01 May 2000 00:00 [Source: ICB]UK contractors Kvaerner, Simon-Carves and Amec are upbeat about their prospects, and are exploring new geographic and business areas for the future. Elaine Burridge reports
Anglo-Norwegian engineering and construction group Kvaerner is heading towards a brighter future. It has made good progress in its restructuring efforts and 1999 was a year of significant improvement, according to David Tomlinson, president of process technology. The restructuring has been aimed at ensuring the group regains its financial strength and reduces it debt and has led to a more focused approach on engineering and construction.
###9005###Kvaerner is exiting the shipbuilding business and has sold six out of its 13 yards. Its pulp and paper business is also up for sale. The company cut costs by NKr1.1bn ($129m) in 1999 with NKr400m of that at Kvaerner E&C which was significantly more profitable in 1999 than in 1998, Tomlinson says. After completion of planned disposals, Kvaerner will have an annual turnover of about NKr50bn with 55 000 permanent staff in 45 countries.
Disposal of the remaining non-core businesses and continuing improvement in performance is the aim for 2000 and Kvaerner will look around cautiously to see what opportunities there are for restarting growth of the business in core areas with a technology bias.
'What is emerging is a technology-focused, technology-led group where intellectual property is a key asset far more than buildings, plants and machinery were in 1996 when Kvaerner acquired Trafalgar House. Kvaerner E&C and its process technology capability are at the heart of this,' says Tomlinson. 'One way in which we differentiate ourselves is by offering a broad range of technologies, developed in-house and through collaboration and acquisitions.'
Kvaerner E&C is one of the group's core businesses with annual revenues of over NKr15bn ($1.9bn) and some 9000 people in 22 countries. It serves markets in chemicals and polymers, refining, oil and gas, pharmaceuticals, minerals, mining and steel.
On 1 January, Tom Snow moved over from the process technology business to become president of chemicals, polymers & refining. He also heads the pharmaceuticals and organic synthesis business. These businesses operate principally from four offices: in Portsmouth, UK; Zoetermeer, the Netherlands; and Houston and Bridgewater in the US, which are supported by a network of offices throughout Asia-Pacific and an engineering centre in Mumbai, India.
Kvaerner sees Asia-Pacific and Latin America as growth areas. 'The number and quality of enquiries coming out of Asia has been steadily improving over the last six months,' says Snow, who believes one of Kvaerner's key strengths is its local execution capabilities and knowledge of Asian markets.
In China, the contractor is bidding for a management contract for the BASF/Yangzi Petrochemical complex in Nanjing. It is also bidding, in an alliance with Fluor Daniel, for Shell's jv $4.5bn petchem complex in Nanhai.
The introduction of new refinery regulations in 2005 is also beginning to generate opportunities. Kvaerner has products and experience in the areas of hydrodesulphurisation and hydrodearomatisation and has been awarded a project to modify the Holborn Europa refinery in Hamburg, Germany, to meet the directive.
Alliances and partnerships generate a substantial part of the business. Kvaerner has alliances with DuPont, BP Amoco, Shell, BASF, Union Carbide and Dow Chemical. It is a preferred contractor for a number of technologies including polyethylene, polypropylene, pure terephthalic acid, acetic acid and caprolactam.
Kvaerner Process Technology licenses proprietary processes for oxo alcohols, including butanols and 2-ethylhexanol, butanediol and derivatives, syngas, hydrogen, methanol, detergent alcohols, speciality diols, esters, and a range of amines, ethanolamines and amides.
Its new technology centre was officially opened in February 1999 in Stockton-on-Tees, UK, where Kvaerner carries out its own and collaborative development work and builds mini-plants to test new processes.
The acquisition two years ago of Swiss firm Buss (now Kvaerner Process Technology Switzerland) has added technologies in phosgene and fluorine chemicals as well as the advanced Buss loop reactor (ABLR) technology. The ABLR has been used in over 500 different reactions in more than 200 commercially operating units to produce pharmaceutical intermediates and fine chemicals.
Size does matter. Small is definitely best for UK process engineering company Simon-Carves, and this ethos is borne out by the fact that the company's order book is the highest it has been for ten years. 'It is a tough market but because we are smaller we can change our focus more quickly than the competition,' says managing director Alwyn Bowden.
What it may lack in size, it certainly makes up for in experience. The Cheshire-based company was formed in 1880 and has operated throughout the world. 'We have managed to create a history of punching well above our weight,' says Bowden.
###9006###Owned by the Simon Group, Simon-Carves has carried out many projects in the former USSR, Asia and the Middle East. It turned in profits of £1.9m ($3m) in 1999, up 12% on the year before, against a background of difficult market conditions.
Its strong performance has been helped by the parent company's decision to refocus on Simon-Carves and its capabilities in the core areas of process engineering, design and project management and to divest the division's other interests. It sold its share in the Simon-Carves-Fenco sulphuric acid joint venture in Canada to partner SNC Lavalin last year and is negotiating the sale of its remaining Australian business.
The engineering services business is now based primarily at the UK office in Stockport, where its strong order book is expected to underpin performance for at least two years.
