That’s why engineering, procurement and construction (EPC) companies in Alberta should sit up and take notice as Japan’s Toyo Engineering Corporation recasts its scattered global network as the more integrated Toyo and pours resources into its young Calgary office.
Toyo is counting on its network of overseas offices to drive its recovery from the global financial crisis, the growing competition from Europe and South Korea, the prolonged sovereign debt crises in Europe, the record-high exchange rates for the yen against the U.S. dollar and the euro, and the disastrous earthquake and tsunami that walloped Japan’s east coast nearly two years ago.
By bulking up its global network and going after new unconventional oil infrastructure work in what it calls “frontier markets”—the Russian Commonwealth of Independent States, North America, Iraq and sub-Saharan Africa—Toyo hopes to become a “global leading engineering partner” to industry, according to an annual report laying out its strategy to 2015.
Toyo’s entrée to Canada was its 2010 purchase of Tri Ocean Engineering Ltd. The Japanese parent wanted to acquire ready-made expertise in Arctic and offshore environments to gain a toehold in the oilsands and shale gas–extraction sectors. Established in 1976, Tri Ocean was a Calgary production facilities design and project management company with offices in Russia and London.
In 2011, Tri Ocean’s name was changed to Toyo Engineering Canada Ltd., and it nabbed its first oilsands-related contract.
But what exactly is Toyo?
It’s a Japanese EPC company established in 1961, with its head office in Tokyo. Over the years, it has expanded into 16 countries and completed projects in more than 50 countries through its subsidiary offices. Those contracts have come from companies engaged in oil and gas production, oil refining, chemical fertilizer and petrochemical production, infrastructure construction, environmental concerns, and manufacturing.
Toyo’s global net sales last year were almost C$1.8 billion, down from a peak of C$3.6 billion in 2008, calculated at ¥91.08 to one Canadian dollar.
A new president and chief executive officer was named last June. As he took the helm of the company, Katsumoto Ishibashi vowed to take “an aggressive management approach to achieving new growth.” In the company’s annual report, Ishibashi announced a medium-term business plan that sets a target of ¥12 billion (C$131.8 million) in global consolidated net income for the 2015 year.
He intends to get there by means of three strategies:
Toyo’s priority markets geographically are places where it already has considerable muscle—Japan, East Asia, Southeast Asia, Latin America, India and the Middle East. It has done engineering and procurement on gas gathering and treatment plants in Japan, Brazil, Indonesia and China; and it has a track record on refineries and upgrading plants in Russia, India—and again—Japan and Brazil.
But in the longer view, the company recognizes the necessity of developing an identity in what are currently its frontier markets.
Oilsands on the radar
Alberta’s oilsands industry isn’t very high up on that list, but it is definitely on it, along with North American shale gas. “Led by our local companies in the United States and Canada, we intend to aggressively continue to target new projects,” Ishibashi says.
Given that context, and given Japan’s fabled ability to assimilate elements of foreign culture, the company is confident it can establish itself in Canada, working on Canadian projects.
Key to its strategy is bolstering its Canadian staff with international resources.
“This is how we differentiate ourselves,” Toyo’s director of business development in Calgary, Akira Shigeta, tells Oilsands Review. “What we are trying to do is combine the experience and expertise of our comprehensive engineering [network] doing projects for clients worldwide, and our expertise and experience in Canada, in this climate, to provide service in Canada.
“Looking at the market, especially the construction industry, there is an oilsands rush, so there’s a short supply of manpower,” Shigeta says. “But because Toyo has a global network and several EPC centres worldwide, we can mobilize resources to Calgary.
“Because we have 250 Canadian employees, we can make sure all the designs will be in accordance with Canadian design standards and authenticate them.”
While it ramps up, Toyo’s core business will continue to be the conventional projects that Tri Ocean developed with long-term clients. “Traditional work is done by [our] sustaining capital project unit,” Shigeta says.
Meanwhile, its major capital project unit is focused on sniffing out any new opportunities that might arise while engineering one-off projects in the unconventional sector.
Foot in the door
Toyo already has its foot in the door in Alberta, fulfilling a sheaf of contracts for the long-awaited Sturgeon Refinery that is just beginning construction northeast of Edmonton. The go-ahead for the project was confirmed in November 2012 by partners North West Upgrading Inc. and Canadian Natural Resources Limited.
More than 10 years in the planning, the upgrader is intended to keep jobs and economic spinoffs in the province, rather than exporting them along with raw materials. The first of three equal phases is estimated to cost $5.7 billion, and the entire facility is expected to take three years to build.
Once all three phases are completed, the upgrader will process up to 150,000 barrels of raw bitumen per day into diesel, diluent, naphtha, butane, propane and ethane. It has also been designed to capture CO2 emissions to provide feedstock for further market uses.
Toyo’s early-stage contracts were for engineering services for the sulphur recovery unit, the light ends recovery unit, the sour water stripper unit and the amine treatment unit.
“We have been working on the specs since December 2011, and the FEED—the front-end engineering design work—was completed last year,” Shigeta says. “We are now in transition to doing the detailed design and construction work.”
In December, Toyo in Alberta established its own construction division to accomplish planning and execution management for both its traditional, core sustaining capital projects division and its unconventional oil-oriented major capital project business unit. The Calgary office now promises it can deliver complete project execution capability along with its engineering and procurement ventures.
Also in December, the company absorbed NorthernLight O&G Construction as a member of the Toyo Group in Alberta.
“Construction contractors, including modular [fabricators], are very busy,” Shigeta says, noting that space is very tight at Edmonton’s fabrication yards. “Our work has to be contracted [out], but at least at the bidding stage, we have more certainty about cost and scheduling.”
Interestingly, despite the company’s expectation that it will develop construction capability in Canada, Shigeta adds, “We can mobilize fabrication capabilities overseas for projects in Canada.”
Building a strong core
In order to establish itself in this new market, Toyo spent this winter looking for people to serve as a strong core for the offshore workers it anticipates pulling in as the workload demands.
The company sought a human re- sources generalist and contracts manager along with a senior instrumentation/controls engineer, project manager, process engineer, lead mechanical engineer, HVAC specialist, piping materials engineer, piping designer and design lead, and project quality manager.
Toyo’s strategy to create a cohesive global entity requires that overseas offices apply unified standards for safety management, which Toyo believes improves quality at the same time.
Consistency across the network is seen as key to developing a corporate culture that attracts human capital from around the world. Toyo has been redesigning its human resource management system to accommodate the requirements of an internationally fluid workforce.
What will not change, though, is the underlying belief in the collaborative power of teamwork for the common cause—pooling workers’ abilities based on mutual trust and respect—which is one of the broadly accepted guiding principles of Japanese business- management culture.