Conference ANIMP & ECI Oct 2012 korean companies strategies for overseas construction

THIRD ANIMP CONSTRUCTION CONFERENCE & ECI AUTUMN FORUMMilan. Italy, October 12th, 2012
PUSHING THE LIMITS OF ENGINEERING CONSTRUCTION
SOUTH KOREAN COMPANY STRATEGIES
For
OVERSEAS CONSTRUCTION
A.COLADARCE

INDEX
• Foreword
• Who are the «magic» five Koreans.
• GCC projects awarded for Oil & Gas onshore.
• Artificial reasons for Koreans competition success.
• Reality.
• Subcontracting strategy & matrices.
• What future?

FOREWORD
For last year ANIMP Conference, BAIN & Co. compared Italian EP&C
Contractors and Manufacturers competitivity vs Koreans for the Oil & Gas
business.
I guess more than one guy present here has enrolled somebody to «spy»
Koreans working side by side to his organization or out of the fence of one of their
mega projects where they are completely alone….to grasp some secrets of their
winning execution strategy.
In the following slides I’ve collected findings of this watching activity from their
outside construction or plant fences; opinions of final Owners and PMCs; data
from Project Control specialists mobilized on site; Subcontractors judgements,
etc.

VERSUS
Years 2009 onwards: the
attack to ROW EPC!!

GCC O&Gas ON SHORE PROJECTS (Chrono) 1/6
Country Project name Package
Value
(Billions
Euros)
EPC Contractor EPC based in
K.S.A. Manifa Oil field
Utility 1,32 JGC Japan
Process 1,32 Snamprogetti Italy
Kuwait Al Zour Oil Refinery
Offshore facilities 0,76 Hyunday Korea
Process 2,72 JGC/GS Japan/Korea
Desulphurization 1,36 SK Korea
Tank farm 0,82 Daelim Korea
Utilities 1,36 Fluor USA

Country Project name Package Value EPC Contr. EPC based in
UAE
Habshan Gas Gas processing 3,37 JGC/Tecnimont Japan/Italy
KSA
Jubail Export
Refinery (JER)
Aromatics (#3) 0,50 Samsung Korea
Utilities (#5B) 0,30 SK Korea
Interconnecting (#5A) 1,00 Technip Italy
Process Unit #2A 1,22 Technip Italy
Process Units #1 0,86 Tecnicas Reunidas Spain
Tank farm port 0,53 Rotary Singapore
Tank farm plant 0,18 Punj Lloyd India
Process Unit #4 0,57 Chyoda/Samsung Japan/Korea
Process Units #2B 0,65 Daelim Korea

GCC O&Gas ON SHORE PROJECTS (Chrono) 1/
UAE Habshan gas
Offshore facilities 1,22 Hyunday Korea
NGL Recovery 1,51 GS / Petrofac Korea/UK
Tank Farm 0,38 CB&I USA
UAE Das Island Project Gas processing 0,72 Hyunday Korea
UAE
Ruwais Refinery
Expansion
Utilities 1,96 Samsung Korea
CDU 1,52 SK Korea
RFCC 2,23 GS Korea
Crude Oil Storage 0,84 Daewoo Korea
Offshore facilities 0,37 GS Korea
UAE Ruwais LNG NGL Recovery 1,43 GS / Petrofac Korea/UK

Qatar Barzan Gas Proj. Gas processing 1,72 JGC Japan
K.S.A.
Wasit Gas Plant
(onshore)
Inlet & Gas Processing 0,73 SK Korea
Power Plant 0,45 Samsung Korea
NGL Fractionation 0,23 SK Korea
SRU 0,45 Jacobs / SK USA/Korea
K.S.A. Shaybah LNG
Inlet & Gas Processing 0,75
Samsung Korea
NGL Recovery/Utilities 0,75
Power Plant 0,30
Increased Gas Process. 0,27
Residential 0,11 MMG K.S.A.

