Qatar is home to a growing number of contracting companies, some established to take advantage of the pre-2022 World Cup construction boom, while others have been here for decades.
One such company that is firmly rooted in Qatar, is Qcon. Established in 1975, initially as a maintenance company, the firm diversified over the years, moving to fabrication related off-shore structures, evolving into construction and, eventually offering a full spectrum of engineering, procurement and construction (EPC) services.
Mazen Abu Naba’a, Qcon’s managing director, has held his position since 2006 and has been in the country for 49 years, with origins in Palestine. He explains the company’s core focus, which covers diverse areas: “Today we have three core businesses under one umbrella. The principal competency of Qcon started with maintenance and we have expanded regionally into maintenance shutdown and normal maintenance, manpower supply and modification works – that is a major part of the company.
“The second part is cyclic, such as building off-shore marine platforms and, the third part is project management in terms of construction projects and engineering procurement and construction (EPC),” he explains.
The projects that Qcon has worked on are mainly oil and gas. In terms of maintenance this includes RasGas and on the construction side, the Dolphin Gas project, ($220mn), Qatargas Jetty Boil-Off Gas (JBOG) Project, and also work on Barzan among others, too numerous to list.
While the ongoing uncertainty in the region around the fluctuating oil price has the market hesitant around investment and there is a definite ‘wait and see’ attitude, Abu Naba’a assures that the drop in oil price has not been detrimental to his business.
He elaborates: “The price drop is not hitting us directly – where it is hitting us is more from a client attitude, in terms of asking to renegotiate the prices on existing contracts. These contracts were won on a competitive basis but nevertheless, expectation is that somehow there is a reason for reduction,” he says.
“Construction in Qatar did not change and actually it has gone up – creating a dilemma to manage it [the perception]. We are talking about eroded margins more than eroded business,” he adds.
“The oil price crunch is forcing everyone to be price sensitive, with some companies reducing profit in an effort to maintain their workforce to get through this phase, to weather this period. To mitigate that, we look regionally for compensation for work volume,” he explains and continues: “On the oil and gas construction side there is shrinkage, as most of the plants are already mature and operating, leaving a few projects that everyone is fighting over.
“This is leading to lower margins, with contract terms and conditions becoming one-sided in favour of the client, creating additional intrinsic commercial risk to contractors.”
He adds that this results in trying to create a balance between an “appetite in terms of workload and realistic pricing and risk”.
Abu Naba’a shares that the company, while already established in Abu Dhabi, is in the process of starting up operations in Saudi Arabia, “as these are the approved growth scenarios for us in terms of region expansion”.
He continues: “Already, one third of our income comes from Abu Dhabi. We are in the middle of legal formalities for the Saudi market, although Qcon has already been invited by clients from that market, to bid for projects there. We believe 2017 will be the year for Saudi Arabia,” he adds keenly.
With the diverse offering the company brings to the market, it is maintenance, manpower and contracts that constitute the stable revenue stream as, Abu Naba’a explains, “plants need these services to run. The projects are cyclic and thus the margins are cyclic”. He stresses that the company’s focus is to retain its maintenance market share in Qatar and to grow it in Abu Dhabi and Saudi Arabia.
“As part of our growth strategy, even regionally, we would like to start with maintenance because it has less impact in terms of risk” he explains, commenting, “and the company has the financial strength to stand a hit from a poor decision in this sector.”
The contractor has a noteworthy resume of energy projects in Qatar.
“For one client, on the Barzan Project, competing amongst many contractors, we took the award for ‘Contractor of the Month’ – 13 times, in terms of quality, safety deliverables and client relations.
“And, we are talking about competing against internationals,” he adds with obvious pride.
“We believe our attention to quality and safety – especially when it is time-related, a production or a safety issue – is a key factor why clients come back to us with repeat business – this is a differentiator.”
Abu Naba’a elaborates that in oil and gas safety is more structured, heavily regulated and better defined “as you are dealing with internationals that already follow and set standards across the world. So they help you to grow with them as well.
“The challenge is when safety becomes a bottleneck in doing the job, because the job of the safety team is to do the job safely, not to just stop the job [if an issue occurs]. We have to find solutions and continue with the work at hand.”
He says that the safety protocol gap between oil and gas and infrastructure is significant. “While infrastructure is implementing procedures, they are still behind oil and gas industry. The government is working with infrastructure contractors to upgrade the safety standard across this industry, but it will take some time before it reaches the same level as the oil and gas sector.” He believes that Qatar is no different to any other country in the region in this regard and points out that the Emir’s aim is to upgrade the labour status, to develop and improve, to grow with international trends and standards.
“The challenge that we face is always to be cost-effective and have meaningful project pricing, with reasonable client expectation.
“Presently however, the expectation is high, with insufficient time to deliver, and a one-sided contract in the client’s favour.
“While there are clauses for variation and scoping etc they are not implemented properly or, the people are not empowered on the client’s side to do it in the right manner,” he adds with mild annoyance.
Looking ahead, Abu Naba’a says pragmatically: “We plan for the worst and we hope for the best.
“We know that it [the oil price drop] is not going to disappear over the next couple of years and therefore we have protected ourselves by having long-term contracts. This is a double-edged sword however, as with long term projects the prices are current, locked in at the lowest possible prices with little room for escalation.
“In Qatar particularly, as we get closer to 2022, things are going to escalate and what is a profit today may be a loss tomorrow.
“Thus, anything awarded today and locked in for five years will be a loss in 2022,” he says a little disconsolately but ends on a more optimistic note: “Hopefully, as we reach the end of the contract, we will have more contracts with better margins that will off-set the loss.”
