Adipec 2016: Halliburton president says oil industry is getting brighter, but still challenging

A question and answer session with Jeff Miller, the president of the American oilfield services firm Halliburton.

Let me start with a question posed in a Wall Street Journal headline the other day: “As oil bust recedes, is a barroom brawl about to break out?”, which was referring to a quote from you. Is the premise of that question right: has the oil bust receded?

We think we are clearly on a path to recovery. We’re seeing increased activity in North America and the supply/demand balance for US onshore services is headed in the right direction, but we are still in an oversupplied equipment market. Internationally, lower commodity prices continue to put pressure on pricing and activity. However, we believe we will see a bottoming of this market in the first half of 2017. Even though the light at the end of the tunnel is getting brighter, there is no question we remain in a very challenging market.

Is it fair to say the large oil service companies such as Halliburton will now concentrate just on profitable work and resist industry cost deflation, duke it out, as it were, with the oil companies?

I can only speak for Halliburton … we’re most focused on those customers with whom we best collaborate, who value what we do and who ultimately reward us for helping them make better wells. We’ve worked closely with our customers during the down cycle to improve their project economics through technology and operating efficiency. Now, we are at a point in the North American cycle where we are shifting our focus from building to maintaining market share, while improving profitability.

Relatedly, David Lesar said to investors he expected that competition for market share would give way to a concentration on profitable business. Has there been a fundamental change in the industry or is it still a cyclical business?

History shows the oil and gas industry is a cyclical business. What is changing is how both operators and service companies approach our current environment. We see operators taking a methodical response in activity based on commodity price fluctuations. At Halliburton, we’re focused on being asset light so we can more efficiently address the quicker duration cycles that we see taking place.

Does the proposed merger between GE and Baker Hughes indicate that the sector is still ripe for more consolidation?

There will always be mergers and acquisitions in our industry as companies attempt to gain a competitive advantage. No matter how the competitive landscape evolves. Increased intensity and competition drives us to work harder and to better serve our customers.

The oil slump has been brutal in terms of cost-cutting – particularly jobs – by oil companies, with Halliburton alone cutting by 40 per cent, or 35,000. Are you still in streamlining mode?

We’re constantly evaluating our costs structures to address the current environment. In the third quarter, we achieved a monthly run-rate of the US$1 billion structural cost reductions announced earlier this year.

The US shale oil patch has contracted significantly in the past two years but showed signs of rebound in recent months. How would you assess its prospects for next year?

US land markets are recovering and we expect a steady climb in activity to continue as operators get back to work and repair their balance sheets. Of course, we believe this is dependent on certain commodity price thresholds.

In the Middle East, there is a great deal of reform and reorganisation going on, not least at Abu Dhabi National Oil Company (Adnoc). How is this affecting Halliburton?

In in our industry we see change happening every day – what is important for a company like Halliburton is how we work with our customers such as Adnoc and Opcos to collaborate and engineer solutions to maximise asset value and deliver the lowest cost per barrel regardless of the environment. We know that change brings its own set of challenges so we focus on what we do best.

How would a decision by Opec – and potentially some non-Opec producers – to limit output affect Halliburton?

Output limits would likely reduce activity in some places and increase activity in others. That being said, shorter, more volatile commodity price cycles are inevitable in the industry.

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ABU DHABI OIL, Adipec 2016: The National’s full coverage

Central bank policies may be a roadblock to oil investment, says Yergin

Saudi market grows in importance for ABB

Abu Dhabi to step up petchems output

IT improvements in the oil industry could save billions

Recovery use shows solar works with oil

Higher US and Australian LNG output brings challenges

Gulf Marine Services adds new vessel to fleet

Oil services firm SPX expands in Abu Dhabi

Forget the 4×4 – now you can go 6×6 with Mercedes’ amazing off-road lorry

__________________________________

amcauley@thenational.ae

Follow The National’s Business section on Twitter

Adipec 2016: Halliburton president says oil industry is getting brighter, but still challenging

A question and answer session with Jeff Miller, the president of the American oilfield services firm Halliburton.

