Offshore potential in KuwaitApril 12, 2018
Marzouq Issa Buarki, general manager of TechnoGas, talks to TOGY about the unlikelihood of local demand for industrial gases to increase due to a lack of new major oil and gas projects. TechnoGas manufactures and distributes oxygen, argon, nitrogen, CO2 and mixed gases to contractors across Kuwait and the GCC area.
On speciality gases: “We are also looking to enlarge our operations in speciality gases. Contractors use these gases for testing and calibration purposes. These are high-value gases, and we need to expand in this area. The value is high, and just a few orders can make a big difference.”
On offshore potential: “For offshore drilling projects, we have a better chance than others to supply the required gases. When it comes to facilities construction, we will compete and have confidence in this. There will be subsurface welding to be done and we have the required welding gas that can be used under water. We are waiting for KOC to be clear about when the offshore project will start.”
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Could you walk us through the company’s latest activities?
There have been some good developments in the past year. We grew by 12% in just one year [March 2017-March 2018]. We have taken over more of a share of the market since last year, reaching almost 32%.
We have been very active in approaching all the big players, and have added more than 10 contractors to our list. These are very big contractors, such as Sinopec, which just started work on the Al Zour New Refinery Project. Just last year, we secured a contract with Schlumberger to be their sole supplier for liquid nitrogen, which they will use to lift crude oil in wells all over the country.
We are working with other major contractors on the New Refinery Project. We will also be involved in supplying industrial gases for the LNG import terminal. This project will require a lot of industrial gases since the scope of it covers both on- and offshore.
We are working with SK [Engineering & Construction] on the CFP [Clean Fuel Project] to supply them with liquid nitrogen to be used for purging. A huge quantity is required to purge the facilities and equipment, the completion of the CFP will take more than one year. It could possibly be completed in early 2019.
Additionally, we have also been slowly entering the medical gases market. We will focus on this in the year ahead. On top of that, we are exploring opportunities to expand our scope of work to cover the installation of gas networks for the propane gas that is mainly used in major restaurants, coffee shops and hotels.
Which types of industrial gases are in high demand?
Liquid nitrogen and liquid oxygen. Oil service contractors use these a lot for purging and testing. Oxygen is also used for welding.
There is also higher demand for argon. The only problem with argon is that its production is limited, and the price is not stable. It is not available in big quantities as nitrogen and oxygen are. Though it is required by the market, the demand is not stable.
These days, contractors are also using a mixture of gases such as an argon/nitrogen mix or an argon/CO2 mix for welding.
What is the benefit of mixing argon?
The benefit is to ensure a high-quality weld. Contractors might sometimes ask for an argon-nitrogen mix or an Argon-CO2 mix of certain percentages. The costs of these kinds of mixtures are higher than argon gas.
Given the expansion of the market in Kuwait, do you expect local demand for gases to increase or to remain relatively stable?
Demand is almost stable for the time being, and I do not think it is going to increase. Once the CFP, Al Zour refinery and gas terminal are done, I do not see any major projects coming. These three are the last major projects that are important to the market.
Of course, there are plenty of medium and small-sized projects which will continue to come, such as the new gathering stations.
KPC has announced on different occasions that it will spend a great amount on the oil, gas and petrochemical industry over the next five years, but I have not seen any announcements of major-sized projects.
This is why we are thinking on exploring – and penetrating – other sectors, so we can generate revenues in other areas.
There has been a lot of excitement surrounding the offshore bidding rounds. Do you expect your services to be needed?
For offshore drilling projects, we have a better chance than others to supply the required gases. When it comes to facilities construction, we will compete and have confidence in this. There will be subsurface welding to be done and we have the required welding gas that can be used under water. We are waiting for KOC to be clear about when the offshore project will start.
Do you expect there to be any challenges when operating offshore?
We don’t expect challenges from our side, but there will be some challenges in the offshore drilling activities and the facilities construction.
However, Kuwait has been talking about going offshore for more than 10 years now. KOC has never worked offshore, lacks experience offshore and has always been hesitant to go offshore. Kuwait is the only country in the Gulf that has not gone offshore.
Maybe it has to do with a lack of offshore experience, but they need to move quickly. Kuwait needs to produce from these offshore fields.
What makes you the preferred partner for large companies?
When we penetrated the market just three years ago, we did so based on providing excellent service to our customers. We arrive on time, provide good-quality products and services, and never failed our clients. We work closely with our customers to meet their requirements.
We work 24 hours, seven days a week, and our plant runs around the clock. If we receive a request to send a tanker of liquid nitrogen, we always arrive on time to drilling or well site locations. We have no problems meeting our clients’ requirements.
Whatever we agree on, we are committed to, even if we incur costs. This is our approach with clients, and this is why they have slowly switched to working with us.
What will your focus be in the coming years?
In addition to breaking into the medical gases sector, we are working hard right now to get contracts with KOTC [Kuwait Oil Tanker Company] in order to secure a continuous supply of propane gas to provide our customers, such as hotels and big restaurants. We think this is a big market for us to penetrate. Currently, we are providing a very small quantity of propane cylinders to the market – to industrial contractors who use it mainly for heating purposes.
We are also looking to enlarge our operations in speciality gases. Contractors use these gases for testing and calibration purposes. These are high-value gases, and we need to expand in this area. The value is high, and just a few orders can make a big difference.
The only problem here is that users always look for a low price. We are trying to convince them that even though our speciality gases are expensive, our products are better for them. Clients such as Schlumberger buy our products because they know the quality we provide meets their requirement.
We are not stagnant. We are always thinking of something new we can do. We do not want to stop at one thing. I am not only looking for the Kuwaiti market share but I want to increase revenues from other markets.
How are you looking to expand TechnoGas’ activities beyond Kuwait?
Our main focus is Saudi Arabia, since consumption and demand is high there. We recently secured two additional customers in Saudi Arabia, and we are now supplying them with liquid nitrogen, liquid oxygen and liquid argon. We provide them with a regular supply on a weekly basis. We expect the quantity to increase with time.
We are also currently working on entering the Iraqi market and we are presently talking to one high-potential client to conclude a deal.
In addition, we have some co-operation agreements with companies in Qatar and the UAE to exchange some of our products and services.
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