Mott MacDonald’s oil, gas and petrochemicals units have been involved in projects with a capital value of $8.8 billion in 2010-11, and 2012 holds an exciting mix of challenges and opportunities says Charles Ellinas, the managing director of OGP at the global consultancy
In our first Contractor Insight feature, Ellinas discusses the company’s regional performance, the EPC contract landscape, and prospects and challenges lying in wait in 2012:
“The market situation is certainly better than a couple of years ago, things have picked up. We are involved in quite a few major projects, mostly in the UAE, in Oman, and in Iraq more recently.
Prospects for Iraq
Iraq is quite central to our plans for the future. We have been working there for 50 years and in the last 7 years we delivered over 1000 projects mainly to restore basic services. Our work in the region recently received an award from the British Expertise, a UK based association who promotes UK engineering, development and management consultancy skills internationally.
Despite initial difficulties things are starting to look up for Iraq. Big projects such as the Shell Gas Capturing scheme worth $17Bn are underway and Exxon’s Common Seawater supply is back on track after a period on hold.
There is no doubt that the government has many challenges ahead and the country’s drive to improve infrastructure and social development still has some way to go. However, a range of factors are all contributing to improve the conditions in Iraq.
On one hand there is the determination of international oil companies (IOCs) to make the most out of their investments, also fuelled by the high oil price. On the other hand the Iraqi government is fully aware that improvement of living conditions for its citizens and the creation of wealth can only be accomplished by realising the potential of the oil and gas sector to create a stable source of GDP.
Staying competitive
The EPC landscape has become increasingly competitive, not least due to the recent ascendancy of Asian firms that compete aggressively on price and challenge traditional regional business models. Our strengths derive from our global presence and the Group’s multidisciplinary expertise. We are capable of combining diverse skills to deliver them locally, and thanks to our flexibility we can improve operation efficiency to the advantage of our clients.
What sets us apart is our widespread presence with local offices everywhere in the region, which have been here for a very long time now. Mott MacDonald established itself here around 50 years ago, and Ewbank Preece, fully owned by Mott MacDonald, was one of the nineteenth century pioneers in the region. We have been in Oman for over 50 years, continuously.
Market overview
The UAE and Oman are key market for us. We are working in Iraq, and Qatar has been very big for us but we are making inroads into Saudi Arabia next year.
In North Africa, production levels are quickly ramping up to pre-conflict volumes. Stability in the region is improving and so will be the business.
The Omani government recently announced that they expect investment in their oil and gas industry to be over $45bn over the next five years, with major projects such as BP’s Khazzan gas field in the lead”.
State of the market
The oil and gas market is expected to be stronger than ever in the region in 2012. Despite political instability and the global economic downturn, which is affecting businesses worldwide, the Middle East oil industry is on a good footing.
Investing in EPC projects is the best option for many countries to take advantage of the high oil price and generate revenues to support infrastructure and social development projects, increase employment and improve living standards.
There was some slow-down in the UAE and Oman during the second half of 2011 but 2012 promises to be good with the global oil and gas capex expenditure expected to be 16% up on 2011. With the oil price at $100-$110 per barrel, things are looking good.
Underlying strength comes not least from “the strong economic growth from China and India and their increasing needs for oil and gas, which are fuelling expansion”.
“There is a gradual alignment towards China” in the Middle East in general, Ellinas explains, “Because China is becoming such an important oil importer”
Risks and opportunity landscape
That is not to claim that the EPC contract market is without risks. Political unrest and the global economic downturn contribute to contracting risk. However these can also turn into opportunities for the local population.
In Oman and Iraq for instance we are fully committed to train and develop the local workforce to grow the number of skilled professional engineers. We are also promoting our oil and gas training service, which we see as a natural addition to our traditional engineering services.
Looking ahead
Mott MacDonald remains firmly committed to the Middle East, we are focused now on regional growth, not just in oil and gas, but in other sectors as well.
There will be increased activity in the oil and gas sector in 2012. It’s the only way the local population will benefit, by investing oil revenues in improving infrastructure and social development. So that is going to fuel growth, not just in the oil and gas sector, but in other sectors too.
