Toshiro Miyazaki

Miyazaki keeps a close eye on the bottom line, and the results are impressive. He says the best is yet to come.

How big is MODEC?
In terms of sales, we believe we will go over $2 billion in 2013. In terms of backlog or orders, we should go over $3.5 billion this year. In 2012 we reached $3.5 billion thanks to strong orders from Petrobras and others. This is a nice increase from the financial crisis of 2008 and 2009, when orders fell to the $2 billion level. There has been a gradual but steady recovery since then.

How many employees does the company have?
At the end of 2012 we had about 2,600 employees, including contract workers.

How big is the fleet?
At present we are operating 17 FPSO/FSOs. Total amount of oil produced by our constructed FPSO fleet is approximately one million barrels per day. We have carried out about 40 FPSO/FSO projects up to now.

How many of the units are time-chartered?
Thirteen FPSO/FSOs are currently time-chartered by oil companies, and we provide operations and maintenance services for four units.

Who are your major customers?
Oil majors like Shell, BP, Chevron, BHP, etc. National oil companies like Petrobras, Petronas and PetroVietnam, and independent oil companies like Marathon and Tullow, etc.

How is the company structured?
The headquarters is in Tokyo, which has the functions of group management, asset management, financing and business development. Outside of Tokyo there are two main bases of operations. One is in Houston, which specializes in sales and marketing. The Houston office is in charge of business development in the Atlantic area, which covers North and South America including the Gulf of Mexico, Brazil and West Africa, and overall management of TLP projects. The second base of operations is in Singapore, and that is where management of the FPSO/FSO construction takes place with satellite offices in Dalian, China, Singapore and Thailand.

One specific component of engineering and construction that is very important is mooring technology, and that is managed out of a company in Houston called SOFEC. In addition, we have two major offices in Singapore and Rio de Janeiro for the fleet operations and maintenance business, and we have local offices in each operational site like Mexico, Australia, Vietnam, Ivory Coast and Ghana.

Tell us about your own career. Are you an engineer?
I started my career in the accounting group of Mitsui Shipbuilding Co., Ltd., the parent company of MODEC, in 1972. So I have been over 40 years in the business. I spent many years with Mitsui Engineering & Shipbuilding (MES), and then with MODEC I was first an External Auditor and then an outside Director before becoming President and CEO in 2011. Prior to that I was fully responsible for Finance, Accounting and Corporate Budgeting as Director of MES, including its hundreds of subsidiaries.

As you know, financing is a key factor of the FPSO business, especially for charter business, and so my background in this area has been very useful over the years and especially in my new role.

Does MODEC have its own shipyards?
No, MODEC does not have its own shipyards. And although our parent company is MES, we have not used Mitsui’s yard for our FPSO/FSO construction yet. One of the company’s key concepts is “Fabless,” which allows us to evaluate and choose the most competitive shipyard and construction yard from various candidates for each FPSO/FSO/TLP project. Up to now, for the construction/conversion of our FPSO/FSOs, we have worked with shipyards in Singapore, China, Korea, etc., and have good relationships with them and do valuable cooperative work with MES.

MODEC operates worldwide. In your opinion, what region or regions of the world offer the best opportunities in 2013 and beyond?
Our very traditionaI base of operations has been in Southeast Asian and Oceania countries like Indonesia, Vietnam, Thailand and Australia. More recently we have been expanding into Atlantic areas. For our FPSO charter business we believe that South America and especially Brazil and West Africa will continue to be very good markets. We also see good markets in the Gulf of Mexico. We also see some mid-size FPSO projects in Southeast Asia in the near future again.

LNG is considered the fuel of the future. Has MODEC built any Floating LNG production units?
We built up a lot of experience in the FPSO area, in both EPCIC (Engineering, Procurement, Construction, Installation & Commissioning) and Operation & Maintenance, especially in the largest and most sophisticated FPSOs. Those experiences enabled us to develop two FLNG concepts. One is a large FLNG concept for major gas fields developed from land-based LNG plant technologies. With our on-land LNG specialist partners we have been awarded a couple of FEED (Front End Engineering Design) contracts. The other is the LiBro™ FLNG concept, suitable for small to medium gas fields, which involves our own liquefaction technology specifically developed for offshore application achieving the highest efficiency and safety.

