Market Survey: Pumps and Valves

With strong demand for upstream oil and gas projects, power generation, and desalination, key markets in the UAE, Saudi Arabia, Qatar and Kuwait are driving growth for the multi-billion dollar pumps industry, despite setbacks in other regions due to the worldwide slowdown. Multinational companies such as GE Oil and Gas have established a major field office presence in some of these markets as they see that proximity certainly pays dividends in this increasingly cost-driven industry.

Pump providers that have not traditionally been associated with the oil and gas industry are going out of their way to get a piece of the regional market’s growth potential. Torishima which is a relative newcomer to the upstream business, specialises in pump solutions and servicing in the power, desalination ,water and wastewater sectors.

However, with its engineering and manufacturing workshop in oil and gas-rich Abu Dhabi, and its upcoming regional service centre soon to open in Dubai, the company is making efforts to diversify its coverage to include more upstream business.

GE Oil & Gas

Anticipating a future surge in demand in the Middle East’s rapidly growing pumps market is definitely the name of the game for GE Oil & Gas.

The company’s Pumps & Valves platform manager for turbomachinery, Emanuele Santo, is a firm believer that there is much to be gained from having its commercial teams and application and field service engineers in the region.

“We continue to build our local footprint and as part of our regionalisation strategy we are implementing a local organisation that will support streamlined project execution and services delivery for our entire customer base across the Middle East.”

“We have a strong backlog of sales for projects in the Middle East and over the next two years we will install almost 100 large and medium size pumps around Abu Dhabi alone,” he says.

Pump sales in 2008-2009 demonstrated a strong presence in India, North America and Africa for the company which has more than 18 000 centrifugal pumps installed around the world. But it anticipates a moderate slowdown in the North American market with focus increasingly shifting to the Middle East, Russia and China.

“Regardless of oil and gas industry segment, the demand for pump equipment has remained strong and is projected to continue growing for a few more years especially in key regions, including the Middle East. This is mainly driven by two factors. Firstly, refinery capacity shifting to Asia and the Middle East, and secondly, incremental reserves being more expensive,” according to Santo.

He does however say that until oil prices increase to make exploiting new reserves profitable, the focus will be on developing the enhanced oil recovery processes through water or CO2 re-injection.

He alludes to the tough economic climate saying that customers worldwide are having to re-evaluate project economics much more closely but that his company has a healthy backlog of projects to maintain its manufacturing and service operations.

“While the global financial crisis certainly has impacted the upstream and downstream markets, we have been able to alleviate the situation thanks to some major oil boosting projects and multiproduct shipping in the midstream market,” he says.

“We are fully focused on the oil and gas industry and applied adjacencies such as carbon capture and storage, waste to energy, concentrated solar power and geothermal, as well as supplying turbomachinery equipment for industrial power generation,” concludes Santo.

LEWA pumps

Sriram Iyer, regional manager of LEWA pumps and systems believes the current market trend is on consolidation and cost reduction.

“The market has grown over the years due to the increasing business of oil and gas,” he says.

“Now that oil and gas have cut back their requirements, the fall out is a drastic reduction in the number of projects and also more cut backs in project costs.”

National oil companies and their associated EPC contractors in the UAE and Saudi Arabia form the bulk of the customers and revenue for the German company.

Iyer says that the current market is getting to be cost driven and in the long term, the company will need to look at various means to localise the production and have the advantage of being near the customer.

He says that at the moment EPCs and oil companies are reaping the benefit of lower market demand. He adds that there is overcapacity in the region and that it would require another two to three years for demand to match with the supplies.

A lot of smaller oil companies and EPC contractors are quite active in countries like Yemen, Iraq, India etc. Iyer says that previously the returns in these areas were not very attractive for these companies. With the downward trend, these areas are being more aggressively pursued for exploration and production.

Despite the rapidly changing and somewhat uncertain market conditions, Iyer is buoyant about the future for LEWA.
“For the year 2010-2011, we expect the downturn in the oil and gas industry to be reversed by end of 2010.This is showing up in the number of budget enquires that we are receiving. So, somewhere in the middle of 2011, we expect EPC orders for pumps and other equipment in the oil and gas segment.”

Torishima Service Solutions

Japan’s Torishima Pumps Manufacturing Co. which has installed over 6000 pumps in the Middle East, and primarily operates in the desalination sector, is looking to diversify its business in the region further by also moving into the oil and gas sector.

The company’s service arm, Torishima Service Solutions which already has a manufacturing and servicing workshop in Abu Dhabi will soon be opening a brand new 10 000m2 facility in Dubai.

The new facility is part of Torishima’s plan to beef up its engineering presence and service capability for its regional pump operations. The upcoming service centre in Dubai will have the capability to work over and repair pumps from any provider worldwide.

The company’s overall strategy for the region is to serve Torishima and non-Torishima customers in the Middle East. Along with the Dubai facility the company’s workshop in Abu Dhabi is to establish a foothold in the Emirate’s oil and gas sector and branch out further into the industry. ”This will serve as an excellent platform to leverage our position as both the number one supplier of pumps along with spares, repairs, service and technical support,” says John Houston, sales and business director for Torishima Service Solutions in Dubai.

