Nov 24, 2015 - Flue Gas. Desulphurization. Dry Scrubbers. De-Nitrogene. Oxide (DeNOx). Electrostatic precipitator. Spray
21° CONVEGNO ANNUALE SEZIONE COMPONENTISTICA D’IMPIANTO ANIMP
THE VALUE OF PACKAGES Tullio Buonocore, Giacomo Franchini Grand Hotel Villa Torretta, Sesto San Giovanni (Milano), November 24th 2015
Packages for the Oil&Gas and Power industry are an Italian stronghold … ~1.6 BILLION EUR ~170 REVENUES COMPANIES ~80% EXPORT >5000 EMPLOYERS
15/20% GLOBAL MARKET SHARE 2
… with Key Success Factors that are similar to the one of a small EPC Contractor Packager’s competences
Quality of sub-contractors and equipment / bulk
Understand different specs and requirements
Few assets but efficiently operated
3
A Package is like a tailored suit
≈ 4
The on order delivery of a great tailored suit requires similar capability of Packagers Tailor’s competence
Quality of materials
Interpret and accommodate Clients’ preferences
Few assets but efficiently operated
5
THE VALUE OF PACKAGES
!
• Packagers act as “small” EPC Contractors • Distinctive Italian competences for Packages • Packages require specific competences and know-how
WHICH SUSTAINABILITY? 6
Objectives of this analysis • Map the competences of the Italian Packagers • Allow vendors to know where to grow in a sustainable way • Increase the international visibility of vendors, especially Small and Medium Enterprises (SME) • Propose value chain actions to increase sustainability 7
Interviewed ~20 companies and 50+ people EPC CONTRACTORS
16/06
12/06 and 3/11
22/05 and 6/10
PACKAGERS
23/09
11/06
11/06
04/06
26/08
03/06
29/07
28/08
29/10
23/09
04/06
24/06
24/09
23/11 12/10
Avv. Guido Maglionico (Legal advisor to ANIMP) 22/07
THANK YOU FOR YOUR AVAILABILITY AND CONTRIBUTION. 8
Agenda
What is a Package Market Players and economics Sustainability Proposed actions 9
Definition of Packages Packages are multidisciplinary and process-oriented items that are defined by their functionality. Packages have critical interfaces with the rest of the plant, thus are often highly co-engineered along the value chain and may have long lead times. 10
What is and what is NOT a Package for this analysis? EPC CONTRACTOR
MODULES FOR TOPSIDE COMPLEX PACKAGES / SYSTEMS
ORIGINAL EQUIPMENT MANUFACTURER
MULTIDISCIPLINARY SKID-MOUNTED PACKAGES
HIGH COMPLEXITY EPC PACKAGES
“SIMPLE” SKIDMOUNTED
Multidisciplinary competence is the base to put together various equipment
Special parts of a plant with a specific functionality
• Heating equipment • Utilities packages • …
SUBSEA PACKAGES Simpler skid mounted machineries (e.g. pumps)
SUB-PACKAGES (PACKAGES-FOR-PACKAGERS) Suppliers of small packages (with specific functionalities) and that are part of larger packages
11
∞1
Multiple names 1 package Contractor A
End User M
TEG Gas Dehydration Package System (Glycol type)
Contractor B
Gas and liquid dewatering pack. Systems (glycol regeneration)
End-User N
Gas / Liquid Dehydration Unit
Glycol Dehydration Package
Contractor C Contractor Z
Process Package Very generic
Gas Dehydration Package 12
Leading sources have been considered to set a common language on Packages ANALYSIS OF PUBLIC CATEGORIZATION
INTERVIEWS WITH CONTRACTORS, VENDORS, INDUSTRY EXPERTS
MAPPING OF KEY VENDORS 13
16 FAMILIES of Packages within 2 GROUPS of categories PACKAGES WATER TREATMENT PROCESS PACKAGES
HANDLING SYSTEMS WEIGHING AND PRODUCTION CONTROL
Fired Heaters Waste Heat Recovery Units
SOLID HANDLING
FLUE GAS TREATMENT
LIQUIDS HANDLING AND REFUELING SYSTEMS
REFRIGERATION
TRANSFORMATION AND FINISHING PACKAGES
COOLING TOWERS
Boilers
PACKING
