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LogBOARD CHANGEAndy Inglis, head of Petrofac’sIntegrated Energy Services(IES), is leaving the companyand stepping down from theBoard to become Chairmanand Chief Executive ofDallas-based oil explorerKosmos Energy.Petrofac CEO Ayman Asfarihighlighted Andy’s key role inleading the company’s five-yearplan. He said: “Andy has madea significant and lasting impacton Petrofac’s success. Thegrowth of the IES business,which has seen athree-fold increase in netprofit in just three years,is testament to hisachievements and heleaves with ourgratitude andRob Jewkes(right) stepsup as AndyInglis (top)moves onbest wishes for the future.”Rob Jewkes, currentlyManaging Director ofDevelopments for IES, hasassumed the wider role ofChief Operating Officer for IES,reporting directly to Ayman,who will oversee the IESbusiness.Rob has been with Petrofacsince 2004, and has 35 yearsof experience in the oil andgas sector.Ayman added: “IES is nowa business of scale with a clearstrategy to deliver operationalexcellence, commercialinnovation and bespokeofferings to both new andexisting clients.“I look forward to workingwith Rob and the team to takethe business forward.”In his note to staff, Andyexplained that hisdecision to leave hadbeen influenced byboth personal andprofessional reasons.“My new role allowsme to relocate withmy family backto the US,” hesaid, “and givesme an excitingnew careeropportunity.”NEWS ROUND UPThe Jurong Island training facility, visited by the BoardTHE BOARDJOURNEY TOSINGAPORE& MALAYSIAFor many people, a companyboard meeting means a routineassembly around a large table.Not so for the trip that thePetrofac Board of Directorstook in October last year.During a week in Singaporeand Malaysia, they managed totake in a training facility onJurong Island, a shipyard inPasir Gudang, and a fullschedule of board meetings, aswell as getting to know clients,employees and suppliers.This isn’t the first time theBoard has undertaken such atrip: as well as being encouragedto visit Petrofac sitesindependently, the full Board istaken on a site visit like thisonce a year. In 2012, a similartrip was arranged for Algeria.Chairman Norman Murrayexplains: “Being an effectivedirector is not just about sittingdown in board meetings. Thisgroup can be the ultimatedecision-making body for acompany, looking at strategicand governance issues. Thesetrips are a way for our Boardmembers to see the realpicture, to meet people and geta better understanding of thePetrofac business. Ours is apeople business, and thatneeds to come alive for theBoard. The Board alsorecognises the wholeheartedsupport that Ayman and histeam give to these trips whichare an enormous logisticalundertaking in terms ofmanagement time and input.”SUCCESS WITH DEBUT PETROFAC BONDPetrofac successfully placedits debut bond issue into theUS capital market, raisingUS 750 million in October.The proceeds were used torepay debt outstanding underthe Group’s existing revolvingcredit facility, and so providefurther financial flexibility tosupport growth and investment.Group Head of TreasuryBrendan Boucher said: “Thisrepresents an important step inthe evolution of Petrofac’s6 Petrofacts February 2014capital structure and providesan additional source offinancing over and above theGroup’s existing bank facilities.“It’s important that wemaintain the level of financialflexibility required to underpinour investment. This meanshaving access to multiplesources of finance in additionto our existing bank facilities.“The US capital market is thedeepest pool of global liquidity.The bond has established theGroup in this important marketand will facilitate access toliquidity for years to come.