(EnergyAsia, August 7, 2018, Tuesday) — Asia’s share of the world’s oil market has nearly doubled over the past 30 years to a record 35.2% in 2017, according to BP’s latest annual review of energy statistics.
In his new starring role at GE Power Services, football fan Martin O’Neill sees the hugely competitive English Premier League providing a few management lessons.
“We can’t afford to buy a Neymar yet, nor would we want to pursue a strategy of splurging on players and projects like Manchester City,” said the general manager of the company’s newly established Cross-fleet Service Solutions unit.
It’s less than a month before the World Cup tournament kicks off in Russia. The interview over dinner at a lovely restaurant in the bustling industrial city of Baden in Switzerland quickly takes on football references.
Brazilian superstar Neymar became the world’s most expensive football player when he joined France’s Paris Saint-Germain for US$250 million last year. English champions Manchester City, backed by the Abu Dhabi government, has invested heavily in players and infrastructure over the past decade to become a global force in the sport.
“Our strategy would be to grow the business organically. We favour a more modest approach like Burnley or Leicester,” Mr O’Neill said. Both are smaller English clubs that have been punching above their weight in recent years. Leicester won the championship in 2016 while Burnley finished in a creditable seventh position last season.
Mr O’Neill, who shares the same name with the manager of the Republic of Ireland national squad, said he is focused on building a team that will win matches and progress up the table with each season.
“The immediate goal is to win credibility, gain the confidence of customers, and strike fear in the hearts of rival teams,” he said.
The reference to mid-table performers seems incongruously modest for a global conglomerate that reported a total revenue of US$122 billion in 2017. But these are difficult times, not just for the company but the world economy too. GE is undergoing life-changing surgery under John Flannery who took over as chairman and CEO in August 2017. To revitalise the underperforming 126-year-old symbol of industrial America, he is selling off a number of businesses so that the future slimmer GE will focus only on its Power, Aviation and Renewable Energy divisions.
As part of that message roll-out, GE Power Services, a unit within the power division, hosted a group of international journalists at its Baden headquarters from May 14 to 15. The company’s senior executives, led by CEO and President Scott Strazik, presented its global strategy with details and codenames like cross-fleet service solutions, advanced gas path (AGP), and additive manufacturing.
Cross-fleet Service Solutions
The power-generation business experienced a period of rapid global capacity expansion In the 1980s and 1990s. This golden period coincided with strong economic growth in many developing countries such as China, India and Southeast Asia that were emerging from a low income base. Electricity consumption grew rapidly, leading to orders for the construction of large power generation plants, including many that operate on gas-fired turbines.
Many of these plants, built by GE as well as its rivals, Germany’s Siemens and Japan’s Mitsubishi Heavy Industries, are nearing the end of their normal shelf lives. Their owners are faced with big decisions to upgrade the plants and extend their operating years as they face new pressures from rising energy costs and environmental standards.
GE Power Services, which supports more than 2,800 customers worldwide, sees opportunities from boosting the performance and reliability of existing gas turbine fleets, especially those manufactured by its competitors. This will form part of its business to provide services for more than 28,000 power generation equipment assets owned by its customers.
At the Baden event, the company announced the launch of its Cross-Fleet Service Solutions unit that supports a range of technologies including those used by Siemens’ SGT-800 and Mitsubishi’s 501F units. The goal is to take market share from its competitors.
GE said the injection of its advanced capabilities and technology into these fleets will help gas plant operators gain more flexibility, reliability and efficiency while extending maintenance intervals. Ultimately, it is aimed at helping customers boost their profits.
The company said its technology inputs have boosted the performance of gas turbines manufactured by its competitors by six percent, and extended their operating time by an average of 40,000 hours.
Already, it has snared more than US$200 million worth of orders in Latin America, Europe and Russia. The cross-fleet solutions will also be offered to the owners of the 7,500 GE gas turbines located around the world.
“We’re executing projects on multiple continents, with a healthy pipeline to follow,” said Mr Strazik, who was chief financial officer until his promotion last October.
“Cross-fleet is not about servicing somebody else’s machines. That’s boring. It’s about taking those machines and making them our own,” he said.
“It’s about adopting those machines, inserting our technology, our coatings, our alloys, our engineering depth. That then allows us to do things with the machines, with our technology that the customers need, that we don’t necessarily think our competitors can do.”
