THE VALUE OF PACKAGES
21° CONVEGNO ANNUALE SEZIONE COMPONENTISTICA D’IMPIANTO ANIMP
Tullio Buonocore, Giacomo Franchini
Grand Hotel Villa Torretta, Sesto San Giovanni (Milano), November 24th 2015
2
Packages for the Oil&Gas and Power industry are an Italian stronghold …
~170COMPANIES
~80%EXPORT
>5000 EMPLOYERS
~1.6 BILLION EUR REVENUES
15/20%GLOBAL MARKET
SHARE
3
… with Key Success Factors that are similarto 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
4
A Package is like a tailored suit
≈
5
The on order delivery of a great tailored suit requires similar capability of Packagers
Tailor’s competence Quality of materials
Few assets but efficiently operated
Interpret and accommodate Clients’ preferences
6
THE VALUE OF PACKAGES
WHICH SUSTAINABILITY?
• Packagers act as “small” EPC Contractors•Distinctive Italian
competences for Packages• Packages require specific
competences and know-how
!
7
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
8
Interviewed ~20 companies and 50+ peopleEPC CONTRACTORS PACKAGERS
12/06 and 3/11
22/05 and 6/1004/06 11/06
11/06
THANK YOU FOR YOUR AVAILABILITY AND CONTRIBUTION.
16/06
29/0722/07
Avv. Guido Maglionico(Legal advisor to ANIMP)
28/0824/09
23/09
24/06
12/10
23/09
29/1003/06
04/06
23/11
26/08
9
Agenda
What is a Package
Market
Players and economics
Sustainability
Proposed actions
10
Definition of Packages
Packages are multidisciplinaryand 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.
11
What is and what is NOT a Package for this analysis?
MULTIDISCIPLINARY SKID-MOUNTED
PACKAGES
Multidisciplinary competence is the
base to put together various equipment
COMPLEX PACKAGES / SYSTEMS
Special parts of a plant with a specific
functionality
“SIMPLE” SKID-MOUNTED
Simpler skid mounted machineries (e.g.
pumps)
SUB-PACKAGES (PACKAGES-FOR-PACKAGERS)
EPC CONTRACTOR
HIGH COMPLEXITY
MODULES FOR TOPSIDE
EPCPACKAGES
Suppliers of small packages (with specific functionalities) and that are
part of larger packages
SUBSEAPACKAGES
• Heating equipment
• Utilities packages
• …
ORIGINAL EQUIPMENT
MANUFACTURER
12
Multiple names 1 package
Contractor A
Contractor B
Contractor C
TEG Gas Dehydration Package System
(Glycol type)
Gas / Liquid Dehydration Unit
Process Package
Very generic
End-User N
End User M
Glycol Dehydration Package
Gas and liquid dewatering pack. Systems
(glycol regeneration)
Contractor Z
Gas Dehydration Package
∞ 1
13
Leading sources have been considered to set a common language on Packages
INTERVIEWS WITH CONTRACTORS, VENDORS, INDUSTRY EXPERTS
ANALYSIS OF PUBLIC CATEGORIZATION
MAPPING OF KEY VENDORS
14
16 FAMILIES of Packages within 2 GROUPSof categories
ALWAYS IN SCOPE AND FOCUS OF THIS ANALYSIS SOMETIMES CONSIDERED TO BE PACKAGES
HANDLING SYSTEMS
WEIGHING AND PRODUCTION CONTROL
SOLID HANDLING
LIQUIDS HANDLING AND REFUELING SYSTEMS
TRANSFORMATION AND FINISHING PACKAGES
PACKING
CRUSHING AND GRINDING
EQUIPMENT AND SYSTEMS FOR SPINNING LINE
Boilers
Fired Heaters
Waste Heat Recovery Units
Heat Recovery Steam Generators (HRSG)
Waste Heat Recovery with ORC plants
Furnaces
Incinerators
Components and Accessories of Furnaces and Incinerators
Flares
Storage Tanks
Silos, Cylinders and Spheres
PACKAGES
WATER TREATMENT
PROCESS PACKAGES
FLUE GAS TREATMENT
COOLING TOWERS
HEATING, VENTING AND AIR CONDITIONING (HVAC)
FILTRATION, SEPARATION