HEATING, VENTING AND AIR CONDITIONING (HVAC)
CRUSHING AND GRINDING
FIRE-FIGHTING SYSTEMS
EQUIPMENT AND SYSTEMS FOR SPINNING LINE
FILTRATION, SEPARATION SKID-MOUNTED PACKAGES
ALWAYS IN SCOPE AND FOCUS OF THIS ANALYSIS
Heat Recovery Steam Generators (HRSG) Waste Heat Recovery with ORC plants Furnaces Incinerators Flares Components and Accessories of Furnaces and Incinerators Storage Tanks Silos, Cylinders and Spheres
SOMETIMES CONSIDERED TO BE PACKAGES 14
Packages (1/2) Water Treatment
Process Packages
03.01
Wastewater, Water and Produced Water Treatments
Desalination
Liquid Hydrocarbon Treatment
Gas Treatments
Water Filtration
Flue Gas Treatments
03.02
H2 Recovery/ Purification
03.02.12G
Membrane systems
Thermal 03.01.04G
Reverse Osmosis (RO)
Multi-stage flash distillation (MSF)
03.01.01G
03.01.05G
Multiple-effect distillation (MED)
Onshore 03.01.02G
Filtering And Clarification 03.01.08G
Physical treatment package 03.01.09G
Physico-chemical treatment package
03.01.03G
03.01.07G
Electrodialysis & Electrodialysis reversal (ED & EDR)
Electrodeionization (EDI)
03.01.12G
Chlorination 03.01.13G
Ozonation 03.01.14G
03.01.06G
Vapour Compression desalination (VC)
Offshore
Water Sterilization
03.01.10G
Demineralising / Softening /Treating Condensate 03.01.11G
Conditioning And Remineralization
Ionisation 03.01.15G
Ultraviolet Disinfection Systems Or Colloidal Silver
Adsorption Units
03.01.34G
03.01.37G
Scraper (all types)
Air Diffuser 03.01.35G
Tanks and basin accessories
Hydro cyclones
Activated Carbon Package
03.01.38G
Flight scraper
03.01.36G
03.01.21G
03.01.22G
Polymer Adsorption Package
Deareator 03.01.40G
03.01.42G
For Water/Oil Separation
Vacuum
03.01.41G
03.01.43G
Corrugated plate interceptor (CPI) 03.01.28G
Induced Gas Flotator (IGF)
Thermal
For Reserve Osmosis (RO) 03.01.45G
Corrugated Plate Separator (CPS) 03.01.29G
Membrane equipment
For Capillary distillation
American Petroleum Institute (API) Separator 03.01.27G
Dissolved Air Flotation (DAF)
Water Tanks 03.01.46G
For Ultra and Micro-Filtration 03.01.47G
For Electrodialysis (ED)
Extended Aeration 03.01.17G
Bio-Disc 03.01.18G
Bio-Filter 03.01.19G
Membrane Bio Reactor (MBR)
03.01.48G
Cartridge Filters 03.01.49G
Bag Filters 03.01.50G
Basket Filters
03.01.24G
For Water Flocculation 03.01.25G
Grit Removal
Moving Bed Bioreactor (MBBR)
Gas Sweetening 03.02.01G
Pressure Swing Adsorption (PSA) 03.02.02G
Membrane
Strainers
Gas Dehydration
03.01.30G
Stabilization Units 03.01.31G
Pressure filters 03.01.52G
Sand Filters 03.01.53G
Multi Media Filters
03.02.05G
Fixed Bed Systems with Mol Sieves and other solid desiccants 03.02.06G
Sulfur Recovery Unit
Ultra Filtration (UF) Package 03.01.55G
Self Cleaning Filters
Flare Gas Recovery Unit
Refrigeration
Joule Thompson Expansion 03.02.10G
03.01.33G
Thermal Drying Units
03.02.13G
Flue Gas Desulphurization 03.03.01G
03.02.16G
Oil Desalter
Membrane
03.02.14G
Wet scrubbers 03.03.02G
03.02.17G
Oil Stabilizer
Dry Scrubbers
Methanator
03.03.03G
N2 & O2 Production and Purification
Polishing Units
03.02.18G
03.02.21G
Pressure Swing Adsorption (PSA)
Adsorbent
Spray-dry scrubbers
Regenerative Processes
03.02.19G
Membrane
Catalyst
Vapour Recovery Units
03.02.23G
03.02.24G
Cryogenic Storage Systems
Pressure Swing Adsorption (PSA) 03.02.25G
Vacuum Swing Adsorption (VSA)
Dry Regenerative Process 03.03.05G
03.02.20G
Cryogenic Air Separation Unit (ASU)
03.03.04G
03.02.22G
03.02.26G
Temperature Swing Adsorption (TSA)
Wet Regenerative Process 03.03.06G
De-Nitrogene Oxide (DeNOx) 03.03.07G
Electrostatic precipitator 03.03.08G
Pressure Relief Panels
Dryers
03.02.08G
03.02.09G