UAE Ruwais Clean Diesel Process unit 8,59 GS Korea
K.S.A.
Yanbu Oil Refinery
(YERP)
Process Units #1 0,58 Tecnicas Reunidas Spain
Process Units #2 0,45 SK Korea
Process Units #3 0,90 Daelim Korea
Process Units #4 0,53 Daelim Korea
Tank farm 0,30 ENNPI Egypt
Pipelines 0,08 Punj Lloyd India
Solids Handling 0,19 Techint Italy
Interconnecting 0,17 MMG K.S.A.
Offsites & Utilities 0,75 KBR USA

GCC O&Gas ON SHORE PROJECTS (Chrono) 6/ 6
UAE
Borouge
Petrochemical
Ethane Cracker 0,81 Linde Germany
PP PE 1,24 Samsung /Tecnimont Korea/Italy
Utilities 0,71 Hyunday Korea
UAE Shah Gas Proj
Offshore facilities 1,13 Samsung Korea
Gas Processing 2,64 Saipem Italy
The «Magic 5» got 33,0
Billions Euro out of 55,9 Bl. in
GCC (2009-2010)

WHAT RESTS TO THE REST OF THE WORLD IN GCC

ARTIFICIAL REASONS FOR KOREAN COMPETITION
SUCCESS.
• KOREANS HAVE HAD A VERY FAVOURABLE KWON DEPRECIATION
AGAINST USD.
• YOU NEVER ENCOUNTER ONE KOREAN ONLY, AGAINST ROW
CONTRACTORS:
o MULTI ATTENDANCE TO TENDERS
o PRE-AGREEMENT TO WHO WILL BE THE WINNER OF THE FLOCK
(I.E. NO DIRECT COMPETITION BUT MUTUAL SUPPORT TO
VARIOUS TENDERS LIMITING ALSO THE ACCESS TO ROW
CONTRACTORS
• K. EXPORT OVERPRODUCTION OF DOMESTIC MANUFACTURERS.
• KOREANS DO EVERYTHING ON DIRECT HIRE OR UTILIZE DOMESTIC
SUBCS HIDDEN UNDER THEIR HATS.

REALITY
• KOREANS MEET THE FINAL OWNER GOALS: SIMPLE & CHEAP PLANTS
IN A SHORT SCHEDULE.
• THEY COMPETE EACH OTHER AND BEING LISTED IN SEOUL, THE
FINANCIAL MARKET EXPECTS THEM TO CONTINUE TO REPORT
STRONG REVENUES GROWTH AND GOOD MARGINS FROM ONE YEAR
TO THE FOLLOWING ONE.
• THEY COMPLETE PROCUREMENT (60%-95%) EARLIER THAN ROW AND
THIS APPLIES BOTH FOR PROCESS OR INTERC. UNITS: FROM 2 TO 5
MONTHS >>> Some evidences from JERP or YERP.
• THEIR SITE CONSTRUCTION IS VERY STRONG WITH THE PROPOSAL
DEP.T (DURING TENDERING PHASE) AND IN THE
EXPEDITERS/INSPECTORS AT HOME/FABRICATION PLACES.
• THEY PREPARE ONE HELL OF A WORK DURING TENDER PHASE.

REALITY (continued 2)
• KOREANS SELDOM RE-SCHEDULE CONSTRUCTION: COMPETENCY &
PRAGMATISM MAKE THEM VERY ADHERENT (WOULD SAY «BONDED»!) TO
PLANNED CURVES.
• STILL AT SITE:
o THEY START ACTIVITIES ON A RECORD TIME (RARELY AFTER M. 5).
o THEY RAMP MANPOWER PEAKS FASTER THAN ANYBODY OF ROW .
o THEY VERY SELDOM ARE WRONG ON EFFICIENCY (MANHOURS SPENT
VERSUS MANHOURS PLANNED).
• KOREANS SUBCONTRACT TO LOCAL ENTITIES AS MUCH AS THEY CAN,
NEVER UTILIZE A GENERAL CONSTRUCTION CONTRACTOR FOR THE
ENTIRE CONSTRUCTION EFFORT, OFTEN SUBCONTRACT TO SPECIALISED
(& FIDELISED) KOREAN FIRMS WITH BOTH DOMESTIC AND
INTERNATIONAL EXPERIENCE.

