The Recipe for Success
January 01, 2020
As an international industrial services provider, Bilfinger augments asset integrity and overall equipment efficiency, ensuring a high level of availability and reduced maintenance costs. The company’s scope covers the entire value chain from consulting, engineering, manufacturing, assembly, maintenance, and plant expansion to turnarounds, but also environmental technologies and digital solutions.
Bilfinger delivers its services in two lines: – technologies, and engineering and maintenance. The company is active in Continental Europe, Northwest Europe, North America and the Middle East. With its 36,000 employees, the company upholds the highest standards of safety and quality, and generated a revenue of $4.63bn in financial year 2018. Since 2016, Tom Blades is the chairman of the executive board of Bilfinger.
When asked about his priorities when he took over the current role, Blades says: “For the company, we set ourselves three priorities on day one. One was to stop the brain drain because we were losing people. Second was to develop a strategy, and the third was to stop the cash drain. We put in place the strategy at the end of 2016. We came out with the execution plan for the strategy in early 2017, which in itself helped address the issue of brain drain.”
“As a direct result, people again had a way forward, they had a purpose, everyone knew where they belonged within strategy which became the catalyst for change. We built the strategy ourselves without any consultants. We developed it at the top, pushed it down, and rolled it back up. With the execution of the strategy comes the third priority – stopping the cash drain – and finally this year we will have positive cash flow. So, after three years, we are on the way forward again. We are not quite where we want to be yet. The next phase is about the gross margin development and further top line growth, but I can say that so far we have ‘checked the boxes’,” adds Blades.
When Bilfinger kicked off the strategy, the company decided to focus on six industries – oil and gas, chemicals and petrochemicals, energy and utilities, metallurgy, cement, metals and bio-pharma. The focus on those industries was important so that the company does not get distracted with other topics and other industries. The oil and gas sector contributes about 20% of Bilfinger’s current revenues. The first three – oil and gas, chemicals and petrochemicals, and energy and utilities put together account for about 75% of the company’s revenues, and the latter three about 25%, but growing very quickly, especially biopharma. Effective change requires focus which is why concentration on these six industries was important.
“The second initiative that I took is to consolidate our business. We had initially 279 legal entities in March 2016. We have been able to merge many of these in various countries providing us critical mass. It gives us bigger teams and with size comes quality, and standardization of process execution,” Blades explains.
“The third element is risk reduction. While not risk adverse we are very risk aware. You can say that we are very focused on risk. For us, risk is understanding a project from the outset, and analyzing that risk not only in safety and compliance but also financially. We combine those risks with the cost model, and execution model and ultimately let these feed in to the contract. This triangle has become sacred for us. It empowers us to execute more confidently, execute on time, and execute on budget. It makes us happy, and our customers happier.”
Digitalization is an interesting topic because it can mean so many things and typically it means something different to almost everybody. The classic digitalization is around online shopping, then banking, which moves on to automobile industry, then to robots, and to the manufacturing sector. Where digitalization is not really prevalent is in the process industry, which tends to be a lot more difficult to try to digitalise because there are a lot of analogue effects because for example the fluids moving around and the changing pressures or temperatures.
“It is very difficult to try to model this in the process industry and to find the right twin whereas if you are building a car, it is very digitally discrete and more straightforward. Process industry is an untapped segment where we have an advantage. I think that digitalization is the key to being efficient, effective and successful, in the process industry. You essentially need three key elements for this – you need a twin, you need artificial intelligence, and you need domain expertise. If you have these three, then I think you have the recipe for success. Bilfinger has all of them, which places us uniquely vis-à-vis many other companies,” claims Blades.
“When you start with digitalization , you tend to look at a part of a larger process. Then, as you begin to get experience and gather up speed, the area you are looking at becomes larger and larger, and it does not just stop with the plant. Once you have been able to model a plant end-to-end, you have to have the twin, the algorithms, and the domain expertise, and you tend to go out further in developing a holistic model.”
“If you take a refinery, for example, you may initially be looking at the quality of the crude that comes into the refinery, and you are looking at the markets. If you are able to anticipate the quality of your crude, and anticipate what is in high demand in the market, this tends to lead to opportunities for higher margins, then that gives you elements for an end-to-end model. If you then go further beyond the markets, for example consumer trends then the holistic approach of an end-to-end model just keeps growing and so do the possibilities,” Blades elaborates.
In 2025, I foresee less people in plants, higher efficiency, and squeezing out that last percent of value from the hydrocracker of the separation system. I expect an increased focus on overall equipment efficiency.
Key changes by digitalization
In the past and not so very long ago, organizations were focused very much on just the capex. When a company builds a plant, or realizes an expansion, it looked at the capex driven IRR. Today, that has changed. If the plant is already in the design phase, the company is looking at the operating costs. The total cost of ownership has become the IRR model.