Dewatering Units
Oil Dehydration
Hydrocarbon Dew Point Control
Thickening Units 03.01.32G
03.02.15G
Pressure Swing Adsorption (PSA)
03.02.04G
TriEthylene Glycol (TEG)
03.02.07G
For Sludge Treatment
Desulphurization processes
03.02.03G
Amine
03.01.51G
03.01.54G
03.01.26G
Flotator
03.01.44G
Odour Control Equipment
03.01.39G
Ion Exchanger
03.01.16G
Filter Media
03.01.20G
03.01.23G
Equipment
Biological Treatment Package
03.03
Silica Gel
Solid Dryers
Air Dryers
03.02.27G
03.02.31G
Regenerative Desiccant Dryers
Rotary type 03.02.28G
Fluid Bed type
03.02.32G
Refrigerated Dryers
03.02.29G 03.02.11G
Inert Gas Generation
Gas Dryers
03.02.33G
Deliquescent Dryers
03.02.30G
Liquid Dryers
03.02.34G
Membrane Dryers November 2015 Rev. 03
Soil Remediation 03.03.09G
By Means of Thermal Processes 03.03.10G
By Means of Chemical and Physical Processes 03.03.11G
Degassing Towers
Packages (2/2) 03.04
Refrigeration 03.04.01G
03.06.01G
System package with Rotary or Reciprocating Compressors
03.04.02G
System package with Centrifugal Compressors
03.04.03G
System package, Absorption type 03.04.04G
Unit for Air Conditioning
03.07
03.06
Heating, Venting & Air Conditioning (HVAC)
03.07.01G
Foam systems skid unit
Chillers 03.06.02G
Heat Pumps 03.06.03G
Air Handlers 03.06.04G
Self Contained Units
03.08
Fire-Fighting Systems
03.07.02G
Gas extinguishing systems skid unit
03.09
Filtration and Separation
Skid-mounted packages 03.09.01G
03.07.04G
Gas extinguishing systems and water mist systems units
Solid-Liquid Filters
Centrifuges
03.07.05G
Fire protection – pressurization units
03.07.03G
03.07.06G
Gas extinguishing systems cabinet
Water mist systems skid unit 03.07.07G
Sprinkler valve skid unit
Separators
03.08.18G
Vacuum Filters
Pressure Filters 03.08.01G
Rotary Drum Filters 03.08.02G
Disc Filters
Pusher Type Centrifuges
03.08.24G
Decanter Centrifuges
03.08.06G
Horizontal Plate Pressure Filter
Cooling Towers Natural Draft 03.05.05G
Wet type
Unit Ventilators & Fan Coil
Various Components
Horizontal Centrifuges
03.06.08G
Blower & Fan
03.05.07G
Inducted type 03.05.08G
Forced type 03.05.09G
Small Dimensions
03.08.08G
Nutshell Pressure Filter 03.08.09G
Automatic Pressure Filter
03.06.07G
03.06.09G
Others
Other Filters 03.08.12G
Electrostatic Filters (Dust, ...) 03.08.13G
03.08.20G
03.08.07G
Vertical Pressure Leaf Filter
03.06.06G
Humidifier
Mechanical Draft
03.08.04G
Tilting Pan Filter & Table Filter
Heat recovery ventilation (HRV)
03.05.06G
Dry type
03.03.03G
Horizontal Belt Filters
Vertical Centrifuges 03.08.21G
03.08.14G
03.08.15G
Electrostatic Coalescers, Precipitators
03.08.16G
Dedusting Filters with Fan 03.08.17G
House Filters
03.08.25G
Centrifugal – Dust from Gas 03.08.26G
Liquid from Liquid 03.08.27G
Solid from Liquid
Peeler centrifuges 03.08.22G
Other types Of Centrifuges
Candle Filter
Air from Liquid
03.09.03G
Gas Pressure Regulating Systems 03.09.04G
Fuel Gas Treatment Skids 03.09.05G
Instrument Air Package 03.09.06G
Diesel Generator Package
03.09.07G
Manufacturing of Skid-mounted Pumping System 03.09.08G
Manufacturing of Skid-mounted Compressors System 03.09.09G
Well Testing Skids 03.09.10G
Production Manifold skidmounted 03.09.11G
High-integrity pressure protection system (HIPPS) 03.09.12G
Auxiliary Skid Unit 03.09.13G
Metering skid Unit
Pig Launchers and Receivers
03.09.14G
Other Separators
Screens
03.08.11G
Pneumatic Pressure Filter
03.09.02G
Accumulator Skids
03.08.28G
03.08.10G
03.08.33G
Rotary Screens
Air Filters
Smoke Extraction Equipment
Liquid from Gas
03.08.19G
03.06.05G 03.05
Magnetic Type – Solid from Solid
03.08.05G
Filterpress
03.08.23G
Dosing Systems