MODEC has been working on “Gas to Liquids” technologies since 2007. Can you tell us about micro-channel reactors and if the company has built any modularized GTL plants?
We have been developing micro-channel reactors for years. Our demonstration plant in South America is under commissioning now and synthetic oil production is about to start.

MODEC has developed an exciting new “Floating Wind & Current Hybrid Power Generation” technology called SKWID. Tell us about that.
SKWID was developed based on our experience in the FPSO business. We learned from the FPSO business that, to deliver a fully integrated system, we must be specialized in each and all areas of the FPSO including marine, topside and mooring technologies without treating any of them as a black box. Likewise, we need to be specialized in the turbines, marine and mooring technologies to develop a good floating wind turbine as a fully integrated system.

Our offshore operational and maintenance experience with FPSOs told us that we should not have any machinery that requires periodical maintenance in the water nor high in the air. From these points we realized that somebody like us should develop a more innovative hybrid power concept based on our oil and gas experiences, which is SKWID. We are to install our first sub-megawatt model this year and plan to commercialize it in 2014.

Deepsea mining is attracting a lot of attention. What is MODEC’s involvement in this emerging offshore resource?
In the oil and gas world, offshore production has increased in significance, and operations   have reached 2,000 meters of water depth and 7,000 meters of drilling depth. On the other hand, subsea production mining is not yet popular and is merely done in 200 meters of water. One of the reasons has been technical difficulties in solid resource lifting from the deep sea. In this circumstance we have developed a new airlift concept, workable in thousands of meters of water depth, to lift subsea solid resources like rare earths, manganese nodules, cobalt rich crusts, hydrothermal deposits, or gas hydrates.

Japan is a country surrounded by an extremely large area of ocean, and recently the Japanese government has taken an interest in the fact that there is a large quantity of resources in the ocean surrounding the island of Japan. Related to this, we are aware that our technology may be very useful in recovering mineral resources from the ocean floor. We are confident that the deepwater airlift system (DWAL), which MODEC developed, will be very useful in pursuing this goal.

Will the wind and deepsea mining areas grow in importance?
Correct. In the last two or three decades, the oil and gas production frontier gradually went farther offshore and pushed its edge deeper and deeper into the sea. Both wind power and mining are now in shallow water, and we believe they will follow the same path as the oil and gas industry.

What is your vision for the company? Where do you see it in five years?
We have a Vision Statement that reads: “MODEC will be the global leader in delivering and operating innovative and reliable floating production systems by developing skilled, proactive and committed teams focused on creating value.” We live by that. As far as the markets are concerned – and looking at the FPSO markets in the last 10 years – we see that the number of facilities increased by 100. In the next five years, on the optimistic side, it may be as many as 140 units, but even being less optimistic we think it will be at least 100 units. We already see that there are about 60 projects that are now in the planning stages. In the next year, we see an additional two to three units in the deepwater area on our side.

As the FPSO/FSO/TLP market continues to grow, it will move to more challenging areas such as harsh environment, deep water, and sour crude/gas. We will continue to explore the technology frontier and be a reliable partner for the oil companies as a preferred FPSO/FSO/TLP service provider. Our “Mid-Term Business Plan 2014” shows the targets to be achieved in the next three years. We will continue to grow with efficient operations and keep our leading position in the market.

Do you have any final thoughts you would like to share with our readers?
In our business the most important thing is to offer a service to customers that is highly efficient. Our main goal is to offer an even better service to our customers. In our company we have five core values that we intend to focus on. Employees’ safety is our most important value, and our employees should be able to show their technical abilities while still enjoying a safe working environment. We would like to continue having a business where our colleagues can work together in a good spirit of teamwork. We do so by cultivating a talented team that works with integrity, communicates openly, serves the community and protects the environment.

Floating production facilities are a key technology for offshore oil field development. We would like to continue to contribute to the development of resources in the ocean for the benefit of all mankind.