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Interview with Eric Gutierrez, President - OGC, Kiewit - Discusses LNG Export Projects
 

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Q: Could you give us a brief overview of your background in the energy projects industry and your current role at Kiewit?

A: I was born and raised in South Texas, where many of my family members made their living as builders. For me, there's a personal appreciation for the work ethic, lifestyle, relationships, and impact that being a part of these opportunities makes on the local population. I've been involved in construction and energy projects since early in my career. Half of it has been building power projects; the other half has been spent on oil, gas and chemical (OGC) projects. Today, we see more overlap in these markets with onsite power generation, large motors and a growing focus on electrification.

I’ve had the opportunity to spend most of my career on the road, building projects between North America, South America, and Africa. As my career progressed, I had the opportunity to provide oversight of projects that took me to Australia, Asia, and the Middle East. More recently, it’s more about building teams that build projects. Today, I lead the OGC business and operations in Mexico for Kiewit.

Q: Kiewit has been involved in some of the world's leading LNG export projects from Australia to North America (including the first LNG facility on the US East Coast). What is the secret to your success in delivering major LNG export projects?

A: We're a local contractor first. With the opportunities of LNG work in the northeast, the Gulf Coast and Canada, our identity as a local contractor allows us to bring our experience and people to every region. Our history as a builder emphasizes fundamentals, which allow us to deliver jobs successfully and safely. Our delivery model has a long, self-perform history but also values partnering because of the deep technology expertise of our partners. We have strong relationships with other companies that complement our skillset in certain parts of our market.

When I talk about fundamentals, we focus on estimating, project controls and planning.  Kiewit relies on its many companies and experts to deploy expertise from anchor bolts down to above-ground construction. Our internal deep foundations and civil expertise allow us to mobilize very quickly. With our recent acquisition of Weeks Marine, we now have a strong arm of marine construction, dredging, tunnelling, and aggregate expertise that will give us a competitive advantage and enable us to bring the best of Kiewit to not only our projects but our clients. More recently, the company has invested in our engineering resources, growing to over 3,200 staff across North America. Engineering leads many of our early engagements, and many of our clients are looking for innovative solutions to improve CapEx or achieve fast-paced schedules. If you look at our track record, you see our ability to deliver large-scale, mid-scale, modular and floating facilities.  This is a function of our ability to partner and adapt.

Q: What are some of the major projects your team is currently working on?

A: Some of the jobs we're currently working include the Golden Triangle Polymers Project for ChevronPhillips Chemical Company and we're wrapping up Rodeo Renewed for Phillips 66. We have several projects with Freeport LNG and are working on other renewable diesel projects. We're doing some gas compression in Mexico for TC Energy and FEL work including FEEDs that cross hydrogen, sustainable aviation fuels, LNG and other technologies. There's a lot of activity on front-end work across these different markets.

 

Q: How do you see the execution and delivery of LNG Export projects has changed over the years from Wheatstone to Cove Point and more recently Calcascieu Pass in the Gulf Coast? Do you see changes in design and execution strategies? Do you see changes in the size or scope of projects?

A: LNG has been and continues to be one of the most dynamic markets over the last decade. We see constant change in size, means and methods, commercial models, and schedules. The word that comes to mind is “adaptable” – as a contractor, we must be adaptable to meet the needs of our owners.  Each client has very specific objectives, so it’s important for us to work closely with each one. The one thing that hasn't gone away and continues to be important is the demand for staying on schedule and delivering cost certainty. Even with the significant need for innovation and change, our clients are still looking to have it done by a certain date, within budget, and that continues to put pressure on contractors.

In terms of what this means for a company like Kiewit, we must be selective. We need to engage as early as possible. It's important to have transparency, which allows us to put challenges on the table and work them together. Because of the emphasis on speed and certainty, there is no time NOT to be transparent. You need to come to the table prepared to jointly solve problems.  We look for partners that complement our skillsets and strengths.  One could argue that the challenges we face have become more pronounced over the last few years. The owner community continues to look at how they can differentiate their companies and projects, and for ways to get to market as quickly as possible. Kiewit aims to bring our best ideas and best resources to these opportunities with the intention to be part of the answer.

