executive interview Bechtel executive interview

‘We don’t have several million shareholders to whom we can by Mark Lazell turn for equity, nor [email protected] a government that lmost 70 years ago American firm Bechtel will finance us or our won its first contract in the Middle East, to enlarge project. We are in a the main oil refinery in competitive business ABahrain. The contract scope, minor by today’s standards, laid the foundations and that competition for a web of close and fruitful working relationships the US engineering and is growing’ construction giant has since forged at the highest levels in the region. of almost $33 billion in 2011 – which David Welch, who heads up Bechtel’s were up 18 per cent from 2010 – Welch Europe, Africa and Middle East suggests the company enjoys a sound operations, is probably not the sort of financial base here. person to let such a weight of corporate “We have had a healthy Middle East history and regional achievement faze business for a generation. It goes up him. Prior to assuming his post he and down due to the market rather than held a number of high profile posts in Khalifa Port in Abu Dhabi regional events, which is not unusual,” the US diplomatic service. From 2001 he says to 2005 he was the US ambassador ‘Has Middle East instability in good times and bad, through a wide “We are a privately held firm. We take to , and from 2005 to 2008 the variety of historical events, from the pride in being good at what we do. If assistant secretary of state for Near caused us [Bechtel] to 1990 [Iraqi] invasion of Kuwait to the that means we are big in dollar terms Eastern Affairs in the US Department of re-evaluate our business Algerian civil war,” says Welch, putting that is a good thing too, but is not the State. An speaker, his diplomatic the ‘’ events since early 2011 prime driver for us. We want to pick career also saw him serve key postings strategy in the region? firmly into context. our projects and deliver them in the in , and Saudi Arabia, as The simple answer is no, “In the last 18 months, we’ve been way the client wants.” well as Pakistan. OK. We had to stop our operations in Welch speaks of how diversity in the Such wealth of experience and but it is not a callous no’ at the height of the confrontation business helps mitigate negative market knowledge is undoubtedly beneficial as David Welch there but we re-opened our office some cycles as well as events which are more Welch helps Bechtel navigate the often months ago. In Egypt, we had a brief difficult to forecast. unpredictable and sometimes choppy inevitable risks. interlude for safety reasons. Elsewhere “As a global business you want to waters of the Middle East over the last The beginning of its relationship it was business as usual.” manage your portfolio responsibly. We 18 months in particular. with the region in the post-war 1940s ‘Business as usual’ in Bechtel parlance want to be competitive internationally, “Has Middle East instability caused coincided with a conscious strategy on normally means mega projects, and this we want to be worldwide capable, but us [Bechtel] to re-evaluate our business the part of the Bechtel family to focus year has been a significant one for the we want to have a balanced portfolio. strategy in the region? The simple on the biggest projects it could handle company in this region in that respect. Diversified geographically, and in the answer is no, but it is not a callous – particularly those it could project At the beginning of last month, the types of projects we do, so all our Bechtel no,” he tells The Gulf. manage in their entirety. company marked the start of commer- business lines are productive. We’d like He emphasises the company’s policy The decision to closely engage with cial operations at the first phase of a to have different kinds of contracts of being “cautiously vigilant” wherever the region apparently paid off. Four $7.2 billion port and industrial complex to balance out the different kinds of it operates, and managing the risks it years after the Bahrain refinery contract in Abu Dhabi (see also page 44-45) contract risk.” Project diplomacy faces. “We do not accept risks to our Steve Bechtel, son of company founder which it had ‘program managed’ in its Welch’s diplomatic nous is also no people. [Chairman and chief executive] W A Bechtel, visited Saudi Arabia – entirety for Abu Dhabi Ports Company doubt helping forge closer links with David Welch is senior vice president of US engineering Riley Bechtel believes safety is a then a vast land with a lot of desert but (ADPC), the client. regional stakeholders. company value, including safety from almost no infrastructure – and returned Such projects have helped Bechtel sail “I think we have a good reputa- and construction giant Bechtel, as well as its region security risk.” with a contract to build a 1,300 km relatively smoothly through a difficult tion in the region,” he remarks, president for Europe, Africa and the Middle East. The Over the last seven decades, the section of the Trans-Arabian pipeline, period for the countries in the wider adding that the company company has certainly experienced which would link oilfields on the Gulf region. Although he chooses not to goes about its business quietly. “We former US diplomat discusses how intimate regional the full gamut of Middle East experi- to the Mediterranean Sea. reveal how much the Middle East don’t have our signs all over everything,” knowledge helps drive the firm’s Middle East ambitions ences – the handsome rewards and the “We have been involved in this region contributed to Bechtel’s global revenues he insists. 8

