We feel Western companies have now caught up in the game in terms of pricing, especially Spanish companies.

Assaf AL SALEM Managing Director AL THARWA AL MUTTAHIDA GENERAL TRADING & CONTRACTING

A partner for principles in Kuwait

April 19, 2018

Assaf Al Salem, managing director of Al Tharwa Al Muttahida General Trading & Contracting, talks to TOGY about prospects among KOC’s new drilling projects and key challenges faced by companies entering the Kuwaiti market. Tharwa Contracting provides services related to equipment trading, EPC contracting and chemicals, and focuses on partnerships with international firms.

On soil remediation: “Our remediation efforts are encountering material that has a lot of water and oil and has been exposed to the sun, so it took us a while to understand this material. It must be treated and cleared of hydrocarbons before it can be landfilled. In 2017, we became very familiar with this material and, moving forward, we are able to provide an efficient service. In terms of lessons learned, 2017 was a good year.”

On challenges faced by foreign entrants: “For many companies, the first problem is the language barrier. This is a big problem in Kuwait. A second obstacle is understanding certain government restrictions. Companies need a local partner to guide them through these restrictions. We follow and push forward all of the applications and ensure that the bureaucracy in Kuwait is easily dealt with.”

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KOC has announced that it is looking to ramp up both onshore and offshore drilling. Which types of projects are you targeting for your partners?
Our Chinese representation for drilling is with a company called Kerui. They are familiar with KOC and do heavy, shallow and medium depths. Kerui is approved in Kuwait for onshore drilling and we are excited to participate with them in the onshore drilling rounds, but we also plan to get them approved for offshore. There are a lot of development rigs coming and they are in line to participate in those tenders. Kerui has sold five rigs already to a local drilling company in Kuwait , but we plan to expand their operations.
Kuwait’s offshore is a big project. It will go to the big names such as Halliburton and Schlumberger, but these companies must choose rigs from the approved vendors and there is a specific list for that. We are assisting our clients in securing pre-qualification. There is a plan to increase competition by bringing more companies to the vendor list for offshore. Currently there are only six or seven approved in Kuwait. Kuwait has the strictest parameters for approval, and many companies are rejected.

What are the main challenges that foreign companies face coming into the market?
For many companies, the first problem is the language barrier. This is a big problem in Kuwait. A second obstacle is understanding certain government restrictions. Companies need a local partner to guide them through these restrictions. We follow and push forward all of the applications and ensure that the bureaucracy in Kuwait is easily dealt with.
Moving forward, the other obstacles will be Customs clearance on oil rigs and heavy equipment. Technical requirements are covered in the approval process, but the obstacles there are mostly just a lot of paperwork. Kuwait is finding a solution to that by moving towards e-government and finding more efficient ways of doing things, but I don’t see the results there yet. I expect to see those results in 2018.
The last obstacle is the labour force. Kuwait is currently finding solutions to its labour availability and bringing in foreign skilled labourers. There is a lot of fraud in this process. There are many fake businesses bringing in workers who get subleased to other businesses. There are thousands of people doing illegal work permit trading. Companies take double the money – from the person they bring here and from the company they lease the person to.
There are efforts from the government to address this through a rigorous vetting process on each person coming in, but they have yet to find a way to stop it. Still, there are efforts to penalise companies doing this.

 

What have been your company’s main activities over the past year?
It was a very important year. We faced challenges at the beginning of the year in various sectors and projects, but mostly vis-à-vis the Kuwait Environmental Remediation Programme, which is our big focus. The terrain is very difficult, and the damage done to the soil is quite significant. The project we are participating in is considered a big pilot. There will be 15 tenders over the next seven or eight years. The first results from the first tenders will be released soon.
Our remediation efforts are encountering material that has a lot of water and oil and has been exposed to the sun, so it took us a while to understand this material. It must be treated and cleared of hydrocarbons before it can be landfilled. In 2017, we became very familiar with this material and, moving forward, we are able to provide an efficient service. In terms of lessons learned, 2017 was a good year.
Another milestone in 2017 was the approvals we helped secure for Larsen & Toubro for its valves and for category 1 EPC, which allows the company to participate in tenders of USD 100 million or more with KNPC. We have the responsibility of marketing and selling their products, and guided them on seven valve category approvals.
With the New Refinery Project, these valves will do well because they encompass all the categories of valves to be sold. We have a mandate for the international and local sales and these sales are made from L&T to the New Refinery Project. All valve sales are done internationally and locally with KNPC being the end user.

Which kinds of projects will Larsen & Toubro be targeting this year?
They are now able to participate in the gathering centres and pipeline projects, and they were recently awarded a pipeline project from KOC for KWD 90 million. We have their mandate for approaching KNPC and we plan to bid with them for a pipeline gathering centre, tank farms and all mega-value projects worth more than USD 100 million.

You have spoken in the past about partnering with companies in an effort to bring new technologies into the country. How successful have you been in that endeavour?
We have a full roster of companies that we represent in this regard. It was always a challenge for us. Bringing in Indian companies in the beginning was difficult. There was a bias against Asian companies. Even as late as 2006, there were no Indian, Chinese or Korean companies in the market. It was a challenge to bring them in, but they add quality and value.
We represent Spectrum Oil/PNG, which provides a unique technology based on an Italian technology: Their drilling rig is fully automated. There is a crane and a control room and it’s all operated by remote control. The operator can control the rig from an air-conditioned room. That is good for Kuwait since it gets very hot here during the summer months. We have yet to convince KOC about this operation, since it’s about 1.5 times as expensive as a Chinese rig.

Are you looking at Asian companies specifically?
No, quite the contrary. We feel Western companies have now caught up in the game in terms of pricing, especially Spanish companies. We are actively looking and seeking out Western companies. We feel many companies in Europe and the US have adapted to the aggressive pricing strategies of their Korean and Chinese counterparts. People survive by adapting. Also, in Kuwait it isn’t simply that the lowest bidder wins. There is a technical evaluation as well.

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