REALITY (continued 3)
• THEIR SUBCONTRACTORS ARE HAPPY TO WORK WITHIN THEIR
ENVIRONMENT (UNIT PRICES BASED, WITH STRONG COMMITTMENT
TO DELIVERABLE AND DELIVERIES ROS DATES).
• ONCE KOREANS WANTS TO GROW IN COMPETITION THEY ARE NOT
RELUCTANT TO HAVE AN HIGH PROPORTION OF FIXED COSTS LIKE
ROW CONTRACTORS:
o THEY BRING THEIR OWN CONSTRUCTION EQUIPMENT FLEET
and/or
o PREFER TO DIRECTLY HIRE MANPOWER TO BETTER CONTROL
EFFICIENCY OUTPUTS.

SUBCONTRACTING STRATEGY
PROJECT ORGANIZATION (Home Office)
FULLY EMPOWERED SITE
ORGANIZATION
LOC
SUBC 1
LOC
SUBC 5
LOC
SUBC 2
LOC
SUBC 6
LOC
SUBC 3
LOC
SUBC 7
LOC
SUBC 4
KOREAN
B.UP
SUBC 2
KOREAN
B.UP
SUBC 1
PROJECT ORGANIZATION
(Home Office)
SITE ORGANIZATION
LOCAL/INTERNATIONAL
GENERAL CONSTRUCT.
SUBC.
LOC
SUBC 1
LOC
SUBC 2
LOC
SUBC 3
LOC
SUBC 4

SUBCONTRACTING MATRIX
PK 1
EC/DMC
PK 2
DPC
PK 3
Tank Farm
PK 4
PC
PK 5
HDPE
Piling BOWON LEE CHUNJO BOWON LEE
Civil Works
AL SUWAIDI
KETTANEH
Buildings (Arch) AL MISHAL
Underground KETTANEH
Tank
Fabric/Erection
DOOSAN MECATEC NOT APPLICABLE NOT APPLICABLE
Piping Shop Fab
AL SUWAIDI TCC AL SUWAIDI TCC
Steel Structure /
Equipment
Erection
A G Piping
Electrical
Instrumentation
Heavy Rigging CHUNJO
Insulation
AL SUWAIDI TCC AL SUWAIDI
BINZAGR
Painting TCC
SAUDI KAYAN construction execution period Feb 2007 - May 2010 (HDPE Aug 2008 - Oct 2010)

SUBCONTRACTING MATRIX SATORP JERP
PK 1
TECNICAS
REUNIDAS
PK 2A
TECHNIP
PK 2B
DAELIM
PK 3
SAMSUNG
PK 4
CHIYODA/S.SUNG
PK 5A
TECHNIP
PK 5B
SK E&C
Piling not applicable
ASTALDI
not applicable KELLER DYWIDAG JEC not applicable
Civil Works
SINOPEC(HP&LPHDS/CDU/VDU/H2)
NSH(CDU/VDU)
NSH
KCC KETTANEH
NESMA(COKE
DRUMS
/FURNACES)
DYWIDAG
(PROCESS
AREAS/LPG/M
EROX)
CCE
AMANABuildings (Arch) SARCO
Underground
NSH
Piping Shop Fab
SINOPEC(MHC/DHC)
NESMA(FCC/ALKY)
MMG
SAMSUNG
(AROMATICS)
SUNGCHANG
(PARAXILENE)
NESMA
AMANA /
L&T
Steel Structure /
Equipment
Erection
NCC
A G Piping AIC
Electrical
JAL CARLO GAVAZZI
CARLO
GAVAZZI
CARLO
GAVAZZI
Instrumentation
Heavy Rigging MAMMOET MAMMOET ALE
MAMMOET
MAMMOET SARENS MAMMOET
Haulage/
transport
FAGIOLI FAGIOLI FAGIOLI FAGIOLI FAGIOLI FAGIOLI
TOTAL 4 SUBCs TOTAL 5 SUBCs TOTAL 6 SUBCs TOTAL 6 SUBCs TOTAL 6 SUBCs
TOTAL 6
SUBCs
TOTAL 9
SUBCs

