IPLOCA Faces Up

To Increasing Global Challenges

John Allcorn, Executive VK Kaushik, Managing Hasan Gurtay, Senior

Vice President of Director of Punj Lloyd. Project Manager of
Wlllbros. Tekfen Construction &
Installation Co., Inc..

By Jeff Share/Editor

arely does a day go by that the world’s newspapers and electronic media do not delve into stories focusing on energy,
which in today’s picture remains one concentrating on oil and natural gas.
With oil prices hovering between $125-150 a barrel and no letup in sight, either in terms of alternatives or increased
production, the oil and gas industry is under greater pressure to manage challenges that directly threaten the world’s economic,
political and social fabric. Few are more attuned to these issues than the members of the International Pipe Line & Offshore
Contractors Association (IPLOCA), which will hold its 42nd annual convention Sept. 29-Oct. 3 in Athens, Greece.
IPLOCA members John Allcorn, Executive Vice President of Willbros, VK Kaushik, Managing Director of Punj Lloyd, and
Hasan Gurtay, Senior Project Manager of Tekfen Construction & Installation Co., Inc., discussed several of the challenges
facing their organization.

P&GJ: What issues are proving the most
challenging for IPLOCA members today?
Gurtay: Increased competition and the high
number of companies entering the tenders (which
are generally not members of IPLOCA and not
invested in achieving higher QAQC and HSE stan-
dards) are the biggest challenges. IPLOCA mem-
bers have to develop lower cost and more efficient
ways to complete projects. Focusing on the higher
technology construction and use of high efficiency
methods such as automatic welding, achieving
lower repair rates, etc. can be solutions.
Another challenge is the shortage of quali-
fied construction manpower at both supervisory
and skilled labor levels. In order to reduce the
dependence on the labor, one solution seems to
be increasing the prefabrication, modularization
and degree of automation in construction.
Allcorn: The extensive build-out of ener-
gy infrastructure worldwide has created high
demand levels for both engineering and con-
struction services. Acquiring and managing the
necessary resources, both personnel and equip-
ment, to meet commitments to customers, to
operate safely with an expanded and less expe-
rienced workforce, and to meet the expectations
of shareholders has proven to be most challeng-
ing in this resource-limited environment.
Kaushik: Many new pipeline construc-
tion contractors have appeared on the horizon.
They might not have suitable credentials but
are ready to work at rock-bottom prices or
even at a loss to create suitable qualifica-
tion. With the main criteria of selection with
government oil companies being the price,
they eventually land the projects. It has been
observed in many cases that these new entrants
are not adhering to HSE and quality norms.
Secondly, there are problems with availability
of equipment and manpower.
P&GJ: What is the extent of construction
activity among the contractors? Where are the
best opportunities and why?
Allcorn: Willbros currently has 90% of
its contract backlog in North America. Our
bookings of $1.2 billion in new work last year
indicate the strength of the market in North
America. We believe the infrastructure build-
out now under way in North America will also
be reflected in international markets in the next
few years and we are focusing on the Middle
East and North Africa as areas for expansion of
our activities outside of North America.
Gurtay: The best opportunities are still in
the Middle East because of the high number of
projects in the market.
Kaushik: With crude prices around historic
peaks, there are several pipeline projects on the
horizon in all major oil-producing countries.
P&GJ: In the U.S., the construction boom
in the pipeline business appears limitless. How
does that compare to other regions, and does
that present any specific problems in terms of
available manpower, equipment, steel?
Kaushik: There is a lag between the time
when the requirement of pipeline projects
is felt and when they actually appear on the
horizon after financial closure. Around south
Asia, there is a common perception about new
project requirements but they are yet to show
their face in such numbers where a shortage of
contractors is felt. Due to the increased num-
ber of projects the world over, there is always
a shortage of manpower, equipment and steel.
However, good construction companies main-
tain the balance so that projects don’t suffer.
Allcorn: We don’t believe the boom is
limitless, but we do agree that the visibility we
now have is the best in recent memory and we
expect to operate at current levels for the next
few years. Clearly, there are manpower and