SKID-MOUNTED PACKAGES
FIRE-FIGHTING SYSTEMS
REFRIGERATION
Water Treatment
Demineralising / Softening /Treating
Condensate
Conditioning And Remineralization
For Water/Oil Separation
American Petroleum Institute (API)
Separator
Corrugated plate interceptor (CPI)
Corrugated Plate Separator (CPS)
Extended Aeration
Bio-Disc
Membrane Bio Reactor (MBR)
Bio-Filter
Moving Bed Bioreactor
(MBBR)
Biological Treatment Package
Stabilization Units
Thickening Units
Dewatering Units
Thermal Drying Units
For Sludge Treatment
Equipment
Air Diffuser
Tanks and basin accessories
Hydro cyclones
Scraper (all types)
Flight scraper
Ion Exchanger
Flotator
Dissolved Air Flotation (DAF)
Induced Gas Flotator (IGF)
Deareator
Vacuum
Thermal
Membrane equipment
For Reserve Osmosis (RO)
For Electrodialysis
(ED)For Capillary distillation
For Ultra and Micro-Filtration
Desalination
Membrane systems
Reverse Osmosis (RO)
Electrodialysis & Electrodialysis
reversal (ED & EDR)
Thermal
Multi-stage flash distillation (MSF)
Multiple-effect distillation (MED)
Vapour Compression
desalination (VC)
Onshore
Offshore
Physical treatment package
Physico-chemical treatment package
Filtering And Clarification
Activated Carbon Package
Polymer Adsorption Package
Adsorption Units
Wastewater, Water and Produced
Water Treatments
Water Sterilization
Chlorination
Ozonation
Ionisation
Ultraviolet Disinfection Systems
Or Colloidal Silver
For Water Flocculation
Odour Control Equipment
Grit Removal
Water Tanks
03.01.12G
03.01.13G
03.01.14G
03.01.15G
03.01.16G
03.01.17G
03.01.18G
03.01.19G
03.01.23G
03.01.20G
03.01.08G
03.01.09G
03.01.10G
03.01.11G
03.01.30G
03.01.31G
03.01.32G
03.01.33G
03.01.24G
03.01.25G
03.01.21G
03.01.22G
03.01.26G
03.01.27G
03.01.29G
03.01.42G
03.01.43G
03.01.40G
03.01.41G
03.01.37G
03.01.38G
03.01.39G
03.01.34G
03.01.35G
03.01.36G
03.01.04G
03.01.05G
03.01.06G
03.01.01G
03.01.02G
03.01.03G
03.01.44G
03.01.45G
03.01.46G
03.01.47G
03.01.28G
03.01
Water Filtration
Pressurefilters
Sand Filters
Ultra Filtration (UF) Package
Self Cleaning Filters
03.01.52G
03.01.54G
03.01.55G
Multi Media Filters
03.01.53G
Filter Media
Cartridge Filters
Bag Filters
03.01.48G
03.01.49G
Basket Filters
03.01.50G
Strainers
03.01.51G
November 2015Rev. 03
Electrodeio-nization (EDI)
03.01.07G
Packages (1/2)
ProcessPackages
TriEthyleneGlycol (TEG)
Fixed Bed Systems with Mol Sieves and
other solid desiccants
Gas Dehydration
Gas Treatments
Oil Dehydration
Oil Desalter
Liquid Hydrocarbon
Treatment 03.02.12G
03.02.04G
03.02.05G
03.02
Pressure Swing Adsorption (PSA)
Membrane
Gas Sweetening
03.02.01G
03.02.02G
Amine
03.02.03G
Sulfur Recovery Unit
Refrigeration
Joule Thompson Expansion
Hydrocarbon Dew Point
Control03.02.08G
03.02.09G
Silica Gel
03.02.10G
Oil Stabilizer
H2 Recovery/ Purification
Pressure Swing Adsorption (PSA)
Membrane
03.02.15G
Methanator
N2 & O2 Production and
Purification
Pressure Swing Adsorption (PSA)
Membrane
03.02.18G
Cryogenic Air Separation Unit
(ASU)
Adsorbent
Catalyst
03.02.21G
03.02.22G
Polishing Units
Vapour Recovery Units
Pressure Swing Adsorption (PSA)
Temperature Swing Adsorption
(TSA)
03.02.24G
03.02.26G
Deliquescent Dryers
MembraneDryers
Refrigerated Dryers
Air Dryers
Regenerative Desiccant Dryers
Dryers
Gas Dryers
Liquid Dryers
Fluid Bed type
Solid Dryers
Rotary type
03.02.31G
03.02.32G
