If there’s any doubt about the sincerity of Middle East producers making good on their pledges to increase production to meet world oil demand and provide a buffer against price spikes, just take a look around the area.

“Our yards are empty,” said Ibrahim Al-Alawi, corporate business development manager for Dubai-based AlMansoori Specialized Engineering.

A slickline unit conducts its work in the desert as oilpatch operations in the Middle East and throughout the world keep equipment busy. (Photo courtesy of AlMansoori Specialized Engineering)
It’s the same with nearly every service company in the Middle East and the Far East, he said — equipment is in the field at work and backlogs are piling up. In some cases, service companies have had to delay services to long-time customers because they just don’t have the equipment to get to all the work quickly.

Operators, he said, are “more active. They’re getting more from existing fields. They’re dusting off files on old exploratory wells and reappraising fields. They’re putting mothballed wells back on line.”

In addition, some countries are opening their doors to exploration for natural gas by international oil companies, notably Qatar, Oman, Yemen and Saudi Arabia.

Newcomers

“Things are booming. The environment is changing. We had the big 10 companies. Now we’re getting smaller companies from Europe, Canada and the US,” he added.
That means it’s getting easier for new companies to get into some areas of the Middle East, but each country has its own rules, and Kuwait, Saudi Arabia and Abu Dhabi still are protective and hard to enter. The other countries are easier to approach.

A typical arrangement in Iran, for example, allows the international oil company to handle the exploration, then it must turn fields over to national oil companies for development. That’s the way Iran is handling its giant South Pars gas field, the Iranian extension of Qatar’s North field.

For AlMansoori, that means it works for the international company during exploration and makes new arrangements with the national oil company for development.

Now the company’s primary focus is on Qatar and Saudi Arabia. Both countries host higher levels of exploration, and Saudi Arabia is in the process of raising its production from 9 million b/d now to 12 million b/d in 2012. Just to replace production, Saudi Aramco must add 3.2 billion bbl of reserves a year. At the same time, it also wants to find 5 Tcf of gas a year.
Although the company isn’t in the drilling business, that effort means a lot of work on infill wells and workovers and new work in areas that are lightly explored.

The demand for services also puts the Dubai company in the same position of most of the companies in the oilpatch. With the demand for people and technology, AlMansoori, like many other companies in the Middle East, could use more equipment. Its revenues are increasing, and the number of employees and the amount of equipment have reached record levels. “Our goal is to grow 25% a year. We think it’s feasible,” he said. During the past 3 years revenues have increased progressively.

At the same time, the company has to be careful that it doesn’t grow too fast, and that depends on the quality of people and the quality of operations. It wants newly graduated job candidates for a good reason. They don’t bring poor work habits from former jobs.
That’s also a tradition since Nabil Al-Alawi, Ibrahim’s father, started the company 29 years ago. The former Otis employee started the business as the late 1970s boom was moving into full growth, and he had to compete with major international service companies.

To play in that game, the company relied on its reputation for quality work, and to prove that quality, it acquired the ISO 9001: 2000; ISO 14001: 1996 and OSHA 18001: 1999 qualifications with all the emphasis on health, safety and environment (HSE) those standards require. The company has more than 4 million hours of zero lost-time incidents.

At the same time, the business grew from a single wireline unit into more wireline units, production testing and drillstem testing services, tubular inspection services, hydrogen sulfide services, training services, and a particular emphasis on HSE services.
At the same time, the company took advantage of national requirements in some areas to form third-company joint-venture arrangements with National Oilwell Varco, FlowServe, Nalco and others.

Right now, the hottest areas among the 16 countries staffed by the company’s 900 employees are Saudi Arabia and Qatar, and with two successful licensing rounds behind and another coming up, Libya looks like the hot spot in North Africa. Syria is a potential emerging market in the Middle East as it opens bidding for tracts offshore in the Mediterranean the year. “People we know in Syria expect 2007 to be active,” Al-Alawi said.

Know the territory

Knowledge of the territory and familiarity with people in the industry, in operating and service companies, and in government offices is an important aspect of doing business successfully in the Middle East.

Each company has its own ways of doing business, and a service company can work better when it knows the differences. For example, AlMansoori teams like to work in Saudi Arabia, Qatar and Oman. Each of those countries has big budgets and each has developed its own fields. To do the job right, they’ve put systems in place with all the bells and whistles it takes to conduct efficient operations.

In many cases, large national oil companies have their own in-house teams for operations for which they have a constant need, well maintenance, for example. Just as some of those companies are allowing international companies into their territories to explore for gas, some are giving up their proprietary business operations in favor of professional service companies. The reason: those services rarely represent profit centers in national oil companies, and they lack the motivation of profit-based businesses.

In other areas, Qatar, Abu Dhabi and Oman, for example, AlMansoori sees a trend in which the government is taking over services. “They are trying to keep costs down,” he said.
In some countries, a service company must act as technological advisor or turnkey operator to make up for a lack of expertise within the national oil company or among independent operators with little field experience. It is essential for a successful company to know how the operators, the companies and local governments like to work.

In many ways, operators in the Middle East are no different from operators anywhere in the world. They want the biggest bang for their bucks, and they’ll choose services on that policy, but when the service offers are close, experience with people gets the nod.

That familiarity falls in line with the way companies do business in the area, he added. In the United States and Canada, a service company might pick up a job for a specific task, complete the job in 9 months to a year and move on to the next contract.

Typically, outside of North America, much of the work is handled under longer-term contracts, 3 to 5 years. People expect to work together for long periods of time, and they expect business relationships and personal relationships to last as well.

Representatives of major service companies have seen that first hand as they went into an operator’s office with a pitch for a product or service and found cold receptions. “If they have a choice, they’ll go with the person they like,” Al-Alawi said. “The 10-minute sales pitch doesn’t work. You must sit down, have tea, chat and visit when it’s not about company business. Make jokes. Maintain the relationship.”

That kind of relationship pays off in more ways than contract-to-contract business. AlMansoori employs people from 35 nationalities, and it can find ways to align its operations with the cultures of the people it works with. Those personal relationships also work well when the company tries to break into the business community in a new country. It’s easy to get positive recommendations from friends if the quality of work makes the recommendation an honest one.