Darius Adamczyk, chairman and CEO of Honeywell spoke exclusively to Pipeline Magazine’s Julian Walker about modernising its oil and gas offering and why the energy sector is so important
How important is the oil and gas sector to Honeywell?
Honeywell’s history in the oil and gas sector dates back more than 100 years. Our technologies are at work in almost every refinery in the world, producing 60 per cent of the world’s gasoline, 70 per cent of its paraxylene, and 90 per cent of its biodegradable detergents. In addition, 40 per cent of the world’s LNG is processed using Honeywell technology. We are also a pioneer in automation control, instrumentation, and services for the oil and gas, refining, petrochemical, and chemical industries.
Honeywell’s success in the sector comes from our focus on producing great value for our customers. We offer innovative Connected Plant solutions that integrate our process technologies and advanced control systems to make every day of a plant’s operations its best day in terms of productivity, efficiency and safety. We invest heavily in research and development to maintain our leadership position in the sector. For example, about 40 per cent of Honeywell UOP’s annual revenue is generated from technologies introduced within the last five years, which shows the strong demand from customers for our new solutions.
We also have a broad portfolio of industrial safety products and solutions that protect 500 million workers around the world every day. We offer fixed and portable gas detectors along with head-to-toe protective gear, including hard hats, boots, hearing protection, safety harnesses, respiratory and electrical safety equipment, turnout gear for first responders, and protective eye-, hand- and footwear.
How are you looking to take Honeywell’s oil and gas offering forward?
The sharp decline in oil prices in 2015 focused the industry on operational excellence. Honeywell is delivering digitalisation and automation solutions that enable our customers to achieve even higher levels of performance and long-term viability.
Honeywell has developed a modernisation concept we call the “Refinery of the Future.” Our approach is to ensure these facilities have the flexibility to cost-effectively address changes in market conditions today and over the next several decades. The Refinery of the Future is a digitally connected facility equipped with cloud-enabled connected plant services that analyse plant data with proprietary models to provide recommendations that improve process optimisation and operational reliability, minimise energy consumption and waste products, and better manage water. These technologies also bridge gaps in experience caused by retirements and personnel attrition, providing insights and guidance to plant operators. Our Refinery of the Future technologies are tremendously valuable to plant operators because they identify areas of underperformance that may have been hidden before. They can also help customers recover millions of dollars in lost productivity per year and even identify problems that can be corrected before they affect operations.
How important is digitalisation to Honeywell?
The Internet of Things (IoT) is unlocking new value and fundamentally disrupting long-standing industry practices. Honeywell has the unique ability to blend physical products with advanced software to create solutions that are more connected, efficient, and productive. Our connected offerings are becoming a more important part of our portfolio for the industries we serve. Many companies are now embarking on digital journeys, and what differentiates Honeywell as a technology partner is our experience and deep domain expertise in oil and gas, combined with our focus on delivering solutions that bring substantial value to our customers.
We are also leaders in the industrial cybersecurity space, which is very important to our customers as threats evolve and become more sophisticated. We do not treat cybersecurity as a standalone issue. We work on cybersecurity from the start with our customers so they can stay ahead of threats while reaping the benefits of digitalisation across their operations.
What is Honeywell doing in the digital space for the oil and gas sector? Is software going to be the key?
The industry is adopting software solutions so rapidly that today, a refinery or petrochemical or gas plant that does not have a connected, digital solution will soon be at a severe disadvantage. Digitalisation represents the key to long-term profitability and competitiveness. Honeywell is a leader in software solutions and instrumentation, and our connected technologies are driving the digitalisation of process industries, delivering a suite of solutions that unlock value for our customers. Our IoT technologies integrate processes such as data management, data control, and data analytics by combining software and physical equipment analysis to solve problems and prevent operational failures in real time -- or before they occur. We also integrate our cybersecurity solutions to deliver a comprehensive digital offering that is protected from cyberattacks.
How is Honeywell positioned to meet the changing energy landscape?
There is a growing need for integration between refining and petrochemicals to generate more value for producers. Refineries that converted 15 per cent to 25 per cent of their production into petrochemicals once were thought of as being highly integrated. That is different now. Honeywell recently licensed a world-scale complex that will convert more than half of its net products into petrochemicals. In fact, refineries in the future may only produce petrochemicals, and they could be among the most consistently profitable facilities for our customers.
Honeywell’s Refinery of the Future concept can help refineries and petrochemical plants be flexible, integrated, and connected – and more consistently profitable. Honeywell combines a long-term consultative approach with core strengths in technology development, which helps our customers form a clear long-term view of how the energy and petrochemicals landscape is evolving and what solutions will be needed to meet global demand.
Gas is often overlooked, not just as a transportable source of clean energy, but as an important source of petrochemicals. In many countries, gas is already the largest source of electrical energy. Natural gas liquids extracted from gas can be converted into propylene, ethylene and other petrochemicals, and form the basis for new industries. Honeywell is a major player in these technologies.