03.02.33G
03.02.34G
03.02.27G
03.02.28G
03.02.29G
03.02.30G
Cryogenic Storage Systems
03.02.23G
03.02.13G 03.02.16G
03.02.14G 03.02.17G
03.02.19G
03.02.20G
Flare Gas Recovery Unit
Inert Gas Generation
03.02.11G
03.02.06G
03.02.07G
Vacuum Swing Adsorption (VSA)
03.02.25G
Flue Gas Treatments
By Means of Thermal
Processes
By Means of Chemical and
Physical Processes
Soil Remediation
Degassing Towers
Desulphurization processes
Wet scrubbers
Flue Gas Desulphurization
Dry Scrubbers
De-Nitrogene Oxide (DeNOx)
Electrostatic precipitator
Spray-dry scrubbers
Dry Regenerative Process
Regenerative Processes
Wet Regenerative Process
Pressure Relief Panels
03.03.09G
03.03.10G
03.03.02G
03.03.03G
03.03.01G
03.03.05G
03.03.04G
03.03.06G
03.03.07G
03.03.08G
03.03.11G
03.03
Fire-Fighting Systems
Gas extinguishing systems and water mist systems units
Fire protection –pressurization
units
Water mist systems skid unit
Sprinkler valve skid unit
Foam systems skid unit
Gas extinguishing systems skid unit
Gas extinguishing systems cabinet
03.07.02G
03.07.03G
03.07.01G 03.07.04G
03.07.05G
03.07.07G
03.07.06G
03.07
System package with Rotary or Reciprocating Compressors
System package with Centrifugal
Compressors
System package, Absorption type
Unit for Air Conditioning
03.04.02G
03.04.03G
03.04.04G
03.04.01G
03.04
CoolingTowers
NaturalDraft
MechanicalDraft
Small Dimensions
03.05.09G
Wet type
Dry type
03.05.05G
03.05.06G
Inducted type
Forced type
03.05.07G
03.05.08G
03.05
Filtration and Separation
Pusher Type Centrifuges
Centrifuges
Horizontal Centrifuges
DecanterCentrifuges
Peeler centrifuges
Other types Of Centrifuges
Vertical Centrifuges
Pressure Filters
Solid-Liquid Filters
Filterpress
Horizontal Plate Pressure Filter
Vertical Pressure Leaf Filter
NutshellPressure Filter
Automatic Pressure Filter
Candle Filter
Pneumatic Pressure Filter
Vacuum Filters
Rotary Drum Filters
Disc Filters
Horizontal Belt Filters
Tilting Pan Filter & Table Filter
Electrostatic Filters (Dust, ...)
Air Filters
Smoke Extraction Equipment
Electrostatic Coalescers, Precipitators
Other Filters
DedustingFilters with Fan
Metal Detectors
Elutriators
Other Separators
Decanters
Film Evaporators
Multi-CyclonesHouse Filters
Separators
Magnetic Type –Solid from Solid
Liquid from Gas
Centrifugal –Dust from Gas
Liquid from Liquid
Solid from Liquid
Air from Liquid
Screens
TravellingBand
Drum
03.08.01G
03.08.02G
03.03.03G
03.08.04G
03.08.18G
03.08.11G
03.08.09G
03.08.10G
03.08.12G
03.08.13G
03.08.14G
03.08.15G
03.08.16G
03.08.17G
03.08.20G
03.08.08G
03.08.19G
03.08.05G
03.08.07G
03.08.06G
03.08.22G
03.08.21G
03.08.26G
03.08.25G
03.08.28G
03.08.27G
03.08.23G
03.08.24G
03.08.33G
03.08.36G
03.08.34G
03.08.37G
03.08.35G
03.08.29G
03.08.30G
03.08
Rotary Screens
Fixed and mobile automatic Racking
Revolving Racking
03.08.32G
03.08.31G
Bar Screens
November 2015Rev. 03
Heating, Venting & Air Conditioning
(HVAC)
Air Handlers
Unit Ventilators & Fan Coil
Chillers
Heat Pumps
Various Components
Heat recovery ventilation (HRV)
Humidifier
Blower & Fan
Others
Self Contained Units
03.06.06G
03.06.07G
03.06.08G
03.06.09G
03.06.02G
03.06.03G
03.06.04G
03.06.05G
03.06.01G
03.06
Skid-mounted packages
Manufacturing of Skid-mounted
Pumping SystemDosing
Systems
Well TestingSkids
Production Manifold skid-
mounted
High-integrity pressure protection