44 Pipeline & Gas Journal / August 2008 / www.pgjonline.com

equipment limitations, but we have been able
to meet our commitments through thoughtful
planning and internal training programs.
Gurtay: We are not working in the U.S. We
are working in three regions — Middle East,
Caspian and North Africa — where there is
also a serious shortage of qualified manpower
resources as well as steel and equipment in the
industrial construction market.
P&GJ: Regarding manpower, in North
America the availability of workers from weld-
46 Pipeline & Gas Journal / August 2008 / www.pgjonline.com
ers to engineers is a growing problem. Is that
also a problem for your business?
Kaushik: There is a growing hia-
tus between worker availability and their
requirements in world markets. Due to much
freer movement of workers across interna-
tional boundaries, there is a perpetual short-
age across growing economies. However,
good companies have tried to balance this
exodus as they have their brand names and
reputation at stake. Despite the problems
of manpower, Punj Lloyd has been able to
provide adequate manpower for execution
of its projects.
Allcorn: We now employ automated weld-
ing on many projects in order to make the best
use of the limited availability of pipeline weld-
ers. Our engineering operations have expanded
to new geographic locations in Salt Lake City
and Kansas City to give us access to a larger
pool of potential employees.
Gurtay: That is a problem in our region also.
P&GJ: How have today’s record-breaking
energy prices affected the construction business?
Allcorn: Energy prices are a leading indi-
cator for our business and the positive pricing
environment has underpinned expansion in
areas like the oil sands in northern Alberta. We
believe more stable prices at a lower level would
be a positive factor as planning is difficult in
volatile pricing environments. The shale plays
are attracting significant investment in North
America and the high levels of investment drive
the need for more gas pipelines, which is a posi-
tive factor for our business.
Gurtay: All kinds of “alternative” energy
resources have entered the agenda. Wind,
solar, hydrogen, nuclear, biomass, and hybrids
of these, such as wind-hydrogen, nuclear-
hydrogen have entered the energy planning of
all industrialized countries.
But on the other hand, we foresee the oil-rich
countries’ investments for both oil and gas pipe-
lines will further increase to export oil and gas at
high prices and also increase their investments
on the infrastructure pipelines with the higher
revenue earned from the oil and gas exports.
Kaushik: Business is picking up in terms
of project numbers. However, the profit mar-
gin for projects does not increase in the same
proportion. Contractors are not getting com-
mensurate prices in view of cutthroat competi-
tion and all benefits of high energy prices are
predominantly going to clients.
P&GJ: What role do you see LNG having
as natural gas becomes a global fuel?
Gurtay: LNG is the only possible inter-
continental transportation medium of natural
gas. Therefore, as natural gas becomes a glob-
al fuel, we may expect more LNG plants and
terminals to be installed around the world.
Allcorn: We have always held that LNG
will play a role in the total energy supply for
North America and the world as producing
countries monetize the natural gas asset and
users bid for supply.
Kaushik: LNG’s role is going to increase from
the demand perspective. From the supply side also,
more trains with larger capacities are continuously
being added. LNG is able to transcend the political
issues that still remain with cross-country pipelines.
Constant increases in demand will help maintain
the economic viability of LNG.
P&GJ: What changes have you noticed in
dealing with operating companies? Do you pro-
vide more services for them than in the past? Is
there competition for the same workers?
Kaushik: This depends on the type of
operating company we deal with. Government
oil companies are enjoying the increased com-
petition provided by many new contractors.
However, international companies don’t rely
on new contracting companies with little expe-
rience. They realize and pay for the increased
cost of construction and extra services that
they require. The increased competition results
in a cap on the margin. We don’t face any
competition for manpower, whether engineers
or welders from the operating companies. The
skill sets for these two jobs are different.
Gurtay: We are observing a continuous
increase in demand for greater health, safety
and environmental performance and higher
quality assurance levels in each project. We
are providing more HSE and Q services to
the operating companies during construc-
tion projects.
It is usual to have some migration of
workforce between the operating and con-
struction companies, particularly on the
engineers’ level. Construction companies
have to provide better payment, leave cycle
and camp facilities to the staff to keep them
in their construction sites.
Allcorn: Our EPC model is more attrac-
tive than ever as our customers seek execution
teams to supplement their capital projects
48 Pipeline & Gas Journal / August 2008 / www.pgjonline.com
groups and complete the large number of proj-
ects contemplated.
P&GJ: What is your prediction for pipe-
line activity for the next five to ten years?
What are the forces that will drive that activity
forward?
Allcorn: We believe much of the invest-
ment which drives pipeline construction
activity has already been sanctioned and is
under way. The drilling rates in new areas
demand new infrastructure to monetize the
reserves being developed. While our visibil-
ity is limited to the next couple of years, we
believe the fundamentals will drive additional
activities, not yet identified as specific proj-
ects, for the next three to five years in North
America and beyond that timeframe in select
international markets.
Gurtay: Our prediction is that there will
be sufficient pipeline projects in the regions we
work in over the coming five to ten years because
of the high oil prices and revenues which are
earned and spent to increase the production and
export of more oil and gas as well as developing
distribution and infrastructure projects.
Kaushik: A lot of new pipeline require-
ments will crop up from replacement activ-
ity. Many older pipelines are outliving their
design life because they were constructed
when capacity requirements were small in
developing countries.
Panelists
Hasan Gurtay is a mechanical engineer,
B.Sc., M. Sc. who joined Tekfen in 1983
and worked in several pipeline construction
projects in Turkey, Saudi Arabia, Germany,
and Kuwait. He is now managing the BTC
Crude Oil Pipeline Expansion Project 1.2
Case in Turkey.
VK Kaushik is an engineering graduate
from the Madhav Institute of Technology,
Gwaliar. He joined Punj Lloyd in 1970 and
has handled increasing responsibilities in
operations both in India and abroad. As
managing director, he heads the complete
operations of the company with responsibility
for pipelines, tankage and terminals, turnkey
and composite construction, civil construc-
tion and telecom. India’s first and the world’s
largest LNG tank terminal at Dabhol was
constructed under his leadership.
John K. Allcorn joined Willbros in
2000 as senior vice president of Willbros
International, Inc. and was elected execu-
tive vice president of Willbros Group, Inc.
and Willbros USA, Inc. in 2001. He was
employed at U.S. Pipeline, Inc., a North
American pipeline construction company,
as senior vice president, from 1997 until
joining Willbros in 2000. Allcorn has over
19 years of pipeline industry experience
including an established record in operations
management, finance, and business develop-
ment. P&GJ