 

Q: What do you think are the major challenges that are currently impacting successful project execution for major LNG export projects in the Gulf Coast?

A: You'll hear repeatedly that it’s supply chain management and labor availability. It highlights the need to continue developing craft and staff along with partnering with suppliers. This also places more value on well executed FEEDs and execution plans that look to manage these risks before the Final Investment Decision.

Q: How does Kiewit see the current craft labor shortage in the Gulf Coast and are there any key initiatives you're employing to help address it?

A: We've seen this before – back in the 2012-2016 timeframe – in the Gulf Coast. There was a massive build-up, and the supply of labor struggled to meet demand, and that has certain implications. It shapes the planning during the early phases of a project to address those challenges. It could be that we need to cap the number of craft that we will need for this project, and that could mean that there's a modularization strategy that goes into a pursuit early on. Other solutions rely on only taking work you can handle. Kiewit is a company of companies, so for us, it's looking at demand across all our companies and asking if we can bring in Kiewit resources to build this job. This is not something new to us. On recent jobs we've built, we've reached into our infrastructure, power, and industrial businesses. It's not only about gathering skilled craft workers, but also the leadership we need – whether they're general foremen, foremen, superintendents, or specialty craft – to deliver the project.

Q: Modular construction has come into focus more on projects as developers look to work around the craft labor risk. Is Kiewit a big proponent of a modular approach? Where / when do you think a modular approach should be used? What do you think is the key to a successful modular approach?

A: Kiewit has a long history of module fabrication, starting with our 555-acre Kiewit Offshore Services operation in Corpus Christi that has been serving clients for decades. That and other parts of our business bring a lot of internal expertise related to manufacturing operations and module fabrication. It gives us an insight in terms of the means and methods, engineering, procurement and our approach to production, quality, and safety – all the things that make modular construction a success. When it comes to decision-making, that's a project-by-project and a point-in-time decision. Many times, people assume that modules are cheaper and faster – and maybe in a risky environment, they are. However, modularization typically drives increased costs. The quantities will go up and the lead time will be stretched.  For this choice to be economically competitive, Asia yards must be part of the evaluation.  There have been many successful jobs that are stick-built, but I think it's something that should be investigated and decided with a client at the very early stages. Ideally, it should be decided during the pre-FEED stage. After that, it's really deciding whether it is coming from Asia or whether there is an opportunity to blend with the US or North American modularization. It's an option that should always be considered for these large projects, and it's clearly an area where its impact on LNG is still in question.

Q: You recently acquired Weeks Marine. How do you see that acquisition complementing your existing services?

A: It's great. Kiewit and Weeks have had a long-standing relationship working together on key projects over several decades, so we knew Weeks shared many of the same values and approaches to pursuing and building projects. From there, looking at Weeks’ capabilities, highly skilled workforce, and overall offering in the market, adding all of that was a great complementary decision. It’s an opportunity for Kiewit to enter other markets as a full solutions provider and to further differentiate ourselves in the eyes of our clients.

Q: How have you as an EPC seen the recent impact of Biden LNG export pause? What impact do you think it might have on the industry in the US and on projects in the pipeline?

A: Our industry is resilient.  That said, it benefits those furthest along in the process. It puts pressure on others to reevaluate the timing of their investment. From our perspective, it's something that is out of our hands.

Q: Many project developers are currently grappling with challenges such as material cost inflation and supply chain and logistics challenges including key equipment delays. How long do you see these issues lasting? And what are some of the ways in which project developers can help mitigate against these challenges?