26 October 2012 | the gulf the gulf | October 2012 27 executive interview Bechtel Leading Change

8 Going about things quietly isn’t easy when some of the region’s most strate- gically-important infrastructure projects – such as the Khalifa Port and industrial zone in Abu Dhabi – are part of your global portfolio. Flush with oil wealth on the back of high crude prices, Gulf states have prioritised infrastructure investment to support economic growth. Welch suggests this will continue to be a growth driver for Bechtel going forward. “This appears to be a fairly sweeping decision on the part of all economies, and we think that represents an opportunity,” he says. The region president is outwardly unconcerned about the effects of the global economic slowdown on Bechtel’s Bahrain’s oil refinery regional prospects. He also notes that long lead times for large construction greater onus on Bechtel to be good at projects can absorb market oscilla- what it does. ‘Decision making is tions. “Big investments are being made and tough. I have been “We are in a period of global econom- investors want them delivered on time, ic stress, but logically that does not to a high quality standard, safely, and involved in a lot of have an effect on long-term planning. ideally within the allotted budget. It takes several years to conceive a “I think we have, for the most part, serious foreign policy project, plan it and execute it. been able to do that and when they look decisions and they “Construction industry time lag is around the world and say ‘we’ve got to about two years – if the market is build a very sophisticated gas process- are never easy. What soft now, in about two years’ time ing plant or LNG [liquefied natural gas] you can expect it to have an effect on plant or smelter, here’s who we would you don’t know is the business. That’s why our strategic logically look at to do it’ – in most cases often greater than plan seeks to balance out the kinds of we would be in the top three or top five businesses we have and the places we competitors,” he explains. what you know’ have them.” Welch acknowledges the challenge of For Bechtel, its enduring track record achieving greater local involvement in and Sabic [Saudi Basic Industries in the region – according to Welch is regional projects, even though Bechtel Corporation] also need these skills,” has the longest history of any American designs training programmes to capture says Welch. “The Royal Commission engineering and construction firm in local talent in the jobs market. like what we are doing and we want to the Middle East – provides a platform “In Oman, when we built an alumin- do more, but we all understand we are for future growth, though Welch is well ium smelter, we had a very significant in a competitive labour environment.” aware of the need to continue engaging number of Omani contract hires, and we The theme of people and skills contin- with its partners in the region to “get trained quite a number of them. It was ues as the interview draws to a close. hired”. the first significant training programme The former diplomat says in his experi- “We don’t have several million that involved women workers, a fact ence of both business and diplomacy, shareholders to whom we can turn which the Omanis still refer to with people and the quality of their decision for equity, nor a government that will pride,” he recalls. making “are everything”. finance us or our project,” he says. In Saudi Arabia, Bechtel has a rolling “Decision making is tough. I have “We are in a competitive business programme geared to training higher been involved in a lot of serious foreign and that competition is growing. Public end engineers who can then play a role policy decisions and they are never easy. finance globally is now strained, and for the Royal Commission [for Jubail and What you don’t know is often greater that has an impact on businesses where Yanbu] – Bechtel’s long-standing client than what you know. In business, you national governments or parastatal for the development of Jubail Industrial try to make decisions based on quality entities are involved because it is just Port – in expanding the rapidly-growing information and reasonable judgement difficult for them to borrow,” he contin- city’s downstream industries. of risk,” he observes. ues. “It is a competitive business getting In a volatile Middle East, such observa- In Welch’s opinion, this puts even these guys because the likes of Aramco tions have even greater resonance. <

28 October 2012 | the gulf