SUBCONTRACTING MATRIX SHAYBAH LNG
PK 1
Inlet & Gas
Treatment Plant
PK 2
NGL Recovery &
Utilities
PK 3
Power Plant Pack 4a Gas Handling
GOSP 1 & 4
Pack 4b gas Handling
GOSP 2 & 3
PK 5
Residential &
Industrial
Civil Works
GUSAN
GUSAN
KAMCO
Mohammad Al Mojil
Group (MMG)
Buildings (Arch)
Buildings
(Precast const)
Ranco & Zamil Ranco & Zamil
Underground GIWI TCC PTS Chelsea
Piping Shop Fab Hajri
Samsung Saudi
Arabia
Fabrication Shop
ARCC not applicable
Steel Structure /
Equipment
Erection GIWI TCC SUNGDO E&C JCC Sung Chang
not applicable
A G Piping not applicable
Electrical
SAMYOUNG SEJONG MIDONG Carlo Gavazzi
not applicable
Instrumentation not applicable
Heavy Rigging Mammoet not applicable
Insulation RB Hilton Bin Zagr RB Hilton TBD not applicable
Painting RB Hilton Hajri RB Hilton TBD not applicable

WHAT FUTURE?
• KOREANS DIVERSIFYING INTO REGIONS AND FIELDS?
• FEED EXPERTS?
• WHAT ELSE?
Q & A SESSION

© ABB Group February 1, 2012 | Slide 1
Faster on procurement (1/3)
Month
Pack 2B
KOR
Pack 3
KOR
Pack 5B
KOR
Pack 4
JAP&K
Pack 1
EU
Pack 2A
EU
Pack 5A
EU
10 31,0 25,0 40,0 26,0 31,0 33,0 25,0
15 53,0 52,0 54,0 49,0 53,0 55,0 52,5
20 72,0 70,0 72,0 67,0 72,0 67,0 62,0
25 92,0 93,0 96,0 84,0 92,0 77,0 82,0
30 98,5 96,2 100,0 98,5 98,5 89,0 100,0
Koreans are from 10 to 15% points faster than the European MCs
procurement centers
JERP (KSA) example:

Faster on procurement (2/3)
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
%ofPROGRESS(SourceSATORP)
Project Month
JERP (KSA) ACTUAL PROCUREMENT CURVES
Pack 2B KOR Pack 3 KOR Pack 5B KOR Pack 4 JAP&K
Pack 1 EU Pack 2A EU Pack 5A

Therefore faster on site (3/3)
Pack 1 EUR
Pack 2A
48
55
65
74
81 83 85
Pack 2B KOR
93 93
99
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
17 18 19 20 21 22 23 24 25 26 27
%ofTons(SourceMC'MaterailManagers
Project Month
JERP
Piping Cumulated site del.ry (tons)
Pack 1 EUR Pack 2A EUR Pack 2B KOR
-
4
18
32
38
45
Pack 2B KOR
61
72
77
81
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
17 18 19 20 21 22 23 24 25 26 27
%ofIDia(SourceSATORP)
Project Month
JERP
Piping Cumulated Prefab (IDia)

-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45
%Progress
Project Month
YERP EP&C&C Planned vs Actual
Pack # 3 (DAELIM)
ENG P ENG A PROC P PROC A
CONSTR P CONSTR A COMM P
As of June’12
value: 0,95 BilEUR
Approx. 17 Mhours

