Expanding oil services companies reach out to GCC partners

Petrofac is seeking an edge on rivals through local investment. (Supplied)
Updated 07 September 2018
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Expanding oil services companies reach out to GCC partners

  • Petrofac has made it clear that having a social license to operate — shorthand for supporting local economies — was a critical factor that determined whether it won tenders or not
  • Petrofac CEO Ayman Asfari: The delivery of in-country value, or ICV, is becoming increasingly important. The established national oil companies are prioritizing ICV

LONDON: Oil services and equipment companies are courting GCC partners to bolster local job creation and investment as they seek an edge on competitors to secure new business in the region.
The oil price recovery means there are more opportunities in the oil and gas sector after years of stagnation, although the KSA market has been relatively strong.
Petrofac, the oil services company with a growing reach in the Middle East, has made it clear that having a social license to operate — shorthand for supporting local economies — was a critical factor that determined whether it won tenders or not.
Petrofac CEO Ayman Asfari told Arab News: “The delivery of in-country value, or ICV, is becoming increasingly important. The established national oil companies are prioritizing ICV. In Abu Dhabi, for example, the tendering process now fully embeds ICV. It means that companies with the highest ICV have almost the right of first refusal on business.”
Active training and a development program of local talent are needed, he said.

 

ICV was a key focus area in Saudi Arabia. “More than 20 percent of our employees on the Fadhili project are Saudi nationals and our total local content across all our Saudi projects, including procurement, is expected to peak at more than 50 percent later this year,” said Asfari.
“On the question of the ICV, the in-country value, it’s really a license to operate now. It’s a requirement by clients increasingly. And unless you can meet that requirement, you will not be able to do business,” he added.
Elsewhere, London-listed Lamprell, based in the UAE, is looking to qualify as a contractor to Saudi Aramco under which contractors take up offshore engineering, procurement and construction and projects in the oil and gas sector.
An important aspect of this process is the Kingdom’s Total Value Add (IKTVA) program, which is intended to boost local investment and meet Vision 2030 objectives.
Lamprell strategy is to set up a Saudi limited liability company with KSA’s Asyad Holdings as a local partner.
Equipment and engineering services company Sparrows Group has recently been granted commercial registration to operate in KSA after it created a local JV.
Sparrows said: “A locally established company with the relevant commercial registration is a major requirement. The IKTVA program is sponsored by Saudi Aramco and is designed to drive increased investment, economic diversification, job creation and workforce development within the Kingdom.”

Decoder

The oil price recovery means there are more opportunities in the oil and gas sector after years of stagnation, though the KSA market has been relatively strong.


Gulf defense spending ‘to top $110bn by 2023’

Updated 15 February 2019
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Gulf defense spending ‘to top $110bn by 2023’

  • Saudi Arabia and UAE initiatives ‘driving forward industrial defense capabilities’
  • Budgets are increasing as countries pursue modernization of equipment and expansion of their current capabilities

LONDON: Defense spending by Gulf Arab states is expected to rise to more than $110 billion by 2023, driven partly by localized military initiatives by Saudi Arabia and the UAE, a report has found.

Budgets are increasing as countries pursue the modernization of equipment and expansion of their current capabilities, according to a report by analytics firm Jane’s by IHS Markit.

Military expenditure in the Gulf will increase from $82.33 billion in 2013 to an estimated $103.01 billion in 2019, and is forecast to continue trending upward to $110.86 billion in 2023.

“Falling energy revenues between 2014 and 2016 led to some major procurement projects being delayed as governments reigned in budget deficits,” said Charles Forrester, senior defense industry analyst at Jane’s.

“However, defense was generally protected from the worst of the spending cuts due to regional security concerns and budgets are now growing again.”

Major deals in the region have included Eurofighter Typhoon purchases by countries including Saudi Arabia and Kuwait.

Saudi Arabia is also looking to “localize” 50 percent of total government military spending in the Kingdom by 2030, and in 2017 announced the launch of the state-owned military industrial company Saudi Arabia Military Industries.

Forrester said such moves will boost the ability for Gulf countries to start exporting, rather than purely importing defense equipment.

“Within the defense sector, the establishment of Saudi Arabia Military Industries (SAMI) in 2017 and consolidation of the UAE’s defense industrial base through the creation of Emirates Defense Industries Company (EDIC) in 2014 have helped consolidate and drive forward industrial defense capabilities,” he said.

“This has happened as the countries focus on improving the quality of the defense technological work packages they undertake through offset, as well as increasing their ability to begin exporting defense equipment.”

Regional countries are also considering the use of “disruptive technologies” such as artificial intelligence in defense, Forrester said.

Meanwhile, it emerged on Friday that worldwide outlays on weapons and defense rose 1.8 percent to more than $1.67 trillion in 2018.

The US was responsible for almost half that increase, according to “The Military Balance” report released at the Munich Security Conference and quoted by Reuters.

Western powers were concerned about Russia’s upgrades of air bases and air defense systems in Crimea, the report said, but added that “China perhaps represents even more of a challenge, as it introduces yet more advanced military systems and is engaged in a strategy to improve its forces’ ability to operate at distance from the homeland.”