Interview with Farhan Mujib, President, JGC Corporation 

 

Q: Could you give us a brief overview of your background and role at JGC Corporation?

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A: I'm president of JGC Corporation. I joined the company about two and a half years ago. In my role, I'm responsible for all our EPC business outside of Japan, which is about 80% of the group's turnover. And before that, as you know, I was with KBR for 31 years.

 

Q: Can you explain the role that you see LNG playing in the energy transition?

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A: I think it's going to be the major energy transition fuel for the near-to-medium term, to provide enough energy to meet demand in terms of adequate supplies for industrial and transportation use as the world switches over from coal and oil. Gas is the only source currently available in enough capacity and at competitive cost to provide an economic solution to deal with that demand side and anything in the renewable space is still not cost-effective to actually compete with gas as the most effective use of hydrocarbons.

 

Q: Demand growth from Europe for US LNG has driven calls for increased investment in new LNG facilities in the Gulf Coast and East Coast/West Coast. What is your current view on the number of projects you think will go ahead over the next few years?

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A: I think the bigger issue is supply chain. That's going drive how many projects can effectively proceed on that timescale. You've got both issues in terms of contractor capacity as well as supply chain capacity from key equipment suppliers and that's probably going to limit how many projects can be developed concurrently. I think probably only three main LNG contractors are left that are able to do EPC projects – ourselves, Technip Energies and Bechtel. There are not many other players now available in the marketplace who are able or ready to take the risk. On the key equipment suppliers, with the demand for competing projects in Middle East, whether it's downstream or even wind power projects, there's heavy pressure in terms of long lead delivery for key equipment, which is taking about 4-6 months longer. As a result, it's putting huge pressure on what projects can be done. So I expect probably not more than two or three projects simultaneously can be developed in the US Gulf Coast.

 

Q: Could you share with us some of the major LNG export projects JGC Corp. is currently involved with globally?

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A: Sure. We just finished the floating LNG project in Mozambique. That's the first project to come on stream in Mozambique, and that was just announced last week. We're currently working on the LNG Canada project, which is the first LNG project in Canada. We are bidding for two projects in the US Gulf Coast. One is Freeport Train 4, the other one is Cameron Train 4. Then we are pursuing the Papua expansion in PNG, and then we are pursuing another floating LNG project in Malaysia and another LNG project in Abu Dhabi.

 

Q: JGC Corp. has designed and built plants that count for over 30% of the worlds LNG production volume. What’s the secret to your success?

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A: I think the main one is being very selective about projects we choose - that means the clients we work with and also the partners we work with as well – and only take up projects that we believe we can successfully execute, so we don't pursue every client or every project, and then just retain the focus on how many projects concurrently we can handle. We don't take more than probably three projects at a time that we can execute at different phases, so that really allows us to use key resources and also manage our risk better compared to other companies.

 

Q: What project is JGC most proud of and why?

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A: I think the project that we're doing in Canada at the moment. We’re quite proud about the work that we've done, it being the first project in Canada, but also in terms of the modularization technology that we've deployed on that project. It's highly advanced compared to any other modular execution that's been done. It has allowed us to complete a substantial amount of work in fabrication yards and limit the amount of people as well as the construction work that needs to be done at the job site. We're quite proud about the engineering and the technical work that's been done, and the quality of the modules that have been received at the job site.

 

Q: As the move towards greener LNG facilities gathers pace, what are some of the most exciting green technologies/projects you are seeing implemented currently? And what are some of the latest solutions JGC is developing to create greener LNG facilities?

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A: There are a number of things that we're working on and also, some things that clients are doing, I think, like the LNG Canada project. It's among the lowest-carbon LNG projects that are currently under development, because of its unique design and leading-edge technologies. The facility will use energy-efficient gas turbines and the latest methane mitigation technologies to help reach low-emissions standards. It's also a water-cooled plant, so, again, a cleaner solution. GHG emissions from the LNG Canada operations will be lower than any facility currently operating anywhere in the world today: 35 per cent lower than the world’s best performing facilities and 60 per cent lower than the global weighted average.

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In terms of newer technologies, we have a new design that we've been developing, which is going to be a zero-carbon LNG new plant design, and we will look at actually capturing all carbon that's emitted from the facility to make it into a zero-emission plant. A project that we were pursuing in the Middle East is again an e-drive project, with power coming from solar or a renewable source. And again, deploying technologies to minimize or eliminate any carbon that's going to be emitted as well. Those are some of the technological aspects we're doing, working with different equipment providers in terms of looking at long-term machines where hydrogen can be used as a direct fuel to operate the plant in terms of compression technologies that are going to be deployed there. We are also looking at construction techniques in terms of equipment and other things that can be used like digital technologies and robotics on the facilities as well to minimize construction resources and equipment.