Metal Detectors 03.08.34G
Elutriators
For Gas
03.09.16G
Lube Oil Systems Wellhead Control Panels 03.09.18G
03.08.30G 03.08.35G
Drum
03.09.15G
Sub – Packages
03.09.17G
03.08.29G
Travelling Band
For Crude Oil
Power Packs
Decanters 03.09.19G
Bar Screens
03.08.36G
Film Evaporators
03.09.20G
03.08.31G
Fixed and mobile automatic Racking
Compressed Air Systems
03.08.37G
Multi-Cyclones
03.08.32G
Bundles of Cylinders 03.09.21G
Hydraulic Cylinders
Revolving Racking
November 2015 Rev. 03
Handling Systems 04.01
04.02
Weighing and Production Control
04.03
Liquids Handling and Refueling Systems
Solids Handling
04.01.01G
Scales
04.04.01G
Elevators for Passengers and Goods
Conveyors
04.01.02G
Weighing Bridges 04.01.03G
Belt Weighing Systems
Batching and Feeding Systems 04.01.04G
Electromechanical Extractors 04.01.05G
Electromagnetic Extractors 04.01.06G
Apron Weighing Extractors 04.01.07G
Belt Weighing Extractors
04.02.01G
Belt and Pipe Conveyors 04.02.02G
Roller Conveyors
Mixing Equipment 04.01.09G
Continuous Mixing 04.01.10G
Batch Mixing 04.01.11G
Vacuum Mixer 04.01.12G
Handling / Dosing for Additives and Others (PE, PP, ...) 04.01.13G
Package Unit of Sampling
04.02.13G
Rack and pinion 04.02.14G
Traction
Screw Conveyors 04.02.04G
Vibrating, Oscillating and Air Cushion Conveyors 04.02.05G
Steel-band, Pushbar and Apron Conveyors 04.02.06G
Chain and Reddler Conveyors
Stockpile equipment and dispatching 04.02.15G
Truck and Wagon Loaders
04.02.17G
Reclaimers
04.02.07G 04.02.18G
Pan Conveyors
04.02.08G
Catalyst Handling Systems
Telescopic Chutes 04.02.19G
Wagons Haulage 04.02.20G
04.02.09G
Bucket and Screw Elevators
Pneumatic and Gravity Handling 04.02.10G
Pneumatic Conveying Systems
04.02.11G
Bin Activators (Extractor Under Silos)
04.02.24G
Hoists 04.02.25G
Bridge Cranes
Portal / Gantry Cranes 04.02.27G
Other Cranes
Stackers 04.02.21G
Forklifts
Heavy Lifting
Strand Jacks 04.02.29G
Flat Jacks 04.02.30G
Hydraulic Jacks 04.02.31G
Hydraulic Gantry Cranes 04.02.32G
Skidding System 04.02.33G
Others
04.02.23G
Mainly non-Oil&Gas
04.03.03G
Car Cleaning Station 04.03.04G
Onshore Loading Booms Loading Arms Land (Mechanical)
04.04.03G
Package Unit of Sinterizing 04.04.04G
Package Unit of Briquetting 04.04.05G
Extrude and Pelletizing Equipment 04.04.06G
Package System for Crystallization and Concentration
Offshore 04.03.06G
Refueling System for Helicopters used on Platforms 04.03.07G
Marine Loading Arms 04.03.08G
Multipurpose Towers for Platforms and Gangways
Airport Equipment 04.02.34G
Baggage Handling Systems 04.02.35G
04.07
04.05
Crushing and Grinding
Packing 04.05.01G
Bagging Machine 04.05.02G
Bags Breakers 04.05.03G
Packing Machine
04.05.10G
Oil Canning and Packing Units
Crushers
Impact Crushers
04.05.12G
04.07.02G
Bagging, Palletizing and Packing Fertilizers and others
Roller Crushers
For Drums
Hummer Crushers
04.05.05G
Wrapping Machine 04.05.06G
Strapping Machine
04.04.15G
Package Unit for Steel Drum Manufacturing
04.04.08G Package System of Polymer Finishing (Dewatering, Drying and Packing)
Filling Lines for Drum, Cans and Bottles
Package Unit of Plastic Film Extruding and Forming 04.04.10G Package Unit for Screening and Regeneration (Catalysts And Others)
Solidification
04.05.09G
04.06
Equipment and Systems for Spinning Line
04.06.12G
Spinning Process
Post-Spinning Processes 04.06.01G
Melt Spinning
Package System of Granulation
Dry Solvent Spinning 04.06.03G
04.04.12G
Powder Processing Equipment
Wet Solvent Spinning 04.06.04G
Reaction Spinning
Drawing
Washing Modules 04.06.07G
Lubrication 04.06.08G
Crimpling & Recrimpling 04.06.09G
Drying 04.06.10G