“Despite the challengingeconomic conditions, therewas a high level of investorparticipation which allowed usto exceed our original target– testament to the strength ofthe Petrofac credit.”The five-year bond, whichwill mature in October 2018,offers a fixed annual interestrate of 3.40%, to be paid tobond holders semi-annually.Whilst the bonds were initiallysold to institutional investors,they are also listed on theGlobal Exchange Market of theIrish Stock Exchange. Thebonds are tradeable securities,and as such are bound by thePetrofac Share Dealing Code.Any Petrofac employee orhis/her connecting partiesconsidering trading in bondsmust contact the Secretary tothe Board before doing so.Co-operation agreedin NigeriaDecember: Petrofac andTaleveras, the Africanindependent oil and gascompany, signed a five-yearmemorandum ofunderstanding for co-operationwith the NigerianPetroleum DevelopmentCompany (NPDC).The memorandum, which isextendable, allows all partiesto explore options includingfunding, technical support,training services, and assetdevelopment on a risk servicecontract, and productionenhancement contract, tosupport NPDC’s aims to furtherbuild indigenous capacity andtechnical capabilities.The agreement has beenreached as part of the ongoingpromotion of the NigerianOil and Gas Industry ContentDevelopment legislation.Extended subseaoffer in MalaysiaNovember: Petrofacannounced the launch of itsnewly extended KW Subseabusiness, which will enhancethe company’s offer in thedeepwater offshoreengineering services sector inthe Asia-Pacific region.Consistent with the Group’sstrategy of further penetrationinto the offshore oil and gasmarket, the expansioncombines local offshorepipeline consultancy, Pegasusand international subseaengineering and consultancybusiness, KW Subsea.The combination of the twoniche businesses will facilitatefurther access to thedeepwater subsea, umbilical,riser and flowline (SURF) andpipeline sector.Craig Muir, ManagingDirector for Petrofac’sEngineering & ConsultingServices (ECS) business said:“Our KW brand is a wellestablished name in theinternational subsea anddeepwater arena, whilePegasus is well positionedand has access to a growinglocal Malaysian market.Under a unified KW Subseabrand we will continue togrow our regional capabilityin Malaysia, leveraging thecombined expertise andallowing us to provide anenhanced offering to theMalaysian market.”Refinery improvementproject in OmanNovember: Petrofac andKorean-based companyDaelim were awarded athree-year Engineering,Procurement and Constructioncontract by Oman OilRefineries and PetroleumIndustries Company (ORPIC).The value of the contract isUS 2.1 billion.The contract encompassesengineering, procurement,construction, start-up andcommissioning services at therefinery, which is located in theSohar Industrial Area, 230 kmnorth-west of Muscat.The contract includesimprovements at the existingfacility as well as the additionof new refining units.Subramanian Sarma,Managing Director ofPetrofac’s OnshoreEngineering & Constructionbusiness, said: “We have beenin Oman since 1988 and havea detailed appreciation for theoperating environment.ORPIC is a new customer forus and we look forward tostrengthening our relationshipas the project progresses.”Production successat Majnoon oil fieldSeptember: Majnoon oil fieldopened its first well (MJ 11),thus achieving first oil. Theopening ceremony wasattended by the Iraqi DeputyPrime Minister, along withdignitaries from Shell, Petrofacand Iraq’s ministries.Several more wellheadshave since been successfullyopened and 26 October wasthe first day that the field brokethe 175,000 barrels a daytarget figure for firstcommercial production.Inauguration ofthe El Merk projectOctober: The El Merk projectinauguration ceremony tookplace in Algeria, attended bymore than 150 people,including Algeria’s EnergyMinister, Youssef Youssfi andthe Sonatrach President,Abdelhamid Zerguine.Petrofac was awarded thecontract for the US 2.2 billionCentral Processing Facilityon the site in 2009. It consistsof utilities, inlet separation,two oil trains, associated gasThe El Merk facility, Algeriacompressors, natural gasliquids and injection gas units.The Energy Minister andrepresentatives fromSonatrach and the partnercompanies thanked Petrofacfor their contribution towardsthe completion of the project,and Ayman Asfari was invitedto speak at the event.Extension awarded on Iraqcrude oil expansion projectOctober: OPO has beenawarded an extension withSouth Oil Company for the IraqCrude Oil Expansion Project.Worth US 98 million, OPO willprovide operations andmaintenance services onphase two infrastructure ofthe project.Total renews OPO’scontract in North SeaJanuary: Total has renewedOPO’s operations andmaintenance contract for afurther two years. The contract,worth 34 million, relates to theAlwyn and Dunbar platforms,both in the Northern North Sea.EVENTSWe are sponsoring theNigeria Oil & GasConference and ExhibitionAbuja, 24-27 FebruaryWe are exhibiting at theOffshore TechnologyConference, AsiaKuala Lumpur, 25-28 MarchThe Iraqi Deputy Prime Minister at the Majnoon opening ceremonyMaarten van Aller, from IES,is speaking at theannual FPSO ConferenceSingapore, 6-9 AprilPetrofacts February 2014 7

