Among the most interesting developments that have shaped the United Arab Emirates' oil and gas industrial sector, the birth and rise of an FPSO (floating production, storage and offloading) cluster stands out. The expansion of engineering and fabrication capabilities was nurtured on the back of the growth of both the onshore and offshore exploration and production sectors. The availability of cheap unskilled and semi-skilled labor, energy, workshop spaces and easy access to source materials all contributed to the local growth of many fabricators, from small cottage industries to some major players today in the first league of global operators. National Petroleum Construction Co. (NPCC)-jointly owned and managed by the Abu Dhabi National Oil Co. (Adnoc) and Consolidated Contractors Co. (CCC)-has been completing jobs for both the Abu Dhabi domestic market and for international customers, such as Shell in Iran, constructing facilities for use in the development of Iran's Soroosh/Nowrooz oil fields, in association with Iran's Naft Sazeh Qeshm (NSQ). With capacities in steel structures fabrication, topside, jackets, corrosion coating of pipes, pressure vessels, storage tanks and spheres, NPCC offers services as an engineering, procurement and construction (EPC) contractor for the onshore and offshore oil, gas and petrochemical industries. Based in Mussafah, Abu Dhabi, NPCC is competing with other leading companies in Abu Dhabi, Sharjah and Dubai. But the presence of other fabricators in the neighborhood has also created synergies based on subcontracting and cooperation to share the workload. The integrated group International Management & Construction Corp. (IMCC) was established by merging four distinct companies and a buy-out from Germany-based Babcock. The group's yard is a stone's throw away from the NPCC yard and has combined facilities provided by its four member companies: gathering, coating, pipe-making, mechanical and engineering services, and a metal and construction company. This unique integration, with a total production of 40,000 to 50,000 tons of fabricated steel per year and with an available workforce of 2,200 people, is one of the largest service companies and multi-product-based fabrication facilities in the Gulf region. The group has developed its fabrication activities in jackets, decks, process topsides, FPSO turrets and catenary anchor-leg mooring (CALM) and single-point mooring (SPM) buoys. Selling products and services all over the world, IMCC is competing with other operators in the UAE for the attractive FPSO market. Started from scratch in the country, the activity benefited from a key asset that made everything possible: Dubai's dry docks, the largest in the whole Gulf region and among the biggest operations worldwide. Able to host ultra-large crude carriers (ULCCs) and very large crude carriers (VLCCs), the state-owned company started conversion jobs in May 1996. The 274,000-deadweight-ton Stena Contender was converted into the floating storage and offloading (FSO) vessel Nkossa 1 for single-buoy moorings (SBM) using a number of UAE operators. The successful conversion in June 1999 of the Cossack Pioneer for Woodside Energy Ltd. from Australia further enhanced the yard's capabilities in FPSO/FSO conversion and refurbishment operations. The full conversion of the Xikomba, which left the yard in August 2003 after a 16-month work period, was the first full conversion undertaken by Dubai's dry docks. The Mystras, a 143,000-ton VLCC, was next to be converted for SBM, using the know-how of the UAE fabrication and engineering cluster. It became an FPSO with an 80,000-barrel-per-day production capacity and 1.1 million barrels of storage capacity. The vessel is now at work for Agip offshore Nigeria. Before that, a second FSO conversion job was completed on a vessel that is now operating off Murmansk, Russia. The Dubai Dry Docks management, at first rather reluctant in moving into the FPSO/FSO conversion activity, was eventually convinced of the potential held by this market by local fabrication and engineering companies. The likes of Lamprell, IMCC and the GMMOS group were among the bullish players that pushed for the development of an FPSO cluster in the UAE. These companies participated in the first conversion projects and expect more in the years ahead. Peter Whitbread, Lamprell chief executive officer, says, "We looked at the market and the developments in the deepwater production and FPSO market and in 1997, we had a hard run at SBM, the most aggressive and dynamic player in the business. We developed a privileged relationship and now have a worldwide collaborative agreement with SBM where we have a preferential relationship to build their FPSO topside modules. We also have a collaborative venture with the Dubai dry docks, which are preparing the hulls." GMMOS, another multi-faceted group, has fabrication facilities, marine services, engineering and shipbuilding companies grouped under a single umbrella. Its move into the FPSO scene was prompted by the inception of Global Process Systems (GPS), an engineering company that designs particular topside modules for production platforms and FPSOs. Since then, Paul Gibbs, GMMOS group chief executive officer, has been delighted with the growth of this activity. "When we developed GPS in 1990, we felt that the FPSO market was a key niche. We went to visit the dry docks in Dubai and explained that we thought we could rival Singapore and obtain some of the international work by teaming up. "In the last two years, Dubai's dry docks have taken quite a lot of work, proving the point, despite the fact that Singaporeans are difficult to compete with." In effect, and as late entrants into the FPSO fray, the UAE is facing tough competition from Singapore, the market leader, but also from Malaysia, Korea, Japan and soon China, the one competitive threat that could reshuffle the market cards in the decade ahead. However, local players have confidence in the domestic FPSO cluster's competitive edges. Whitbread says, "The quality is better, because we do everything ourselves as a one-shop facility. We identified this a long time ago when we first approached the Dubai Dry Docks. With us on one side and the dry docks on the other side, the process is much easier and smoother. Meanwhile, in Singapore, you have to talk to a hundred subcontractors managing a part of the assembly process and it becomes an agonizing and expensive process to coordinate their work." Indeed, the concentration in the engineering and metal fabrication is a key advantage. Down the road from Lamprell is U.S.-based J.Ray McDermott's fabrication yard. A few hundred meters away is Fabtech, a local fabricator that developed its competencies in pressure vessels, but also in more sophisticated construction works like the recent completion of the world's largest onshore drilling rig, designed to work in Kuwait. All these operators are competing and cooperating, pushing ahead with the strengthening of the industrial cluster. The presence of the dry docks makes Dubai the most obvious contender for the FSO/FPSO conversion works but Abu Dhabi isn't far either. And heavy modules have been easily transported by sea from yards in the Mussafah industrial zone, where NPCC and IMCC are hosted, just outside the city of Abu Dhabi, to Jebel Ali, Dubai's free zone that is hosting most of the industries located in the emirate. With the proclaimed will of both Abu Dhabi and Dubai to further promote and develop oil and gas service activities, one can bet on the future of the UAE as a heavy fabrication and construction center of choice for the Gulf region and for global markets as well. With expectations of sustained growth in the FPSO market in the years ahead, fueled by ever-more deepwater developments, the UAE oil and gas industrial cluster could well match the success of its exploration and production counterpart, and help strengthen the UAE's diversification efforts. Easing the legal restraints surrounding mergers, acquisitions and ownership and improving transparency surrounding local markets are steps that could help the movement to press further ahead by attracting even more operators willing to make the strategic move that other players have already done successfully. Synergies are there, waiting to be tapped.