system (HIPPS)
Accumulator Skids
Auxiliary Skid Unit
For Crude Oil
Metering skid Unit
For Gas
Gas Pressure Regulating Systems
Fuel Gas Treatment Skids
03.09.01G 03.09.07G
03.09.02G
03.09.11G
03.09.10G
03.09.09G
03.09.14G
03.09.03G
03.09.15G
03.09.04G
03.09.12G
03.09
Pig Launchers and Receivers
03.09.13G
Sub –Packages
Lube Oil Systems
Wellhead Control Panels
Power Packs
Compressed Air Systems
Bundles of Cylinders
Hydraulic Cylinders
03.09.16G
03.09.18G
03.09.17G
03.09.19G
03.09.20G
03.09.21G
Manufacturing of Skid-mounted
Compressors System
03.09.08G
Instrument Air Package
03.09.05G
Diesel Generator Package
03.09.06G
Packages (2/2)
Refrigeration
Handling Systems
Electro-mechanical Extractors
Electromagnetic Extractors
Apron Weighing Extractors
Scales
Weighing Bridges
Belt Weighing Systems
Batching and Feeding Systems
Handling / Dosing for Additives and Others (PE, PP, ...)
Package Unit of Sampling
Weighing and Production Control
Belt Weighing Extractors
PaddleExtractor
Continuous Mixing
Batch Mixing
Vacuum Mixer
Mixing Equipment
04.01.02G
04.01.03G
04.01.04G
04.01.05G
04.01.06G
04.01.07G
04.01.08G
04.01.09G
04.01.10G
04.01.11G
04.01.12G
04.01.13G
04.01.01G
04.01
Crushing and Grinding
Impact Crushers
Roller Crushers
Hummer Crushers
Other Crushers and Grinders
Crushers Mills
Grinding Mills (SAG, rod, ball, …)
Vertical Roller Mills
Horizontal Roller Mills
Vertical Roller Pre-Grinders
(CKP, …)
Roller Presses
04.07.01G
04.07.02G
04.07.03G
04.07.04G 04.07.08G
04.07.07G
04.07.06G
04.07.05G
04.07.09G
04.07
Equipment and Systems for
Spinning Line
Melt Spinning
Solvent Spinning
SpinningProcess
Dry Solvent Spinning
Wet Solvent Spinning
Reaction Spinning
Drawing
Washing Modules
Lubrication
Crimpling & Recrimpling
Post-Spinning Processes
Drying
Cutting
Balling
Various Equipment
04.06.01G
04.06.02G
04.06.03G
04.06.04G
04.06.05G
04.06.06G
04.06.07G
04.06.08G
04.06.09G
04.06.10G
04.06.11G
04.06.12G
04.06
November 2015Rev. 03
Packing
Oil Canning and Packing Units
Bitumen and Other Canning and Packing Units
Bagging, Palletizing and Packing
Fertilizers and others
BaggingMachine
BagsBreakers
PackingMachine
PallettizingMachine
Wrapping Machine
Strapping Machine
Containers Making Systems
Filling Lines for Drum, Cans and
Bottles
Gas Cylinder Conditioning, Filling Lines
04.05.01G
04.05.02G
04.05.03G
04.05.04G
04.05.05G
04.05.06G
04.05.07G
04.05.08G
04.05.09G
04.05.10G
04.05.11G
04.05.12G
04.05
Package Unit -Drum Heating By
Steam
Package Unit for Plastic Drums Manufacturing
Package Unit for Steel Drum
Manufacturing
For Drums
04.04.13G
04.04.14G
04.04.15G
Package Unit for Wax Moulding
Calcination Process
Package Unit of Sinterizing
Package Unit of Briquetting
Extrude and Pelletizing Equipment
Package System for Crystallization and
Concentration
Package System of Coke Slurry
Transformation and Finishing
Packages
Package System of Polymer Finishing
(Dewatering, Drying and Packing)
Package Unit of Plastic Film Extruding
and Forming
Package Unit for Screening and
Regeneration (Catalysts And Others)
04.04.06G
04.04.05G
04.04.04G
04.04.03G
04.04.02G
04.04.01G
04.04.07G
04.04.08G
04.04.09G
04.04.10G
04.04
Solidification
Package System of Granulation
Package System of Pastilles &
Flakes Forming
Powder Processing Equipment
Powder Drying (PVC and Others)
For Milling Powders (PVC and Similar)