“The equipment and expertise will be second to none, and what we will be able to do here with a local provision will be very
attractive to end-users of major pump equipment,” he concludes.

Gates Engineering & Services

Gates Engineering & Services is an industrial pump rental and sales service. The company says that the UAE today is one of the its most thriving markets in the MENA region. Gates has regional offices in Saudi Arabia, Qatar, Oman and Bahrain have also contributed to its overall regional revenues.

Gates provides its services to a range of customers within the different industries it serves, namely the oil and gas and marine sectors.

The company provides high power (HP) and ultra high power (UHP) water jetting pumps to national oil companies, oilfield service providers and rig refurbishment contractors.

The company’s global headquarters, is located in the Jebel Ali Free Zone in Dubai and encompasses a fully- fledged production shop and warehouse facility, which the company says helps it meet operational requirements from its regional offices and also from branch offices in Australia, China, Brazil, Turkey, India and the US.

Like many other companies in the current downturn, when upstream projects had a setback in terms of progress, their related industries also felt the pinch.

The company’s biggest challenge in the current market is the ability to deliver on customers’ time and budgetary constraints in terms of manufacturing, supply chain and pricing structures.

It is a known fact that when upstream projects had a setback in terms of progress, all other related industries also felt the pinch,” the company said in a statement to Oil & Gas Middle East.

The company says its long-term business strategy, which has been sharpened in the early stages of the recession as it reached out to as many customers in as many industries, is to streamline greater collaborative efforts within the pumps business by expanding its sales and rental fleets worldwide and working with other product and service lines to provide integrated solutions to its customers.

Action International

ACTION International is a UAE headquartered solutions provider to oilfield and industrial service companies, contractors and utilities. The company has built an enviable reputation working closely with smaller contractors, supporting them with solutions to their pumping needs.

The company has also become a first port-of-call for companies in need of deploying substantial resources in a short time to deal with emergency breakdown and flooding. Padraig Nagle, managing director tells Oil & Gas Middle East regional market growth is back on the cards, and that Action is poised to capitalise on opportunities outside it native UAE borders.

What’s your take on market conditions today?

There are distinct signs of recovery which can be gauged from activity in the different sectors. We should only interpret the data with the long term nature of industrial pumping contracts. There are five traditional sectors in the pump market. The general pump industry is capital investment driven and is a very diverse sector and general trends can be very misleading.

Oil and gas activity is likely to increase as trading activities and infrastructure projects are being released. The chemical and distribution market saw a significant decline. The trend for sales and new orders should be positive for 2010-2011
For 2010, the overall market has remained solid, maintained at 2008-09 levels. What we have noticed is that many contracts have encountered delays and in turn contracts are being awarded with shorter lead times. This poorer visibility makes resource planning somewhat more challenging.

Are PMCs and EPC contractors still using price pressure as a way to secure contracts for less?

In the beginning of the recession this was the case. However, the market has improved a lot and the economy has graduated to a state of normality. That said, the recession will have a long term effect on the pricing for the future. An increase in demand from the power generation, chemicals, petrochemicals, water and wastewater industries will contribute to the growth. We expect that the market is to return to normal growth trends from 2011 to 2012.

Have you had instances where customers have struggled to meet payment terms?

This is certainly a burning issue in the current economic climate. However, for the most part Action has not had to change its credit term. This is largely based on our model to offer clients an alternative to capital intensive solutions. By its very nature our solutions are cash flow friendly.

Where are you focusing your efforts today?

From a strategy perspective, over the past year we have been hard at work, establishing business links in Qatar, Oman, Saudi Arabia and beyond. Earlier this month we officially opened our Qatar office, with dedicated resources to meet the specific needs of the local market. The UAE is traditionally our home market, although we have always provided equipment and services throughout the Middle East and North Africa region. As part of our on-going expansion we shall be establishing dedicated offices to these markets over the next two years.

Also, given that today’s market still present challenges, we have been making sure we are very focused on ensuring our product offering is aligned with the changing needs of our market. Value is high on everybody’s list of concerns, and accordingly we are continuously reviewing our processes to ensure we offer maximum value to our clients without eroding the quality and service levels, we are recognised for, in the market.

What differentiates your offering?

Our expertise and dedication! Action is dedicated to the pumping industry and as such our technical and field staff are experts in their field. This expertise allows us to engage with our clients ensuring an optimised solution is developed to meet their needs. Action maintains a complimentary diverse fleet of pumping & pipeline related equipment, maintained to the highest standards.

Our commitment to constant investment in the fleet ensures we maintain one of the youngest, largest, and most diversified fleets in the region. Combined we have the technical ability to consult on applications and the operational competence to deliver a turnkey project anywhere in the MENA region.

You are optimistic you have the right tools to capture regional growth then?

Our growth will be driven through product and territorial expansion. Our vision is clear. We will establish operations across the MENA region providing engineered solutions and market leadership in the pump industry.