04.04.13G
Powder Drying (PVC and Others)
Cutting 04.06.11G
04.04.14G
For Milling Powders (PVC and Similar)
Balling
04.04.15G
Package Unit of Micronization and Powder Handling
04.06.05G
04.06.06G
Solvent Spinning 04.06.02G
04.04.11G
04.07.08G
Vertical Roller Pre-Grinders (CKP, …)
Roller Presses
04.05.08G
Gas Cylinder Conditioning, Filling Lines
04.07.07G
04.07.09G
04.04.14G
04.05.07G
04.04.09G
Other Crushers and Grinders
Package Unit for Plastic Drums Manufacturing
Containers Making Systems
04.07.06G
Horizontal Roller Mills
04.07.04G
04.04.13G
Package Unit Drum Heating By Steam
04.07.05G
Grinding Mills (SAG, rod, ball, …) Vertical Roller Mills
04.07.03G
04.05.04G
Pallettizing Machine
Mills
04.07.01G
04.05.11G
Bitumen and Other Canning and Packing Units
Package System of Coke Slurry
Package System of Pastilles & Flakes Forming
Front / Pay Loaders
Airport Handling Equipment Oil&Gas
Fuel Filling Systems - Land
04.04.02G
Calcination Process
04.04.07G
04.02.12G
Rotary Vales, Vane Feeders, Feed Hoppers and Diverter Valves
04.03.02G
04.02.28G
04.02.22G
Automatic Storing Systems
04.03.01G
Onshore Refueling Systems
04.03.05G
04.02.16G
Ship Loaders and Unloaders
Package Unit for Wax Moulding
Onshore
Hoists and Cranes
04.02.26G
04.02.03G
04.01.08G
Paddle Extractor
04.04
Transformation and Finishing Packages
November 2015 Rev. 03
Various Equipment
Agenda
What is a Package Market Players and economics Sustainability Proposed actions 18
The global market for Packages is ~8.5B EUR (~10% of procured value for Oil&Gas plants) Global market for Oil&Gas Packages, end users perspective (2014, B EUR)
100%
6.4B
Silos, Cylinders and Spheres 0.1B Other Various Packages 0.1B
2.1B
Total = 8.5B
Filters, Screens and Separators 0.2B
80
Refrigeration 0.3B HVAC 0.3B Process Filters 0.5B Storage Tanks 0.6B
60 Process Packages 1.7B
Handling Systems 2.1B
40
20
Water Treatment 2.7B
0
Source: SupplHi analysis based on interviews with EPC Contractors
19
End-users’ universe is enlarging: more opportunities Complexity / rigidity in specs
+
-
IOCs / large NOCs Medium / small NOCs Independents
ILLUSTRATIVE
“Aramco or Shell have complex standards that must be strictly respected, also on Packages.”
“Clients are changing. The new ones have less requirements and more flexibility in accepting our standards on Packages, reaching Manufacturers’ standards.” 20
End-Users and Contractors are “forced” to collaborate with Packagers NEED
LEVER
MANAGE RISKS
• Mitigate risks with closer interactions • Share / transfer risk to Packagers (also through Terms & Conditions) – They represent a cost and EPC Contractors are willing to pay for that
REDUCE COSTS
• Players to “buy directly key equipment, for 3rd parties execution” • Leverage on Packagers’ knowledge
SHORTER DELIVERY TIMES
• Accelerate the conclusion of the Engineering of the Packages, to order to deliver better and earlier 21
EPC Contractors leverage on packagers’ know-how and forfeited some competences “Packages started in the late ’80s from a saving perspective. The idea was also to transfer some risks and leverage on the focused know-how of suppliers. But our legal and managerial side is not yet aligned to needs: bringing to the extreme, the same person that purchases a pump follows the day after a 15 million euro purchase”
Source: interviews with ANIMP members
“Packages always existed and we don’t have perception of an increase in utilization over the last years. But this is mainly due to the current competition in the industry. Being an EPC Contractor, the make solution is theoretically the best one, especially for large packages.”