We also cannot forget about the fact that half the skilled labor in the oil and gas sector are retiring in the next decade. Oil companies require a new generation of talented engineers and technicians who need to be seasoned in their roles. Our Connected Plant solutions use digital twins to bridge the knowledge gap and to provide that training. A digital twin is the virtual version of an asset or a process that replicates or simulates how the asset or process should perform under a set of ideal circumstances.
Are you creating a more focused company? What is your outlook for 2019?
We have significantly transformed our portfolio since 2016, when we spun our resins and chemicals business into an independent company now called AdvanSix. Last year, we spun off the Garrett transportation systems business and the Resideo home products and distribution business. Today, we are a simpler, more nimble organisation centered around six end markets. While we have made great progress, this is an ongoing process. We will keep evaluating our portfolio to see where we can improve. We also have a robust pipeline of opportunities to add to the portfolio through mergers and acquisitions, as we did with acquisitions in the warehouse automation and cybersecurity spaces in the last several years.
As we reported at the start of this year, Honeywell expects to continue to see growth in our long-cycle businesses supported by our strong backlog at the end of 2018. We have some cautious assumptions related to our short-cycle businesses given the uncertain macro environment today. We expect to see continued strength in our equipment and services businesses and broad-based automation growth driven by our short-cycle software and services business and connected industrial offerings.
What do you see as the biggest challenges and opportunities facing the oil and gas industry over the next few years?
Among the greatest challenges is the need to produce even cleaner burning fuels. Stricter International Maritime Organization (IMO) regulations will eliminate the use of high-sulfur bunker fuel. At the same time, many countries are also moving away from burning fuel oil for power generation and heating. These trends are quickly closing the market for heavy, high-sulfur fuels and creating demand for significant upgrades in refining. More than ever before, these upgrades must be made with a clear view of future market conditions.
A big opportunity will be presented as the Middle East continues to build-out gas infrastructure to support global demand for cleaner-burning energy and provide a new feedstock for petrochemical production. The opportunities are clearly visible as digitalisation in the refining, petrochemical and gas industries continues to gain momentum.
With the right technology, our customers can generate the most value from every drop of oil and every cubic foot of natural gas they produce. We are supporting our customers with new sulfur removal, heavy oil upgrading and alkylation technologies, modular gas processing and treating solutions, and even more efficient processes to manufacture petrochemicals. Thanks to digitalisation, we can unlock value from operations that was previously unattainable. Many of our customers are investing in digital technologies and data analytics to improve the profitability of their operations. They understand that IoT implementation will help them achieve high levels of safety, security, efficiency, and reliability.
How important is the Middle East region to Honeywell?
The Middle East is a major market and, increasingly, a center of technology development for Honeywell. We have been present for more than 60 years and have strong business ties across the Gulf states, where we support long-term economic growth through innovation, IoT-led Industry 4.0 initiatives, and localisation. Our strong local leadership reflects our commitment to provide the best talent to support our customers.
Last year, we opened an innovation hub at our regional headquarters in Dubai to promote knowledge exchange and engage with our partners from the Gulf states and beyond. We also launched an industrial cybersecurity centre of excellence to train customers with real-time cyberattack simulations and provide advanced customer consultations. In April, we launched the Honeywell Masdar Innovation Center at Masdar City in Abu Dhabi to advance digital transformation for the oil and gas, petrochemical and infrastructure sectors in the UAE and elsewhere in the region.
We have a strong presence in Saudi Arabia, which we continue to expand. In addition to offices across the Kingdom, Honeywell has two manufacturing facilities, a state-of-the-art R&D center, and an integration and training center in Dhahran Techno Valley. We also have an advanced cable production facility in Jubail and are opening a new factory there later this year. We also plan to open an innovation and training Center in Riyadh. This gives you a sense of how we continue to expand our footprint in the region.
You were recently in Kuwait for the opening of a manufacturing and testing centre. What was the significance of this opening?
In February, Honeywell became the first company to offer “Made in Kuwait” automation solutions to the country’s oil, gas, and petrochemical customers. Our new centre in Kuwait will help our customers quickly deploy technologies because product assembly, customer testing, and acceptance all occur locally under one roof. We can assemble distributed control system (DCS) platforms and operator consoles for small- to medium-size automation projects. We can also customise industrial software and IoT solutions, and design and assemble fire alarm panels, auxiliary consoles, power distribution panels, and other cabinet systems.
Is Honeywell looking to expand its localisation initiative to other countries in the region?
In addition to establishing local manufacturing and assembly capabilities, we have been spearheading localisation and knowledge transfer initiatives for many years. In Saudi Arabia in 2011, we established a technical center in Dhahran Techno-Valley in collaboration with King Fahd University of Petroleum and Minerals (KFUPM). We have since jointly developed pioneering catalytic processes for petrochemicals production there.
We also have launched Honeywell Automation Colleges in Saudi Arabia, Kuwait, and the UAE to actively invest in the next generation of engineers and local talent. We provide courses specifically designed to address the challenges and future requirements of regional power and water, oil and gas, and automation industries.
Our global TECPro graduate training initiative drives knowledge transfer in the region by giving engineers hands-on training in the process and industrial automation industry, supporting regional efforts to become knowledge-based economies. Each year, we are proud to turn out a larger and more diverse class of graduates.