Just as important, GE Power Services is well-positioned to provide long-term services support for a wide range of gas turbines following the expansion of its cross-fleet capabilities, said Mr O’Neill.
The company said customers are supported by its global network of 40 service centres that inspect and analyse cross-fleet hardware, as well as develop repair solutions to keep power and steam producers operating and improving.
Advanced Gas Path (AGP)
“When I arrived as the engineering leader in 2003, there was no advanced gas path (AGP). So now there is, and we talk about all the cool stuff that has allowed our customers to be better at their business,” said Steven Hartman, GE Power Services’ chief technology officer.
AGP combines hardware upgrades, software packages, or a customised mix of both, to enable customers to extract more value from all major gas turbine components. The solutions include applying design innovations, materials advancements and control software to boost the output and efficiency of gas turbines as well as extend their maintenance intervals and maintain low emissions.
As a result of AGP upgrades to existing gas turbines, the company said it has added a total of seven gigawatts of power capacity around the world. AGP-enabled plants are generating an additional total of nearly 19.4 million additional megawatt-hours (MWh) of power a year, sufficient to meet the electricity needs of two million homes.
“Advanced Gas Path is a huge deal for us,” said Mr Hartman, an American who lives in Baden and speaks German.
At the Baden event, GE Power Services announced that it had secured three new AGP orders from different companies in Saudi Arabia, Dubai and Japan.
State-owned Saudi Cement will apply the AGP solution at its three GE 6B gas turbines at Hofuf. Saudi Cement, which became the first in the cement industry to adopt the solution, expects to boost power output by up to 16.9%.
Next, Dubai Electricity and Water Authority (DEWA) signed a US$52 million agreement to install the AGP technology in three GE 9E gas turbines at the Jebel Ali Power & Desalination Station. The upgrade, to be completed next year, will increase energy production, improve efficiency and reduce carbon emissions, as well as extend the life cycle of the gas turbines for an additional 12 years.
GE also secured a first AGP project in Japan, from Ohgishma Power Co Ltd, a joint-venture company between Tokyo Gas Co. Ltd and Showa Shell Sekiyu. As part of the agreement, Ohgishima’s three GE 9F gas turbines in Kanagawa will be upgraded to improve efficiency by 2.5 percent. Its emissions level will be reduced to 15 ppm nitrous oxide to help Tokyo Gas remain competitive in Japan’s struggling power industry.
Since 2010, our revolutionary AGP technology has been installed in 435 units across four GE gas turbine fleets in 39 countries on five continents,” said Mr Strazik.
“We are expanding our AGP solution to GE 6B gas turbines to increase output and availability on our fifth gas turbine type. In certain industrial applications, the need for more megawatts, efficiency and flexibility is paramount, and our AGP technology can help cement companies like Saudi Cement’s increase their power capacity.”
Additive Manufacturing (AM)
Steven Hartman’s enthusiasm for additive manufacturing (AM) gushes over when he starts expounding on the subject.
According to AdditiveManufacturing.com, AM describes the technologies that build 3D objects by adding layer-upon-layer of material including plastic, metal, concrete or possibly even human tissue in the future.
The range of AM technologies today include 3D printing, rapid prototyping, direct digital manufacturing (DDM), layered manufacturing and additive fabrication in the making of a three-dimensional object.
AM is increasingly crucial to the power industry which is under pressure to supply electricity at low cost while remaining profitable, or to at least stay afloat in the case of many developing countries. Power companies must keep cost down while raising plant performance.
“We’ve been doing additive manufacturing for 20 years,” said Mr Hartman. Instead of replacing entire sections in an ageing gas turbine, a plant operator is able to focus on the defective or underperforming parts using AM technologies.
“In AM repairs, you take out the old part, you cut out a section, you put in a new printed version. It’s a novel application that allows customers not to change their whole unit, but just change that one part and they get 15% cooling flow improvement which improves their performance and save fuel,” he said.
A key ingredient in 3D printing is the choice of the material used in the making of the replacement part.
GE Power Services has a distinct advantage because it is able to draw on “the accumulated massive amounts of data on material characteristics” to design and produce the part needed in the gas turbine, said Mr Hartman.
The material’s characteristics are critical to the plant’s performance.
