Emerging Markets Focus
This is being complemented by the favorable policies and initiatives of the MENA governments to source increasingly larger volumes of services locally, in order to promote local employment, prevent wealth outflow, develop local talent, and help diversify the economy.
Additionally, the region does not lack talented entrepreneurs. Many of them emanate from well-established family businesses that have decades of experience in the oil and gas industry, and are now expanding to provide higher end OFS.
Some of the eminent regional names worthy of mention are the UAE based Al-Mansoori Group and the NPS Group which was the result of a merger between the National Oil Well Maintenance Company (NOWMCO) of Qatar, National Petroleum Technology Company (NPT) of Saudi and National Drilling Company (NDC) of Saudi.
Another variety of entrepreneurs are those that are leaving large NOCs, IOCs, and global OFS companies alike, to establish start-up businesses to provide niche energy services. For example, companies like Target and Falcon oil field services (both from Oman) and the Kuwait based Gas & Oilfield Services Company (GOFSCO) were started and/or strengthened by such entrepreneurs.
There are also a small but growing number of regional OFS companies that are moving from being agents of global OFS majors to establishing their own services, and forming a niche in their own countries as well as throughout the region.
Any discussion on opportunities in the MENA regions OFS segment cannot exclude the potential presented by Iraq. Various estimates suggest that the Iraqi OFS market is expected to rise from $1.3bn in 2010 to $8bn by 2014. It is further estimated that over 2010-2016, with a base case target production of 5 million barrels per day, there is a need to drill approximately 5,000 wells; making the Iraqi OFS market-size around $20bn, with local companies accounting for 35% market share.
On the bullish side, with a target production of 11 million barrels per day, the market size is estimated to be around $60bn with local companies accounting for a $20bn market share. These statistics alone might be enough reason for the regional OFS companies to capitalize on the aforementioned opportunity.
Exploiting the Opportunity
In our view, the approach to exploit the regional OFS opportunity is multipronged. The low hanging fruit is for regional OFS companies to form JVs with international companies. There are numerous examples of such engagements being successful in the past, and there is potential for more. Another approach is for regional OFS companies to acquire companies that provide a specific service or possess a specific technology.
Lately, this approach has been the path of choice for regional companies, providing an avenue to rapidly grow their portfolio and allowing them to effectively compete with international OFS companies. Last, and possibly the least explored approach, is to build indigenous OFS companies, ground-up.
In summary, the MENA OFS sector represents a large opportunity for regional companies. It is likely that the MENA’s OFS sector is at an inflection point; there is potentially space for several regional OFS players to capture a reasonable portion of the MENA OFS market.
About Kuwait Financial Centre “Markaz”:
Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD1,03 billion (USD 3,64 billion) as of September 30, 2010, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.
Authors:
Nawaf Marafi, Vice President – Oil and Gas, Markaz Ali Rampurwala, Senior Analyst – Oil and Gas, Markaz Rajiv Bishnoi, Assistant Vice President – Oil and Gas, Markaz
For more information please contact:
Mariam A. Al Suwailem Assistant Manager, Media & Communications Kuwait Financial Centre S.A.K. "Markaz"
Tel: +965 2224 8000 ext 1817 Direct: +965 2224 8078 Fax: +965 2249 8740
msuwailem@markaz.com
Drillers and Dealers :::
::: February 2011 Edition
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