22
Major trends are creating long term opportunities for Packagers
MODULARIZATION NEW REGULATIONS BROWNFIELD LOCAL CONTENT 23
Continuous trend for modularization HIGHER ACCESSIBILITY TO REMOTE OR CRITICAL GEOGRAPHIES OFFSHORE
MODULARIZATION
IRAQ
PACKAGES CANADA
“Modularization is basically a package brought to the extreme.” 24
Regulations typically create a disruption in the supply chain
Zero discharge S-ECA
• Advanced wastewater treatment technologies to purify and recycle virtually all of the wastewater produced, with no discharge of any kind of pollutants into the environment
• Since 1/2015, all vessels in the Emission Controlled Area (ECA) of the Baltic Sea, North Sea, English Channel and waters 200 nautical miles from the coast of US and Canada, have had to reduce their sulphur emissions to 0.1% m/m • ECA area may be extended to new geographies
Flaring
• Zero Routine Flaring by 2030: endorsed by 9 Countries and 10 Oil Co.’s (>40% of global gas flaring) • Some companies are anticipating results (e.g. eni in Nigeria, setting a strong reduction already by 2017) Source: interviews with ANIMP members
25
ECA area may be extended to new geographies
Current ECA Possible new ECA
ECA AREA
Current sulfur limits: • ECA: 0.10% m/m • Other sea areas: 3.50% m/m (0.50% after 2020)
Source: ExxonMobil
26
Russia is currently the #1 country for flaring emissions, followed by Nigeria FLARING EMISSIONS BY COUNTRY
North Sea Black Sea
Gulf of Mexico
Venezuela, Colombia & Trinidad
Caspian Sea
Red Sea
West Africa
Middle East East Africa (Yemen)
Asia
AustralAsia South America
3,5 MTPA Source: World Bank
27
Packages are typically related to technology cycles … INTRODUCTION
GROWTH
MATURITY
ILLUSTRATIVE
DECLINE SULPHUR
POLYPROPYLENE LPG LDPE POLYETHYLENE WATER TREATMENT
CARBON DIOXIDE AND CARBON MONOXIDE OXYGEN
HYDROGEN LNG DELAYED COKER UNITS (DCU) LNG MARINE
Time Source: interviews with ANIMP members
28
… and some Packages’ application will require higher focus over the next years
NOT EXHAUSTIVE
INCREASED FOCUS WATER TREATMENT
LNG MARINE
FLARING SYSTEMS
“NICHE MARKET”
EPDM DCU …
+ BROWNFIELD AND REVAMPING PROJECTS ARE OPPORTUNITIES ALSO FOR SMALLER PACKAGERS Source: interviews with ANIMP members
29
Some types of Packages will be always needed “EVERGREENS” (present in all types of plants) AIR DRYERS
DOSING SYSTEMS
Source: interviews with ANIMP members
FILTERS
NOT EXHAUSTIVE
DESALTERS
30
Systems integration can be delivered only by large players, uncommon in Italy •Trend of systems integration by large players able to deliver multiple, large and integrated packages, with a cross-industry perspective (Oil&Gas, Power, Shipbuilding, …) –leveraging also on technological and process competences and international commercial presence –increasing their bargaining power toward Clients as well as packagers and sub-packagers Source: interviews with ANIMP members
SYSTEM INTEGRATOR
COMPLEX PRODUCTS
31
Agenda
What is a Package Market Players and economics Sustainability Proposed actions 32
Photography of the Italian Packagers value chain, 2015 ~170 companies ~50% of companies with 5000 employers
Source: SupplHi analysis, OneSource
1.6 Bln EUR revenues 80% export
Avg EBITDA margin ~9% 33
Packagers mainly located in northern Italy (Lombardia and Emilia Romagna) # of suppliers, by HQ Region
Lombardia
84
54%
Emilia Romagna
24
15%
Veneto
9
6%
Piemonte
6
4%
Marche
6
4%
Toscana
5
3%
Liguria
5
3%
Lazio
4
3%
Other
21
10%
Total
164 100% 34
The supply chain for Packages is highly interconnected …
ILLUSTRATIVE
END-USER EPC CONTRACTOR SUB-EPC FOR PACKAGE PACKAGER WORKSHOP / PACKAGER SUB-PACKAGER COMPONENTS OF A PACKAGE Source: interviews with ANIMP members
35
… and became too long “Presence of Sub-EPC for Packages that typically add limited value to the picture and create further complexities.”
“This long chain has a strong impact on schedule are requires escalation and creates delays for decision making. It also fragments competences across the value chain. Profit margins are also spread around.”
“In such a long chain Technical Standards sum up and become very complex to assess.” Source: interviews with ANIMP members
36
Examples of Italian Packagers ILLUSTRATIVE
Note: includes international companies with Engineering and manufacturing activities in Italy
NOT EXHAUSTIVE
37
Increase in the number of small Italian Packagers together with lack of specialization “Every week a new Italian Packager is knocking at our door and we are not able to fully understand its capabilities.”
