Dynamics in Saudi Arabia’s offshore services

Saudi Arabia

Mohammed Alsubaie, CEO of Jana Marine, talks to The Energy Year about Saudi Aramco’s plans to boost offshore construction and drivers affecting offshore support vessel supply and demand in the region. Jana Marine provides marine offshore services to the oil and gas sector, specialising in delivering solutions and services related to offshore construction and maintenance projects.

How have Saudi Aramco’s plans to boost offshore construction affected the marine sector?
As Saudi Aramco announced the projects that will enable them to increase their production capacity from 12 million to 13 million bopd by 2027, it is noted that a lot of them are offshore, such as the Marjan, Berri and Safaniya field expansions. There will be a lot of offshore construction work.
There will definitely be a need to increase the number of vessels such as jackup barges, crew boats, platform supply boats, OSCVs [offshore subsea construction vessels], OSVs [offshore support vessels] and more. This is one of the reasons why we are in the process of expanding our fleet.

What are the main drivers affecting OSV supply and demand in the region?
I think that in the coming three to five years, there will be a scarcity in the market for all types of OSVs, from crew boats up to jackup barges.
The market did not build for the last four or five years, after the drop in oil prices. People used to speculate by taking bank loans, building vessels based on price speculation and then selling them with high margins. However, after the last oil price crash, most shipyards got stuck with the vessels, owners bailed out of purchase contracts and banks got in trouble because their creditors were shipyards who could not repay their loans. It will take time for the market to readjust and regain the confidence of investors. I think a lot of companies incurred high debts with high interest rates and did not take into account the rise in global inflation.
The OSV fees and rates have been increasing steadily. After the Covid-19 pandemic, fees jumped by 20-30%. In the future, it will definitely increase due to supply-and-demand dynamics. Once the demand is high, the price will go up. When it comes to oil and gas, supply is currently low and demand is high. The upcoming IMI [International Maritime Industries] shipyard is supposed to start operating in 2023. This will help fill in the gap of the shortage. It will have three main sections: VLCCs, OSVs and rigs.

How is climate change affecting the demand for jackup barges used in offshore construction?
I believe the jackup barges will be in high demand in the future, especially in the Gulf. We are building two jackup barges in China. Hopefully, they will be ready by Q1 of 2024.
Climate change is bringing more unstable climatic conditions to the region. We never had strong wind in the summertime, but now we have wind as well as rain. These barges have an advantage in that they can be jacked to the seabed and provide a stable platform to continue offshore construction activities uninterrupted, regardless of bad weather or wind. This will provide an improvement in terms of cost and time for Saudi Aramco. With other vessels, you need to pull out from the platform to safe shelter, increasing the downtime and the cost.

What are the company’s main activities?
We are a marine company with strong construction capabilities and small fabrication capabilities. We perform a lot of maintenance and modifications too, including blasting, commissioning for SCADA systems and more.
Our main activity comes through a hook-up contract with Saudi Aramco, in which we apply all our expertise in areas such as tie-ins and commissioning. It is performed on what we call a time unit rate basis, in which we give Saudi Aramco the vessel, the equipment and the workforce, and they manage the utilisation of our resources.

What market trends pushed Jana to build its engineering capabilities?
Recently, Saudi Aramco started to de-scope some of the midsize projects which used to be reserved for LTA [long-term agreement] contractors. They are divided into small packages as a lump-sum contract that companies like ours can do.
When Saudi Aramco increased job scope for the local hook-up contractors within offshore construction activities and started awarding more lump-sum projects, marine companies needed to deliver a complete scope including design engineering, procurement and construction. For higher scopes, there are multiple international players that have design engineering capabilities, and we are happy to partner with them for larger projects.
In the past, we joined with an international EPC contractor and bid together. Once this partnership ended due to Covid-19, we decided to build our own capabilities. Now, we have a well-established engineering department. This enables us to bid for lump-sum contracts on our own.
We are collaborating with a fabrication company in India, MATHEW, that has a lot of experience with multinational oil companies. Together with MATHEW, we did a lot of work as subcontractors for LTA contractors.

How have local marine companies’ relationships with international EPC providers changed?
These companies know how to do the detailed engineering and fabrication of big jackets, and hence, they are capable of large-scope projects. However, they lack capabilities in IKTVA [In-Kingdom Total Value Add] and other localisation compliance. With the IKTVA compliance requirements increasing every year, they are approaching us for support and partnership. Even in the bidding stage, they come to us for our help to do the quotation based on our inputs. Before, we were trying to get business with international EPC companies. Now, they are trying to secure our help.

How does the IKTVA programme affect competitiveness and training in the marine sector?
The marine sector is a new one for the larger section of the Saudi workforce and traders. There is a lot of competition from Asian companies. However, things changed with the IKTVA programme. Introduced by Saudi Aramco, it gave a lot of help to the local workforce and companies in Saudi Arabia to allow them to grow and compete in the market. It is not easy for international companies to achieve a high IKTVA score unless they set up facilities in-country and put in place a clear plan to train Saudi employees.
For us, it is our duty to train our local employees. We’re now at 47% Saudisation. We are carefully selecting our people and sending them to the right institute to be trained. We train our staff at the newly inaugurated National Maritime Academy, the Saudi Petroleum Services Polytechnic for construction training, National Industrial Training Institute and Leading National Academy, Saudi Arabia’s first female training centre. Saudi Aramco has established an impressive number of training facilities and the government financially supports companies in getting Saudi nationals trained.

What is the company’s strategy for diversifying its services?
Saudi Arabia is going through a trend of privatisation. In the coming years, more and more facilities are going to be run by private companies. We submitted our prequalification to Mawani, the Saudi Ports Authority. We have partnered with a Dutch company that is very experienced in port management and tugboats.
We are also enhancing our subsea capabilities. As we are Aramco-approved for diving services, we are a good contender for upcoming projects in this field and are currently in the bidding stage for them. Requests have been issued for quotation for the new tender for diving. We have created a JV with a Swedish company called NDE Offshore in order to expand into diving services.
We have a new company called Navigation Solutions which caters to the demand for support services for the marine sector, such as catering, agencies, ship chandelling and more. We put all these services under one umbrella, and we are planning to expand it in many ways. For instance, there are plans to create a ferry service throughout the Gulf, and we would be in a good position to service this project.
We are also registered with NEOM and the Red Sea Project. We are looking into how we can participate in the new trends around green hydrogen and electric mobility. We are focusing on many areas; we are not just involved in oil and gas activities.

How would you describe the socioeconomic transformations Saudi Arabia is going through?
In my opinion, Saudi Arabia will be better than many developed Western countries soon. Imagination is only for those who dream, but we don’t dream in Saudi Arabia. We set goals, we work on them and we will reach them. The projects we work on are huge. They need a lot of investment, but I think they are moving forward.
Our financial system has become international to allow the inflow of investments. Regulations regarding visas have changed. Government agencies are regulated and measured through KPIs. We have women’s empowerment. We have 37 women currently working with us. A lot has changed.

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