What is the scope of your work with the oil and gas industry in the Middle East?
Ali & Sons Marine Engineering Factory (ASMEF), part of the Ali & Sons industrial conglomerate, is a diversified facility that provides support to the on/offshore industry in many ways. We work directly with operating companies, major EPCs, and other service companies, not only in UAE but throughout the whole region.
We execute full or partial EPC contracts, such as process modules, skid packages, static equipment, offshore platform jackets and topsides, and so on. In the midstream segment, we support the offshore fields through building, repainting, and maintaining all types of cargo barges, transportation vessels, tug boats and dredgers through our ship repair and new-build business unit.
In the upstream segment, we have executed upgrade, repair, re-certification, revamp projects for offshore drilling rigs and accommodation jack-ups that serve the drilling and brown-field industry. ASMEF also provides yard and jetty access, to facilitate the logistics of mega offshore projects like UZ 750, where part of our quayside is serving as the marshalling yard. We also receive oversized packages that need to be sent to the onshore fields, which can be transported easily from our yards, avoiding the bridges and flyovers.
As an Abu Dhabi-based company, the ADNOC group is a major client for you. Which of its projects are you working on?
The ADNOC group of companies and its EPC contractors are the main source of projects for ASMEF, and we are aggressively upgrading our prequalification status with them to cover more work groups, both onshore and offshore.
We are working in many projects where the ADNOC group is the end-user, such as supplying and building interconnecting modules for Petrofac/ ZADCO. This project is progressing well.
The substation container for Schneider/ ZADCO, which is the biggest E-House built to date in the UAE, is close to completion – the package is ready and waiting for the end-user to decide on the schedule for transportation to site.
Another project is being completed on Das Island for Cape/ ADGAS, replacing pipe supports on the existing facility – this includes site verifications, procurement, engineering, fabrication and site installation. This project was a real challenge as it involved brown-field conditions and had to be planned with different stakeholders.
ASMEF’s performance on this project has prompted the recent award of a similar, much larger one on the island, from XERVON/ ADGAS. The project formalities and deliverables for this start very soon.
Another prestigious project for ASMEF this year is a major E-Houses project of 25 containerised packages for TOZZI/ ABB/ ADCO. Engineering and procurement activities for this project are well on schedule and we are planning to start the construction activities this month. The engineering works have also started for another project, to supply chemical storage tanks for GOGAS/ ADMA. This will include the mechanical design, procurement, fabrication and testing for the tanks.
What sort of work is undertaken at the yard?
We have three main business units in ASMEF, namely the oil and gas, ship repair, and new-build and jack-up/rig repair and upgrade. These are the main revenue streams in our organisation.
The facility serves all our projects as needed, as we have a multi-disciplinary team. Our engineering and procurement departments can easily handle different types of projects, as can our proposals and commercial team.
We have one operations team that handles all the construction, and the operations management team is experienced enough to organise all the resources – from manpower to equipment – that are necessary to achieve our quality, productivity, and safety specifications.
Which of ASMEF’s products or services is proving most popular with your clients?
In the past year or two, we have developed long-term service agreements (LTSA) with our ship-repair clients, which allow clients to benefit from a fixed rate. This means that they can easily estimate the cost of works before putting their vessel in for repair, and they can reduce their overhead costs. The LTSA also have pre-agreed terms and conditions, so no contractual negotiations are usually needed.
Another product trend in the oil and gas business is that operating companies, along with the major EPCs, have come up with the E-House concept, where they have developed a different design to replace the electrical switchgear, transformers, UPS and battery concrete buildings with steel, containerised, transportable packages. With this ‘plug and play’ concept, the savings in terms of cost and time are massive, as the packages are built in the controlled environment of the yard, where all the resources and facilities are available, as opposed to the conventional way of building it as console onsite. ASMEF is currently executing two of this type of project, and our bid pipeline has a significant number of this type.
How profitable is the manufacturing and fabrication of offshore structures and what is your specialism in this area?
It is difficult to set any standard measures for the profitability, as it differs from project to project and from one business to another. The fact is, however, that the margins levels are normally linked with the risks involved in a project, so it differs all the time.
Personally, coming from an offshore oil and gas background, I can tell that the risks are high in this business, and lots of times there are those unknown risks that no-one could predict. At ASMEF, we opt to have a diversified business model in order to not only control our costs, but also to have different sources of income that maintain and sustain the business financials.
What is your opinion of Abu Dhabi’s LNG market, and how is ADNOC coping with the challenge of meeting the emirate’s natural gas demand?
With the strong economic growth and rapid population increase, not only in Abu Dhabi but throughout the UAE, there is a growing demand for power, which in turn means the supply of natural gas will have to be developed. Building LNG terminals would help to partially meet this demand, and the UAE is taking steady steps to develop LNG and regasification plants with the international companies, but these projects are long-term and take years to develop.
The UAE currently uses almost 50% of its natural gas in the enhanced oil recovery (EOR) process, which increases the production from oilfields but reduces natural gas availability to the power generation. As a result, the UAE has taken a strategic decision to free-up some of the huge volume of gas being used in EOR through projects like the carbon capture recovery and storage projects, which will drastically change the availability of local natural gas.
The investment being made in developing other resources, including sour and tight gas projects, will also boost the availability and utilisation of local gas, as will the LNG import plan. At ASMEF, we are keeping a close eye on those plans as they will result in major developments that will need the likes of our facility to support this effort.
What kind of impact has the low oil price had on ASMEF’s business?
Having been in the industry for almost 25 years now, this is the third time I’ve seen this kind of drastic drop in the oil prices. It was only 15 years ago that the prices were at the $40 level, so I think it is time to look back and see why the cost has inflated and try to adapt to the current situation.
For ASMEF, we still see lots of opportunities, as the major capex will now be diverted to asset management, preventive maintenance, and upgrade projects, in order to maximise the throughput from the existing operating facilities.
It has been proven over the years that oil price changes are unpredictable and lots of factors may have another sudden impact on the prices – only time will tell.
What are ASMEF’s growth plans in the Middle East and internationally?
We have been targeting projects outside the UAE and are bidding on two major modularisation programmes, both for projects in other GCC countries. We have also submitted our prices for packages that would be installed as far away as Brazil.
We are marketing our facility with the international clients, as well as the local ones, and the ASMEF team has been travelling to Europe and the US for that purpose. In the UAE, we are working on plans to extend our services and operations to other emirates as well.
We have set our growth strategy and are moving ahead with it. We have a capex project plan that was approved by the group’s board of directors. With the approved development budget, we have completed our jetty expansion and dock basin project, increasing our waterfront from 350m to 545m and creating a dock basin that allows work from land on three different sides, and can accommodate much bigger vessels, ships and jack-ups.
We are also progressing well with our dredging programme, which will enable us to receive vessels with bigger draft at the jetty-side, and involves dredging below our floating dock to accommodate sizable ships, barges and vessels. This will be available to our customers in October.
We are also about to award our new office-compound project to a specialist contractor. When finished, the new office building will provide better facilities for all our current and future staff and clients, besides freeing-up yard space. New warehouse and training facilities also are planned.
One of the most important developments for the company is a one-stop-shop concept that was initiated by the ASMEF chairman, Shamis Al Dhaheri, last year. This project will serve the needs of all of the company’s business units, and our clients, offering specialised services like rotary equipment and valve repair, refurbishment and overhauling; electrical and instrumentation calibration; top-drive repairs, and motor rewinding. It will also be audited by international OEMs in order to be recognised as their certified repair shop in the UAE.
With all of this, ASMEF will be adapting to market dynamics and developing our organisation and facility to be flexible enough to cope with market changes in the future.