Petrofac’s first ‘mega project’ was inthe Caspian region more than adecade ago – and it’s an area thatremains of strategic importance today.Robin Knight looks at three countrieswhere hydrocarbons set the pace.Photographs by Phil SayerThe Galkynysh gastreatment plant, builtby Petrofac, canprocess 10 billion cubicmetres of gas a year.The total productioncapacity of the plantis 30 billion cubicmetres a year8 Petrofacts February 2014MAKINGINROADSIN THECASPIANPetrofacts February 2014 9

Pipelines crisscross the region(right), and the firedheater in theCentral ProcessingFacilities atGalkynysh(far right)Kashaganoffshoreoil ERBAIJANBakuTURKEYAsia-ChinapipelineUZBEKISTANTU R KM E N ISTANAzeri-Chirag-Gunashlioil fieldShah DenizAshgabatgas fieldIRAQGalkynyshgas fieldAFGHANISTANIRANHyperbole has been part of the Caspianscene at least since the day Robert Nobeltravelled to Baku in 1873 to buy locallygrown walnut wood for rifle stocks. Whenhe saw ‘spouters’ gushing thousands oftonnes of oil, Nobel quickly forgot all aboutwalnut, summoned his brother Ludwig andbought land – with a primitive oil refinerythrown in.One hundred and forty years later, it isstill hydrocarbons that set the pace in theCaspian region. Throughout the territoryin and around the Caspian Sea, scores ofmajor projects involving billions of dollarsare underway to exploit the great energyriches to be found onshore and offshore.If the oil and gas era is drawing to a close,no one has told the 30 million Azerbaijanis,Kazakhs and Turkmens.The area’s contribution to world energyproduction remains relatively small onpaper – less than 5% for both oil andnatural gas. Yet this disguises reality on theground. Stimulated by major investmentsin the last decade, no less than 70% of newhydrocarbon production in non-OPECcountries in the three years to 2013originated from the Caspian. On everyprojection this trend is expected to persistover the rest of the decade to 2020.Three diverse countries – Azerbaijan,Kazakhstan and Turkmenistan – are at theheart of the upsurge. Petrofac isrepresented in each one – “a region ofstrategic importance to us” in the words ofAndy Inglis, head of Petrofac’s IntegratedEnergy Services.Underlining the point, in Kazakhstan thecompany has signed a series of contractsin ten years including one related to thegiant Kashagan discovery– the largestnew oil field found anywhere in the world inthe past 30 years. In Turkmenistan a US 3.4billion contract signed by Petrofac in 2010– to help develop the world’s secondlargest gas field – is the biggest ever won10 Petrofacts February 2014by the company. Extremes of this sort, asRobert Nobel soon realised, are integral toany Caspian energy assessment. Forexample, the geology is complex, the areais remote from world markets, the 700-milelong sea is landlocked, the climate veersfrom boiling hot to icy cold, infrastructure isdeveloping, and logistics can be a problem.It makes for a challenging brew.Man-made archipelagoAt Kashagan in the northeast of theCaspian Sea, for example, developmentissues are described by insiders as“mind-numbingly complicated.” Today themost visible evidence of this complexity isthe massive scale of newly-builtproduction infrastructure – a huge offshorearchipelago of islands that rise out of alagoon protected by curved atolls, allman-made. Situated 4,200 metres belowthe seabed, Kashagan is a high-pressurereservoir with the added complication thathydrogen sulphide is mixed in with itshydrocarbon reserves. It is also located ina part of the Caspian Sea where ice packsin the winter months are incredibly strong.Further south, down the eastern side ofthe Caspian, the equally immense SouthYoloten gas field (now Galkynysh) in thesandy deserts of Turkmenistan has provedscarcely less of an engineering andlogistics challenge. Another greenfield