Let me start with a question posed in a Wall Street Journal headline the other day: “As oil bust recedes, is a barroom brawl about to break out?”, which was referring to a quote from you. Is the premise of that question right: has the oil bust receded?

We think we are clearly on a path to recovery. We’re seeing increased activity in North America and the supply/demand balance for US onshore services is headed in the right direction, but we are still in an oversupplied equipment market. Internationally, lower commodity prices continue to put pressure on pricing and activity. However, we believe we will see a bottoming of this market in the first half of 2017. Even though the light at the end of the tunnel is getting brighter, there is no question we remain in a very challenging market.

Is it fair to say the large oil service companies such as Halliburton will now concentrate just on profitable work and resist industry cost deflation, duke it out, as it were, with the oil companies?

I can only speak for Halliburton … we’re most focused on those customers with whom we best collaborate, who value what we do and who ultimately reward us for helping them make better wells. We’ve worked closely with our customers during the down cycle to improve their project economics through technology and operating efficiency. Now, we are at a point in the North American cycle where we are shifting our focus from building to maintaining market share, while improving profitability.

Relatedly, David Lesar said to investors he expected that competition for market share would give way to a concentration on profitable business. Has there been a fundamental change in the industry or is it still a cyclical business?

History shows the oil and gas industry is a cyclical business. What is changing is how both operators and service companies approach our current environment. We see operators taking a methodical response in activity based on commodity price fluctuations. At Halliburton, we’re focused on being asset light so we can more efficiently address the quicker duration cycles that we see taking place.

Does the proposed merger between GE and Baker Hughes indicate that the sector is still ripe for more consolidation?

There will always be mergers and acquisitions in our industry as companies attempt to gain a competitive advantage. No matter how the competitive landscape evolves. Increased intensity and competition drives us to work harder and to better serve our customers.

The oil slump has been brutal in terms of cost-cutting – particularly jobs – by oil companies, with Halliburton alone cutting by 40 per cent, or 35,000. Are you still in streamlining mode?

We’re constantly evaluating our costs structures to address the current environment. In the third quarter, we achieved a monthly run-rate of the US$1 billion structural cost reductions announced earlier this year.

The US shale oil patch has contracted significantly in the past two years but showed signs of rebound in recent months. How would you assess its prospects for next year?

US land markets are recovering and we expect a steady climb in activity to continue as operators get back to work and repair their balance sheets. Of course, we believe this is dependent on certain commodity price thresholds.

In the Middle East, there is a great deal of reform and reorganisation going on, not least at Abu Dhabi National Oil Company (Adnoc). How is this affecting Halliburton?

In in our industry we see change happening every day – what is important for a company like Halliburton is how we work with our customers such as Adnoc and Opcos to collaborate and engineer solutions to maximise asset value and deliver the lowest cost per barrel regardless of the environment. We know that change brings its own set of challenges so we focus on what we do best.

How would a decision by Opec – and potentially some non-Opec producers – to limit output affect Halliburton?

Output limits would likely reduce activity in some places and increase activity in others. That being said, shorter, more volatile commodity price cycles are inevitable in the industry.

__________________________________

ABU DHABI OIL, Adipec 2016: The National’s full coverage

Central bank policies may be a roadblock to oil investment, says Yergin

Saudi market grows in importance for ABB

Abu Dhabi to step up petchems output

IT improvements in the oil industry could save billions

Recovery use shows solar works with oil

Higher US and Australian LNG output brings challenges

Gulf Marine Services adds new vessel to fleet

Oil services firm SPX expands in Abu Dhabi

Forget the 4×4 – now you can go 6×6 with Mercedes’ amazing off-road lorry

__________________________________

amcauley@thenational.ae

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Adnoc to host oil chiefs talks ahead of Adipec

The annual gathering, highlight of industry calendar, takes on added significance before Opec’s meeting later this month

Sultan Al Jaber, the chief executive of the Abu Dhabi National Oil Company (Adnoc), will host closed-door talks with the heads of some of the world’s top oil companies ahead of this year’s Abu Dhabi International Petroleum Exhibition and Conference (Adipec), which opens tomorrow.

