Construction

SNC-Lavalin Interview: The importance of evolving

Michael Dunn, SNC-Lavalin SVP – Resources for MEA and Asia Pacific, says the business is adapting and changing in a supremely competitive environment

In October 2019, SNC-Lavalin, a Canadian-based global, fully-integrated professional services and project management company, announced that it had made a significant new appointment to its Resources senior leadership team, with Michael Dunn taking on the role of senior vice president – Resources, Middle East, Africa and Asia Pacific. Having only joined the company in May 2019 as managing director – Resources, Arabian Gulf countries, this promotion saw Dunn take on a much wider role, leading oil & gas and mining and metallurgy activities in the APAC regions.

With this appointment, SNC-Lavalin hopes to strengthen its capabilities and market offerings by bringing in a wealth of experience and regional industry knowledge, thanks to Dunn’s 20 years of experience in operations and management, building businesses and delivering projects in the oil & gas, mining and metallurgy sectors in the UK, the Middle East and Australia.

Furthermore, with 10 years of extensive experience in the GCC under his belt, Dunn will also be able to play a key role in repositioning the company’s service offering and leverage its existing capabilities, while delivering on its growth plans in the region, the company says.

Having been in the role for a few months now, Michael Dunn sits down with Big Project ME for an exclusive first interview in his new role, discussing not only his mandate from the company’s senior leadership, but also his own ambitions and plans for the Resources business.

“When I was appointed as senior vice president for Middle East, Africa and Asia-Pacific, my key focus was to understand what the challenges are, and what needs to be done in the Gulf and the wider region. It was a very clear mandate (from his superiors) – unfortunately our lump sum turnkey business was not performing well, and as a result of that, we needed to de-risk the business.

“We needed to actually look at the business, we needed to look at the customer base we had, and we needed to look at the markets. SNC-Lavalin operates in four sectors – Resources, Engineering, Design and Project Management (EDPM), which is under the Atkins, Atkins Acuity and Faithful+Gould brands, and Nuclear and Infrastructure.

“To try and put the Resources section of the business into context, roughly speaking there are 16,000 people in the Resources division globally – 11,000 of those people are here in the Middle East and Africa region. However, there are 14,000 SNC-Lavalin employees in the region, while overall there are 50,000 employees globally. So my role is to come into this region, look at the customer base (specifically the resources sector). What we needed to do initially was essentially to focus on strategic markets within the Gulf region and integrate our service offerings within these markets,” he explains.

Expanding on this, Dunn says his first task was to identify the offices within the organisation that needed to be consolidated into the regional management structure. The second was to look at the sub-regions in the Resources business – starting with the APAC region, and particularly Saudi Arabia, in itself a large market for the group. The decision was made to divide the region into manageable sectors, with the Gulf as one sub-region and Southern Africa as another, while Saudi Arabia has been maintained as its own business sector.

One of the advantages Dunn has in his new role is that he has key senior leadership figures working alongside him at SNC-Lavalin’s headquarters in the UAE. Having this support network in close proximity is something he holds in high value.

“Craig Muir joined the company in April 2019 as the president for Resources globally – he is based in the UAE. Recently we’ve also appointed Matthew Bishop as managing director, Gulf for Resources. Since the Middle East is a key growth market for Resources, the centre of the management structure is based in the UAE, with offices and a local presence across the region,” Dunn explains.

“With a management structure and dedicated expertise that has a deep knowledge of the region and of clients’ needs, the business is well positioned to leverage its existing capabilities and grow our end-to-end engineering and consultancy, project delivery and asset management services under Resources.”

This move towards restructuring regional operations comes as part of a wider push from headquarters in Canada, where the global leadership has made significant decisions over the last year. As Dunn explains, these decisions could have potentially huge ramifications for the company.

“My mandate was not only to put the structure in place and understand the business, but more importantly to de-risk the business. Our businesses have not performed well, and in the middle of last year SNC-Lavalin president and CEO Ian L Edwards made a strategic decision to diversify – move away from the businesses that were bringing in unpredictable outcomes.

“We have got 12 long-term turnkey projects that we are managing to run down and finish. Those projects will mostly be completed by the end of 2021, while two of those projects are estimated to be fully completed by 2024. We needed to move towards an area where we have strengths.

“If you look at our DNA, we have been operating in this region for 50 years and SNC-Lavalin has been a household name for the last 100-plus years. In this region, we have been very successful in the past in the engineering and consultancy space. We needed to move back into a much more predictable space with our customers by moving away from big lump sum billion-dollar projects, moving away from unpredictable performance to more predictable services.”

Given the company’s acquisitions in recent years, this shift in strategy is clear. The focus on the three key business lines – engineering and consultancy, project delivery services and asset management – has meant that the acquisitions of companies like Kentz, Atkins and Faithful+Gould will allow SNC-Lavalin to keep project delivery right at the centre of core offering – which is to offer end-to-end services to its customers.