The development of technology is a core part of the business and Bowden believes its technology focus is almost unique for a small company. It has installed over 60 polymer plants worldwide and says it is the world's leading process engineer for ldPE technology, where it has an exclusive licence from ICI, as well as being a preferred contractor for Exxon's process. Simon-Carves designed the Kemya 215 000 tonne/year ldPE plant in Saudi Arabia which was completed in March and which is the largest Exxon process plant in the world.
Simon-Carves also provides lldPE/hdPE and PP technologies from Montell and has supplied VCM/PVC plants using processes from EVC and Oxy Vinyls. It has a licensing agreement for Monsanto Enviro-Chem Systems' sulphuric acid technology and offers Grande Paroisse's fertiliser processes. It is continuing to develop a technology for the containment of ldPE discharges which it has been working on with BP Amoco for a number of years.
Bowden says it is heavily marketing the ICI chlor-alkali and oxo-alcohol processes. An exclusive licence agreement for the oxo technology was signed in late 1998 and a worldscale plant based on the ICI process is due to start up in Asia this year. A process study for another plant has also been sold. In addition, Simon-Carves won a contract in late 1999 from Cristal in Saudi Arabia for a titanium dioxide expansion and new chlor-alkali facility. Work has started on the project which, Bowden says, is key to the company's push into the Middle East.
Prior to the Asian financial crisis, Simon-Carves would have expected about half of its business to be overseas with half in the UK. However, the region's economic crisis and the influence of world prices has diminished the overseas market quite considerably but Bowden says his company has managed to resist the impact by refocusing its activities on the pharmaceuticals sector. As a result, 75% of its business is now in the UK. 'We have been one of the most successful contractors in pharmaceuticals during the last year and are certainly the biggest contractor in agrochemicals in the UK now,' Bowden explains.
Two large agrochemical projects are under way in the UK, for Aventis in Norwich and AstraZeneca in Scotland, and work is also progressing on pharmaceutical projects for Rhodia and AstraZeneca.
Asia is still a target area, and Bowden expects to start picking up work again within six to eight months as projects previously put on hold are now starting to be released. He also sees future growth in the Middle East where 'if you have technology, you have an advantage', he says. Simon-Carves is bidding for chlor-alkali and polymer projects in Iran.
Amec has just gone global as a result of its merger with Canadian engineering company Agra. The £240m ($380m) purchase, which was due to be completed in April, creates a company with £3.7bn turnover and over 27000 employees worldwide and moves the company to third place in engineering and design behind Fluor Daniel and Bechtel.
'The merger is a powerful combination which not only strengthens Amec's position in the North American market, but the increased scale gives us better access to the global market,' says Steve Lee, managing director of Amec's industrial business group.
The deal, which is the biggest in Amec's history, follows a year of restructuring during which the company has reformed into three distinct businesses - capital projects, services and investments - which has led to a reshaping and regrouping of the individual businesses. Amec intends to be a one-name business, with company names such as Matthew Hall and James Scott to be phased out. The aim is to provide a more focused approach to customers and to build relationships with key customers based on its main business strengths.
The company does not have any proprietary processes but uses other companies' technology under licence. Lee says Amec is trying to align itself more closely with key technology players as it believes it is essential to have a strong relationship with the technology providers, particularly on new builds.
He says Amec now has two focuses - to seek more alliances in the area of maintenance and operational support and to grow its international share of the market. He believes maintenance and operational support arrangements are a key growth area, particularly in the UK. Amec has agreements in the UK with British Nuclear Fuels, Millennium Inorganic Chemicals, Astra- Zeneca and Huntsman ICI and was recently awarded a five-year alliance contract by Union Carbide for its facilities at Wilton. This deal covers maintenance and operational support, capital projects up to a limited value and various turnarounds and shutdowns and is worth some £25m over the five years. Lee says Amec also has a number of other possibilities in the pipeline.
Although alliances are predominantly a UK phenomenon, the idea is beginning to take hold elsewhere and Amec is looking at opportunities in Belgium and the Netherlands in conjunction with Spie in which it owns 41%. Agra also has a number of strategic alliances in the US.
The Amec group has started 2000 with a record order book of £3.3bn, an increase of 9% on a year ago. Work in the Middle East is starting to pick up again, helped by the recovery in oil prices, and Lee says Saudi Aramco is now progressing some of its expansion plans. The company awarded Amec a major contract at the end of 1999 to build an ethane recovery plant near Al Jubail on the Gulf Coast. Amec is also looking at oil and gas projects in Iran and Libya.
In the UK the company is involved in BP Amoco's polyethylene, polypropylene and ethanol projects at Grangemouth and is also constructing a pharmaceutical facility for Pfizer at Sandwich, Kent.
Amec is particularly looking at China and Pakistan where it has 'a number of possibilities'. Amec has several years' experience in China and is nearing completion on a 200 000 tonne/year paraxylene plant using UOP technology at Luoyang in Henan province. Amec has a strategic relationship with a design house in China and has built relationships with some key customers.
In Pakistan there are a number of Western oil companies investing and Amec is looking at contracts in the oil and gas sectors. It is the management contractor for the Parco refinery at Mahmood Kot.
Malaysia has also been identified as a key area. Amec is carrying out a front end study for a fertiliser plant in the country where possibilities are starting to emerge. Lee also sees some potential in Malaysia for maintenance and operational support.
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