Adnoc said Mr Al Jaber, who is the Minister of State as well as the head of the state oil company, will hold roundtable discussions with chiefs of 20 top oil companies, including Bob Dudley, the chief executive of BP, Rex Tillerson, ExxonMobil’s chief, and Patrick Pouyanne, the head of the French major Total.

Amin Al Nasser, the chief of Saudi Aramco, Nizar Al Adsani, the head of Kuwait Petroleum and Saad Al Kaabi, head of Qatar Petroleum, will also attend.

The Adipec gathering, which is one of the top two annual meetings in the industry’s calendar, has taken on added significance this year as ministers and top executives meet amid a round of tough negotiations aimed at agreeing some kind of output restraint by producers both within and outside Opec, the result of which will have widespread implications for the industry as a whole.

Opec ministers are due to meet formally on November 30 in Vienna to finalise terms, which have proved difficult to pin down as Iran and a number of other members claim special circumstances and refuse to contribute to any curbs. Also, there has never before been a credible deal between Opec and major non-Opec members, especially Russia, which has voiced support but still pumped oil at a post-Soviet era record last month.

The worry among the top oil companies is that their unprecedented cut in investment in response to the oil price slump may ultimately lead to a shortage in a couple of years and a resumption of the boom-bust-boom industry cycle.

“We are entering a time where societal, technological and political trends are reshaping the environment in which oil companies operate,” Mr Al Jaber said.

The Abu Dhabi summit “will provide a timely opportunity for key industry leaders to openly discuss important issues, including potential areas of partnership to advance the industry”, he said.

A key item for the talks, which will be chaired by Daniel Yergin, the vice chairman of the IHS Markit consultancy, will be what form partnerships between the international oil companies and national oil companies should take, with Adnoc looking to its US$10 billion Al Hosn project as a model, where it partnered with Occidental Petroleum to commercially exploit difficult sour (high sulphur) gas using new technologies.

Occidental’s new chief executive, Vicki Hollub, will take part, as well as Ben van Beurden, the head of Royal Dutch Shell, Claudio Descalzi, the head of Eni of Italy, and chiefs of a number of key partner companies for Adnoc, including Schlumberger, Inpex of Japan, Korea National Oil Corporation, Statoil of Norway, Indian Oil Corporation and a number of Adnoc subsidiaries and affiliates, such as OMV of Austria and Cepsa of Spain.

The International Energy Agency (IEA), the rich countries’ energy watchdog, in September said oil industry investment looks set to drop sharply for the third year in a row, with oil discoveries at their lowest level since the late 1940s.

The IEA estimated capital investment in oil and gas projects would drop by 24 per cent this year, to $450 billion, following a 25 per cent drop last year.

Investment will have fallen by more than $300bn in the past two years after the oil price collapsed from nearly $120 a barrel to current levels of about $50 a barrel, and it shows no sign of recovering next year, the agency said.

“Lower oil prices have placed an increased priority on resilience and efficiency and companies in the industry are independently searching for sustainable strategies in this new energy landscape,” Mr Al Jaber said.

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Abu Dhabi starts up world's first commercial steel carbon capture project

Abu Dhabi has started up the world’s first fully commercial carbon-capture steel project, a milestone for the industry that also is the largest to inject CO2, or carbon dioxide, into oil reservoirs to enhance output.

The Al Reyadah project, which has been in the works for four years, is a joint venture between Abu Dhabi National Oil Company (Adnoc) and Masdar, the renewable energy arm of Mubadala Development, the emirate’s strategic industrial investment fund.

It is also sponsored by Emirates Steel Industries (ESI), whose two Abu Dhabi plants will have a net zero carbon footprint once the project is fully operational.

“This project has been under study for a very long time and now it is a reality,” said Suhail Al Mazrouei, the UAE Energy Minister.

“When it is fully operational it will remove CO2 equivalent to taking more than 170,000 cars off the roads,” while also improving both oil and gas output to meet national objectives, the minister said.

The oil, gas and coal industries, as well as industries that are heavy energy consumers and big C02 emitters, have been pursuing carbon capture, storage and utilisation (CCUS)technology for well over a decade and bodies such as the United Nations intergovernmental panel on climate change and the International Energy Agency have pointed to the technology as vital to meet targets to reduce CO2 emissions to curb man-made climate change.

