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“AK Engineering Services is the engine roomof growth for engineering services at AkerKvaerner,” says Paul Hardy, a TeessideAlliance Manager.With 2,300 on its payroll in the UK, thiscompany is a potent force … one that offers thepeople, skills, technologies and know-howrequired to deliver the forward-looking solutionsthat today’s upstream energy sector demands.In essence, today’s AK EngineeringServices business in Britain was seeded in1994, when a five-year maintenance contractwas struck with chemicals giant ICI, includingits Wilton Olefins complex on Teesside, andwhich involved transfer of workshop resourcesand its central engineering workforce.“We achieve these targets28through innovation, betterplanning, sharing of resourcesand new engineering technologiesin order to work morecost-efficiently while takingfull account of HSE.”Huntsman’s Olefins facility – maintained by Aker Kvaerner.“This gave us a bedrock of capability to executemaintenance contracts on Teesside,” says AkerKvaerner’s Paul Hardy, who was later involved inthe management of this 450-strong workforce asOperations Manager for Wilton and Billingham.More of the Wilton story later. But the ICIdeal opened the door to other business beingsecured by Aker Kvaerner in one of Britain’sbackbone chemicals and petroleum productsindustrial locations such as ConocoPhillips’ OilTerminal at Seal Sands operated for Norpipe,which largely draws its feedstock from theNorth Sea – via the Ekofisk Pipeline network –where it is cleaned, reduced in pressure and forwardedto North Tees Refinery.Notable among such clients is BASF,which initially asked for assistance in redesigningits maintenance and operations strategy atits Seal Sands facility under an Americanmethodology called Everest.This presented Aker Kvaerner with theopportunity to harness the skills base conferredunder the ICI arrangement, marry those with existingNorth Sea offshore contracting expertise andbreak into the petro-chemicals support market.There is a strong logic as naphtha andpropane are “cracked” at the olefins complexto produce ethylene and butadiene, which arethe petrochemical industry’s basic buildingblocks used to manufacture virtually all plasticconsumer products made with chemicals,while BASF uses feedstocks from North Teesrefinery in producing base chemicals fornylon products.“This was us starting to build a portfolioof ‘blue chip’ clients,” recalls Hardy.“BASF had an ambition to reduce itsfixed-cost base and turn it into a variable-costbase that would, in terms of maintenance, becontractor led.”“They wanted to redesign their maintenanceoperations by offering to transfer theirentire contractor workforce, thereby becomingan alliance partner with AK EngineeringServices while, at the same time, moving keytechnicians into an operational role to supportfront-line maintenance.”That transition took place over a ninemonthperiod founded on an Alliance-style,incentive-based risk and reward contractfocused on improvements in areas such as centralizedplanning, engineering support, designcapability, rotating equipment management andtotal valve management.Workforce flexibility was an essential element.Hardy says, “It’s about being able tomigrate people in and out with workflow, thepeaks being major plant shut-downs.”The fruitful BASF relationship continuestoday and demonstrates how a focused operationsand maintenance contractor with a wideclient base can successfully maximize opportunitiesand flexibility to move personnel aroundand share best practices.Forging an AllianceReturning to Wilton, it was in July 1999 that ICIsold a number of key Teesside units – olefins,polyurethane, paraxylene and Tioxide – toHuntsman, the largest privately held chemicalcompany in the world.As Aker Kvaerner was the incumbent maincontractor at olefins and already had prior Tioxideexperience, it became obvious that it should seekto widen that remit to include polyurethanes andparaxylene, both of which are co-located atWilton, and also the Tioxide business at Greatham.The reason why Huntsman took this route isclear enough … there was a need to streamlineand make more efficient the businesses it hadbought. And today, this process is most advancedat the olefins plant, according to Hardy.“Huntsman was looking at opportunitiesto reduce costs, innovate and implement adifferent contractor approach,” he says.“Consultants engaged to review the strategysuggest that, while all contractors wereextremely competent, there was duplication ofroles and overlapping functions.”“An alliance-style arrangement was proposed,whereby key contractors with the abilityto influence maintenance strategy and costsshould be re-engaged under a contract that providedopportunities to earn enhanced profits inreturn for delivering innovative solutions andsmart working. The direct result is the creationof a win-win relationship.”