sitea long way from any urban facilities, it isexposed to shifting winds that createchains of high, long-moving dunes andsteep elevations. Soil density is very looseand the water table is non-existent.To add to the complications of majorprojects like Kashagan and Galkynysh,the political complexities of a region thatincludes Azerbaijan, Iran, Kazakhstan,Russia and Turkmenistan cannot beunderstated. For Petrofac this is a minefieldbest skirted around by emphasis on coreengineering, technical and trainingexpertise. In Kazakhstan, says JohnAndersen, Senior Vice President EasternEurope and Caspian for PetrofacIntegrated Energy Services, “we find a lotof opportunity. They want results quicklyand we’re willing to take some risk, invest,develop relationships and build on ourtrack record.”At Kashagan, Petrofac’s contractinvolved work on three trains of oil, gas andsulphur treatment plants. These wereKYRGYZSTANcompleted by 2012. Since then aMemorandum of Understanding has beensigned with KMG Exploration andProduction to undertake training and toCHINAboost production at 14 mature oil fields(one of which dates from 1911) in the Embaarea in western Kazakhstan. The objective,John says, is a 15-25 year contract whichwill allow Petrofac to provide capability forKMG EP and its subsidiary EMG. He adds:“The training we’re offering is attractive toKMG; the notion of mutual gain has beengrasped very quickly. Down the line we seean opportunity to extend the agreement.It looks like an awfully good market.”“A strategic project in terms of Petrofac’saccess into the downstream market wasannounced in Q3 of 2013 where we are inconsortium with Germany’s Linde andKorea’s GS Engineering & Construction,”says ECOM’s CIS Business DevelopmentDirector Sebastian Lagaditis. “KLPE hasengaged us to provide services in relationto development of its IntegratedPetrochemicals Complex andInfrastructure (IPCI) project, situated inthe Tengiz and Karabatan regions ofKazakhstan. We are currently workingon the US 77 million first phase of thecontract and subject to satisfactoryconclusion it is contemplated that the IPCIproject will move into a second phase, inexcess of US 3.5 billion, for a polyethyleneplant comprising two streams eachproducing 400,000 tonnes per annum ofproduct. This is one of several industrialopportunities that have been sanctioned inKazakhstan. There’s a real sense of activityin the country.”In Turkmenistan, Petrofac’s breakthrough came in 2010 via the SouthYoloten gas field project, now renamedGalkynysh. ’Aggressively’ scheduled forcompletion in 33 months, the contract hasremained on time and to budget withinauguration celebrated in September2013. The result is a gas treatment plant400 km south of the capital Ashgabat thatcan process 10 billion cubic metres of gasa year. Much of the facility’s productionwill be exported through the 1,833km longCentral Asia-China Pipeline as part ofTurkmenistan’s agreement to supply Chinawith 30 billion cubic metres of natural gasover the next 30 years.At its peak 14,500 personnel – threequarters of them locals – worked forPetrofac on this venture. A dedicatedconstruction training facility was built inthe nearby town of Mary. Adding to thechallenge were the remote location of thesite, the complicated logistics throughthe Caspian, and the extreme weatherconditions.In addition, the Petrofac-built plant wasonly one of three being builtsimultaneously at Galkynysh, the othertwo being constructed by China’s CNPCand Hyundai Engineering of South Korea.“Despite this, our Petrofac team wasable to manage all the complexities well,”says Sebastian. “Productivity wascomparable to the Mideast, we developeda good relationship with Turkmengas(the host company) and there were nosignificant changes to the contract.Theessentials:Galkynyshgas plant,TurkmenistanWe also achieved some nice add-onssuch as employing local constructioncontractors, who in turn used the experienceto help grow their own businesses.”Focus on trainingAcross the Caspian in Azerbaijan,Petrofac’s involvement goes back evenfurther, to the early nineties in fact. “Ourfirst ‘mega’ project in the region howevercame in the shape of the AGT pipelineproject where Petrofac played a centralrole in the construction of the Georgiansection