While the Al Reyadah project is one of 15 large-scale projects worldwide, according to The Global CCS Institute, a number of projects have gone by the wayside because their sponsors said they were not economically feasible.

The Abu Dhabi project was able to overcome this because of a number of unique features, such as the proximity and favourable geology of the oilfields, as well as the concerted support of its shareholders, Emirates Steel and the Abu Dhabi Government.

“This project will allow for the more productive use of a valuable commodity, natural gas, whether for power generation, or as petrochemicals feedstock, or for export,” said Sultan Al Jaber, the Minister of State and the chief executive of Adnoc, which owns 51 per cent of Al Reyadah.

“It also unlocks another potential revenue stream in the industrial sector, encouraging the wider application of commercially viable CCUS technologies globally,” he added.

The plant is located in the Mussafah industrial area on the outskirts of Abu Dhabi city, between the two main ESI plants. Saeed Al Romaithi, the chief executive of ESI, said the project will take out 800,000 tonnes of annual CO2 emissions and is the first iron and steel project of its kind in the world, ahead of pilot projects in China and Taiwan.

The US$122 million project includes the world’s largest high-pressure compressor unit, which will take a total of 41 million standard square feet per day of dry CO2 from the two plants, compress it into a state where it acts like a liquid, the run it 43 kilometres via pipeline to the Rumaitha and BAB oilfields in Abu Dhabi’s main onshore oilfield concession, said Paul Crooks, the project manager.

“We are taking CO2 from Emirates Steel and injecting it on a commercial basis into our reservoirs – there is a huge difference between injecting it to dispose of it and injecting it for EOR, or enhanced oil recovery,” Mr Al Mazrouei said. “It is in the pilot phase now but the initial reaction in the reservoirs is positive and we are hoping we can expand this project.”

The project has reached about half its capacity in the past two weeks and that may rise further depending on Adnoc’s requirements.

So how has it been able to be commercial when other projects have failed?

“You create value by liberating natural gas which is currently being ijnected for enhanced oil recovery, so you have gas that can be freed up for the economy,” said Bader Saeed Al Lamki, the executive director in charge of clean energy technolgoies at Masdar. “Also, you are able to extract more oil and ultimately it is a closed loop so the CO2 is trapped there, so it is a value proposition.”

The ratio of CO2 injected to natural gas freed up for other purposes is 1:1.5, Mr Al Lamki said.

Clean energy technology is a plank of the Government’s economy transformation strategy and over the past decade Masdar has invested $2.7 billion in the development of renewable energy and clean technologies in the Mena region and international markets, said Mohamed Al Ramahi, the Masdar chief executive.

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Supreme Petroleum Council approves Adnoc strategy

The Supreme Petroleum Council (SPC), Abu Dhabi’s top oil industry decision-making body, yesterday approved Abu Dhabi National Oil Company’s (Adnoc) five-year business plan and budget, which includes a commitment to boost oil production by 400,000 barrels per day (bpd) by 2018 to 3.5 million bpd.

Other measures include a commitment to increase petrochemicals output by more than two-and-a-half times, to more than double petrol production, and to raise fertiliser output.

Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi, Deputy Supreme Commander of the Armed Forces and Vice Chairman of the SPC, said the strategy that Adnoc chief executive Sultan Al Jaber and his board had set out would “build on the foundations laid in the past eight months, during which Adnoc embarked on a journey to evolve into a more agile and resilient company that is strategic, commercially minded and performance driven”.

Since Mr Al Jaber took over this year, the company has undergone a series of major changes, including a nearly complete change of the most senior management, including major corporate divisions and chiefs of the main oil and gas operating companies.

Mr Al Jaber has also combined companies, including the offshore units, Zadco and Adma-Opco, to reduce the number of operating companies to 15 from 18, and taken other measures to streamline and cut Adnoc’s costs after the sharp drop in oil prices over the past two years.

Mr Al Jaber described the approval of the five-year plan and budget, as well as the strategy set out through to 2030, as a “momentous milestones” for the company.

