When I visited Weir Oil & Gas’ facility in Dubai’s JAFZA South industrial area in November 2015, only a few workers and the smell of fresh paint greeted me. But even back then, something told me that the brand new engineering centre was worth the $20mn Weir Group had invested – the facility would serve the organisation well in its bid to consolidate its position within the regional oilfield services market.
Last month when I visited the centre again, this time to interview the new EMEA regional managing director, the factory had a completely different look. Numerous workers and supervisors, apart from engineering, sales and other services staff, were busy at work, and the HSE officer showing me around the unit was having to yell above the sound of active machinery to make me hear him.
“This investment (in the JAFZA South site) was made at the onset of the downturn, in 2015. So that was a significant commitment from the (Weir) Group to manufacture in-country. When the decision was made to commit this CAPEX, the Middle East was the natural choice,” Ronan Le Gloahec told me in his office at this facility.
“As I was told when I started in the EMEA region in 2002, the last drop of oil will be coming from this region. Weir as a group truly believes this, so we decided to make this CAPEX investment. The reason we came to Jebel Ali (in Dubai) is because we felt this was very central to the region. From the supply chain point-of-view, this centre offers us access to most places in the Gulf region, but not limited to that – we can access the Asian, African and European markets. The Middle East as a sub-group is vital to the plans of Weir Group, as far as oil and gas is concerned,” he said during this exclusive interview.
Le Gloahec was anointed, only in May this year, as the leader for Weir’s business in the massive Europe, Middle East and Africa region, the remit of which, in his words, “spans from the Norwegian sector of the North Sea right till South Africa, while our border on the West side is the Atlantic Ocean and goes as far as New Zealand in the East – so pretty much the whole of the Eastern Hemisphere.”
Le Gloahec’s familiarity with living and working in this sprawling region of the globe, coupled with his experience of being engaged in the oil and gas business here for the last 14 years, is something that he says had prepared him to assume charge of this crucial responsibility within the Weir Group.
“I’m not foreign to this region, having been involved with the Middle East and Asia Pacific for the last 14 years, with two previous employers – Schlumberger and Welltec. So, I’m quite familiar with the geography (of the entire region he now manages),” Le Gloahec claims. “I’ve run this region from Paris, Dubai and Kuala Lumpur under Schlumberger, and from Kuala Lumpur in the last five years for Welltec.”
A comprehensive offering
Weir Oil & Gas’ portfolio of products and services for the upstream sector is distinctly segregated into three key segments of oilfield services: pressure control, rotating equipment, and operations & maintenance. The JAFZA South facility is vital to Weir Oil & Gas’ business in EMEA, as this is where the engineering, production and functioning of all three segments take place, allowing Weir to serve its considerable customer base in the region. The Dubai unit manufactures and redesigns pressure control products and rotating equipment, and combines its expertise in both to provide after-market services.
“We partner with our customers to do asset management – be it field assets, producing assets (from the wellhead to the grid), and we actually staff these assets with Weir employees on a full-time basis,” the Frenchman says. “Today, Iraq for example, is one country where we have several of these operations and maintenance projects. So not only do we have skilled labour in these projects, but we also carry out maintenance operations from our service centre in southern Iraq, supported by the Dubai facility.”
Weir Oil & Gas is today a key oilfield services provider to most of the regional majors, and the kind of engagements it has with its Middle East clients “goes to show you the diversity of services we provide to our customers,” Le Gloahec, a native of Brittany in western France, remarks.
The company has been operating in Saudi Arabia for many years now – and has been providing workshop services, rotating equipment and operations and maintenance to Saudi oil giant Aramco. In the UAE, Weir Oil & Gas operates in a joint venture with local industrial services provider GASOS in Abu Dhabi to cater to Emirati oil giant ADNOC. Also in the Emirates, the Sharjah National Oil Company is a key customer, for which Weir Oil & Gas had undertaken a major operations and maintenance project for rotating equipment installation, within a tight window of 60 days, between mid-November to end-December 2016 – a project that Le Gloahec feels tested the engineering capabilities of the Dubai centre.
In Oman, Weir Oil & Gas is working on a training services contract for the Sultanate’s NOC Petroleum Development Oman (PDO) to offer technical training to PDO’s staff. However, it is in Kuwait where Weir Oil & Gas has made its latest achievement. In mid-2016, the company won “a significant order”, worth about $12mn in value, from the Kuwait Oil Company (KOC), the equipment as part of which were being shipped while Le Gloahec was speaking to me.
The scope of work for the KOC contract was the supply of various configurations of wellhead equipment – a total of 11 configurations, covering almost the full spectrum of equipment that Weir manufactures at the Jebel Ali plant.
“Why was this important to us: not only was this a key foray into the pressure control domain in the Middle East, but it was also a significant-sized order. It catered from different pressure regimes – from 3,000 to 10,000 psi. It allowed Weir to showcase what our ability was. I would say the contract with KOC that we won last year was our first foray into Kuwait with our Jebel Ali plant equipment; the sheer size of it (the deal) is why we want to advertise it,” says Le Gloahec, a qualified chemical engineer from the prestigious École Nationale Supérieure de Chimie de Rennes in France.
“So from one location to the next, the revenue mix differs. Again, it is more to do with the various alignments we have in different basins and how long we have been there. Our, ultimate goal is that in each and every country in which we operate we have significant contribution from all three verticals. This is what I am driving towards. So when it comes to a five-year strategy, there is equal attention to all our segments.”