“The new Packagers that we are meeting are small companies that were the terminal part of a much longer value chain.”
Source: interviews with ANIMP members
“The new Packagers come from 3 different extractions: Former suppliers of large packagers that delocalized this part of the value chain in low cost countries Engineering companies willing to expand their scope of work Small companies not willing to grow in order to keep labour flexibility.” 38
~50% of companies with 50 M EUR) Medium (>10 and >50 M EUR)
1.6
-2%
% VARIATION 2011-2013
1.6
1.6
0.5
0.5
0.5
+11%
0.9
0.8
0.8
-6%
0.3
0.3
0.3
-9%
2011
2012
2013
Small (10 M EUR
5-10 M EUR
Replicability needed across multiple packages
0-5 M EUR
Time 45
Typical causes of distress of Packagers CAUSES
EXAMPLE Packager of analyzers shelters, wellhead control units and skids
• Not meeting required performance of the package
Packager mainly focused on skid-mounted machines (e.g. Compressors, …)
• Too dependent on a single main customer, which absorbed almost full capacity • Lack of internationalization
Packager of skid-mounted machines
• The increase in quality (and consequently costs) wasn’t recognized by the market • Complex financial sustainability
Traditional packagers
• Complex owner’s succession plan in a family business
Source: interviews with ANIMP members
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What are the competences required to deliver a Package? 1
Business Development and Strategy 2
3
R&D
4
5
Commercial (Sales, Marketing, Proposals) 9 10 11
Project Management 6
7
8
After Procurement Engineering Fabrication sale and services Post Order
Quality and HSE Legal (T&C, TM protection, Claims, …) Financing Logistics General Services and other support functions 47
1 Business Development and Strategy • Italian Packagers are SME / family companies usually too small, lacking of critical mass • Italian Packagers do not have a clear strategic direction and a growth path Source: interviews with ANIMP members
“We totally lack of medium / long term planning. We are a family business and all our investments are operative and not strategic.” “We would like to find the right product but we don’t have idea of where to focus on.” “With 10/15 M EUR of revenues, Packagers are looking for contracts of similar size, or even larger.”
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2 Project Management • Italian Packagers sometimes lack of a fully empowered and endorsed Project Manager –EPC Contractors highlight the frequent lack of knowledge of basic PM tools Source: interviews with ANIMP members
“Very small family-owned companies have some leadership, but small to medium companies lack of PM culture.” “I was attending a Project Management course at ANIMP and some Packagers close to me were 1 step behind, missing some basics.”
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3 Research & Development • Packages are typically not patented and rarely use proprietary technologies • The majority have no specialization and do not focus on technologies • Possibility to trade mark the “Utility model” Source: interviews with ANIMP members
“Specialization in Packages is strongly preferable because it implies expertise, higher levels of professionalism, as well as long-term success.” “Packagers are typically worried about filling their production capacity and do not care about developing specific technologies.”
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4 Commercial (Sales, Marketing, Proposals) • Supplier scouting is complex and takes time and resources –Lack of tools to find and pre-qualify Packagers • Packager are not always qualified with key End-Users • Sales are not connected to Execution Source: interviews with ANIMP members
“We would like to use a common vendor database (“albo”) of Packagers that highlights their capabilities based on an agreed set of competences” “There is a quick turnover of salesforce and Technicians are not aligned with younger salesforce.”
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5 Engineering • Specifications are not always understood in full • Client arena is changing and has more flexibility in accepting new standards for Packages (e.g. “not all clients are like Aramco or Shell”) • Technical standardization is required to reduce costs Source: interviews with ANIMP members
“Our packagers don’t digest the specifications: they typically say lots of yes, without understating all the terms and conditions and specs and that’s when issues will arise.” “Technical standardization is required to reduce complexity and costs but needs to be driven by Packagers.”
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6 Procurement and Post Order • Procurement and Post Order (Expediting and Inspection) are delivered with random performance • EPC Contractors find complex the handling of warranties in case of semi-finished goods surrendered to the Packager Source: interviews with ANIMP members
“Packagers are sometimes not able to buy due to low bargaining power toward large vendors of key machineries, and require support from the EPC Contractor.” “It’s very complex for a packager to manage a warranty claim if something goes wrong, given the low bargaining power toward larger vendors.”