Under the strategy, Adnoc’s upstream will remain its most profitable segment although the company plans to “enhance our downstream and petrochemical businesses, to take advantage of growing demand for higher value products”, Mr Al Jaber said in a statement released after the SPC’s approval.

Adnoc reaffirmed its intention to boost oil output by 400,000 bpd to 3.5 million bpd in 2018. That target was originally set for the end of next year, and the company yesterday left it open as to whether there might be any restriction on output in the meantime, under any deal that might be reached by Opec at a ministerial meeting in Vienna on November 30.

The UAE has backed efforts by Opec – agreed in Algiers in September – to hammer out a deal to limit output to rebalance the world oil market.

Adnoc said it “aims to stretch the margin of each refined barrel of oil”, and announced it would raise petrol production to 10.2 million tonnes per annum (mtpa) by 2022 with the addition of a new petrol and aromatics project, adding 4.2 mtpa of gasoline and 1.4 mtpa of aromatics.

Petrochemical production is to grow from 4.5 mtpa this year to 11.4 mtpa by 2025. The expansion will add polyolefin capacity and new petrochemical products coming from a world-scale mixed feed liquid cracker.

The plan also said the sharply rising output of sulphur from Al Hosn sour gas project, would create opportunities to develop a UAE fertiliser operation.

Adnoc will be “supporting the development of a local sulphur products industry, including enhancing the existing ammonia and urea industry, with a new generation of advanced fertilisers”, the statement said.

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Vision for a merged Ipic and Mubadala takes shape

The Minister of Energy, Suhail Al Mazrouei, yesterday said he sees big growth opportunities, especially for petrochemicals, in the merger of Mubadala Development Co and International Petroleum Investment Co (Ipic).

“The merger will create an opportunity for us to consolidate our efforts and to forge partnerships that would be capable of enhancing global competitiveness and opening new markets for us and our companies,” said Mr Al Mazrouei, who is also the managing director of Ipic and one of the triumvirate steering the merger through, with Mubadala Development’s chief executive, Khaldoon Al Mubarak, under chairman Sheikh Mansour bin Zayed Al Nahyan.

On the merger, the minister said: “Teams are working day and night and we hope we would be able to make the announcement by the end of the year.”

The intention to merge was announced in the summer, but the details are being hammered out by teams from the two companies, with advice from consultants Bain & Co, as well as branding adviser Landor Associates. The merger is expected to be formalised through an announcement setting out the details before the end of the year.

The combined group had assets valued at the end of last year at about US$125 billion, with the energy portfolio making up about two-thirds of Ipic’s assets and about 10 per cent of Mubadala’s, including Mubadala Petroleum, of which Mr Al Mazrouei is chairman.

The structure of the new company, including its divisions, which span aerospace and defence, information and communications technologies, metals manufacturing, as well as energy, has not yet been finalised, including the shape of the diverse energy interests, covering the Masdar renewables portfolio, power utilities, as well as oil, gas and petrochemicals investments.

But Mr Mazrouei said the new structure would open up opportunities to meet Abu Dhabi’s strategic goals of diversification and job creation.

“Establishing this investment fund would lead to a quality economy for future generations and will promote a diversified economy,” he said. “It would enhance our competitiveness in the petrochemical industry, especially, working in tandem with Adnoc.”

Ipic’s petrochemicals interests were highly profitable last year, at a time when oil and gas was suffering. For example, Borouge, which is a joint venture between Adnoc and Borealis (64 per cent owned by Ipic, with the rest owned by Austrian oil company OMV, which is in turn 25 per cent owned by Ipic), reported $1.3bn in earnings on $3.8bn in revenue last year.

Borouge has been the focus of Abu Dhabi’s petrochemicals development since it was founded in 1998 and recently ramped up its third expansion phase at Ruwais, adjacent to Adnoc’s main oil refinery in Abu Dhabi’s Western Region, with the $4bn project more than doubling capacity from 2 million tonnes to 4.5 million tonnes. The plant is now the world’s largest integrated polyolefins complex.

“Now, we are looking at Borouge 4 … and Nova [Chemicals, another Ipic division] could step in, for example, for Borouge 5,” the minister said, noting that petrochemicals gives the company downstream exposure to expanding markets for products from detergents to car parts, especially in key expanding markets China and India.

