Driven by high liquidity on the back of strong oil prices, the future for development projects is bright, but it is going to be challenging.
The Madrid-based international engineering and construction firm has built more than 900 industrial plants worldwide and has recently turned its interest in the Middle East, following its excellent track record in Mediterranean and South American countries.
It was among the first to set up a base in China, where it has undertaken valued at more than $1.6 billion, covering iron, steel, petrochemical and fertilizer projects.
The situation is challenging, but somewhat eased by the fact that there is no American engineering, procurement and construction (EPC) players in the market,” he said, adding that additionally Tecnicas Reunidas can carry out engineering works in China and Venezuela which are operating at a lower cost than the head Madrid bureau.
There are other concerns, however, especially when it comes to the Middle East. “Our main challenge is human resources. Opening up the Muscat office and bringing in more Asian staff is one of the challenges we set ourselves,” he says.
Tecnicas Reunidas is 38 percent owned by Spain’s largest bank Banco Santander Central Hispano (BSCH) with the second largest bank Banco Bilbao Vizcaya Argentaria (BBVA) holding 25 percent. Private investors own the remaining 37 percent.
Since 2000, Tecnicas Reunidas has been concentrating on the Middle East, which is the world’s hydrocarbons hub. The engineering capacity of the Spanish is as good as anywhere else and it is cheaper. The company has an appetite for EPC. “So when you take a global market view, the Middle East very quickly comes into focus. In a nutshell, anywhere in the Middle East is a target for us, if we feel we can give the client value and be competitive.
The region is significant for the company and that is reflected in its order book. About 80 percent of its annual turnover accounts for international projects, some 50 percent of it coming from the region.
The company’s ownership structure has contributed to its financial strength, which is one of its greatest assets.
Tecnicas Reunidas enjoys a very healthy balance sheet, because it is a private company with three shareholders including BSCH and BBVA. So it does not have a problem with bonding support or financial support.
The financial strength gives Tecnicas Reunidas the capacity to bid for projects of up to $500 million without having to team up with other contractors. As projects become larger in scope and more demanding, particularly in the Gulf, Tecnicas Reunidas has emerged as one of a handful of EPC contractors capable of taking on such jobs on its own.
The estimated $220 million contract awarded in August 2003 to build a diesel hydrotreating complex for Saudi Aramco in Yanbu is among the company’s recent successes. In April, Tecnicas Reunidas won the estimated $360 million contract to expand the Juaymah fractionation plant for the same client.
In Kuwait, the company recently won the $100 million lump-sum turnkey (LSTK) contract for Kuwait Oil Company (KOC). In Iran, Tecnicas Reunidas and the local Sazeh Consult are low bidders for the $300 million contract to build a mono-ethylene glycol plant at the Bandar Imam Olefins 8 complex.
The selection of projects is client-driven rather than country-focused. “Basically, we regard Saudi Aramco as a major point of interest, along with Qatar Petroleum (QP) and KOC. Registration is in progress with Abu Dhabi national Oil Company (ADNOC) in Abu Dhabi. “ Tecnicas Reunidas is watching countries like Jordan, Syria and Iraq.
Tecnicas Reunidas is already ready for acquisitions in an attempt to strengthen its position and build up capacity in the region. Tecnicas Reunidas figures in most of the bidding lists for major engineering, procurement and construction (EPC) contracts for oil, gas or petrochemical projects in the Middle East.
Established in 1972, when a group of Spanish investors acquired Lummus Espanola, a subsidiary of the Lummus Company, Tecnicas Reunidas initially focused on the home market. In the late 1980s, however, it entered the international arena and recently the Middle East and North Africa.
“It was basically by a process of evolution that Tecnicas Reunidas got itself more into international markets,” says Steele. As the market in Spain has become more mature, Tecnicas Reunidas’ activities have been a lot more focused on the international market, especially in the past 10 years. As the company has the engineering capacity of the Spanish is as good as anywhere else and it is cheaper. “What’s more, we’ve an appetite for EPC. So when you take a global market view, the Middle East comes into focus. If we feel we can give the client value and be competitive, our target can be anywhere in the region.”
