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McDermott: Strengthening its regional presence

McDermott: Strengthening its regional presence

Oct 16, 2016
10 min read
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McDermott has really turned things around over the last three years and David Dickson president & CEO explains how the US integrated EPCI firm buckled down to bring in big project wins in Saudi Arabia, Mexico and India, writes Julian Walker. 

When David Dickson took over at McDermott three years ago he faced an uphill struggle to turn the long standing fi rm around as it was facing a few fi nancial challenges. “McDermott was not in the best of shape,” he said. Dickson quickly set about transforming the way McDermott operated globally and to re-focus on core markets that had been slightly neglected over the years, particularly in the Middle East. “One of the things we did was make big changes to the management team and we brought a lot of new people in,” he added. One of the main changes was that rather than having the company operate as silo organisations across the globe, “I centralised a lot of it. My tactic was to transition from a global perspective to something we internally call ‘The McDermott Way’.” He explained that this method meant that no matter where in the world a project was taking place, be it in Mexico, Brazil or Australia the execution would be the same. “We centralised a lot of our activities such as engineering and fabrication.”

He gave an example of this in Mexico, where a number of McDermott’s fabrication experts from the Middle East supported a big project in Mexico. “The impact of the McDermott Way can be seen in our results over the last 6 to 7 quarters, which have been in line with expectations. We have not had any bad news or surprises. I feel our projects are working better under the McDermott Way.”

Rediscovering Middle East strength

McDermott has a long history in the Middle East and has been working in the region for 55 years but when Dickson took over he wondered why the fi rm’s position was not as strong as it should have been. “One thing I soon realised about McDermott when I took over is that it is the strongest EPCI contractor in the region. It is working in all the countries in the region. I compared us to the competition and apart from Abu Dhabi’s NPCC, McDermott is the only vertically integrated company in the Middle East with all our assets being permanently located in the region. So whywasn’t this strength and advantage refl ected in terms of the volumes of business and profi tability of the company,” Dickson said. McDermott embarked on a strategy to ensure it strengthened the profile of the company in the Middle East.

“We had some leadership changes that saw Linh Austin come on board as vice president and general manager. He created a new dimension to the team.” He discussed the strategy: “The big thing in the Middle East was to become more customer and market focused. So we wanted to understand what really drives our customers to develop projects, where we need to position ourselves and do we have the right assets in the right places.” 

Middle East still active

One of the main advantages that the Middle East market has to offer McDermott and other international players is that even during the low oil price environment, “the one area that has being least impacted has been the Middle East.” That is why Dickson has made sure that McDermott has really focused on the Middle East region since becoming CEO. “To have the long history we have in the Middle East and have all the facilities on the ground, I think it is fair to say our reputation is hopefully number one across the whole region, apart from in the UAE where we are challenged by Abu Dhabi’s NPCC. We must continue to work and build on that.” He explained that one area that McDermott doesn’t have much market share is the UAE, which is because there is a very capable and strong competitor in NPCC. “This does make it a little bit more challenging here in the UAE but we have recognised this and we can work on it”, he said. One area that McDermott excels at is the cost competitive edge it can offer its customers with its on the ground presence in the region. “We are cost competitive today, certainly in Jebel Ali in Dubai. If you look at the volume of business we have,” said Dickson.

Focus on Saudi Arabia

One country in particular has seen the bulk of McDermott efforts to re-kindle its old ties and that is Saudi Arabia. “One of the areas we had kind of lost our way was in Saudi Arabia. So we spent quite a bit of time on being customer focused and rebuilding the relationship with Saudi Aramco,” said Dickson.

He added: “I can say today that this has progressed well. We have been very successful in the last year or so with some big Aramco awards. Aramco makes up a significant part of our back-log here in the Middle East. We would expect that to continue as we see future bids. We have the largest market share in the kingdom compared to our competitors. So our long term outlook in Saudi is good.” An advantage for McDermott of having worked with Aramco over the years is that Saudi’s oil giant has embraced standardisation which hasn’t changed for many years. “This means when we come to Aramco we can bid for jobs very quickly and execute projects very quickly. Standardisation provides Aramco with a lot of flexibility it also makes our life a lot easier as we are engineering, fabricating, building and installing to the same specifications. It helps us to be very productive and cost efficient. These are the benefits we can hand on to the client, Aramco,” Dickson said. In Saudi Arabia, McDermott is very aware about the drive for local content to support the country’s 2030 vision. “We are working towards this goal and we are working closely with Aramco to understand their requirements and put in place plans to ensure we satisfy the Saudi government’s ambition in terms of their 2030 vision. We already have engineering capability in Saudi today and we recently opened a fabrication facility in Dammam,” he noted.  

“We have been pleased to find a lot of good talent within Saudi Arabia and particularly on the engineering side. We are now testing this more on the labour side, such as welders and our fabrication workforce. What we have seen is very positive. We see the opportunity there and we are working on this,” he added. Linh Austin said that McDermott has recently hit a milestone at the fabrication yard in Dammam and that they had recently cut the first piece of steel there.  “The opening of Dammam fabrication yard was one of nine key initiatives that we embarked on in terms of implementing our In-Kingdom total value add programme. We got the approvals for it in early February and we were able to finally put project work in August and officially opened the facility on the 23 August,” commented Austin. On the same day as the opening the engineering firm hosted a trade fair to recruit a number of craft labour applicants to work on the yard. “We had over 600 craft labour applicants turn up which is a really, really positive turnout. We are quite keen to bring on a number of In-Kingdom staff to join us. We have had a presence in Dammam for three years but we are moving to an expanded office to meet growing demand. This will be open at the end of September and will be a 350 person office,” he said. 

Re-positioning in Qatar
Another country that McDermott is looking to re-position itself is Qatar. “We have also looked at re-positioning and building our relationship in Qatar. McDermott did most of the work in Qatar in the early 2000’s but we stepped back after there was a drop off in activity. I am pleased to say that we have a very good relationship with Qatar Petroleum (QP), Qatargas and RasGas,” noted Dickson. As part of building its Qatar presence McDermott announced in July a fi ve year cooperation agreement with NakilatKeppel Offshore Marine to help increase local content for projects in Qatar. “This is all about building up a local presence in Qatar and also increasing our capacity in the region. We see increased activity in Qatar in the long-term. There are three large development fi elds in the country that we expect QP, Qatargas and Rasgas to develop with their international partners,” he said.

NOCs driving projects
Across McDermott’s projects globally they see a common theme that NOCs are continuing to spend despite the low oil price landscape. “Although we have a low oil price environment what we are seeing in the market is that NOCs are continuing to spend. This is very important for us as a company as approximately 60 per cent of our back-log is with NOCs. As a company we have a strong history of working with NOCs. This is something we want to expand and develop further not just here in the Middle East but across our global operations,” Dickson explained.

Safety first
“McDermott is committed to the highest standards of QHSES (Quality, Health, Safety, the Environment, Security) and its performance in this area was strengthened with the launch of the “Taking the Lead” programme last year. Dickson said: “Recently, we celebrated a major safety milestone with the Middle East Area achieving more than 40-million man-hours without LTI. This was the first time the region has achieved this milestone.”
Outlook
McDermott’s CEO concluded: “Our primary markets of focus are Saudi Arabia and Qatar and we are looking at building on our existing relationships with NOCs like Saudi Aramco and Qatar Petroleum.”

This interview first appeared in the October issue of Pipeline Magazine. 

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