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Leveraging gas infrastructure in India will be the key, A K Purwaha, Chairman and Managing Director, Engineers India Limited (EIL)

13 Sep 2012

Engineers India Limited (EIL) today is Asia’s leading design and engineering company. The company, which has clients spanning the hydrocarbon sector, is now looking to branch out into the infrastructure segment. In an interview with Infraline Plus’ Neeraj Dhankher, EIL’s C&MD, A.K. Purwaha, talks about the company’s priorities and unique role in the face of stiff competition from private players, investment areas as well as plans to increase international presence. The following are the excerpts: 

How much of a priority is the oil and gas sector for EIL today considering that the company has branched out to sectors like airports and infrastructure?  

EIL has a core focus on hydrocarbons across the whole value chain. In the upstream segment, EIL started in the 1970s partnering with ONGC, building the required infrastructure for Bombay High. Before that, we had already taken our position in the downstream by building the country’s refineries, starting with the Madras Refinery in 1967, now run by Chennai Petroleum. 

EIL as it stands today began its journey in 1965 with Bechtel. The Government of India decided that this was the right time for India to begin building its capability in the hydrocarbon sector, and identified the downstream sector as the place to start, particularly the refining sector. Within two years, EIL was able to build its competencies to an appropriate level, and transformed into a Government of India undertaking. The company took on its first refining project in 1967, and in 1969 we started working on petrochemical projects. 

Today, to EIL’s credit, there are 20 of 24 refineries in the country, 9 of which were grassroots refineries built by us and another grass root refinery at Bhatinda is close to completion. In this sense, Engineers India is unique, being probably the only company in the design engineering and project management consultancy segment who have more than 50 large refinery projects to its name. In the petrochemical segment, there are 8 completed plants, 7 of which were built by EIL, with two more grass root plants with dual fuel capabilities are in the construction phase.  

EIL repeated its success with refineries in the gas-processing sector. All the C2+ recovery facilities in the country today passed through the offices of our company, and today we are putting those facilities in place. We have also had admirable success working on LPG recovery facilities.  

The KG basin, off India’s east coast, is a gas find comparable to those found in the North Sea. EIL is now working with GSPC, one of the major operators in the basin after Reliance Industries, in order to build up their facilities there. EIL is involved in the project as project management consultants, providing jackets, well platforms, a process-cum-residential platform, offshore pipelines, and onshore processing facilities. Apart from the drilling aspect of the project, EIL is handling everything. 

What opportunities in the gas business are you currently looking at?

I have been associated with many different aspects of the hydrocarbon sector during my 35-year career. In the initial stages of my career I worked at ONGC for 9 years, before serving for over 24 years with GAIL. With GAIL, I saw the evolution of the entire gas sector. EIL has its core strength in the hydrocarbon sector, from upstream to midstream and downstream. We will continue to look towards that space.  

The development of gas infrastructure in India will play a key role for EIL in the future, because today natural gas is only available in small pockets of the country, and in the future we fully expect it to reach across the whole of India. In order to achieve this, there is a vast need for more cross-country pipelines, connecting different communities across the country and bringing gas to the end-users. City gas distribution is another aspect of gas infrastructure that is currently only happening in a few places around the country, but in the years to come will play a much more important role in the Indian energy basket. 

EIL has stated the importance of moving more into Lumpsum Turnkey (LSTK) projects. It has been seen that in general, the PSUs are more open to this type of project than private sector players in India. How have you found the market so far in this regard?

Every client today wants their projects to be completed as quickly as possible, as every day wasted between commissioning and completion costs the company an incredible amount of money. Engineers India has evolved based on this principle, and has developed a number of different solutions for every possible situation. It is not a matter of one solution being better than another; just a matter of tailoring a solution to each individual client, their organizational structure and their expectations. With its long association with Indian hydrocarbon industry, EIL has always been aspiring to provide value added services to clients for enhancing their experience into customer delight.

In the future, we expect rather than one solution becoming dominant in the industry, that it will remain as a mix of different project management styles. Those clients without initial infrastructure or an existing resource pool will inevitably prefer a project with one point of responsibility, leading them to LSTK projects. However, others with reasonable resource pools and their own project management capabilities will look to control costs and source their engineering and construction work from a variety of different offerings.

EIL is known as Asia's leading design and engineering company and you have successfully internationalized the business. What has been the company’s experience so far?

With 46 years of experience, EIL has built more than 50 major refinery projects, seven grassroots petrochemical projects, all the gas processing projects in the country and built up over 60% of the country’s oil and gas pipelines. This is an impressive achievement for a single company. As a result, our company has a huge pool of knowledge and experience available in-house, and we have evolved and continuously improved our systems, processes and databanks, and most importantly our delivery of quality engineering services. Out of all the projects on which EIL has ever worked, we have always met every single deliverable that was required of us. 