 

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

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A: It's a lot easier to deal with those challenges when you're dealing with an IOC or a major client who has a much stronger balance sheet. They're willing to have a balanced risk profile between the contractor and the owner side. I think, when you compare that to a developer customer, probably they have a limited balance sheet and that's the reason why they ask the contractors to take all the risk. That's a very different dynamic in that space – who's carrying the risk and how best to handle that risk, and in that space, how much commitment they're willing to make for long lead items, and commit to schedule deliveries and lock in material pricing well in advance before they can make an FID. That's probably one of the areas where some developers are showing some flexibility, but other than that, really they're leaving all the risk to the contractor so there's not much opportunity in that space other than to price the risk then and manage the risk during execution.

 

Q: How do you think the development of major LNG projects has changed over the past decade?

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A: The biggest change has been the participation of the developers. They actually have a very lean organization and they don't have any of their own specifications or requirements and all they come up with is a performance requirement for a plant of a certain capacity to be built. They've actually introduced fit-for-purpose design and industry-based specifications to be utilized there, which has made their projects move much faster and be a lot more cost-effective. This has ultimately put the pressure on the majors to look at the cost of development of their projects and the time it takes to bring those projects online. Now they're looking at themselves trying to go for leaner execution techniques, as well as having a fresh look at their own standards and specifications. That's the biggest change in terms of how the industry is looking at it because at the end of the day the LNG price doesn't look at "what specs did you use to design the plant" as long as the plant is safe to operate, and the life of the plant is at least 40 years. That's what's becoming the global standard now, it’s the international industry-based specifications as the basis to keep the cost competitive.

 

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 which is a win-win for both operators and contractors?

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A: I think again, as I mentioned, the majors and some of the more sophisticated clients are willing to share that risk. They recognise that the contractors do not control the escalation of the commodity price risk, so until those prices are locked in with the supplier, both in terms of cost and delivery schedule, the owner is willing to absorb that risk. Once that commitment is locked in, then the risk gets transferred to the contractor, which is a lot more manageable from a contractor perspective, and that's probably the most balanced risk that we're currently seeing in the market space.

 

Q: Given JGC’s extensive experience in delivering major LNG projects, what do you see as the key pillars to successful project execution?

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A: I think be very selective about the projects and only take projects that you can properly execute with a good team. People that get overstretched probably take too much risk, and they do not have adequate technical or management resources to execute those projects.

 

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?

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A: I think the relationship is quite good and the only advice that I would give is actually be open to having a transparent and candid conversation about risk, cost and schedule. Trying to put too much risk on either side is not going to be a successful outcome, and I think we've seen in the recent past contractors that took too much risk, it drove them into very different circumstances, and some went bankrupt. That's basically left only a few players remaining in the space and I think those that remain have been prudent and will remain prudent. So I think it's necessary to probably have a more mature and open conversation about risk and schedule.

 

Q: LNG project lifecycles overall appear to be getting longer – is that a fair statement and do you have any thoughts on why that is?

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A: I think, yes, historically compared to when I look at 10-15 years ago, it's longer, probably being driven by the reason that the delivery times from suppliers have become a lot longer and also in terms of the execution capability for construction. It probably is not the same as it used to be in terms of the skill level that used to be available in the marketplace. The productivities that we saw in the construction workforce 10-15 years ago – that skill level does not exist in the marketplace, so it takes a lot longer and more man hours to execute the same quantity of work to be performed.

 

Q: What are some of the latest technological innovations in construction which are catching your eye?

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A: I think the biggest one, actually, is the advancement of modular execution as I mentioned. Historically, I think the level of modularization that used to be deployed was very simple and did not fully look at integrating process equipment and the E&I scope. But the latest work that's being done, we are really deploying offshore-type execution on an onshore facility. So that's one area of technological advancement that's been done and it's proven quite well not only to de-risk the project, but also to optimize the execution. The second area is more automation being done both in engineering and in fabrication. That is actually improving both cost, quality and productivity. And long term, I think you will see more introduction of robotics in terms of execution as well. New technologies are at work and are also being deployed, we are testing them in certain areas as well. We see good potential to apply robotics in construction execution, which will improve quality, but also allow schedule improvement in terms of 24/7 execution, but also reduce the amount of resources that you will need to do the work as well.

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Farhan Mujib will be speaking at the LNG Export Engineering & Construction Conference & Exhibition, May 31 - June 1 in Houston. For more information visit www.lngexport.us