• 30
  • Jan
  • 2018

Pioneering Cluster Plans to Capitalise on Saudi Arabia Opportunities

An innovative and pioneering collaboration venture that will help Scottish firms gain a foothold in the fast-growing Saudi Arabian oil and gas market has been launched by HFI Consulting International.

HFI is paving the way for 10 companies – five from the subsea sector and a further five with advanced drilling and well management (ADWM) technology - to join in its ground-breaking KSA Cluster collaboration initiative. The key objective of the plan is to establish a solid platform for companies seeking to secure a sustainable level of US$5m to US$10 revenues within a three to five-year horizon.

The project, which will be formally launched at Subsea Expo in Aberdeen this coming week, will not only mitigate the start-up risks of an individual approach to business expansion in the region, but consolidate costs and overheads.

Graham Berry, who has a proven track record in preparing companies to enter the drilling equipment and services sector in the Middle East, will be lead for the five companies selected for the ADWM cluster, while Adrian Phillips, who specialises in providing bridgehead management support, will focus on the subsea cluster.

 

KSAnewsversion1

 

HFI is targeting an optimum level of five companies that will collaborate in each cluster to form a consortium that will be synergetic and not competitive. Hugh Fraser, managing partner of HFI, said that the cluster approach had significant advantages over going it alone.

He added: “Saudi Aramco is anticipated to spend US $30bn per annum in the KSA petroleum sector over the next decade. There are currently 117 active drilling rigs, including 18 offshore rigs, and this figure is expected to rise by at least a further 130 by 2019.

“Future drilling programmes will include the Ahmari 1 deep gas project and the Al-Haryd oil project in the Red Sea, which is an emerging deepwater environment. This makes Saudi Arabia the most prospective market in the world for drilling products and services, and a key growth area for technology that has already been successfully utilised in the subsea sector.

“The region presents plenty of scope for installation contractors. Over US$6bn of recent LTA awards in Saudi Arabia have kept a wide range of North Sea companies very busy bidding and delivering subsea solutions from jacket installation to cables to pipelines, and with it there are many opportunities for the supply chain.

“The onset of major offshore projects in Saudi Arabia in conjunction with substantial maintenance activities on existing infrastructure amounts to excellent prospects for pipeline, subsea power cable, reeler and connection systems, concrete protection and stabilisation solutions as well as ROV and the diving community.

“According to the EIC Datastream, six of the top 30 projects in the Middle East are offshore upstream, with US$20bn slated for projects including the Marjan Field Expansion, Safaniya, Zuluf, Berri, Marjan & Hasbah in Saudi Arabia.

“And, of course, there is the recent announcement from Saudi Aramco on its plans to build a multi-billion-dollar maritime yard in the kingdom. Initial production and service operations are expected to start in 2019, with full operation being reached by 2022.

“The scale of opportunity in the kingdom is greater than at any other time in the past – and perhaps at any time in the future – but many UK companies still perceive it as a challenging environment which presents too many barriers to the successful internationalisation of their business.

“Disincentives are diverse: its reputation of being competitive and cost sensitive; the intensity and duration of the Saudi Aramco vendor approval process; the risks of finding a local partner with which to establish an agreement; placing the right management team in location and the level of investment needed offset against the length of time until a positive cashflow can be achieved.

“The KSA Cluster aims to address all of those concerns and more. HFI will steer the cluster companies through the formation of a JV with a local partner, appoint a highly experienced general manager with a proven track record to lead the initial bridgehead period of the venture, and deploy all the necessary arrangements to properly establish the commercial activities of each company in KSA.”

The advantages of the KSA Cluster are that it will allow a broader range of technologies and corresponding commercial proposition to be presented to Saudi Aramco; it reduces the risks, costs and time delays with appointing an individual general manager while the process of establishment is fast-tracked; and, critically, the majority of business costs that would be incurred as an individual are consolidated and equally shared.

KSAnewsversion2

Hugh Fraser of HFI Consulting International

 

Hugh said: “The overarching aim of the KSA Cluster is to consolidate and reduce time and costs while combining expertise and commercial proposition. Essentially it is what HFI does across all its internationalisation initiatives: to increase the prospects of a successful venture and lower the risk of failure.

“The primary objectives of the initiative are to have all participants properly established in KSA with a 12-month period and to establish a platform where each participant will achieve a new incremental gross revenue of not less than US$1m within 24 months, and not less than $5m to US10m within 36 to 60 months. This would result in the companies in each cluster generating a combined US$25m to US$50m in annual turnover.”

The KSA Cluster is another of HFI’s specific initiatives targeted towards the kingdom, where there is a significant government focus on transforming the nation’s economy through the In-Kingdom Total Value Added programme as part of its Economic 2030 Vision and National Transformation Plan. A key objective of this is to encourage local manufacturing and associated foreign investment, local procurement, technology transfer and employment creation.

HFI launched its Saudi Arabian Ventures Initiative last year in order to help companies with North Sea origins capitalise on the IKTVA programme. HFI consultants have many decades of experience of setting up JVs and developing businesses in the region, and the firm also has strong partnerships with in-country specialists.

“The cluster approach envisages significant advantages over an individualistic approach and mitigation of the relative disadvantages, challenges and risks associated with internationalising in the kingdom. It is also hoped that the same approach and system can be deployed for other targeted clusters, making the approach scalable.”

HFI will be at stand 14 at Subsea Expo and its team will be available throughout the duration of the event for an informal discussion about the KSA Cluster Project and other initiatives. Anyone who would like to make an appointment should This email address is being protected from spambots. You need JavaScript enabled to view it..