“If you look at the financial performance of 2019 compared to 2018 – the full-year results for 2019 are expected in Q1 2020 – the biggest single thing I see is the $2.4bn of debt that have come out, relative to the previous year. Although the top-line and more importantly the bottom-line numbers for 2018 were not reflective of previous years, the debt reduction was really significant.

“Two-thirds of the business was a traditional business, one-third was in revenue, one-third in lump sum turnkey contracts; so the de-risk was to take a third of the business out and finish it, and the two-thirds where we were actually seeing good performances, we continue to make it the core of our business.

“The issue we had in 2018 with the financial results was that the underlying business actually performed well, but the one-third in the lump sum turnkey contracts impacted our financial results. This is why we had the change in 2019, with the business repositioning to focus on our core strengths.”

For 2020, Dunn explains that the strategy is clear. Having established a customer base in the region over the last 50 years, SNC-Lavalin plans to be more targeted in where its services are offered – to be very geography-specific, country-specific and customer-specific, as Dunn puts it. “We are being very specific about where we know and believe that we have the strongest relationships and capabilities. That’s where we’ll target our services.”

Another area of focus for the group is its digital offerings, which Dunn says will go across all three key business lines.

“The digital era is here and has been here for quite some time. It’s just that service providers haven’t possibly embraced it as much as other industries. We have the three segments that we go after, and the digital offerings will go across all those phases.

“For example, last year we were awarded a contract by Al Yasat Petroleum, a joint venture between Abu Dhabi National Oil Company (ADNOC) and China National Petroleum Corporation (CNPC), to provide general engineering, project management and technical support services. As part of this agreement, we are also providing our digital expertise to help Al Yasat in their ambition digital transformation plan, using the latest technologies. By combining our traditional engineering expertise with digital solutions tailored to our clients’ needs, we have a unique offering to position our business in the market.

“Traditionally, technology providers offer clients various solutions that do not necessarily meet their projects’ needs. As an engineering company with digital capabilities, we take a different approach by understanding their digital requirements and project challenges, and then offering innovative engineering solutions that utilise digital technologies to address these challenges in an efficient way.

“For example, SNC-Lavalin used virtual reality to enhance the traditional design review on a gas processing facility for one of our clients in the Middle East. As part of the initial engineering review, nine operations and maintenance staff members used VR to scrutinise the plant design by applying their knowledge and on-ground experience of what works best in an operating gas-processing plant. The operators identified 32 actionable improvements or defects in the approved design, representing potential savings of more than $2.5m,” he relates.

Looking at the immediate region, Dunn returns to Saudi Arabia, pointing out that the recent IPO by Saudi Aramco has opened up opportunities outside of the firm’s traditional sectors. While he’s quick to acknowledge that inter-governmental relations between Canada and Saudi Arabia will continue to have an impact on SNC-Lavalin’s near-term prospects in the Kingdom, he also asserts that the group’s current projects will continue to proceed, and that it remains fully committed to supporting all existing clients’ ongoing projects through its 7,000 employees in the Kingdom, 10% of whom are Saudi nationals.

“The biggest thing with Saudi Aramco and SABIC is that it has opened new opportunities for us in the Resources business, outside of the traditional oil & gas, which is the refining space. In addition, our engineering, design and project management business is experiencing good growth and a pipeline of opportunities relating to Saudi Vision 2030’s programme of reform and infrastructure development.”

Oman is another market of considerable interest, Dunn says, highlighting SNC-Lavalin’s successful and long-lasting relationship with PDO, which has seen the company implement a customised technical training programme that helps train and develop local Omanis to perform completions, commissioning and start-up activities independently, using specialised local vendor support where possible so as to maximise PDO’s in-country value strategy, which aims to secure sustainable technical and commercial benefits for the sultanate. To date, more than 200 Omanis have joined the Commissioning Training Academy, which is expected to train a total of 250 locals by the programme completion date in 2022.

“Oman provides a stable environment which will be very conducive to business. It was a net importer of gas through the Dolphin Pipeline. It has substantially increased its gas production now, and I see an opportunity in the market, where SNC-Lavalin can play a key role in supporting the increase in gas production,” he says.

“Oman’s demand for gas is very high, and as the population continues to grow and its infrastructure continue to develop, and as major projects really start to come onstream. Oman is a key market for us, and we see strategic growth opportunities for our business there.”

In conclusion, two other markets that Dunn believes will be vital for the future success of the business are the UAE and Kuwait. With oil companies like ADNOC investing in diversification, he believes the company can not only offer services on particular projects, but also expand its services across the UAE.

“Another key growth market for us is Kuwait. We have got three contracts in Kuwait today, but the key contract is with KIPIC. That is an operations and maintenance contract and it is about nationalisation – training the local workforce. Kuwait is a country where you have an increasingly young population that will lead the socio-economic growth for the future. We are well positioned with exciting relationships that we have to support in order to building local capabilities in the country.”

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