M&A an effective vehicle for growth
The Weir Group is a 146-year-old organisation, established in 1871, and has been entrenched in the Middle East and North Africa region since 1884, providing a variety of industrial services. “So I will turn 50, when Weir turns 150,” quips Le Gloahec, a father of three.
The Group today employs approximately 12,700 people – of that 2,300 are employed in the Oil & Gas division, of which the EMEA region has a labour force of 1,300. The regional workforce of Weir Oil & Gas is distributed across EMEA, with Iraq accounting for the most number of staff, and Saudi Arabia a close second. The UAE follows at No 3, with Abu Dhabi boasting of a significant number of employees in the JV, followed by Dubai, which despite having two units (one each in JAFZA North and South) falls short of the Abu Dhabi facility in terms of headcount.
However, it is interesting to note that although the Glasgow-headquartered Weir Group may have a rich innovation and engineering legacy, having been born in the aftermath of the Industrial Revolution, the organisation’s formal oil and gas business unit is only about a decade old.
The oil and gas division is one of the three core verticals within the Weir Group – the other two being Minerals and Flow Control. “The company acquired the SPM brand in 2007, which is still today a Dallas-Fort Worth-headquartered company, and in 2008 established Weir Oil and Gas as a standalone division in a commitment to growth in the oil and gas market. That is how the Weir Group made a foray into the oil and gas sector,” Le Gloahec reminisces.
Around that same, Weir acquired an American oilfield services provider named Mathena, and entered the Caspian region in 2008 by way of another buyout. “I think we set the tone at the time that we were serious about supporting this (upstream) sector, and had committed a significant amount of money for that acquisition (of Mathena). Since then we have had a number of them (purchases). All along there has been a logic to which technology gap we were filling by these acquisitions,” Le Gloahec comments.
A business unit that has itself come into being and has grown ever since by way of acquisitions, would naturally look to expand by further mergers and acquisitions. Indeed, in this current wave of operational excellence in the global oil and gas industry, Weir Oil & Gas seems to have made M&A a central strategy for business enlargement, as its latest acquisition of KOP Surface Products implies.
“When it comes to innovation, we also have the opportunity to access innovative products from an inorganic point-of-view. That is what we did in June (this year) by the acquisition of KOP Surface Products. KOP is a leading brand as far as pressure control equipment is concerned and they had a leading position in the South East Asia market. So, it is an extremely welcome addition not only with regards to capacity but also in terms of capability to our portfolio,” Le Gloahec explains. He expects the $114mn-worth acquisition and integration process to be completed in this quarter itself.
On the subject of acquisitions, the regional MD says that an outfit has to display four distinctive competencies to be considered by Weir Oil & Gas as a potential target – which are people, customers, technology and performance. “So, I do believe that going forward we will have the same appetite for this growth strategy – be it organic or inorganic. And if upon assessment we see that an inorganic plug-in makes more sense than an organic one, then we will consider it.” Le Gloahec reveals that Weir is currently assessing the credentials of another group “which has been truly innovative over the years, and has been involved in the Dolphin Gas Project, with extremely high-end engineered solutions.”
R&D forms the backbone
Of the three verticals within Weir Group, the Oil & Gas division, quite expectedly, has borne the brunt of the prevailing downturn in the oil and gas industry, in terms of the commercial performance, with the division witnessing a further negative growth rate in 2016 than in 2015. “However, what we did see in the tail end of 2016 is that we have a recovery from the order input point-of-view. In H2 2016 vs H2 2015, we saw input growth which was quite promising for 2017 activity. This is what we are witnessing in 2017,” Le Gloahec mentions, adding that he expects Weir Oil & Gas, particularly in the EMEA region – which contributes a quarter of the vertical’s total revenue, to emerge out of the doldrums by the end of the year.
Considering the stunted growth Weir Oil & Gas has seen in the last eight quarters, one wonders if the management has earmarked any budget at all for research and development (R&D) activity – a crucial aspect in the very subsistence of an oilfield services company. “The commitment to R&D during the downturn has not faltered. It actually has increased in terms of percentage versus sales. In 2016 alone, it was in excess of 1.5% of turnover. Also in 2016, significant share of the revenue was coming from new products that were placed to market,” Le Gloahec affirms.
“We have recently released some breakthrough solutions to the market, those that have been tried in the last three quarters, not limited to pressure pumping but also to include pressure control. Just to evidence the fact that we had committed significant share of sales for R&D. That commitment will not change. Our belief is that there was an executive decision to increase that spend to 2% of sales going forward, and this involved Oil and Gas,” he reveals.
It is necessary for any business leader to dream big, and Le Gloahec has ambitions of his own: “I would say that the ambition is to maintain our fullstream nature. Our peers do not have the luxury of offering fullstream services to the customer base, both from an equipment sales point-of-view, as well as the mid-to-downstream activities, as we do. We can assist our customers throughout the E&P process, from conducting a feasibility study to pumping it from the ground to loading it on to a tanker. Same for an onshore asset; we can draw the picture from a wellhead to the pipeline.”
He concludes, “So from that foundation, I think we have a great opportunity to grow. I want to be a change agent. I have been credited with some key milestones in other companies, and I want to replicate this at Weir.”