He also noted that the merger creates the opportunity to bring international interests, such as North America-focused Nova, to the Middle East, as well as overseas synergies.

The combined company will have, on the Mubadala side, oil and gas production outside of Abu Dhabi of more than 400,000 barrels per day, with refining capacity of 1.5 million bpd, including its wholly owned Spain-based subsidiary Cepsa, as well as a 21 per cent holding in Japan’s Cosmo Oil.

“The combination of all the companies creates a huge integrated oil and gas company … but [it] does not need an integration of those companies at this stage,” Mr Al Mazrouei said.

Instead, a key change will be that project investment decisions will be made at operating company level rather than by headquarters, which would affect pending projects such as a planned $3.5bn refinery at Fujairah, which Ipic was expected to green light in the summer last year.

“The difference in strategy that I worked with the board of Ipic on is to have the investee companies invest in the project, not the holding [company],” Mr Al Mazrouei said. “So, we are pushing all of those projects which were handled by the corporate to the investee companies, who are investing in this business, who will look at it, and the expansion in Fujairah is one of those projects that we are looking at.”

The merger will also expand Ipic’s exposure to 30 countries from 20 countries and allow it to leverage its presence. For example, Mubadala’s power interests and Cepsa’s upstream interests in Algeria might create the opportunity for petrochemical expansion there.

“This is the concept that will be tested when the whole company is merged,” the minister said.

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Strata Manufacturing said on Sunday it had started to deliver on two new product lines for Airbus aircraft.

Strata said it started delivering ailerons and flaptrack fairings for the A330 family of aircraft, including the A330neo, on a sole supplier contract it won for the ailerons last year.

The Strata aileron programme accounted for 26 per cent of the company’s total revenue by the end of this year’s first half, which reached Dh192 million, compared to Dh144m for the previous year.

The company said it also delivered its first shipset of A350 – 1000 flap support fairings on a sub-contract with Saab for Airbus.

Chief executive Badr Al Olama said: “The delivery of the latest shipsets reinforces our commitment to developing a manufacturing hub in Abu Dhabi for the global aerospace industry.”

Lars Jensen, the managing director of Saab Aerostructures said: “With the first delivery of the A350-1000 flap support fairings, our cooperation reached a very important milestone.

“We are pleased to have Strata as a partner to Saab on this work package and they have proven their good capabilities and skilled workforce with this achievement. This is, however, only the first delivery in many to come and we look forward to continue this cooperation on the A350-1000 programme.”

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Strata to ramp up jobs, production after air show order wins

Strata Manufacturing aerospace parts makerbased in Al Ain, is planning to ramp up hiring for new production lines after winning several contracts in the summer, according to the company’s deputy chief executive.

Strata, a key strategic holding within Mubadala Development Corporation’s aerospace and defence portfolio – which includes Avanti turboprop aircraft maker Piaggio Aerospace, as well as the Emirates Defence Industries group of firms – has ambitions to establish itself as one of the world’s leading composite aerospace parts manufacturers.

“We want to be one of the top key suppliers in the world,” said deputy chief executive Ismail Abdulla.

“Our first six years were about building the reputation of company by delivering quality products on time,but we haven’t reached cruising altitude yet,” he added.

Strata said on Sunday that it made its first deliveries on parts for the Airbus A330neo, as well as a Saab sub-contract for A350–1000 wing parts.

In July at the Farnborough show, Strata won contracts with a combined value of US$1 billion to make inboard flaps for Airbus A350-900 wings, and the horizontal tail plane for the Airbus A320, which will run initially through 2032.

The company also won a multi-year contract to make vertical fins for Boeing’s 787 Dreamliner family of aircraft worth “hundreds of millions”, said Mr Abdulla, who added that the Al Ain facility would be hiring an additional 350 people to deliver the new contracts, bringing total employment there to just above 1,000.

The company started production in 2010, leveraging the UAE’s fast-growing airlines and their aircraft purchasing power, with product lines including wing and fin parts for Airbus 330, 340 and 380, as well as Boeing’s 777 and 787, and some “tier one” original equipment manufacturers (OEMs) like Saab and Alenia Aermacchi.