Package Unit of Micronization and Powder Handling
04.04.11G
04.04.12G
04.04.13G
04.04.14G
04.04.15G
Liquids Handling and Refueling
Systems
Onshore Refueling Systems
Fuel Filling Systems - Land
Car Cleaning Station
Onshore Loading Booms
Loading Arms -Land
(Mechanical)
Onshore
04.03.01G
04.03.02G
04.03.03G
04.03.04G
04.03.05G
04.03
Offshore
Refueling System for Helicopters used on
Platforms
MarineLoading Arms
Multipurpose Towers for Platforms and
Gangways
04.03.06G
04.03.07G
04.03.08G
Stockpile equipment and
dispatching
Truck and Wagon Loaders
Ship Loaders and Unloaders
Reclaimers
Telescopic Chutes
Conveyors
Belt and Pipe Conveyors
Roller Conveyors
Screw Conveyors
Vibrating, Oscillating and Air Cushion
Conveyors
Steel-band, Push-bar and Apron
Conveyors
Chain and Reddler
Conveyors
Catalyst Handling Systems
Bucket and Screw Elevators
Pneumatic and Gravity Handling
Pneumatic Conveying Systems
Bin Activators (Extractor Under
Silos)
Rotary Vales, Vane Feeders, Feed Hoppers and
Diverter Valves
Pan Conveyors
Solids Handling
Elevators for Passengers and
Goods
Forklifts
Automatic Storing Systems
Front / Pay Loaders
Heavy Lifting
Hydraulic Gantry Cranes
Skidding System
Strand Jacks
Flat Jacks
Hydraulic Jacks
Others
Airport Equipment
Baggage Handling Systems
Airport Handling Equipment
04.02.01G
04.02.02G
04.02.04G
04.02.03G
04.02.05G
04.02.06G
04.02.07G
04.02.08G
04.02.09G
04.02.10G
04.02.11G
04.02.12G
04.02.21G
04.02.22G
04.02.23G
04.02.15G
04.02.16G
04.02.18G
04.02.17G
04.02.35G
04.02.34G
04.02.28G
04.02.29G
04.02.30G
04.02.31G
04.02.32G
04.02.33G
04.02
Rack and pinion
Traction
04.02.13G
04.02.14G
WagonsHaulage
Stackers
04.02.19G
04.02.20G
Bridge Cranes
Portal / Gantry Cranes
Other Cranes
Hoists and Cranes
04.02.25G
04.02.26G
04.02.27G
Hoists
04.02.24G
Mainly non-Oil&Gas
Oil&Gas
18
Agenda
What is a Package
Market
Players and economics
Sustainability
Proposed actions
19
The global market for Packages is ~8.5B EUR(~10% of procured value for Oil&Gas plants)
0
20
40
60
80
100%
Process Packages 1.7B
HVAC 0.3BRefrigeration 0.3B
Process Filters 0.5B
Filters, Screens and Separators 0.2B
Water Treatment 2.7B
Storage Tanks 0.6B
6.4B
Handling Systems 2.1B
2.1B Total = 8.5B
Global market for Oil&Gas Packages, end users perspective (2014, B EUR)
Silos, Cylinders and Spheres 0.1BOther Various Packages 0.1B
Source: SupplHi analysis based on interviews with EPC Contractors
20
End-users’ universe is enlarging: more opportunities
IOCs / large NOCs
Medium/ small NOCs
Indepen-dents
“Clients are changing. The new ones have less requirements and more flexibility in accepting our standards on Packages, reaching Manufacturers’ standards.”
“Aramco or Shell have complex standards that must be strictly respected, also on Packages.”
ILLUSTRATIVECo
mpl
exity
/ ri
gidi
ty in
spe
cs
+
-
21
End-Users and Contractors are “forced” to collaborate with Packagers
NEED LEVER
• Accelerate the conclusion of the Engineering of the Packages, to order to deliver better and earlier
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
SHORTER DELIVERY TIMES
• Players to “buy directly key equipment, for 3rd parties execution”• Leverage on Packagers’ knowledge
22
EPC Contractors leverage on packagers’ know-how and forfeited some competences
“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.”
