Emerging Opportunities for the International Offshore Market in the Middle East

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Following a period of downturn and reduced spending, the Middle East is becoming somewhat of a small haven for the offshore marine industry. Faring better than the majority of regions following the oil crash of 2008, the territory is widely-believed to be among the first to benefit from the perceived market upturn and is positioned for growth. A low breakeven cost means oil producers in the region are leading the way as E&P spending starts to increase – Headline sponsor of Seatrade Offshore Marine and Workboats Middle East, Abu Dhabi National Oil Company (ADNOC), plans to ramp up production to 5bpd by 2030 and over the next five years, US$130bn will be spent on offshore development.

This should come as good news for owners in the Middle East. However, according to UAE Shipping Association (UAESA), it may be international vessel owners who reap the biggest rewards. A lack of regional shipowners means that opportunities are now emerging for the international market to get a hold on the local market.

Tahir Lakhana, UAESA vice-chairman of The UAE Shipping Association explains, “We are forecasting a high number of government-led oil and gas projects to emerge – and we expect it to escalate. Many expansions in the oil and gas business are taking place in the coming months, particularly in Abu Dhabi and Kuwait. It would be a great investment opportunity.”

Take ADNOC’s $1.36bn expansion of the Al Gharf island as an example, which was awarded to National Marine Dredging Company (NMDC) earlier this year. The construction of two causeways and ten new artificial islands off the coast of Abu Dhabi, where reclaimed land will be used to drill for oil, is expected to accelerate the development of the Hali, Ghasa and Dalma sour gas offshore project. As many as 160 vessels will be required over the next 2-4 years, which presents prominent opportunities for international shipowners to lay prominent foundations within the region.

And while local banks are less willing to take a risk on maritime, there is optimism that financiers from overseas could be attracted to set up in the UAE.

Lakhana continues, “There is a high-quality proportion of investors and banks in European countries, such as Norway, that would be a good fit for the investment opportunities emerging in the UAE. We would like to invite them here to capitalise on these business opportunities and offer our assistance in helping them set up office.”

For vessel owners operating in the North Sea, Norway and the rest of Europe, this open invitation could be crucial to supporting both the regional and global growth of the offshore industry. Furthermore, the sharing of pioneering technology outside of the UAE may allow for greater project profitability in the region.

International collaboration has already begun between Abu Dhabi National Oil Company (ADNOC) and China National Offshore Oil Corporation) CNOOC, with the signing of a strategic framework agreement between both ADNOC and CNOOC to explore new collaboration opportunities in both upstream and downstream for the refining and liquified natural gas (LNG) sectors.

This international agreement includes sharing knowledge, best practice and technologies in the area of ultra-sour gas development; and will furthermore consider CNOOC’s subsidiaries, including Offshore Oil Engineering Co, as a contractor for engineering, procurement and construction opportunities and China Oilfield Services as a supplier of oil field services and to explore potential opportunities in existing and future offshore oil and gas field assets in Abu Dhabi.

On the other end of the spectrum, future opportunities are likely to emerge for decommissioning as long-term offshore projects in the Middle East start to close. The experience from ongoing and efficient decommissioning in the North Sea and Europe could be of great value for decommissioning projects in the UAE – a region that has benefitted from long-term offshore oil and gas projects, due to the size of fields.

Historically, one of the biggest challenges facing international owners, operators and managers in the UAE has been the ability to deliver in kingdom value. However, should an owner be able to successfully establish an office in the region and contribute to the local economy, said owner could unlock some of these upcoming opportunities by having regional commitments in the UAE. 

An example of a lucrative project that was awarded on the basis of in-kingdom-value is that by ADNOC to National Marine Dredging Company  (NMDC) in relation to the $1.36bn Ghassa Concession Artificial Islands. NMDC will deliver dredging, land reclamation and marine construction services as part of the project.

Dr Sultan Ahmad Al Jaber, UAE Minister of State and Adnoc Group CEO, in a statement comments, “NMDC was selected after a rigorous and competitive tender process. The award of this project to a UAE company will generate substantial In-Country Value, supporting local economic growth.”

The project is expected to take 38 months and leverage relationships with local suppliers, manufacturers and workforces, resulting in a total local spend of over dh3.62bn (1$bn).

“Enhancing In-Country Value is an important part of our work plan in the National Marine Dredging Company, as it is for ADNOC,” Mohammad Thani Murshed Al Rumaithi, chairman of NMDC said.

“We will achieve this by spending almost one billion dollars of the contract award in the UAE and creating additional employment opportunities for citizens in the maritime sector. We aim to increase the use of local resources, such as products, facilities and infrastructure in this sector of dredging equipment and services. NDMC will contribute to supporting the development and prosperity of the UAE.”

Gregory Brown, Associate Director for Offshore, Maritime Strategies International comments, “If you're able to actually deliver back to the local economy, you get a real competitive edge. In-country value is a key theme that will be around for many years, and owners looking to establish a presence in the region will need to give careful consideration to.”

Opportunities for the international offshore marine industry to identify a position within this regional market will fall under the spotlight at Seatrade Offshore Marine and Workboats Middle East 2019, which takes place from 23 – 24 September in Dubai, UAE. Taking place in the heart of UAE Maritime Week, this meeting place for Offshore, Marine and Workboats welcomes international delegates to join regional leaders and suppliers to discuss options for the future collaboration and innovation in both the regional and global market place.