Challenges & Live Opportunities : 2017
The Oil Impact
The Middle East economies being largely Oil driven, the market sentiment for power related equipment in the region can be directly affected by the global demand and price of Oil. The fall in oil prices gives insomnia to the export mangers of the industry. As a close observer in this market for over a decade now, here are some of my data-based insights for the industry managers who are eyeing the Middle East market in 2017 and beyond.
On the Oil price front, recently the IMF revised down its 2017 price outlook to $50.1 a barrel, projecting only a gradual increase to $57.5 by 2021. The World Bank also revised its outlook and raised its 2017 projection to $55 a barrel from $53 as OPEC members prepare to limit actual output.
Although the rise from under $30 a barrel in the Q1 to the current $50 seems like a relief, drastic steps will be required to restore a balance between spending and income. These steps will create opportunity as well as threat to the organizations eying this market.
Has the region lost its luster for Power and Energy equipment and solutions?
“Not Really” says Andrew Roehr, Managing Director, Enterprise Solutions at WG Consulting Houston, “Many of the countries in the region have undertaken significant social/economic transformations of their economies, all of which create further requirements for economical and reliable energy. Because they are often not saddled by aging infrastructures, they have the opportunity to build truly “Smart” platforms that reflect the best of today and tomorrow. In many cases, this will mean not engaging with legacy “big iron” vendors, but with smaller more nimble and innovative companies. The opportunity is here for a new standard of operational excellence”
What does the Ground Situation show
As a Sales person I go more by what I see on the ground than what the business press says. Here are excerpts of 10 projects* worth $7 billion placed in the past couple of months:
- The Indian origin Shapoorji Pallonji International was picked as main contractor for Dubai’s Cayan Cantara development, a twin-tower project comprising residential and hospitality components. The project, a joint venture between Cayan Group and Shuaa Capital, is valued at $272.2M and is expected to comprise 700 residential apartments and penthouses along with connected retail, leisure, and food and beverage services as a part of this development. Up to 60% of the project’s residential units have been sold already and it won’t need a super computer to imagine the magnitude of electrical equipment and services the project will require .
- Italian oil and gas contractor, Saipem was awarded contracts by Saudi Aramco for $1bn. This includes the two contracts, under the long term agreement in force and renewed in 2015 until 2021 for activities in the country. These two contracts cover the development of some of the most important offshore fields in the region. These contracts include the design, engineering, procurement, construction, installation and implementation of sub-sea systems in addition to the laying of pipelines, subsea cables and umbilicals, platform decks and jackets. Once again, the equipment industry managers will know more about the business opportunities emanating from these.
- Bloom Properties appointed Becon Construction to execute the enabling works at Bloom Heights, a mixed-use project in Jumeirah Village Circle (JVC) in Dubai. The developer has begun enabling works on the project scheduled for completion in February 2017. Bloom Heights will comprise two high-rise towers linked internally across four podium levels. The project comprises 686 residential units ranging from studio, one, two- and three-bedroom apartments.
- The contract for construction of Al Mutahidah Towers by United Development Company (UDC) was won by Habtoor Leighton Group (HLG) at $159M, involving construction of twin 25-storey residential towers consisting of 480 apartments, two parking levels, ground floor entrance lobby, and amenities areas with the gross floor area of 160,500m2.
- The $125m infrastructure contract for work at Al-Maktoum International airport went to the joint venture of US-based Lane and Sharjah-based National Contracting & Transportation Company (NCTC)
- The Alstom-led consortium – Expolink, ACCIONA and Gulermak – signed a contract with Roads & Transport Authority (RTA) to design and build the extension and upgrade of Dubai’s Red metro line. The $2.9B project will connect the city to the Expo 2020 site and is expected to start commercial service for the World Expo through its 15km line
- Serka Taahhut Insaat, the construction unit of Turkish conglomerate Abdali Holding, received the $276M contract to build the infrastructure of thecommercial quay at the Port of Duqm in Oman. The infrastructure package involves the construction of dedicated terminals along the length of the 2.2 km commercial quay completed in 2012 as part of the port’s marine infrastructure development. A pair of 1,600m-long container terminals will be created as part of the contract.
- In Qatar, India-based Larsen & Toubro (L&T) awarded seven 66/11kV substations at Lusail City mega-development in Doha, Qatar to GE – which will be providing the main relays marking the exclusive provision of all protection equipment for the substations. It also involves more than 400 protection panels and the full DS Agile substation automation system. The panels are scheduled for supply by April 2017 and all the seven substations will be energized by the year end.
- Saudi Aramco placed the $727M contract on Hyundai Engineering and Construction (Hyundai E&C) to build the Uthmaniyah plant. Hyundai expects the contract to be completed by November 2019. Hyundai won the deal after offering discounts to build the gas treatment facility at Uthmaniyah.
- The main contractor was finliased for the Qatar Foundation Stadium scheduled to complete before the end of 2019 – which will host fixtures up to the quarter-final of the 2022 FIFA World Cup. ASTAD Project Management will be responsible for project management, construction management, and construction supervision of the project.
What could be the Opportunity Size ?
The projects listed above are just 10 major ones placed in last three past couple of months.
Our study suggests, there are over 22,000 projects across various sectors in the MENA region out of which over 11,400 projects* valued at over $4 trillion are active.
What will it take for equipment suppliers around the world to tap this market?
“How can you be INNOVATOR if all you do is IMMITATE” says Amet Kianin Greenovator, the Director of Technology ECo FutureLab FZE
The unique advantage of this market is its openness. Unlike most of the matured markets, there are no (major) entry barriers for foreign companies to come and sell here. Imports are free of duty for most of the capital equipment, technical specifications are uniform as per International standards and prices are competitive. Most of the procurement is by open international tendering systems subject to certain local approvals.
You may contact me for details if you are interested in a specific product approval process. Most of the tendering is online and competition is openly global.
Whether you are an existing player in the region or a first time entrant, you would know that selling engineering equipment is not a mere game of appointing an agent or setting up an office.
Here are some key points that will make you succeed in this opportunity.
Accurate Project Market Information:
Contacts and Decision Makers:
With the party of High Oil Prices over about a year back, the Middle East markets have shown a downward sentiment. But like every adverse situation, the region will be driven to policy reforms and systems reengineering. The current scenario will shift the dynamics of competition, raise the bar higher and let the smart survive. Even under the slow-down, there are around 10,000 + live projects valued at $4 trillion for Electrical & Electronic product suppliers to be a part of this market opportunity.
Those who wish to succeed will need a surgeon’s knife now instead of a butcher’s knife as in the past. The winners will be system and data driven, capturing sweet-spots by target project identification, accurate profiling and successful tracking to stay ahead of competition.
Remember, the market will buy from someone! Will you be the winner?
Ravinder Bhan – Dubai