Source: interviews with ANIMP members
“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”
23
Major trends are creating long term opportunities for Packagers
BROWNFIELD
LOCAL CONTENT
NEW REGULATIONS
MODULARIZATION
24
Continuous trend for modularizationHIGHER
ACCESSIBILITY TO REMOTE OR CRITICAL
GEOGRAPHIES
MODULARIZATION
PACKAGESCANADA
IRAQ
OFFSHORE
MODULARIZATION
“Modularization is basically a package brought to the extreme.”
25
Regulations typically create a disruption in the supply chain
Flaring
S-ECA
• 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)
• 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 toreduce their sulphur emissions to 0.1% m/m
• ECA area may be extended to new geographies
Source: interviews with ANIMP members
Zero discharge
• 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
26
Possible new ECAECA area may be extendedto new geographies
Current ECA
Current sulfur limits:• ECA: 0.10% m/m• Other sea areas:
3.50% m/m (0.50% after 2020)
ECA AREA
Source: ExxonMobil
27
Russia is currently the #1 country for flaringemissions, followed by Nigeria
Asia
Austral-Asia
MiddleEast
WestAfrica
Caspian Sea
NorthSea
Venezuela,Colombia &Trinidad
SouthAmerica
Gulf ofMexico
Black Sea
East Africa(Yemen)
Red Sea
3,5 MTPA
Source: World Bank
FLARING EMISSIONS BY COUNTRY
28
Packages are typically related to technology cycles …
Time
MATURITYINTRODUCTION DECLINEGROWTH
CARBON DIOXIDE AND CARBON MONOXIDE
DELAYED COKER UNITS (DCU)
LNGMARINE
WATER TREATMENT
LNG
ILLUSTRATIVE
HYDROGEN
POLYETHYLENEPOLYPROPYLENE LPG LDPE
OXYGEN
Source: interviews with ANIMP members
SULPHUR
29
… and some Packages’ application will require higher focus over the next years
INCREASED FOCUSWATER
TREATMENTLNG MARINE FLARING
SYSTEMS
Source: interviews with ANIMP members
NOT EXHAUSTIVE
“NICHE MARKET”
EPDMDCU
…
+ BROWNFIELD AND REVAMPING PROJECTS ARE OPPORTUNITIES ALSO FOR SMALLER PACKAGERS
30
Some types of Packages will be always needed
“EVERGREENS” (present in all types of plants)
AIR DRYERS
DOSING SYSTEMS
FILTERS DESALTERS
NOT EXHAUSTIVE
Source: interviews with ANIMP members
31
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 andinternational commercial presence
–increasing their bargaining power toward Clients as well as packagers and sub-packagers
Source: interviews with ANIMP members
COMPLEX PRODUCTS
SYSTEM INTEGRATOR
32
Agenda
What is a Package
Market
Players and economics
Sustainability
Proposed actions
33
Photography of the Italian Packagersvalue chain, 2015
~50% of companies with <10 Mln EUR revenues
80%export
Avg EBITDA margin ~9%>5000 employers
1.6 Bln EUR revenues
~170 companies
Source: SupplHi analysis, OneSource
34
Packagers mainly located in northern Italy (Lombardia and Emilia Romagna)
Lombardia
Emilia RomagnaVenetoPiemonte
84
2496
Marche 6Toscana 5Liguria 5Lazio 4Other 21
164
# of suppliers, by HQ Region
Total
54%
15%6%4%4%3%3%3%
10%
100%
35
The supply chain for Packages is highly interconnected …
END-USER
EPC CONTRACTOR
SUB-EPC FOR PACKAGE
PACKAGER
COMPONENTS OF A PACKAGE
SUB-PACKAGER
WORKSHOP / PACKAGER
Source: interviews with ANIMP members
ILLUSTRATIVE
36
… and became too long
“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.”
“Presence of Sub-EPC for Packages that typically add limited value to the picture and create further complexities.”
Source: interviews with ANIMP members
“In such a long chain Technical Standards sum upand become very complex to assess.”
37
Examples of Italian Packagers
Note: includes international companies with Engineering and manufacturing activities in Italy
ILLUSTRATIVE NOT EXHAUSTIVE
38
Increase in the number of small Italian Packagers together with lack of specialization
“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.”