-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
%DirectvsPeakMANOIWER(sourceSATORP)
Project month
JERP Manpower vs Peak
by Packages
Pack 2B KOR Pack 3 KOR Pack 1 EU
Pack 2A EU Pack 5A EU Pack 5B KOR

with the aid of:
Third ANIMP Construction Conference and
ECI Autumn Forum
Pushing the Limits of Engineering Construction
Le sfide e i nuovi limiti della Costruzione
October 12th, 2012 – Milan, Italy
9.30 am to 5.30 pm
Atahotel Executive
Cristallo Room, Viale Don Luigi Sturzo, 45 – 20154 Milano
This ANIMP Construction Section and ECI event will showcase state of art techniques in the
Engineering Construction Industry and the results of adopting cutting edge engineering and
construction management tools. It will interest all stakeholders including owners, operators,
constructors, designers and specialist contractors.
We are now seeing projects that would have been impossible only a few years ago and limits
are continually being challenged and stretched. Construction periods have been drastically
reduced due to traditionally sequential operations running concurrently through innovative
procedures such as prefabricating civil foundations and plant super-structures.
Increasingly heavy prefabricated modules are being built in sophisticated yards, transported
by ship and/or by road and lifted into final position, while buildings are reaching heights
beyond anything that could have been previously imagined.
Severe weather conditions in hostile environments are now overcome successfully through
innovative engineering solutions and lateral thinking by construction specialists. In the past
decommissioning was a matter of simple demolition, but it is now a highly complex operation
requiring sophisticated techniques, ever more regulatory compliance and highly detailed
planning sequences.
Finally, competition from the Far East is challenging companies to provide greater efficiency
through exciting advances in technology, openness to new ideas and at the same time
capturing and utilising the experience gained from previous projects.
Topics relating to Heavy Engineering Plant and Production Facilities include:
• Criteria and parameters in modular design
• Sharing the benefits of lessons learned within a construction company
• 3D modeling as support for construction activities: next steps for
future development (presentation from the Task Force researching
best practice)
• Decommissioning - Planning and Organisation
• South-Korean company strategies for overseas construction
• Best Practice procedures in the transition from construction to
commissioning
Project Case Studies will be presented on:
• Tecnimont’s Propane Dehydrogenation Unit project in Tobolsk, Russia
• Saipem’s Husky Sunrise Oil Sand Project in Canada
• Dimensione Ingenierie’s Monte Bianco New Cable Project in
Italy
see pprogramme and other information on web site www.animp.it

ECI Autumn Forum
October 12th, 2012 – Milan, Italy
9.30 am to 5.30 pm
Atahotel Executive
Cristallo Room, Viale Don Luigi Sturzo, 45 – 20154 Milano
08.45 - 09,30 am
09,30 am
11,00 - 11,15 am
12,45 - 02,00 pm
03,40 - 03,55 pm
04,25 - 05,20 pm
05,20 - 05,30 pm
Registration and welcome coffee
Welcome and Introduction
Welcome:
- John Oliver, Chairman ECI
- Nello Uccelletti, President ANIMP
Introduction:
- Angelo Zucconi & Clive Winkler, Event Coordinators
Criteria and parameters in modular design
- Paolo Cremonini, FAGIOLI
Sharing the benefits of lessons learned within a
construction company
- Jan Broekman, CB&I
Coffee - break
3D modelling as support for construction activities:
next steps for future development
- Massimiliano Del Rio, Task Force ANIMP-ECI
Decommissioning - planning and organisation
- Jeremy Hunt, SELLAFIELD and Ivo Tripputi, SOGIN
South Korean company strategies for overseas
construction
- Antonio Coladarce, ABB
Lunch
Best practice procedures in the transition from
construction to commissioning
- Deniz Metin Kaya, FOSTER WHEELER ITALIANA
Introduction to projects at the limits of engineering
construction
- Angelo Zucconi & Clive Winkler, Event Coordinators
Propane Dehydrogenation Unit project in Tobolsk,
Russia
- Ferruccio Tata Nardini, TECNIMONT
Monte Bianco New Cableway Project in Italy
- Marco Petrella, DIMENSIONE INGENIERIE
Coffee - break
Husky Sunrise Oil Sand Project in Canada
- Giovanni Surian, SAIPEM
Q&A session with all speakers
- Chairmen, Francesco Di Serio & James Bishop
Event summing up and closure of the Conference
PP RR OO GG RR AA MM MM EE
with the aid of:

