New Rules for Globalization

State capitalism is driving globalization strategies. The playing field has changed and an article from this month's Harvard Business Review says it best--

"Until 2008 going global seemed to make sense for just about every company in the world. Since then, we’ve entered a different phase, one of guarded globalization. Governments of developing nations have become wary of opening more industries to multinational companies. They are defining national security more broadly and perceiving more and more sectors to be of strategic importance, taking active steps to deter foreign companies from entering them and promoting domestic, often state-owned enterprises. Indeed, the rise of state capitalism in some of the world’s most important emerging markets has altered the playing field.

To factor globalization’s new risks into strategy, executives must consider their industry’s strategic importance to the host government and their home government. They can then choose among various approaches: strike alliances with local players, look for new ways to add value abroad, enter multiple sectors, or stay home." Read the full article here:http://hbr.org/2014/01/the-new-rules-of-globalization/ar/1

Emiratisation, A Lift for UAE Energy Sector

During my recent trip to the United Arab Emirates (UAE), I heard a lot of discussion about "emiratising" the workforce there. Most private sector jobs are held by expats, though private companies are required to hire locals. Ninety-five percent of small and medium-sized businesses (SMEs) of a more entrepreneurial bent employ expats, resulting in high unemployment rates for Emeratis. 

In the last year, the government has turned a more focused eye on this problem with two initiatives. First, they are encouraging businesses to hire locals by subsidizing salaries to help compensation equal government sector jobs. Secondly, the government is initiating quotas for hiring of personnel. The hope is, creativity and entrepreneurialism will stay in the country.

Local energy companies, like Al Mansoori Specialised Engineering and the Emirates Nuclear Energy Corporation and multi-national energy companies such as Dolphin Energy, Halliburton, Petrofac, Schlumberger, Total, and Total Tractebel are all trying their best to attract and hire UAE locals with job fairs, recruitment and other ways to connect Emeratis with SMEs. 

Promoting talent from within is critical for any organization, region or country and will be central to the growth and success of the UAE economy. Read more in this article from The National, an Abu Dhabi English language publication. 

Nigeria and its energy industry -- can private industry do it better?

Nigeria’s attempts to manage its vast energy industry resources have been complicated. "From 2000 to 2010, more than 100 refinery construction projects were announced in Africa. Only one was built, according to consulting firm Citac Africa, Ltd and others often fell victim to political interference or high borrowing costs," says WSJ.com.  But now, private industry has stepped in to close the gap. (see article)

This change means opportunity for international energy companies who are chomping at the bit to get into Nigeria's power generation and fuel products industry. Many U.S., Asian and European companies are expanding operations in Africa. In addition, this will also support recent efforts to privatize Nigeria's power plants. It’s an exciting time for the country. Read more in the Wall Street Journal Article, Africa's Richest Man Bets Big on Oil Refinery, Aliko Dangote Set to Spend $9 Billion on Refinery Project as Wave of Consumerism Sweeps the Continent.

Stealth competition -- from Asia

One of the more interesting trends in global business is the strategic moves being made by Asian companies to expand outside their traditional markets

Asian companies, especially the small to mid-sized ones established in their own right at home, are looking to expand outside their countries into larger markets that once saw them as simply a source of back room support. 

I saw this trend first-hand when a mid-size Indian company manufacturing power generation equipment invited me to their home offices in India to see their facilities and help them understand the potential for the company’s entry into the US and Latin American markets. 

The company is a good example of the spirit of entrepreneurialism sweeping across Asia looking to expand into the US and Latin America. While in India, I was impressed with the “can do” attitude of the company’s employees. They were excited and eager to learn about doing business in this region. I was also struck by the contrast of the old with the new -- seeing a shiny, new facility ready to take on the world, standing right next to the company’s original, legacy manufacturing building. 

My research of this company and my interviews with current customers and prospective new customers in the Americas, indicated it could successfully establish a presence and compete for market share.

More challenging will be the need for companies such as this to understand the nuances of the local markets they enter. They’ll need to ramp up service capabilities for their products in the markets in which they’d like to sell and provide better training, documentation and direct customer care.

It seems just yesterday US companies were establishing operations in India and other countries to take advantage of the low labor and manufacturing costs. Those days are over. Small to mid-size Asian companies are using a variety of strategies to rapidly move their global expansion agenda to the Americas.

2013 -- A look ahead

As we head into 2013, let's take a look at 2012 in the rear view mirror...