“Within the olefins alliance there is amanagement team headed by me and supportedby Huntsman and other lead contractors, all ofwhich report to the alliance board where thestrategy is steered.”At the heart of the alliance are eight key performanceindicators (KPIs) – safety (OSHA –Occupational Safety and Health Administration)rate, safety compliance, task management, overtimepercentage, maintenance ratio, loss accounting,budget compliance and standard scaffolds.An annual target is set for each.An overall maintenance target cost is alsoagreed annually among the alliance partnersincluding, of course, Huntsman. And AllianceManager for AK Engineering Services is PaulHardy himself.“We achieve these targets through innovation,better planning, sharing of resources andnew engineering technologies in order to workmore cost-efficiently while taking full accountof HSE,” he says.“We reward the workforce out of anymonies gained from the KPI scheme for theirpart in safety performance. But this is a rewardfor excellent safety performance; it is not payingfor safety performance.”Encouraged by Huntsman, Aker Kvaerner isnow extending the gain-sharing approach furtherdown the supply chain with key sub-contractors.Also, the olefins success is being extendedinto polyurethane, paraxylene and Tioxide, theobjective being to further reduce Huntsman’sUK fixed- and variable-cost base.“There is a theme with Huntsman in that itshows how working together can help theclient, while also moving us up the valuechain,” adds Hardy.Into EuropeUntil now, the primary focus of the businesshas been the UK market, but change is afoot.Aker Kvaerner has ambitions in ContinentalEurope, and BASF, ConocoPhillips, DuPontand Huntsman are seen as the key.A preliminary network has been establishedand, in the case of Huntsman which hasoperations in the Netherlands, key contacts arealready in place.Says Hardy, “Migrating our skills intoEurope is a natural progression for us. We’rerecruiting project managers in anticipation ofwinning work; we’re also recruiting expertisefrom the pharmaceuticals and nuclear maintenanceindustries to enable us to move into thoseareas as they are also key to expansion.”“I’ve made a number of presentations tothese new project managers as part of theirlearning about Aker Kvaerner’s track recordserving the needs of petrochemicals in the UK.”“Lessons learned are a key component ofour strategy to ensure we don’t trip up as weenter these new markets.”Hardy agrees that Aker Kvaerner’s alreadyconsiderable presence on the Continent, includingthe upstream technology and project engineeringskills at the group’s Zoetermeer officesin the Netherlands, should help make it easier forAK Engineering Services to carve a wider EUmarket. Russia and China are also in its sights."Today’s close, working relationshipbetween clientand contractor is the resultof considerable effort on both sides, as WiltonbasedHuntsman Olefins Engineering ManagerKevin McQuillan confirms.“Relationships between client and contractorhave evolved since the original transitionsidebarin 1994. After that change, it took us a whileto work out the best way to work out a mutuallybeneficial relationship. This has evolvedover time into today’s alliance arrangement,”says McQuillan.“It was important to work together and tomove from standard incentives contracts tomore inventive arrangements and to ensureclarity of role … contractors knowing whatthey’re expected to do.”That said, McQuillan says today’s way ofdoing business means Huntsman is increasinglyreceptive to suggestions from AkerKvaerner on how work programs should betaken forward.“We have created an environment withinwhich AK Engineering Services can contributeto maintenance decision-making in a supportive,non-confrontational way.”“The foundation of this is in the contractualrelationship where both parties gain ifcost savings are made.”McQuillan is keen to see the gain-sharingapproach extended further and he acknowledgesthat this is where the group’s North Sea supplychain experience should prove invaluable.“That’s the direction we’re trying to takeand Aker Kvaerner might have better leveragewith some of our suppliers than we havebecause of their experience. They alreadyhave fairly big input.”“Our strategy is to minimize interfaces andwe need to recognize that in some areas,handing over responsibility of sub-contractmanagement to Aker Kvaerner might deliverbenefits to both parties.”“It is important for Huntsman’s success,and ultimately for Aker Kvaerner, that wework together to ensure continuous improvementin our overall control of maintenancecosts. Our contractual relationships providea good framework and we are currentlyengaged in an initiative to understandand improve productivity at all levels.”29