In 2009, EIL was appointed against global competition by the Oman Oil Company, for suggested solutions for value maximization of their existing Sohar refinery, which was originally built by a Japanese consortium. From day one of its commissioning, this project has not achieved stable, un-interrupted operation nor the design product yields. After trying for couple of years to address specific issues in the plant, in 2009 they invited different engineering consultancies to the plant. EIL was also qualified for the work and eventually we were selected. We completed the strategy for the plant in about 4 months, presented it to their government and the cabinet, who accepted it. Government of Oman & Oman Oil Company are proceeding with the implementation of the refinery modification plan as per EIL recommendation. In 2010, EIL was appointed detail engineering consultant against global competition by National Petroleum Construction Corporation, Abu Dhabi for EPC installation of their Qushawira Field Development Project for Abu Dhabi Company for On-Shore Operation (ADCO). Construction activities for the project at site are in progress now.   

However, EIL does not yet have a major presence in many countries, because we have been very busy in our home country, developing the hydrocarbon sector. Going forward, we are looking to these countries much more closely. Today we are working in Abu Dhabi, Oman, Qatar, Venezuela, Algeria, and Ghana, and you can expect to see our presence in many more places in the years to come.  

Financially, EIL is a debt free company and sitting on a large amount of internal resources. Which are the key areas in which the company will look to invest internally in the years to come? 

We will be looking to invest in areas where there is a synergy with our existing business. Our prime role will continue to be design, engineering and project management, because those are the company’s core strengths. We will also be doing a lot of activities on LSTK basis, but as I previously stated, we do not expect LSTK to completely overtake EPCM contracts in India. 

Other investments will be in related projects on the fertilizer and power side, city gas distribution and pipelines. We will be looking towards these investments as the opportunities present themselves. In many places we may look to be the operating partner on projects, but otherwise we may take a smaller stake if the size of the project is too large for us to handle. 

EIL is looking to reach a turnover of $1.1 billion USD by 2014. What are the biggest challenges that you will need to confront in the next few years in order to make this a reality? 

Our strategy is based around reaching this target, and perhaps even higher, by continuing to focus on the hydrocarbon sector within the country, to look very closely and more vigorously at the overseas market in the hydrocarbon and non-ferrous sectors. We are also exploring opportunities to diversify into the areas of wastewater management, nuclear power, thermal and solar power, city gas distribution and fertilizers. Internationally, our aim is to find more work in relatively untouched markets like Venezuela, which we have already started to do. We are also studying how we can start working in countries like Brazil, which is another region with a lot of hydrocarbon activity. As our experience is predominantly in onshore projects, we see a lot of opportunity in countries like Brazil once the product comes back onshore.

The PSUs have been largely responsible for building the oil and gas industry into what it is today, but in recent years there have been a lot of changes in India, from the liberalization of the industry to the diversifying roles of the PSUs. Given this situation, how would you define the unique role of EIL today? 

Our company is unique in its partnering relationship with all of its esteemed clients, whether public or private sector. This has developed well since the company began. Initially, the company’s only interactions were with the Indian public sector, as these were the only companies involved in the oil and gas industry in the country. Today, we have seen that the market has been liberalized and the world has entered India, and EIL has learnt to deal with its new clients just as well as it did with its old ones, who are still very valued clients. Our recall value and return business rate are proof that we have managed these relationships very well, even in this brand new industrial and economic environment that we are facing today. As the years progress, we hope that the confidence our clients have in us will continue to be our greatest strength.

What are the major challenges faced by EIL in the past ? How did the company address them and how do you see them change during the next ten years?  

EIL on its part has played a significant role in shaping the hydrocarbon industry of India by developing significant indigenous technology and expertise for offshore platforms, oil and gas processing, oil refining, petrochemicals and pipeline projects.  

Over the years, EIL has developed database of around 2000 suppliers. We have also helped developing manufacturing capabilities of indigenous suppliers resulting in by reducing the imports from 60% to about 10% in hydrocarbon sector. 

High attrition rate due to better employment opportunities in country and abroad was the major challenge that knowledge base companies like EIL had to encounter during last decade. Improved remunerations, structured incentive programs and amicable HR policies facilitated EIL to retain its best talent pool. Attrition rate at our company during last year was less than 2%. 

On operational front, business dynamics in hydrocarbon sector has changed immensely during last decade. For example, the cycle time of completion of a grass root refinery has reduced from 5 years to three and a half years posing immense challenges in all facades of project management. 

These challenges requires us to leverage the knowledge base in Project implementation through standardization, smoother data management, creating dedicated cross functional teams, close monitoring and system improvements, envisaging bottlenecks at the time of project formulation and improved supplier and contractor management.

(InfralineEnergy thanks A K Purwaha, C&MD, EIL for sharing his valuable insights with our readers. The column 'In-Conversation', is a platform to engage experts from various sectors to share their views on the different transformations happening in the Indian energy sector.)