Tuesday, August 30, 2011

Piero Cicalese: The Builder

This article appears in the September issue of Oilsands Review
By Peter McKenzie-Brown
The name Snamprogetti Canada doesn’t come easy for most of us, but it’s nonetheless worth remembering. Snamprogetti is one of Alberta’s hottest success stories in recent years.

According to President and CEO Piero Cicalese, “it’s been a very successful adventure, from 2007 (when he took his present job) to today. While other companies were laying people off during the financial crisis, we were hiring them. We are growing week by week.” An accountant by background, 46-year-old Cicalese conveys a great deal of personal charm. A 16-year veteran of Snamprogetti’s parent organization, he has spent four years in Canada heading its Canadian and Mexican operations.

The roots of the parent organization go back to the 1950s, when Italian oil major ENI set up Saipem SpA to look after its engineering, procurement and construction needs for new developments around the world. Based in Milan, Saipem is now a publicly traded engineering giant, with market capitalization of more than $20 billion. ENI now owns 41% of the company – Europe’s largest oilfield service provider.

As an international organization, Saipem specializes in remote and difficult locations. “For example, we built a very long pipeline in Sakhalin Island (in Russia’s Far East). There is nothing there. We’ve also worked in Iran and Central Asia, East Africa and West Africa. We have a lot of experience developing oil and gas projects in very remote areas.” He stresses that for 40 years the company has been involved in projects involving heavy oil. Because of the remoteness of its activities the company does a great deal of modularization – pre-fabricating projects as modules, then assembling them Meccano-style on location. “We are one of the largest companies around for this kind of work, at least in the petroleum sector.”

Snamprogetti is a wholly-owned Saipem subsidiary, active in North and Central America, and the newest large EPC player in Canada’s oilsands space. The company got its first Canadian contract in 2005, on a joint venture with SNC Lavalin on CNRL’s Horizon project. “For the Horizon project we built the hydrocracker,” according to Cicalese. “We were involved in all aspects of the (roughly $100 million) project. The leadership was ours, and the project went quite well.”

Since his team completed that project, there has been no looking back. There were two people in the company’s Canadian offices when Cicalese arrived in Calgary, he says. Today, “we have more than 350 employees. Most of them are engineers. We are growing, and most of our growth has taken place since the financial crisis.” Calgary is now the main office for the company’s North American and Central American operations. “While all of our offices report back to Milan (including the U.S. office in Houston), I look after Canada and our Mexican division.”

A different mentality
Saipem acquired Snamprogetti in 2006, and retained that name primarily because the company had a foothold in North America already, and therefore some brand recognition. According to Cicalese, “in Canada we are the only true EPC contractor. Most of our competitors are EPMC companies” – companies which add project management to their engineering, procurement and construction services. “We come from quite a different mentality (than EPMC firms). We come from a lump-sum background. If there are cost overruns, our competitors pass them on to the oil company. We absorb them. That’s part of the contract. So, there is much less risk to the client. We are one of the largest lump-sum contractors in the world.”

This approach is unusual in Canada, he says, “but it is quite usual in the rest of the world. We can do this because we have the largest capability of managing risk. There is risk on the table that has to be managed, and we are very good at that.”

This comment triggers the obvious question: if there is so much risk on the table, isn’t quality at risk? Cicalese is adamant. “Quality doesn’t suffer. We have been 60 years in the business, and our record speaks for itself.” He adds, “About 60 of our employees are ex-pats. For the most part they came here from the company’s international operations because of the particular skills they can bring to the table. We have to work to our (international) standards, so we brought them in to help train our Canadian recruits.”

Last December the company was awarded a $1 billion contract to construct the central processing facilities for Husky’s $2 billion Sunrise SAGD project, which will produce 60,000 barrels per day of bitumen after start-up in 2014. Cicalese calls it “one of the very few lump-sum EPC contracts awarded in Canada.” While Horizon dwarfs the combined value of Snamprogetti’s other recent North and Central American deals, he nonetheless boasts that in the last 18 months his firm has signed lump-sum contracts worth more than $1.5 billion.
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