, Petrofac turned to Oman-based STS Group for the fabrication, testing and transportation of the Ghazeer Glycol Package Module. This complex package, weighing in at 180 tonnes and measuring more than 12.5 metres, was delivered to the site as a single unit.
“For Phase 1 of the project, we’d had an identical system produced overseas, which arrived in several pieces for onsite fabrication. At the time, we’d talked about how much better it would have been to get it done here in Oman, as it would saved time onsite, ensured quality, and reduced the safety risks of working at height,” explains Deputy Project Director Bahram Chweich. “STS is an excellent supplier, but this was a challenging project for them, so we were a little nervous and, initially, so were they. But we convinced each other it could be done, our teams provided plenty of support, and the result was great.”
There were several other similar examples. For example, local firm Voltamp produced all of the transformers for the critical equipment on both Phase 1 and Phase 2, and also enhanced its designs based on Petrofac’s input. Meanwhile, long-time Petrofac supplier Oman Cables landed one of the biggest orders of the entire facility, and produced some 500 kilometres of cable in just four months. And Muscat-based Bahwan Logistics handled almost all of the in-country freight including 1,000 containers, 2,000 trailer trips, and 200 trips of outsized equipment on axles.
For the future, it means that Petrofac can call on more local capacity and experience and, as well as benefitting from significantly-sized contracts, several local firms have been able to add significantly to their credentials and capabilities.
“The more we can work with local suppliers, the better it becomes. We save on shipping, we increase control and we build local capacity.”
DEVELOPING THE SKILLS OF OMANI GRADUATES
Petrofac also hired 22 graduates specifically to work on the facility. As part of the company’s wider graduate programme, they received training through the Petrofac Academy and, increasingly, played an active role in the project teams.
Bahram says, “As well as getting structured training and development in both Muscat and Sharjah, some of them went to our offices in India and on study trips to key vendors in Europe and China. They therefore arrived on site with a good level of theoretical knowledge, which we were able to supplement with practical, on-the-job training. It was amazing how quickly they all became valued team members, and we’re very proud of the entire cohort. But I would call-out two names in particular, Abdul Albalushi and Yaqdhan Alsharji, who had pivotal roles in the design phase and also the challenging brownfield element of the project, where Phase 2 was tied-in to the live production facilities of Phase 1. They really impressed us with their energy and determination.”
I’ve worked closely with Petrofac for several years… both here at STS and in my previous roles Petrofac has been a key client. So, I know the company has very high expectations of its suppliers. I also know that, once you’ve landed an order, you can rely on Petrofac 100% to be true partners, and you always get great support from the project team.
For the Glycol Package Model, Petrofac wasn’t sure if the project could be delivered locally… So, we had to reassure them that, yes, we had the right skills, the right facilities, and the right attitude. Then, once it was assembled, we needed to ship it, as a single unit, a distance of 366 kilometres. That in itself was a complex operation which involved, for example, the digging of three-metre trenches in the roadway to clear the overhead power lines. The journey alone took five days.
It was a real source of pride to us… We were proud to deliver such a large and challenging project on time, and to such a high level of quality. We learnt a lot, we also proved a lot about our capabilities, it’s now a great case study example for STS. And the experience is helping us to bid against overseas competitors for more challenging projects.
The concept of In-Country Value (ICV) is just as applicable to a company like STS as it is to Petrofac... We are very proud to be one of the largest private sector employers of Omani nationals, who now make up a third of our workforce. We are also strong on training and development, so we help people to progress to higher tiers of management. And, of course, we always try to procure locally to develop our own supply chain.
STS Group is a leading Omani contracting group specialising in construction, fabrication and maintenance services for the energy and industrial sectors. The group has provided fabrication services for Petrofac for many years and in several countries. But its most challenging project to date was the Glycol Package Module produced for the Ghazeer Phase 2 project.
We speak to Renu Anbalagan, Chief Operating Officer of the STS fabrication division, for his perspective on the project, and also the wider relationship with Petrofac.