“What’s in the metal? Will it last for 10 years or longer? We have all that information and can use that to print those parts.”
Would a contractor using generic AM technology be able to print those parts and install it in a power plant at a much lower cost than GE Power Services?
Mr Hartman acknowledges that possibility amid the growing popularity of 3D printing but he challenges any contractor to have the material knowledge required to design and produce quality parts to enhance the plant’s performance. It is unlikely that they will have the depth and extent of the material database and knowledge found in Advanced Manufacturing Works (AMW), the research arm of additive for GE’s power business.
AMW, located in South Carolina’s Greenville in the US, undertakes research and analysis to improve on the materials and their design and application for use in power plants.
Geopolitics, trade tensions and rising energy prices
While global electricity consumption continues to grow, the demand for new investments in large power plants is unlikely to match its pace.
Amid rising global trade tensions, surging debt levels and increasing geopolitical tensions, most countries are bracing for slower economic growth in the coming years.
Amid the sober outlook for the world economy and GE’s own recent setbacks, Mr Strazik is taking the long view with a firm eye on growth.
“You can’t talk about this business in the context of quarters or in the context of years. You have to look at a business like this over five-year trends because projects are very lumpy, complicated and hard to finance,” he said.
“The longer term trends still show a real need for gas. And that’s why we’re continuing to invest hundreds of millions of dollars in a year in services to meet those solutions.”
Mr Strazik sees long-term sustainable growth in GE Power Services’ AGP business along with its digital, core parts, repairs and services solutions.
“So in the first quarter, we reported core parts repairs and service revenue growth of about 30%, which is the first time in almost a year that we reported growth in that segment of the business,” he said.
“There are much better days ahead for this business financially.”
China has emerged as a major challenge for GE and other American firms, especially since the 2016 election of Donald Trump as US President. GE’s focus on building a strong long-term presence in China comes at a time of rising tensions between Beijing and Washington, DC. American firms have complained about the difficult operating environment in China. At the same time, President Trump wants to stop the transfer of American technology to Chinese firms.
Mr Strazik is resolute that GE has a long-term role in China, especially given the country’s demand for natural gas to fuel its power plants. To clean up its heavily-polluted cities, China wants to reduce its dependence on coal in favour of natural gas and renewable energy.
“Whether China gets along with Trump, GE wants to be in this market. At the end of the day, China is a massive market,” he said. Continuing from when he was GE Power Services’ CFO and commercial leader, Mr Strazik revealed he still visits China every quarter, underlining his commitment to strengthen the company’s position in the country.
GE’s outlook could also be bolstered by the continuing recovery in oil and gas prices on account of strong global demand and rising geopolitical tensions. Some analysts are forecasting that crude prices, now hovering around US$70 a barrel, could return to US$100 a barrel or more over the coming year.
Asked about the impact of high oil and gas prices, Cross-fleet Service Solutions’ Mr O’Neill said without hesitation that it would be a boon for GE Power Services’ prospects.
Pinched by rising fuel prices as a major component of operating cost, power companies will look for ways to keep cost down while maintaining or boosting electricity output at the same time.
“You’re sharpening the economic argument for a Cross-fleet offering with every dollar of the oil price increase. Our solutions are putting true value on the table that will only be amplified by higher oil prices,” he said.
Relegated for the first time from the Dow Jones Industrial Index in June, GE will be like a prized football club with a new squad of ambitious players fighting for a quick return to the Champions’ League.
(EnergyAsia, June 20 2018, Wednesday) — Singapore will remain an important centre for Asia’s booming oil trade despite the growing challenge from potential rivals in China, South Korea and Southeast Asia, said the latest entrant into the region’s independent oil storage business.
(EnergyAsia, June 16 2018, Saturday) — Mobil Refining Australia, a subsidiary of ExxonMobil, has announced it will be building a new crude oil storage tank at its Altona refinery near Melbourne city to help meet the country’s growing demand for transportation fuels.
(EnergyAsia, May 25 2018, Friday) — Abu Dhabi has begun storing crude oil in India with the first delivery of a two-million barrel cargo to an underground cavern in the western port of Mangalore early this week.
(EnergyAsia, May 25 2018, Friday) — China may have built up the world’s largest strategic petroleum capacity in 2017, according to data provided by the International Energy Agency (IEA).
