Teaming up with local partners as the key to international success

”We have been building abroad since 1998 and are quite unique in the way we do this as most companies want to fabricate in their own factory or yard.” Arie Berkman, commercial director at Hertel Offshore refers to the company’s international success formula of building abroad at the site of one of their local partners.

”When we have a project outside of Europe, we do the engineering and global procurement in the Netherlands and the fabrication at the site of our local partner under supervision of our own staff”, Berkman continues. ”For these kind of projects, we sign partner agreements. The advantage of this construction is that we can profit from lower labour costs, reduce import costs and avoid high transport costs. Also, it allows us to comply to local content requirements that many foreign authorities have. We use the local workforce and transfer our knowledge and technology, which is something governments appreciate and the investments stay within the country. When we have an European project, we build the accommodation on our own site in the Netherlands or the UK, mostly in cooperation with local yards.”

South-Korea

Recent countries Hertel Offshore has partnered up with local companies to fabricate their modules are Malaysia, India, Canada and the Middle-East. ”We always make sure to find a local partner, as they are familiar with the local market, the tax system, local products, local workforce and also the culture”, Berkman explains. ”Currently we are in detailed discussions with a partner in South-Korea. We are one of the bigger players in the field of offshore accommodations, but it becomes more and more difficult for us to compete with Asian yards, where big turnkey projects are being specialist. One was the Valemon-project, for which we delivered our accommodation to Samsung last July. Next year the complete platform will be shipped to Norway to be installed. The other current project is Aasta Hansteen, for which we cut the first steel in November. We build the accommodation in the Netherlands and will deliver it to Hyundai in South-Korea in 2015, where it will be placed on the platform and commissioned, before it is sent to Norway to be installed. However, we expect that in the future, Korea will also build accommodations, so we look for a local partner to cooperate with: we bring the knowledge and do the engineering, together we do the procurement and when the accommodation is being built, Hertel supervisors will supervise the construction. We expect that we will be able to do our first project there in 2014. Of course, our current knowledge will be known in these countries within a few years, but we always try to be a step ahead to make sure we keep our pole position.”

Hertel Offshore, headquartered in Rotterdam, is part of the Hertel Group, an industrial maintenance contractor, that employs more than 12,000 people worldwide. The offshore division has offices and fabrication facilities in the Netherlands, the United Kingdom, Romania and China and employs about 550 people. The Hertel Group had a turnover of about € 900 million in 2012, of which 10% to 15% is contributed by Hertel Offshore. Hertel Offshore today is a merging of three companies: Hertel Marine Services, which mainly operated in the Netherlands, CKT Projects, which was acquired in 2005 and operated in the Netherlands and abroad through international partnerships, and McGill Services, added in 2008 and mainly operating in the UK.

The two main activities of the company are offshore accommodations (75%) and outfittings of accommodations on vessels (25%). Berkman: ”We are well-known for our knowledge and expertise and stand out in engineering and procurement. When it comes to offshore accommodations, we realise the whole concept, from the design and the engineering to the construction of the steel and the complete outfitting. For accommodations on vessels we focus on the architectural outfitting and mainly for big special vessels. The Damen Group is a big client for us and we can say that we have outfitted the majority of the vessels for the Royal Netherlands Navy through Damen Schelde Naval Shipbuilding. Our office in the UK is also the biggest architectural outfitter for the British Navy.”

Instead of partnering with local yards, it would also be possible to open up a local facilities. However, that is not Hertel’s philosophy, Berkman explains: ”Having your own facilities costs a lot of money and you can never be sure to have a constant flow of projects. We find it explicitly important to cooperate with local parties who have local knowledge, otherwise you have to pioneer and before you know, years have past. It also is a matter of risk spreading. Our long-term vision is working with local partners and until now it turns out fine for us. It might be that we participate at some point and start a joint venture in the future, but for now we do everything on a project base, because mostly there are a few years in between projects and we do projects in many different places.”

High demands

”We always try to involve Dutch suppliers in our international projects because of the quality and the reliability. Europe has a high quality standard when it comes to offshore living quarters and oil companies want to pamper their employees as it is difficult to find and retain them, so their requirements become higher and stricter and they prefer European standards, which are a lot higher than the Asian and American standards. As we have the knowledge to meet their demands regarding the human factor, safety and aesthetics, we profit from them, because the oil companies are willing to pay more for high-quality accommodations. Living quarters become more and more luxurious, six to seven floors, elevators, gyms, cinema, one person per room instead of two to four. Comfort is ever important and the accommodations more and more resemble cruise vessels. We work with architects and interior designers, who make mood boards and think about the colour schemes: when a platform is situated in a hot country, cool colours are preferable, when situated in a cold country, warm colours are better, just to give a simple example.”

Although Hertel Offshore only has offices in the Netherlands, United Kingdom, Romania and China, they are very well able to receive tenders and contracts from abroad, according to Berkman: ”We have many years of experience with projects for big oil companies like Statoil, ONGC, Chevron, ExxonMobil, Total and Shell and are present on their vendor lists. Therefore these companies know where to find us. Next to that we are pro-active, read our professional literature and know which projects are upcoming. Also we have local agents and partners on several continents who do the first field work and who let us know about upcoming projects in their region.”

Cultural differences

When working in different cultures, cultural differences are unavoidable. How does Hertel deal with them? ”For our upcoming Korean projects for example, we provide cultural workshops for our people and our foreign partners, to make sure there is a mutual understanding”, says Berkman. ”My experience is that the most important thing though is respect; being respectful is appreciated in every country in the world, as is the Dutch mentality and honesty. Also our local agents provide us with advice regarding the local culture and our people who are situated in a foreign country are supported by our local agents and partners. However, it also is learning by doing. About five to ten of our staff are sent abroad per project and the rest of the workforce is local and we see that after a short while they always become one team, they learn from each other. The teambuilding sessions we provide also help. Dutch people are all about clarity and being straight forward, but we also need to be careful to stay tactful.”

Not only the people who are sent abroad, have to deal with cultural differences, also during contract negotiations, Hertel Offshore is confronted with differences in culture, Berkman reveals: ”Every country and every people have their own way in doing business. In the Middle-East and Asia for example, the hierarchy is very strict: only the highest rank in a company makes a decision and he mostly is only present during the last day of the negotiations. That is something to keep in mind during this phase, make sure not to have played all your cards yet, save some for the last day.”

Gail van den Hanenberg