A: I’ll stay out of the prediction business. However, what I do know – and what our company understands – is that we have a lot of data from our projects and overall business operations to help guide our future decisions. We bring the most value by bringing all our buyout and procurement information into these decisions, being open with our clients and saying, “Not everything is growing or needs some risk funds or early buyout, but these are the elements where we should work together.” Whether it's during a limited notice to proceed, whether it's long-lead items, or just some commodities that are moving up and down significantly, how do we manage that risk? Our approach has been to do that, to ensure we're bringing our most current market information, leveraging our relationships with suppliers, and have open discussions with our clients. To say, “Here's how we see risk; we don't think we should try to add a bunch of money for this risk, so let's work together to optimize how we make some commitments early on” so that we can mitigate the potential risks for the supply chain, additional funds, or escalation growth. As for the rest, it's again about picking the right parts of the supply chain or making the decision as close as possible to FID so that together with the customer, we don’t leave uncertainty that could add risk to the project.

Q: Given the backdrop of material cost escalation currently, how do you see the traditional lump-sum turnkey model adapting to create a risk structure that is a win-win for both operators and contractors?

A: There's a lot of ongoing opportunity for innovation around risk/reward models. You can always get to a lump sum; it's a matter of developing a baseline and customizing the approach with the customer. It emphasizes early engagement and defining, within a certain project, where the largest components of risk reside – and then putting in the right commercial model. We are a lump-sum contractor. However, we understand that because of activity in the market or because of certain limitations of how the capital is spent on the front-end of the job, we may need to adjust that commercial model. That's where I think innovation is required. It begins with transparency, a good baseline, and a very precise identification of where those risks reside to make sure we're working through those together. But the lump-sum model is not going away. It's important to stay true to what allows us to deliver a fair lump-sum contract.

Q: What do you see as the key pillars to successful project execution?

A: Our projects are complicated and demanding.  We must have a partnering mentality reflected in the project meetings, culture, and solutions. That's the starting point.  From there, set a clear scope definition to baseline from, develop a good estimate, set up the project with basic project controls and use project reviews to stay on track.  Recognize timely communication, especially when it’s visible to the broader team, that reinforces the team’s willingness to have tough yet effective conversations.  There are many essential factors that could make this list but the concept of teaming and doing our job well seems to transcend most.

Q: How important is the relationship between owner and EPC? And what advice would you give to owners on how to work most effectively with their EPC partner?

A: It's mission critical. I can't say enough about those relationships. We really value not just the client overall, but the individual relationships that are so important on the job. I would say this – the ingredients for success we've seen are solving problems at the working level, allowing the contractor to see where decisions are made and ensuring we have a strong zipper plan to connect the right individuals. Having a sense of urgency around problem solving and making decisions that move the project forward are important. I think everything else is technical or simply part of the job, but the hardest thing is usually just getting alignment between organizations and having a structure throughout the lifecycle of the job, such as monthly meetings or simple phone calls, to have open conversations and anticipate issues and challenges so we can get ahead of them and solve them together.  

Q: Outside of LNG projects, what are some of the other key industries you are seeing growth in demand for your services in the US Gulf Coast?

A: Green and blue hydrogen are a good example of early activity. Those pursuits are in their infancy, but I think they will require similar skills to LNG. It's a market that has the potential to lead to projects, but it's going to require some subsidies early on until the infrastructure and economics fall into place. We’ve also seen growth in sustainable aviation fuel and renewable diesel. We're completing one renewable fuels project in California, and we're also working in Canada. How big that market grows remains to be seen.

Petrochemicals is another market we’re focused on. It doesn't need any subsidies and clients have decades of experience developing these investments. That market appears to value contractors like Kiewit that can bring strong engineering and construction talent to the table, not to mention modularization, and front-end engineering expertise. And there’s also the idea of modularization beyond its current applications. How can we bring those things to the forefront to help these markets and potentially others? There is a lot of activity in industrial and LNG. If you look at the types of LNG jobs you described early on, the sky's the limit on how to best configure these projects, so there's room for early studies and innovation to bring the best projects to market.

Eric will be a keynote panel speaker at the upcoming LNG Export North America Conference & Expo - June 25-26, Hyatt Regency Downtown, Houston.  For more info click here www.lngexport.us 

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