INTERVIEW: Joe Versnel, VP - Midstream, Kiewit

Q: Can you tell us a bit about yourself, your role and your company?
A: Sure. I’m Joe Versnel, I'm the Vice President of Midstream for Kiewit. My role is primarily on what we call the ‘get-work’ side, so it’s focused on project development and customer development. I've have nearly 40 years' experience in oil and gas, pretty much a third in operations, a third in engineering and a third in construction. I started in the oil and gas industry coming out of college, and I've been involved with both the upstream and the midstream sectors most of my career.
My role at Kiewit is to work with customers, whether they're developers or established energy companies to help support their projects and position Kiewit to be the contractor of choice. Our preferred type of project execution strategy is EPC, so we like to do it all: the engineering procurement, construction and commissioning, and so I'm always out looking for opportunities with like-minded customers that fit our culture of safety and performance. At the same time looking for customers interested in the EPC execution.
Midstream is kind of a mixed bag. You have certain segments like gas processing that tend to be almost exclusively EPC. But then you get into gas compression, terminal-type projects, and those are almost exclusively traditional engineering/bid-build. So, I work with companies that haven't necessarily considered EPC and show them the benefits of EPC, where we take on more risk as an EPC contractor, show how we can shave schedule off and how we can be quicker to the market with projects. That's what I spend a lot of time doing.
At Kiewit, while we are known for executing the mega projects, most people are surprised to learn we execute a tremendous number of smaller projects under $50 million. That's an ideal sweet spot in the midstream space, especially transmission-type projects so the market fits us well and our goal is to continue to build relationships with customers and have repeat business.
Q: What projects are you currently working on? Can you tell us any more about these projects and any details that you're able to share about the scope, partners or timelines?
A: Currently I am focused on a variety of opportunities spanning everything from terminals, to gas compression as well as several in the renewable energy space. Location wise they are located throughout the US.
In a way, we view midstream as not necessarily the market, but more the style of execution. If you think about midstream, you're thinking in terms of modularized components that are then integrated into a facility – that's the execution strategy. So that's what I specialize in, looking at how you componentize each of the different parts and pieces and bring that together as efficiently as possible.
Q: What are the key challenges you are facing in project development?
A: It depends on the situation. Developers are typically challenged to raise the capital to fund projects. They need price and schedule certainty to get funding, but engineering has to be progressed and the scope defined to a sufficient level to achieve that aim. Developers may have very limited funds for this front end effort so that can be a challenge.
For larger companies the issue isn’t typically funding as often they have the balance sheet to fund the project. Sometimes these larger companies are bit more transactional in nature and focus solely on price and it can be a challenge to show the total value of an offering when price is the main consideration.
Q: How much of a constraint are workforce shortages likely to be and what can be done to address this?
A: A lot of times it's geographically specific and in an area like along the Gulf Coast, where you have multiple LNG, petrochemical-type projects all in a given area, it will tend to suck up the available resources, which becomes a challenge. You also have areas where you're a bit remote and finding a workforce available to be able to execute that work is a challenge.
Kiewit recognizes our success is largely driven by our craft, and we have to build our workforce. We spend an incredible amount of effort developing and training craft including at our craft training facility up in Aurora, Colorado. While we have a large following of employees that basically travel to jobs for us, we are constantly developing new craft resources. As a double-breasted contractor, we also work hand in hand with the trades in certain areas and we have very good relationships with the various trade unions and we’re working with them to do development and apprenticeship programs.
Q: What can be done to keep construction costs under control?
A: There are a lot of factors that go into a project’s cost. Construction costs are often a function of labor costs and when resources become scarce contractors have to increase wages in order to attract and retain its workforce. But costs are also driven by the quantities of pipe, concrete and wire that it takes to create the facility. This is where we have excelled as a company in seeking value engineering ideas to drive out quantities which in turn reduces costs.