of the Baku-Tbilisi-Ceyhanpipeline,” Sebastian reflects.More recently, Petrofac’s focus inAzerbaijan has been on training. Since2003, the company has co-managed theCaspian Technical Training Centre (CTTC)The 3.4 billion Galkynysh gasfield project is Petrofac’s largestengineering, procurement andconstruction project to date. Thegas field – formerly known as SouthYoloten – is approximately 400kmsouth east of the capital Ashgabat.After an ambitious 33-monthprogramme, the Petrofac-built gastreatment plant was inaugurated inSeptember 2013, and is capable ofprocessing 10 billion cubic metresof gas per year.The feed gas from the fieldcontains up to 4.5% hydrogensulphide, and the developmentincludes gas treatment and sulphurhandling facilities, along withwell pad and gathering facilities,infrastructure and utilities,condensate processing, storageand 100 km of 56” export pipeline.At its peak, the project had aworkforce of 35 contractors withmore than 14,500 personnel, threequarters of whom were Turkmen.near Baku with TTE International on behalfof BP and its partners in two major offshorehydrocarbon developments – the giantAzeri-Chirag-Gunashli (ACG) oil field andthe equally large Shah Deniz (SD) gas field.Today, about nine out of ten nationaltechnicians working at ACG and SD havegraduated from the CTTC, includingsome 450 new staff each year. Trainingenhances production, electrical,mechanical and instrument skills at variouslevels as well as providing a speciallytailored English-language foundationcourse.In 2011 the contract to operate CTTCwas renewed for a further five years. Twoyears later it was widened to include an11-month entry programme for BP’s annualintake of 50 or so Azerbaijani graduatetrainees to deepen their technicalknowledge, business awareness andcommunications expertise.As in Kazakhstan and Turkmenistan,much of Petrofac’s success in creating aviable business in Azerbaijan is down tothe nitty-gritty work of buildingrelationships on the ground through asustained presence and strong delivery.In the future there is every chance thisapproach will produce more results as araft of major oil and gas projects in theCaspian move from planning toconstruction. Azerbaijan, for example,Petrofacts February 2014 11

In a 30-year supplyagreement, much ofthe Galkynysh gas willbe exported to Chinaby pipeline.Below are the thermaloxidizers for thesulphur recovery unit12 Petrofacts February 2014Petrofacts February 2014 13

is gearing up for the second phase of SDdevelopment with plans to market gas insouthern Europe through the proposedTrans Anatolian Pipeline and/or the TransAdriatic Pipeline.For its part, Turkmenistan is alsoplanning the phase two development atGalkynysh, aiming to export an additional30 billion cubic metres to China.Construction continues on the importantEast-West pipeline in the country.Long term, this will move someGalkynysh gas through a new US 2 billionport on the Caspian for onwardtransmission, possibly through thelong-mooted undersea Trans CaspianPipeline via Azerbaijan to Europeanmarkets.In Kazakhstan, oil production is set togrow two-thirds by 2025 while oil exportsshould double by 2035 according topredictions by the International EnergyAgency. The hunt is also on for a marketfor Kashagan’s one trillion cubic metresof gas.In other moves the Kazakh governmentsignalled recently that it is committed, asis Azerbaijan, to upgrading old, partiallydepleted onshore oil fields.Meantime all three Caspian littoralcountries are growing rapidly andincreasingly showing the greaterregulatory flexibility necessary to lure14 Petrofacts February 2014inward foreign investment. Azerbaijan,like Kazakhstan, seems intent on buildingits own petrochemical industries;the launch of a US 17 billion oil-gasprocessing and petrochemical complex60 km south of Baku is now set forearly 2014. And Turkmenistanremains determined to build the costlyinfrastructur

Blueprint magazine Andrew Cave Journalist Writer for the Daily Telegraph, Sunday Telegraph, Forbes and CorpComms, Andrew is an author of the book Secrets of the CEOs Rupert Wright Journalist Rupert has had a 20 year career, writing for publications including The Times, The Financial Times and the Washington Post Marc Morrison Photographer