Revenue rose from Dh60 million in its first year to above Dh400m last year. For the first half of this year, revenue is at Dh192m, up from Dh144m for last year’s first six months, and Strata executives say the company expects to break even next year on revenue of more than Dh500m, with a revenue target of Dh1billion by 2020.

“We have studied the market and what we have noted talking to the some of the big OEMs is that they want a handful of key suppliers around them,” said Mr Abdulla. “We will be doing that internally here and also by looking at opportunities to expand in other countries around the world.”

Last year, chief executive Badr Al Olama said Strata was studying expansion in North Africa as its first step internationally.

“North Africa seems to be a viable market. It opens up a gateway into southern Europe and into more the western side of the world,” he said at the time, and Strata confirmed on Sunday that option is still being studied.

Strata expects that the downturns on some product lines will be balanced by growing volume in others, said Mr Abdulla, addressing comments last week by the Boeing chief executive Dennis Muilenburg warning that 777 production could be cut from about 100 a year to as low as 42 a year from next year.

“We don’t see any major contracts running off,” he said. “When a programme runs down there is usually a programme that ramps up – the 777 goes down, the 777x go up. There has been a drop communicated on the A380, but we believe there will be a compensation with other contracts”, such as the A350.

Strata forms the keystone of Mubadala’s Nibras Al Ain Aerospace Park, a 5 square kilometre aerospace free zone which Mr Abdulla says has ambitions to become an industry cluster along the lines of Seattle and Toulouse, homes to Boeing and Airbus, respectively.

Strata was the first greenfield project at Nibras, which Mr Abdulla ran until he took his current role earlier this year.

Nibras has leased 60 per cent of its space, with tenants including Etihad Flight College, Horizon International Training Academy, The Advanced Military Maintenance Repair and Overhaul Centre and Abu Dhabi Autonomous Systems Investments Company.

“Strata itself has already taken around 1.7 million square feet to cater for the growth that we are planning for,” says Mr Abdulla.

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PricewaterhouseCoopers to expand presence at Abu Dhabi Global Market

PricewaterhouseCoopers is planning to increase its numbers by two-thirds in Abu Dhabi Global Market (ADGM) to take advantage of opportunities created by the region’s government-driven economic transformations.

PwC, one of the world’s largest professional services firm, moved its personnel into two floors of the Al Khatem tower at the capital’s financial free zone last week, becoming the tower’s first tenant. Together with staff already in the square’s Al Sila tower from Strategy&, the Booz & Co division acquired by PwC two years ago, PwC currently has 300 people in Abu Dhabi’s nascent financial centre.

“We want to build that up to 500 very quickly,” said Hani Ashkar, head of Middle East for PwC.

The firm’s international chairman, Robert Moritz, said the move and expansion plan is “very much a vote of confidence” in the prospects for ADGM to establish itself as a financial centre in the region, as it tries to foster a move away from a heavy reliance on oil revenue and public sector employment.

There is considerable competition in the region, with the Dubai International Financial Centre (DIFC) already well established, the Qatar Financial Centre in Doha and King Abdullah Financial District in Riyadh vying for a toehold.

Initially, PwC considers ADGM as a spoke to DIFC’s hub, with the latter the springboard to business in the region and, Mr. Moritz notes, easy access to big emerging markets, especially India.

For its ADGM presence, “we see a lot of local opportunities”, said Mr. Ashkar, starting with the monumental tasks the government faces to add more infrastructure.

“The government is going through a transformation, so with various ministries we’re engaged in helping them think through their issues, their challenges,” he said, with the introduction of value added tax one of the most important.

“It is unprecedented, six GCC countries introducing VAT at same time and the UAE is a leader in that. We’re helping the government think about that. They have to build an administration, put systems in place, train their people to go out and implement this and enforce it and all of our [private sector] clients have to think about the implications, too,” he said.

Among the other changes expected to help underpin ADGM is transformation of the big family-owned business groups that have dominated the UAE’s non-public sector growth for two generations.

