||Success Story Detail
Canadoil Group: Steel Piping Leader Relies on Quality Work, Good People in Big Investment
Good pipes and good people describe the Canadoil Group, a company that also represents strong investor confdence in Thailand.
A global leader in specialty piping systems, in June, the company announced a 20 billion baht (over US$600 million) investment to produce high-grade alloy and steel plates for pipes used in the oil, gas and other industries. “This marks an important new era in our commitment to Thailand as our operational headquarters. Since we frst entered the Thai market 10 years ago, we have employed a deliberate strategy to make Thailand our global base because of its strategic location and reliability,” said Giacomo Sozzi, chief executive offcer of the group.
“The diligence of our Thai employees has propelled our global success story,” he added.
With construction set to begin in September, the new plate mill is described as the most technologically advanced factory of its kind in Southeast Asia and unique to Thailand. Designed by Siemens VAI and scheduled to start production in 2012, the state-of-the-art plant will have an annual capacity in excess of 1 million tons of metal plates, achieving vertical integration of Canadoil’s operations. About 95% of the group’s raw materials are hot-rolled plates, which it transforms into pipes, fittings, pressure vessels and other piping products.
The new mill, Canadoil Plate Ltd or CPLATE for short, will enable the company to produce these plates in-house instead of buying the materials in the market.
Located at the group’s production center in Rayong province’s Amata City Industrial Estate, the project is expected to turn Thailand into a regional hub for specialized metal plates. In addition, the know-how introduced through training will accelerate the development of metallurgy engineering in the country. The project will also contribute substantially to the Thai economy by creating 5,000 jobs during the construction phase and 1,000 direct employees once the plate mill is operational.
At its Rayong manufacturing center, Canadoil has several other projects promoted by the Thailand Board of Investment (BOI) besides CPLATE. These include plants under Canadoil Asia Ltd. for fabrication, ftting and pressure vessels, Canadoil Coating Ltd. for pipe coating, and Canadoil Pipe Ltd. for steel pipes, cladding and overlay products. The group also has trade and support offces in Bangkok.
Big Thai Footprint
A privately held conglomerate, the Canadoil Group was founded by Sozzi’s father in Italy during the 1960s and has grown to become a leading supplier of customized oil and gas piping solutions. Supplying the world’s most well-known engineering, petrochemical, mining, water and environmental companies, the group has facilities in Asia, Europe, and North and South America.
Canadoil launched production at its frst Thailand plant in 2002. The company’s footprint in the country has expanded tenfold to more than half a million square meters since that initial project. Likewise, revenue has grown substantially from US$8.6 million the frst year to US$330 million in 2009.
The company manufactures piping systems in materials ranging from carbon steel to alloys to high-yield grades. In addition to its principal products of line and process pipes, pipe fittings, pressure vessels and their coatings, the group offers design and turn-key engineering solutions.
Although Thailand is now its global base, the group has retained the “Canadoil” name for continuity as it has long been a highly regarded brand in the oil and gas industry worldwide. “In more than 40 years of history, our products have never failed. That means customers give a lot of value to the brand because it represents quality assurance and a level of service,” Sozzi said.
By living in Thailand for the past 10 years, Sozzi has made a personal as well as professional investment in the country. The CEO provided a long list of reasons why the company selected Thailand as its operational base.
“When we were scouting for appropriate locations to expand our business into Asia, we looked at many countries, including China,
Vietnam, Malaysia and Indonesia. We felt that Thailand had the best combination of factors that would make a business like ours successful,” he said.
“Since ours is a niche business, it was important for us to be able to concentrate without the diffculties of partnering,” he added. “That’s why the ability to invest in Thailand as a wholly foreign-owned company was attractive to us. Also, the land here is free-hold, rather than lease- hold as in some of the other countries.”
The 20 bi l l ion baht CPLATE investment certainly shows confdence in Thailand’s future. Sozzi elaborated: “When you make a large capital investment like this, you need to build in factors that will ensure competitiveness. Simply having the latest and greatest technologies and machines by themselves do not give you a competitive edge. The people do. If you realize that your people are your greatest long-term asset, then you will have a lasting advantage.”
Possessing a wealth of accumulated expertise, Canadoil is continuously elevating its in-house technical capability for innovative piping solutions. R&D is always challenging, as oil, gas and seawater are highly corrosive for metal products. As it comes up with new products to withstand high temperature and corrosion, the company benefits from Thailand being an appropriate center for R&D as well as production.
“To develop something, you have to try and then try again until you refne the solution,” Sozzi said. “The lower cost from being in Thailand allows us to bring higher-value solutions than if we were doing the same thing in North America or Japan, for example, where the expense of every hour of every engineer and every welder when doing trials would be a lot more.”
Always looking ahead, the company sees major trends taking shape. Over the coming decade, it anticipates an important shift in sales away the from the conventional oil and gas sector to rapid growth in unconventional areas. These include the gas shale, deep-water gas and oil, synthetic crude, and nuclear power sectors.
“We are one of the very few suppliers of piping to the nuclear sector around the world,” Sozzi said. “And we think nuclear power generation is going to play a very big role in the energy demand of the future.”
Water is another growth industry foreseen. “The revenue of our group 10 years from now will have a much higher representation of the water business,” the CEO noted. “Most people today do not realize how scarce a resource water is. As the standard of living and the GDP in highly populated areas such as China and India continue on a growth path, there could be a huge scarcity of water.”
A lot of work and investment will be required to turn tomorrow’s contaminated water into a clean resource and to desalinate seawater. “Because of the corrosiveness involved, this requires extremely sophisticated alloys and special metals. CPLATE has actually been designed to produce these new types of bimetallic products for such very sophisticated applications,” Sozzi said.
The company fol lows strict measures on protect ing the environment, local communities and its workers. Before inception, each project undergoes detailed environmental and social impact studies. Projects are also carried out according to Canadian standards for industrial development. “For CPLATE, we have broadened these to World Bank and IFC standards. The new project will be of the highest global standards,” Sozzi remarked.
Noting that Canadoil plants are progressive, the CEO added that the company’s safety standards are also the best available in the metal industry.
“Sozzi also emphasized that Canadoil’s continued investment in Thailand will be fruitful not only for the corporation but also for the Thai people. “It is the people that drive the development of the country. That is what gives Thailand stability and strength,” he said.”
The tax privileges offered by the BOI are of a longer term compared with other locations. This was also very important for the capital-intensive enterprise.
Another factor was the country’s signifcant pool of skilled labor in the metal products feld. “We could build on people who knew welding, assembly, fitting, pipes and piping systems,” Sozzi noted.
The people, in fact, ranked highest as a determinant. “The Thai culture of being very welcoming fts well with Canadoil’s core values of transparency and respect,” Sozzi remarked. He added that the Thai people are hard-working, family-loving and dedicated to the betterment of their society.
In a local media advertisement announcing the CPLATE project, Canadoil noted that although it is of foreign origin, the company chose to compose the majority of its human capital with Thai people. The company said its success is a reflection of its people’s capability for teamwork and perseverance. “Human capital is why Canadoil continues to be fully confdent in Thailand as a stable platform for economic and business growth,” the ad said.