ECI Autumn Forum
October, Friday 12th 2012 – Milan, Italy
9.30 am to 5.30 pm
Atahotel Executive, Cristallo Room, Viale Don Luigi Sturzo, 45 – 20154 Milano
Where we are and how to reach us:
REGISTRATION FORM
ATAHOTEL EXECUTIVE - VIALE DON LUIGI STURZO, 45 - 20154 MILANO
PLEASE SEND BY E-MAIL OR BY FAX with copy of bank transfer TO ORGANIZING SECRETARIAT: ANIMP SERVIZI SRL -
Via Enrico Tazzoli, 6 – 20154 Milano
Tel.+39 -02 67100740 – Fax +39 02 67071785 e-mail: rossella.schiavi@animp.it or irina.bolognesi@animp.it
IF COMPLETING BY HAND, PLEASE USE BLOCK CAPITALS
Please tick the relevant box and confirm payment by signing below : (price includes 21%VAT )
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To reach the Atahotel Executive from Central Railway Station: Pick up the under-
ground (MM2, Green line-towards Cadorna) up to "Porta Garibaldi" stop (it takes 5/8
minutes to get there). The hotel is within 5 minutes walking distance from this stop.
To reach the Atahotel Executive from Linate Airport: pick up the Bus n° 73 up to the
final stop (Piazza San Babila) and then pick up the underground (Red Line-towards
Cadorna) (one every 6 minutes) and stop at “Cadorna Station” (4th stop). Then
change into the Green line and get off at "Porta Garibaldi" stop . The hotel is within
5 minutes walking distance from this stop.
To reach the Atahotel Executive from Malpensa Airport : pick up the “Malpensa
Express” leaving from the terminal every 30 minutes. Stop to "P.ta Garibaldi Station"
( it takes 40 minutes to go there). The hotel is within 5 minutes walking distance from
this station.
To reach the Atahotel Executive from Orio al Serio/ Bergamo Airport : pick up the
“Orio Shuttle” leaving from the terminal every 30 minutes up to the Bus terminal (next
to the Central Railway Station). Then pick up the underground (MM2, Green line-
towards Cadorna) up to "Porta Garibaldi" stop (it takes 5/8 minutes to get there).
The hotel is within 5 minutes walking distance from this stop.
Further Information:
Taxi from Linate Airport takes 30 minutes to get to Atahotel Executive.
Taxi from Malpensa Airport takes 50 minutes to get to Atahotel Executive.
Taxi from Orio al Serio Airport takes 50 minutes to get to Atahotel Executive.
K ANIMP & ECI MEMBERS € 145,20
K OTHERS (non Animp/Eci Members) € 242,00
Conditions of Payment
1- Use this format for the registration only
2- Regisration fee must be paid by bank transfer
3- All payments must be done in Euro
4- All banking charges must be paid by the payer
5- Registration accepted only 100% payment
6- Checks are not accepted
7- Title of bank transfer must include participant’s name
8- Only after receiving the payment, ANIMP SERVIZI SRL will
issue and send the invoice to the payer
Conditions of change & cancellation
1- In case of cancellation between September 15 up to September
30, 2012 paid amount will be returned minus 50%. Money shall be
returned no later than 4 weeks after the end of the Congress
2- No refund will be made for cancellation after October 1st, 2012
3- All notifications of cancellation must be in writing
4- Name changes will be allowed free of charge until September
11, 2012
HOTEL BOOKING
ATAHOTEL EXECUTIVE: room reservation can be made through
“Central Booking Office”, phone +39 06 69646964,
e-mail: booking@atahotels.it,
marking as reference: “Convegno ANIMP 12 OTTOBRE 2012”
PRICE PER DAY B/B and 10% VAT:
DUS € 140 DP € 160

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