“They have portfolios, they’ve grown up over the years and in a world that is changing they need to think about whether those companies are relevant, whether they need to transform them, synergise them, go public,” said Mr Ashkar.

Although Abu Dhabi is competing with local and regional financial centres, it still has an advantage, Mr Ashkar said.

“The tried and true recipe is you find a piece of real estate, put in English common law, allow 100 per cent foreign ownership, make it tax-free and make it easier for people to get visas and to live here. That is already in place here, but I think to really gain the traction you need an ecosystem,” said Mr Askhar.

“You need to have schools, health care, they need to be able to get to places easily, so you need (a) proper airline – we probably have that one covered. Also there is a lifestyle point, so you need to have the leisure activities, the beach activities, fun activities, the night life. Once you have that whole ecosystem in place then you can start thinking about whether it is going to succeed and gain the traction.”

“If you are to go and live in Riyadh it doesn’t tick the lifestyle box for most western expats,” said Mr. Ashkar, who lived in Saudi Arabia for many years. “You could argue that that is going to take a lot of effort to gain traction, whereas in this location many of those boxes are ticked. So it has a good chance, particularly if Abu Dhabi Inc can catalyse it and get some of the big players instituted here, which they are doing.”

amcauley@thenational.ae

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Opec head visits Baghdad as Iraq pleads special case to avoid output curbs

The Opec secretary general Mohammad Barkindo flew to Baghdad yesterday for high-level talks with Jabbar Al Luiebi, Iraq’s oil minister, after the Iraqis made it clear they expect to join the list of special case countries who will not be asked to contribute to any output limits that may be agreed at next month’s ministerial meeting in Vienna.

It is the latest in a round of talks triggered by an agreement last month in Algiers by Opec members – particularly de facto leader Saudi Arabia – to push for a deal to curb output to speed up the rebalancing of the world oil market.

Iraq and Iran have been the largest contributors to growth in world oil production this year, with their increases of about half a million barrels per day each more than cancelling out the decline in production by higher-cost producers in the US and elsewhere.

In a statement released to the press, Mr Al Luiebi said to Mr Barkindo: “Your visit comes at a time when Iraq is working hard to develop its oil industry, while at the same time fighting terrorism and achieving victories against ISIS in Mosul and other places in Iraq.”

The emphasis on Iraq’s internal conflict underlined the government’s position that the country should not be asked to contribute to the group’s efforts at a time when it is under exceptional financial strain.

Indeed, Iraq and its international oil company partners have struggled this year to meet capital spending budgets that would help it to meet production goals – despite the higher output this year it has reached a plateau as investment has stalled.

Mr Barkindo stressed that the oil price collapse has been the worst the market has suffered in more than three decades, with the result that industry investment has collapsed by about US$300 billion this year.

The Iraq case underlines the bartering that is going on ahead of any deal, with the special circumstances of Nigeria and Libya and their own internal strife hitting production levels this year; as well as Iran, which is trying to get production back to the level before nuclear-related sanctions in 2012 knocked it down by 1 million bpd.

Iran’s production has, in fact hit a plateau at about 3.6 million bpd during the summer and it has yet to agree with international oil companies, whose technology it needs to rehabilitate its industry, the terms of new development contracts.

In Iraq’s case, the country is “aiming to expand its oil sector through smaller field developments to lower reliance on the major oil fields and their operators for growth”, according to BMI Research analysts.

The government has offered the first new licences since 2012 and is negotiating the contracts directly with potential new investors, including Mubadala Petroleum of Abu Dhabi and Sharjah-based Crescent Petroleum, with different terms than existing contracts.

Next week, Opec’s technical groups are due to meet to hammer out details such as how they will monitor any deal that is agreed, how barrels will be counted and so forth. But the latest round shows that the big questions are still far from settled.

Mr Barkindo was also due to meet the Iraqi prime minister Haider Al Abadi yesterday.

Opec said: “Secretary general Barkindo is expected to visit Kuwait and the United Arab Emirates [in] early November [and attend the Abu Dhabi International Petroleum Exhibition and Conference] in continuation of the extensive consultations post Algiers accord.”

amcauley@thenational.ae

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