A big opportunity in manufacturing

Saudi Arabia

Bassam Bamagous, chairman of the board of Advanced Precision Industrial Services (APS), talks to The Energy Year about the company’s transition from a machining shop to a fabricator, its export ambitions and the current demand for skids. APS specialises in precision machining and engineering services for the energy industry and the aerospace and defence sectors.

How did the company transition from a machining shop to a full-fledged fabricator?
APS can be identified as a specialised steel fabrication company. We produce one of the largest, most complicated skids, measuring around 16 metres, used by Saudi Aramco in incremental projects for the East-West pipeline. Apart from this, we manufacture and deliver different discipline skids such as the chemical injection skids, corrosion inhibitor skids, slop injection skids, detergent injection skids and high-pressure CO2 purging skids.
We started around 15 years ago as a machining shop, doing reverse engineering for gas turbines, power generation spare parts and some military equipment parts. The company was licensed and approved as a General Electric vendor. In 2015, we became a Saudi Aramco-approved chemical injection skids manufacturing facility. Since then, we have worked as a system integrator rather than parts producer. We participate in Saudi Aramco purchasing tenders for specific chemical injection skids, which have been a high-demand item for the last 10 years.

What is APS’ expansion strategy amid a projected increase in demand for local fabrication of skids?
Skid fabrication’s main limitation is space. Sometimes, you cannot take more orders, simply because you don’t have enough space. Our new facility should be commissioned by Q4 2023, and it’s roughly 10 times larger than our existing facility.
We see a big opportunity in the fabrication business, and we have a very aggressive growth plan. We have a new facility under construction in Dammam 3rd Industrial City which is strategically located a few minutes away from King Salman Energy Park (SPARK). We will move to the new facility before the end of 2023.

What is your strategy to diversify the company’s product portfolio in the upcoming new facility?
The new facility will allow APS to expand its manufacturing capacity and add many more products that have already been pre-identified by our team and will be approved in Saudi Aramco systems. We are going to add modular skids, pressure vessels, tanks, steel structures and pipe spools.
We will also manufacture electrical insulators and medium voltage load break switches for the Saudi Electricity Company [SEC], the national utility company. We want to capitalise on our existing relationship with them and localise the production of medium voltage items. SEC has now linked localisation with pre-qualification to make sure that any new registered product has a localisation plan from day one.

What is your vision for the future of APS in the oil and gas sector?
I want APS to be recognised as a manufacturing hub for highly specialised products and a manufacturer of choice for clients such as Saudi Aramco, SEC, Ma’aden, the SWCC [Saline Water Conversion Corporation] and SABIC, which are the largest clients we are targeting.
APS will be ready to contribute to the country by hiring and training local Saudis, localising technologies and know-how in Saudi Arabia, and introducing innovative, value-added, cost-effective and environmentally sustainable products that live up to the challenges arising right now in the oil and gas sector across Saudi Arabia and the GCC. We are looking for these challenges and problems and trying to come up with solutions.

What is APS’s strategy to localise the required know-how to diversify its product portfolio?
These new products we are targeting to develop in our new facility are planned in association with well-recognised international manufacturers overseas. We are doing feasibility studies in collaboration with them to figure out the best way to localise their products. We call them our “know-how partners.”
We’re going to bring this technology to Saudi Arabia. We will begin by complying with the minimum local content requirements and develop them more over time.

What is your stance on future strategic partnerships?
We’re quite open to investors because the sky is the limit. Our facility is 50,000 square metres, and we can develop 10-15 more product lines if we’d like to. OEMs and international fabrication companies are looking for local players and facilities to work with them. Most investors interested in the Saudi market are sophisticated enough to recognise our international manufacturing standards. There are different business models regarding how we can develop strategic partnerships, either through joint ventures, licence agreements or a royalty fee for the know-how.

Does the company have plans to export its products in the future?
Yes, it’s in our plan. Saudi Arabia has a government body called the Saudi Export Development Authority, which helps local manufacturers export goods. Exporting locally manufactured products is going to be a real revenue stream for the country, and it will strengthen our company’s financial and economic perspective.
We are looking first to tackle the GCC market – the UAE, Qatar, Kuwait and Oman – as well as North Africa, mostly Algeria, Libya and Egypt.

How has local content evolved throughout the years?
Saudi Aramco gets all the credit, because they started the In-Kingdom Total Value Add (IKTVA) programme and became the role model for many others. However, today, the SEC has a programme called Bena which translated to English means “construction.” The model and the formula are almost the same as IKTVA. The same is done by SABIC, under their program called Nusaned, which means “help.”
Localisation has become a requirement by the government, affecting the rules regarding local content for all government purchases, including percentages of localisation and other conditions. By royal decree, they created a local content commission. All this is now, from the localisation aspect, run by this commission. It’s become very strong, and if a supplier doesn’t work within the local content regime, it will simply not survive.

What are the main challenges for local companies as they aim to grow in line with their own expectations?
The main challenge that I see is getting competent, highly skilled people, whether they’re managers, engineers or technicians. Getting the right people is very difficult in Saudi Arabia. Saudisation is a national mandate which we believe in, but getting expertise from different nationalities is something that we believe is healthy.
Regarding finance, we have strong shareholders who believe in what we do and keep investing. They believe in our vision to develop APS as a highly specialised manufacturing hub.

Read our latest insights on:

• Egypt
• Kuwait
• Oman
• Qatar
• Saudi Arabia
• UAE