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7 Fabrication • Fabrication is one of the main strengths of the value chain, but typically is subcontracted to smaller fabricators • It is the result of the contribution of many companies and players, in a very long value chain Source: interviews with ANIMP members
“We can improve our Packagers value chain reducing the length of the value chain, getting closer to EPC Contractors and Enduser needs” “Larger players should Investigate local fabrication in countries with high Local Content requirements (e.g. Saudi Arabia, Kazakhstan, …) through local Partner ”
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8 After-sales services • After-sales is typically done by the OEM and it is a pass-through –easy for a Packager to not assess properly the after sale rate of an OEM and submit a wrong bid • Complex to deliver by SMEs Source: interviews with ANIMP members
“We have an increasing need of assessing After-sales capabilities of Package suppliers: this is due to the presence of new smaller clients that are also the operators and want to reduce their full TCO.” “Large Packagers have stronger competences on After-sales, but SME are sometimes not even able to manage the documentation” 55
9 Quality • Business Process and Quality procedures are minimum requirements • Quality requires competence and presidium, but it is not always the case Source: interviews with ANIMP members
“We always need to show a real Business Process and Quality procedures.” “Quality is a must and a value. It requires shared belief and focus of the entire organization, not just the Top Management, and continuous investments.”
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10
Legal
• Not all Packagers are able to manage liabilities and this is “boomerang” for a Contractor • Claim is frequent but the style is not always professional and supported by adequate documentation Source: interviews with ANIMP members
“T&C are every day more demanding and we registered an escalation over the last 3 years. They are reaching unlimited responsibility that are complex to accept as a Packager. That generates complex internal decisions.” “T&C represent a cost and EPC Contractor are willing to pay for that. T&C are always similar but experiences are not shared.”
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11
Financing
• Typically managed on a project-byproject basis, leveraging on the single contract • Financing toward banks is complex and can impact execution Source: interviews with ANIMP members
“The lack of money to purchase goods and services can have a terrible impact on the schedule of a project.” “Some Packagers are under-capitalized and this is an obstacle to bank guarantees.”
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Agenda
What is a Package Market Players and economics Sustainability Proposed actions 59
What we have heard during the interviews
25 potential Value Chain actions 60
25 potential Value Chain actions 1 1a •
1b • 1c •
1d •
2 3 Business Project Development and R&D Management Strategy 2a 3a Shared market • ANIMP Project • Further investigate analysis, ad-hoc for Management the possibility to packagers courses to leverage on the strengthen these “Utility model” for Information sharing critical skills, with Packagers on Corporate tools dedicated focus 3b• Shared R&D Support the for Packagers investments creation of a Cluster 2b • Development of among Packagers of Italian Packagers PM culture and driven by leaders skills through the Join forces, as a support of retired Consortium of small Managers complementary packagers 7
8
Fabrication
9
5 Commercial
6 Engineering
Procurement and Post Order
5a Use an online • Share knowledge 6a• Procurement via platform to get of main End-user Frame Agreement prequalification specs, creating a of non-critical visibility network of Experts items 5b 4b • Shared marketing • EPC Contractors and vendors to coeffort with leading engineer the End-Users solution 4c • Define the rules of 5c engagement for a • Set shared standards for Packager with EPC selected types of Contractors Packages 4d • Support CoEngineering with EPC Contractors 4a •
Quality and HSE
10
Legal
11
Financing
10 •a Share experience 11 •a Engage primary Stimulate financial Continuous among Packagers on Terms & institutions to improvement and setup / extend a investment, also Conditions 10 “value chain supported by •b Investigate if program“ external Experts Banks and 9b dedicated to insurance Co. are • Design and deliver Packages a “certificate of willing to support the Packages’ Italian quality” to the value chain value chain in managing complex T&C through Source: interviews with ANIMP members umbrella contracts
Reduce the length of the value chain, getting closer to EPC Contractors and End-user needs 7b • Investigate local fabrication in countries with high Local Content requirements 7a•
After-sales services
4
Build After-sales competences: allocate dedicated resources, manage effectively the documentation 8b• Promote aftersale capabilities with End-Users 8a•
9a •
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Opportunities for Packagers start today ~6 months
SHORT term Business Plan Rules of engagement Competences Visibility Standardization • Get strategic direction • Improve processes • Complement expertise (PM + Expert) • Obtain visibility (what and how) • Assure financial stability
~1-2 years MEDIUM term
>2 years
After-sales organization
M&A based on complementarity
LONG term
Local presence (commercial, after-sale, manufacturing, …) Modularization
• Extend market coverage • Extend stable organization • Create competitive advantage
• Process Integration • Build of Owner Succession Plan • Enlarge Manufacturing capability • Financial sustainability
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CONTACTS
Tullio Buonocore
Giacomo Franchini
Business Development Consultant
Director
[email protected]
[email protected]
+39 335 470775
+39 348 9201904
www.supplhi.com 63
Grazie per la cortese attenzione
21° Convegno Sezione Componentistica ANIMP 24 novembre 2015
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