It’s been an exciting year in the energy sector driven by the promise of abundant natural gas and challenged by the potential end of production tax credits for renewables and a nuclear industry still recovering from the impacts of Fukushima. 

Power Gen 2012 in Orlando, FL in December, provided a bird’s eye view of key trends -- namely, flexibility and efficiency. I got to hear some top keynote speakers speak on these points. Here’s my take on the “themes from Power Gen” and their impact on the industry going forward --

Low load growth in the North American power sector has been blamed not only on the economic slowdown, but also, quite interestingly, on the more efficient devices we are using to connect us. For example, an iPad uses $1.36 of power per year -- a desktop computer, $26 bucks (see link). More efficiency in devices, means the power industry must find its own means of creating efficiency through improved software products to allow more load control and customer demand analysis. 

Efficiency extends to homes and businesses, too. The expanded use of the internet to control home and business power loads is shaving peaks for users and reducing the need for payments to generators for standby power. 

For the nuclear and coal industries, growth possibilities have moved out of the U.S. to China and India. The U.S. will only provide diversification at this point. The funding news for SMR nuclear technology is positive but will take some time to lead to actual plant builds and jobs. SMRs are also jumping on the flexibility bandwagon by emphasizing their load following capabilities. 

The U.S. will see growth in gas of course, and renewables. Solar, hydro and wind will continue to gain momentum, albeit slowly. And, flexibility will be the buzz word for those integrating gas turbines with renewables to keep that source of power viable. 

With the low economic growth in the U.S. and Europe, continued excitement about expanding into Latin America and Asia, should be at the top of the game plan list for all energy business players. I’ve recently been working with companies from Asia looking to expand into the U.S. -- an interesting twist I’lll write about in a later blog. 

I am excited and upbeat about the new year -- out of change and challenge comes innovation and growth. See you in 2013. 

The shale gas wave – the story keeps getting better

Recent developments continue to support the reality that shale gas is a game changer for the energy sector in North America, putting the region ahead of the rest of the world in production by at least a decade.

North America has several inherent advantages when it comes to shale gas production. Because oil and gas exploration has been around for over 100 years, there is plenty of geological data to help companies pinpoint where to drill.

Secondly, the fact that most land is privately-owned in North America motivates land owners -- who can financially benefit from gas drilling -- to address challenges dealing with local regulations and accelerate production.

Other countries with considerable gas reserves like China and Poland -- and without private land ownership in gas reserves areas or enough water to support exploration -- have found it challenging to get at potential resources.

A recent government study supports shipping some of U.S. natural gas overseas, thus making the market even more attractive for U.S. investors and landowners. Click here.

For the power generation business, this means:

• More headwinds for nuclear generation driving more single plant closures and delayed investment in power uprates and new build.
• Increased pressure on Wind and Solar development, especially with waning support on production tax credits.

And finally, for consumers and industrial users an increase in shale gas production points to something we all want to hear, lower energy costs.

For more details check out this article in the WSJ, click here:

SMRs and the “All-of-the-Above" strategy”

As part of the Obama Administration’s “All-of-the-Above" strategy, this week the U.S. Department of Energy announced an award to support a new project to design, license and help commercialize small modular reactors (SMR) in the United States.  The project supported by the award will be led by Babcock & Wilcox (B&W) in partnership with the Tennessee Valley Authority and Bechtel.  Click here: 

The Obama administration’s strategy is a breath of fresh air for the nuclear industry which has most recently been competing against low gas prices. It’s also a step in the right direction not only for the U.S. but for the world's energy programs. This opens up an option for other countries that have limited natural resources and growing populations, such as China and India.

The administration is showing good foresight to fund nuclear when gas prices continue to stay low. It’s too easy to jump on board with the “fad of the day” and take your eyes off other energy production options. 

The jobs to be created by this award are far reaching as other companies and manufacturers focus on furthering small modular reactor efficiency, operations and design.  

There are still challenges to be resolved to make the SMR concept a valid option in the energy arena:   

• Construction costs need to stay competitive with large nuclear and gas plants. 
• The value proposition of the SMRs is a shorter construction time. Getting these plants built in less than three years will be critical for success. 
• O&M costs need to be kept low as well with staffing and overhead costs optimized to match the lower megawatt output.

This announcement is exciting for the nuclear industry as it supports the Energy Department’s professed position that it is, “Committed to supporting research and development that will advance efficient, safe and cost-effective small modular reactor technologies.” 

The fostering of this innovative technology adds another arrow in the quiver of the U.S. as it aims for energy independence.