(EnergyAsia, May 15 2018, Wednesday) — Australia clearly believes it is still a lucky country judging from the continued sanguine response to the latest warnings that its petroleum stockpiles are stuck at emergency low levels as crude prices surged to a four-year high.
(EnergyAsia, March 27 2018, Tuesday) — Buoyed by expectations for the region’s sustained economic prospects, Singapore is hopeful its bunker fuel sales will build on last year’s record sales of 50.6 million tonnes.
(EnergyAsia, February 18, 2018, Monday) — If Southeast Asia’s 10 countries were to merge into a new nation, it would have the world’s third largest population, and its sixth largest economy. The region’s 640-million population would be behind China and India in size, while its combined GDP of nearly US$2.6 trillion would be larger than France’s and smaller than the United Kingdom’s.
(EnergyAsia, February 10 2018, Saturday) — Thailand’s state-owned PTT Exploration & Production PCL (PTTEP) is making good on a promise to expand its hydrocarbon reserves with an agreement buy over Royal Dutch Shell’s combined 22.2222% stake in the Bongkot field and an adjoining acreage located off the coast of Thailand.
(EnergyAsia, February 7 2018, Wednesday) — Boosted by sharply higher export prices of liquefied natural gas, coal and other commodities in 2017, Indonesia’s economy expanded by 5.07% for its fastest growth rate in four years, the government’s Central Statistics Agency has announced.
(EnergyAsia, February 5 2018, Monday) — in its search for energy security, Indonesia risks creating an uncompetitive giant from the planned merger of two of its largest state-owned oil and gas companies, said consulting firm Wood Mackenzie.
(EnergyAsia, January 29 2018, Monday) — Buoyed by a near 60% surge in net profit last year, Thailand’s largest oil and gas company said it plans to boost its petroleum reserves by investing in upstream projects in Southeast Asia and the Middle East.
(EnergyAsia, January 26 2018, Friday) — Indonesia is becoming less dependent on energy exports as evident from its 2017 trade surplus reaching a five-year high of US$11.83 billion despite the continuing decline in its oil and gas sales.
(EnergyAsia, January 24, 2018, Wednesday) — Singapore’s ‘world-class’ offshore oil and gas sector could lose lucrative oil-rig building contracts after its two leading companies were named in a scandal involving the bribery of Brazilian officials in exchange for multi-billion-dollar contracts.
(EnergyAsia, January 15, 2017, Monday) — Royal Vopak of the Netherlands said its jointly owned storage terminal in the southern Malaysian state of Johor is on course to begin operating in the first half of 2019.
(EnergyAsia, January 11, 2017, Thursday) — China’s influence on the world’s oil markets is growing, thanks in part to the increasing role of its refiners in boosting both crude imports and product exports at the same time.
(EnergyAsia, January 10, 2018, Wednesday) — Asia’s oil expenditure could rise another 9% in 2018 after surging by an estimated 25% last year, according to calculations based on US government data and projections.
(EnergyAsia, December 23, 2017, Saturday) — Without much fanfare, the oil markets have recovered strongly over the past year, with Brent crude rising by nearly a quarter or US$10 a barrel, said the US Energy Information Administration (EIA).
(EnergyAsia, December 21, 2017, Thursday) — India will continue to outpace China and remain as Asia’s fastest growing major economy and energy consumer, according to the World Bank.
(EnergyAsia, December 16 2017, Saturday) — Australia’s natural gas industry is heading into 2018 in “confident new mood” as it continues to recover from a three-year slump, said energy veteran Graeme Bethune.
(EnergyAsia, December 9 2017, Saturday) — Saudi Arabia’s state-owned firm, Aramco, said it has started up its international trading subsidiary in Singapore to serve Asia’s growing oil markets.
(EnergyAsia, December 4, 2017, Monday) — Due largely to reduced production and rising consumption in Asia, the world’s diesel supply will fall short of demand growth next year, said US consultant ESAI Energy Inc.
(EnergyAsia, November 21 2017, Tuesday) — With the price of Brent crude recently touching a two-year high, India is bracing for a sharp rise in its oil expenditure for the current fiscal year ending March 31 2018.
(EnergyAsia, November 18 2017, Saturday) — India’s domestic oil consumption is surging, helped in part by recent economic reforms including the introduction of the national goods and services tax (GST), said two energy consultants.