O&G: Could you kindly give me a brief overview of the company’s background. How long has Weir Oil & Gas been in existence and how long has it been in the Middle East?
Vikas Handa: Weir Group is a 150 year old company. It is one of the UK’s largest engineering group. It is structured in three divisions – oil and gas, power and industrial and mining. In mining, we manufacture the complete mill circuit – pumps, valves, crushers, etc. In oil and gas, we have got four verticals. We are the world’s largest vacuum pump manufacturer for the shale market, in the form of our subsidiary known as SPM, based out of Fort Worth, Texas. In Houston we manufacture valves, in the brand name of Seaboard. From Gabbioneta, Italy we manufacture equipment for process pumps. We also offer full integrated service management for oil companies. So that includes complete maintenance and management pumps, compressors, valves of any make, a one-stop shop for all maintenance and repairs. So these are largely four divisions.
We have restructured the group’s growth in three divisions. We formed our oil and gas division in the early 2000s. I have been with Weir since 1999, so I have been with the company in Dubai for 16 years now. We established the company in Dubai in the early 80s. We were the first ones to move to the Jebel Ali Freezone, when it was being set up near the sea side. We are retaining that facility in the North, and from that we are going to service rotating equipment, pumps, valves, compressors and turbines, and manufacture the spare parts.
In the region we generate over a billion dirhams, annually. Globally, at the peak (when the oil and gas market was bullish) Weir Oil and Gas was estimated to be worth a billion dollar business.
With this plant here in Dubai, which is actually the first in the UAE to manufacture wellhead and valves, it will strengthen our position to offer solutions to our customers in the shortest time possible, as they are being made locally.
O&G: What specific products and services do you produce for both the upstream and downstream sector? How do you service the upstream sector, for example?
VH: In the upstream sector, we cater to the drilling industry. Then we have the OCTG business; we have the premium trading licenses. We manufacture the crossover pump joints that goes into the wellhead. This plant we manufacture the valves locally in Dubai, so its being made in the UAE for the first time ever.
In upstream, especially out of Dubai, we manufacture the entire top side of the rigs which get built in the region. All the drilling contractors are our customers. We manufacture valves and all the API (American Petroleum Institute) accessories that are needed in the drilling rigs.
Besides valves and wellhead, we have complete maintenance management. Like in Iraq, we run the full maintenance management for Lukoil. That includes maintenance of the valves and wellheads to the entire CPF (pumps, compressors, turbines), pipeline. We have workshops where we prepare overhaul pumps, compressors of any make, and manufacture and supply spare parts as well.
With this we can actually offer one stop maintenance management service, completely integrated. We specialise in using customer maintenance.
In downstream we manufacture pumps and valves, we manufacture all types of valves mostly out of Gabbioneta, namely pressure control, pressure relief, control valves, and we service them as well. Production and service.
O&G: What was the rationale behind opening this new $20mn facility?
VH: The rationale is very clear. We always strive on customer service, and our customers wanted us to respond quicker than we could, by having the manufacturing in the UAE. Our top motive is to get closer to the customer, get closer to the market. Our major customers, which are in the Middle East, can visit us anytime, talk to us, and our engineers can go and visit them; that’s why we brought the technology locally.
In terms of cost, we are saving on the shipping costs, as making something out of Houston and getting it shipped to Dubai is expensive. You have companies even air freighting their products, so we are saving costs on that as well. Then you have people visiting back and forth, then comes the engineering and design stages; time wastage becomes an issue. So there are lots of advantages of producing locally.
Dubai happens to be the only production facility for Weir Oil & Gas in the region, and also the UAE’s first. Our centre in Abu Dhabi is more of a servicing facility. There we actually repair high tension electric motors, gas turbines, valves, pumps, OCTG. Our centres in Saudi Arabia, Oman and elsewhere in the Middle East are mostly maintenance and sales units, although we do manufacture small OCTG goods and accessories, pumps, valves, crossover pump joints, spare part for pumps and valves.