“Within this model, if you look at the maintenance of the components you are using, you feature that in at the design stage. So, if you are the designer, and you need a motor, you call the drop-down menu, you have your various suppliers of motors from different cost categories, and you may pay a little bit more because you know it will last longer because all the maintenance roles are stretched compared to the lower cost model. That kind of thinking is very important. The next is that, when the plant is built, you do not just throw away the model you created in the design phase, but the actual model goes within the plant and determines the operating regime,” clarifies Blades.
For us, risk is understanding a project from the outset, and analyZing that risk not only in safety and compliance but also financially. We combine those risks with the cost model, and execution model and ultimate let these feed into the contract.
What the owner of the plant sees is not just the physical plant the way it is, but the way it was designed in the 3D models and also the concepts around maintenance and operational performance. Then, they have a much faster ramp up so that commissioning is quicker. And, of course, operating the plant is a lot more efficient than it was in the older days where everything was on paper. Now, the owners just have the plant the way it was built.
Enhancing plant performance
When asked about the role of Bilfinger in enhancing plant performance of refineries and petrochemical facilities, Blades comments: “First and foremost is the fact that we have a strong position in all the three elements I mentioned earlier – twin, artificial intelligence and domain expertise. We have 36,000 people around the world who spend their days inside the plant, driving performance. They know how the plant should perform.”
“We tend to see that many small and mid-sized customers come to us when they hear about digitalization . They see our references in other plants and say that we would like that in their plants too. When we begin to explain, we give our customer three dashboards. The first we call descriptive. This tells the customer, what is going on if there is a failure. It is almost a real-time root cause analysis. The second one we call predictive and it allows us to take the real-time data, put it into the twin and project it forward.”
“For example, it will tell you that, next week on Wednesday at 4 o'clock in morning, the pump is going to fail. A lot of companies do that. What makes us different is the prescriptive model and that is the third screen. In the prescriptive dashboard, we take that failure advance notice and we give the customer options: Take our model – next week Wednesday 4 o’clock in the morning, the pump is going to fail. We will tell the customer that if you throttle back by 1.2% only, the pump will last until Friday six o'clock in the morning, and then we can take it down. We have all the components in stock. We take the pump down. We refurbish it, and is back up and running on Monday morning,” details Blades.
The prescriptive dashboard also tells the customer that he/she has enough product in the warehouse, or in the tank, based on the market forecast models, sales and operation model, or sales operations planning. There is enough product in the store, and therefore taking the pump out even on Wednesday morning, or afternoon does not matter. This is the advantage of prescriptive optionality. That is what makes Bilfinger different.
The Middle East connection
Bilfinger has been in the Middle East for a long time – more than 60 years – and the company’s focus was initially around electricity. The company has worked for the utilities sector in Kuwait. Bilfinger has worked for Saudi Electricity Company (SEC) in Saudi Arabia. In Abu Dhabi, the company has grown more in the oil and gas sector through its engineering presence, and likewise in Oman.
The age of the facilities in the Middle East is much younger than it is in Europe, or in North America. Typically, Middle East countries only began in the 90’s to capture value by building downstream assets in order to keep in-country value – value generation inside the countries.
“Earlier, the way forward in the Middle East was to add in more people in these plants because labour was so cheap. If there were problems, those were typically solved by adding in more labour. Now, as labour started getting more expensive and the requirements of labour started becoming more demanding in terms of technical expertise, there is a natural transition towards digitalization – towards doing things through more quality rather than through more quantity, and that is digitalization's next level and that is where we come in,” Blades observes.
Impact of digitalization by 2025
When asked about how he envisions the impact of digitalization on refineries and petrochemical complexes in 2025, Blades opines: “In 2025, I foresee less people in plants, higher efficiency, and squeezing out that last percent of value from the hydrocracker of the separation system. I expect an increased focus on overall equipment efficiency. I anticipate that the design philosophies that we have used for the last 50 years, or even longer will begin to change because typically the designer says let us design for a 15-year life. And you extend it by 15 years and then by another 15 years. If you can design operations into the initial concepts, we can actually see a different shift in the way that plants are designed at the outer.”
“I expect that when there are turnarounds, people are prepared for the turnaround. First of all, they will use virtual reality, and then augmented reality. When they go into the turnaround plant, they have seen it already; they know where to go, and what to do, and turnaround time shrinks down. We are driving performance, we are taking out risks, we are increasing production, and we are lowering costs. All these things are probably unending. I would like to say that the next quantum leap will be in 2025.”
The future role of Bilfinger
“Our role is across the spectrum of oil and gas production. We are the strongest in Europe. In the North Sea where the assets are older – dating back to the mid-1960s – the focus is on asset integrity. I think this will come to the Middle East assets as well. Here assets are younger – not very much but by little bit – and therefore you want to squeeze out assets, have them running longer than originally expected. You see this in Abu Dhabi. If we take the example on Umm Lulu, there are lot of submersible pumps to bring the oil to the surface. There was not enough power because they were never conceived to do that,” remarks Blades.
“As you go forward, there are learnings, and you will address those learnings with technology. As far as Bilfinger is concerned, asset integrity, minimizing risk, operating in a safer environment and being able to squeeze additional lifetime out of assets will be our focus areas for the future growth,” Blades concludes.