“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
39
~50% of companies with <10 Million EUR revenues suffered of reduced revenues
Source: SupplHi analysis, OneSource
2011
0.3
0.9
0.5
1.6
2012
0.3
0.8
0.5
1.6
2013
0.3
0.8
0.5
1.6
VALUE OF PRODUCTION, BILLION EUR
+11%
-6%
-9%
-2%
# PLAYERS
Large (>50 M EUR)
Medium (>10 and >50 M EUR)
Small (<10 M EUR)
% VARIATION 2011-2013
40
The value of production of Packagers is on a roller-coaster% VARIATION 2011-2013
OF THE VALUE OF PRODUCTION
+50%
+20%
0%
-20%
-50%
+100%
# OF COMPANIES
Source: SupplHi analysis, OneSource
~45%
~30%
~25%
41
Packages are a stronghold of the Italian plant manufacturing Value Chain
Full spectrum of packages for
competitive export
Packages mainly for the local market
Various packages,
mainly for the local value chain (not
competitive at global level)
Focused on handling systems
Some focus on process filters
Focus on process filters,
water treatment and hydraulics
Mainly for the naval business
Middle East with limited number of players and basic skills to satisfy Local Content
requirements
Limited competences to satisfy Local Content requirements, lack of
global competitiveness
Source: SupplHi, interviews with ANIMP members
ILLUSTRATIVE
42
Foreign Packagers do not possess the same level of execution flexibility
“Once the quality requirements increase, the total cost of supplying a Package from a Chinese tends to be equal to the Italian, considering for example Expediting and Inspectioncosts.”
Source: interviews with ANIMP members
“.”
“Foreigner Packagers have a lot less than Italians and lack first-class execution capabilities and flexibility”
Working with foreign players highlights the same issues. However, other value chains abroad are growing on Packages”
43
Agenda
What is a Package
Market
Players and economics
Sustainability
Proposed actions
44
Packagers growth is a based on a pyramid of competences
+Value of the supply-
Small / Medium Space
Small / Medium Space
Small / Medium Space
Small / Medium Space
LiftingLiftingLiftingLifting
Assembly, Weld. & Quality
Assembly, Weld. & Quality
Assembly, Weld. & Quality
Assembly, Weld. & Quality
MachiningMachiningMachining
Quality / Full NDT
Quality / Full NDT
Painting
DEVELOPMENT ACCELERATORS
Package Module
Very Large Space
Large Space
Large Space
Large Space
Very Heavy LiftingHeavy LiftingHeavy LiftingHeavy Lifting
Assembly, Weld. & Quality
Assembly, Weld. & Quality
Assembly, Weld. & Quality
Assembly, Weld. & Quality
Large MachiningLarge MachiningLarge MachiningLarge Machining
Quality / Full NDT
Quality / Full NDT
Quality / Full NDT
Quality / Full NDT
PaintingPaintingPaintingPainting
Large Engineering
Medium Engineering
Medium Engineering
Small Engineering
Large Sales Proposal teamSales team
Sales teamSales team
Power for testing
Power for testing
Power for testing
Electrical Installation
Electrical Installation
Electrical Installation
Electrical Installation
Instrum. Engineering
Instrum. Engineering
Project Manager
Project Manager
Project Manager
Project Manager
Sub-package
ILLUSTRATIVE
45
Packages go through the typical life cycle, with ~10 M EUR as the critical threshold
REVENUES
Time
MATURITYINTRODUC-TION
GROWTH OR DECLINEGROWTH
0-5 M EUR
5-10 M EUR
>10 M EUR
Replicability needed across
multiple packages
ILLUSTRATIVE
46
Typical causes of distress of Packagers
EXAMPLE
Source: interviews with ANIMP members
Packager of analyzers shelters, wellhead control units and skids
Packager mainly focused on skid-mounted machines (e.g. Compressors, …)
Traditional packagers
CAUSES
Packager of skid-mounted machines
• The increase in quality (and consequently costs) wasn’t recognized by the market
• Complex financial sustainability
• Not meeting required performance of the package
• Complex owner’s succession plan in a family business
• Too dependent on a single main customer, which absorbed almost full capacity
• Lack of internationalization
47
What are the competences required to deliver a Package?
FabricationProcurement
and Post Order
R&DCommercial
(Sales, Marketing, Proposals)
Engineering
Business Development and Strategy
Aftersale
services
Project Management
Quality and HSE
General Services and other support functionsLogisticsFinancing
Legal (T&C, TM protection, Claims, …)
1
3 4 5 6 7 8
2
9
10
11
48
Business Development and Strategy1
• 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.”