The reason we set up this plant in Dubai was to primarily move closer to our customers, save the response time, because these are equipment that are highly technical, and so that our engineers can work closely with the customers and come up with solutions. That was the motivation to build this plant in Dubai.
O&G: Who are your major clients in the region? Any new clients or markets that you will be targeting?
VH: We deal with every major oil and gas producer in the region. If you talk about Saudi we work with Saudi Aramco, in Oman with PDO, in Abu Dhabi with all the ADNOC group of companies. In Iraq, we deal with BP, Shell, Exxon, PMI and SOC. In Qatar, Qatar Petroleum is one of our major clients. So most of the oil and gas drilling companies are our clients.
North Africa is our next focus, as we see that market growing quite significantly in future. We are looking at Egypt, Libya – when the security situation improves, and Algeria. We want to develop our base there. In the Middle East, we are one of the largest integrated service providers. We have over 1,500 people working with us, and we have huge service centres in Iraq, Saudi Arabia, Azerbaijan, Oman, Abu Dhabi and Dubai.
O&G: Weir Oil & Gas has recently acquired a company called Mathena. Why did Weir decide to acquire it?
VH: The acquisition of Mathena happened a few years back. Mathena is actually a specific business for mud engine systems and separators. We definitely wanted to enter the rental market, which was the reason behind this acquisition. Mathena is a really successful business.
O&G: It is well-known that crude oil prices have been declining for over a year now. How has Weir been impacted by the oil price drop?
VH: Everybody has been affected by the oil prices. However, we are taking a long-term view. It (oil) is a cyclic commodity, it (prices) will come up. We have the capacity to grow, as you can see from the inauguration of our new plant, in the lowest of the low market situation. If you are sure about the long-term future and have a long-term strategy, which I think everyone (business) should have, then you will be ready when the market bounces back.
And I have a great team. We are trying to transform this low oil price situation into an opportunity. Apart from our main business of production and servicing of equipment, we also help our customers in reducing their maintenance budgets. When the oil prices are around $100 a barrel, nobody bothers. But this is the time when people want efficiency, they want to take out the bad actors, and we are helping them to do that. So our maintenance side of the business is actually growing now, so is our manufacturing of spare parts for equipment of any make. There we are cutting down on costs for our clients by offering them solutions that they want.
Yes, there is pressure from our customers to offer them discounts (in service charges). But we will see this year (2015) okay.
O&G: Did you participate at ADIPEC? If yes, could you talk about your participation and how business was for you during the event?
VH: Yes we did. I think it was a great event. The sentiment was a little low due to the low oil prices. We did display our wellhead equipment, especially the ‘Made in UAE’ ones. It was more of networking and awareness about the products that we are making here in the UAE.
O&G: What is your opinion of the oil and gas industry’s future? Any predictions?
VH: Predicting oil prices is anybody’s game at the moment. We do believe in a long-term perspective. I don’t think it can stay low for a long time. Oil is not an infinite commodity, it is a limited resource. We are hopeful that by the end of 2016, we will see prices rise to a range of $60-70 a barrel, because from what I hear is both producer and user nations are fine with that kind of a pricing level.
I think the Middle East is holding up the rig count, which is in line with Saudi Arabia’s policy of addressing a future oil shortage. That is significant, I think, for Middle Eastern producers to keep the rig count up.
O&G: Since you have opened a whole new facility, I am sure you must be having loads of plans and lots of exciting things happening. So what other news would you like to share with our readers?
VH: We are operating in times when the market is down and low oil prices are affecting us all. But I think it is important to take a step back now and look at your long-term objectives. And that is why we continue to invest and be different from others (competitors) when the market comes up.
We definitely want to take the market share, when it comes to wellhead and valves production and maintenance. We are the fourth largest wellhead manufacturer in North America. We have just started manufacturing in the Middle East, so I am pretty excited with the prospect of growth. And our customers are loving our growth, from the feedback that we are getting.