Another key area that is certainly a challenge of late is the supply chain. Engineered equipment, especially on the electrical side, is very, very challenged right now, because there are other industries that continue to drive demand for the components we need for our projects. So that demand drives the price up, and often lengthens the delivery schedule. So that lengthened schedule has a ripple effect of delaying a project start which in turn can subject the entire project to another year(s) of escalation of wages. So all of that is a big challenge today.
Q: Do you expect design and execution strategies for midstream projects to evolve over the coming years, and if so, how?
A: Modularization is the flavor of the day. I think there's this thought process that somehow modularization and redesigning and engineering things into modules is this saving grace, and somehow that's going to make everything cheaper, better, faster. In some cases, that's true, but you’ve got to be smart about it. And there are just certain things where it makes no sense to modularize. I have seen cases where a project goes too far to the modularized side and some of the perceived value is not being realized and the project ends up costing more. I think to maximize value we should modularize the things that make sense but continue to stick-build in the field those items where it doesn’t make sense.
Q: What do you see as the key pillars to successful project execution?
A: That's easy: planning. If you don't have a plan, you're just rolling the dice during execution. You've got to have a detailed schedule, you've got to have a work plan, you've got to have it organized and you can't rely on someone's individual talents. You've got to have a system and a process that circumvents individuals, because what if they're sick a day? What if they have to go on vacation or get hurt or whatever? You can see a project's performance tank with the loss of an individual or two if your execution is solely reliant on them.
Your system has to move outside of individuals and be more process driven. You also need to be able to track and analyze the data during execution. Without breaking down the project and accurately tracking your progress it's impossible to know where you are and worse identify where there may be issues or problems.
Absent a robust system you get to the end and all of a sudden your late so companies tend to throw people and resources in an effort to recover, but its too late. But when you have a strong system like our InEight system you know where you are at all times and your able to identify issues and have a recovery plan in place for a corrective strategy to stay on schedule.
Q: How important is the relationship between owner and EPC? And what advice would you give to owners on how to work most effectively with their EPC partner?
A: I'm a firm believer that it needs to be a partnership. An EPC contractor can't sit there and work in a vacuum and say: 'Get out of my business. I gave you a lump sum, leave me alone. I'll hand you the keys when I'm done’. You can't have that attitude, because at the end of the day, nobody builds these projects to let them sit there. They build them to operate them. They want to put them in service.
The operational staff – the company, the owner – they're stuck with whatever is built and so you've got to respect the fact that they are going to be operating that facility for a long period of time, so there needs to be involvement. You should encourage that influence. At the same time, when owners sign up for an EPC contract, define what you want up front. Adding requirements or changes is disruptive. Even if an EPC contractor is compensated for the change, it still changes the flow and makes the project pause to figure out the change.
Both the Owner and Contractor need to realize that in order for the project to be successful, both parties have to be successful. The owner needs to get what they want, be happy with the end product. At the same time, the EPC needs to make a fair profit in order to stay in business, so that they can support the project execution. That's the kind of partnership you really need to make a project successful.
Q: How do you navigate regulatory uncertainty and what would you want from the incoming administration in the US in order to help the midstream sector?
A: The incoming administration appears to be bullish on oil and gas which I support. Fortunately for the midstream space, we need more infrastructure to meet increased demand for oil and gas. So I hope the new administration can come in and roll back some of the regulatory restrictions so that needed projects can move forward. Doesn’t mean we can continue to have some expansion in the renewable space, but there needs to be a balance so we continue to have cheap and abundant energy to fuel our economy.
Q: What is your outlook for the future and what do you want from the industry as you look ahead?
A: With every LNG facility that reaches FID and is constructed, you need more gas, and that gas is going to come via pipeline. For every new petrochemical, every new cracker, every new project that comes online, you need more oil, gas, ethane, whatever the feedstock is. Every new gas fired power plant supporting the grid or the data center build out needs fuel which means more pipelines to meet the demand. So I feel like our industry is going to continue to grow and I hope that we'll see a steady stream of approvals of projects going forward.