49
Project Management2
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.”
• Italian Packagerssometimes lack of a fully empowered and endorsed Project Manager–EPC Contractors
highlight the frequent lack of knowledge of basic PM tools
50
Research & Development3
• 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.”
51
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
4
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.”
52
Engineering
• Specifications are not always understood in full
• Client arena is changing and has more flexibilityin accepting new standards for Packages (e.g. “not all clients are like Aramco or Shell”)
• Technical standardization is required to reduce costs
5
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.”
53
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
6
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.”
54
Fabrication7
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 End-user needs”“Larger players should Investigate local fabrication in countries with high Local Content requirements (e.g. Saudi Arabia, Kazakhstan, …) through local Partner ”
• Fabrication is one of the main strengths of the value chain, but typically is sub-contracted to smaller fabricators
• It is the result of the contribution of many companies and players, in a very long value chain
55
After-sales services8
Source: interviews with ANIMP members
• 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
“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”
56
Quality
• Business Process and Quality procedures areminimum requirements
• Quality requires competence and presidium, but it is not always the case
9
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.”
57
Legal10
• 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.”
58
Financing11
• Typically managed on a project-by-project 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.”
59
Agenda
What is a Package
Market
Players and economics
Sustainability
Proposed actions
60
What we have heard during the interviews
25 potential
Value Chain
actions
61Source: interviews with ANIMP members
25 potential Value Chain actionsBusiness
Development and Strategy
ProjectManagement R&D Commercial Engineering Procurement
and Post Order
Quality and HSE Legal Financing
1 2 3 4 5 6
Fabrication After-salesservices
7 8 9 10 11
• Shared market analysis, ad-hoc for packagers
• Information sharing on Corporate tools
• Support the creation of a Clusterof Italian Packagers driven by leaders
• Join forces, as a Consortium of small complementary packagers
• ANIMP Project Management courses to strengthen these critical skills, with dedicated focus for Packagers
• Development of PM culture and skills through the support of retired Managers
• Further investigate the possibility to leverage on the “Utility model” for Packagers
• Shared R&D investments among Packagers
• Use an online platform to get prequalification visibility
• Shared marketing effort with leading End-Users
• Define the rules of engagement for a Packager with EPC Contractors
• Support Co-Engineering with EPC Contractors
• Share knowledge of main End-user specs, creating a network of Experts
• EPC Contractors and vendors to co-engineer the solution
• Set shared standards for selected types of Packages
• Procurement via Frame Agreement of non-critical items
• Reduce the length of the value chain, getting closer to EPC Contractors and End-user needs
• Investigate local fabrication in countries with high Local Contentrequirements
• Stimulate Continuous improvement and investment, also supported by external Experts
• Design and deliver a “certificate of Italian quality” to the value chain
• Share experience among Packagers on Terms & Conditions
• Investigate if Banks and insurance Co. are willing to support the Packages’ value chain in managing complex T&C through umbrella contracts
• Engage primary financial institutions to setup / extend a “value chain program“ dedicated to Packages
1a
1b
1c
1d
2a 3a 4a 5a
3b4b 5b
5c
6a
7a 8a 9a 10a
11a
10b
2b
• Build After-sales competences: allocate dedicated resources, manage effectively the documentation
• Promote after-sale capabilities with End-Users
4c
4d
7b
8b
9b
62
LONG term
M&A based oncomplementarity
• Process Integration• Build of Owner Succession
Plan• Enlarge Manufacturing
capability• Financial sustainability
MEDIUM term
After-sales organization
Local presence (commercial, after-sale, manufacturing, …)
Modularization
• Extend market coverage• Extend stable organization• Create competitive
advantage
Opportunities for Packagers start today~6 months
SHORT term
Visibility
Business Plan
Competences
Standardization
Rules of engagement
• Get strategic direction• Improve processes• Complement expertise (PM +
Expert) • Obtain visibility (what and how)• Assure financial stability
~1-2 years >2 years
63
CONTACTS
Giacomo FranchiniDirector
+39 348 9201904
Tullio BuonocoreBusiness Development Consultant
+39 335 470775
www.supplhi.com
64
Grazie per la cortese attenzione
21° Convegno Sezione Componentistica ANIMP 24 novembre 2015