Fresh competition in Qatar

At a time when infrastructure projects are booming in Qatar, what challenges do EPC companies face when sourcing labour?
The regulatory framework is being revised to better protect labour rights and contractors must adapt and implement new regulations being enacted by the government. These rules more closely control the origin of Qatar’s workforce, with the goal of diversifying the countries from which we hire our engineers and technicians.
Most of the labour force comes from Asia, and India has traditionally contributed a large proportion of workers in Qatar. With the Ministry of Labour’s new regulations on work visas, although there is a preference for Indian personnel, companies have to tap into other markets to recruit, including Nepal and Sri Lanka.
Workers from these countries are not always qualified and finding the right people can be harder than through former recruitment processes. In turn, it creates the need for additional training for those people to meet the skill level required to work in the local industry.
In mid-2014, the Qatari government also introduced testing for engineers as a pre-requisite to certify them as practicing engineers. This process has impacted the grading classification of most companies and added another challenge for contractors to complete.
To better meet the need for a skilled workforce, several companies have equipped themselves with in-house training facilities for their employees. This is particularly useful for companies with many employees. Medgulf employs 3,200 people and has this type of structure. It is an advantage that companies can use to achieve higher levels of qualification among staff.

How is EPC tendering done in Qatar?
Qatar Petroleum (QP) has been streamlining its tendering processes by compressing the negotiation stage in the past two years. By pushing EPC companies to submit their best offers at the commercial stage after technical pre-selection, QP and its subsidiaries have been trying to reduce costs and negotiation time. As a result, the main project contractors are putting pressure on their subcontractors to cut costs. Qatar is a rather open market with many opportunities, so newcomers have been flying into the country and the level of competition from national and international companies has increased.

How do national and foreign companies coexist in Qatar’s competitive market?
Qatari and foreign companies sometimes work together, as the former have better knowledge of the market and the latter bring their experience on the design side. For example, we partnered with UK engineering firm Penspen and international consulting group COWI for the design of two projects we are undertaking for QP. We are also looking at offshore projects and started communicating with US companies to share expertise and initiate future partnerships.
International EPC contractors are synonymous with increasingly competitive markets, as many of them are very price-competitive. Some foreign firms have been known to enter the market with aggressive low-margin strategies to get contracts, taking the risk of losing money to increase their overall market share.

What have been the effects of lower oil prices on Qatar’s EPC sector since mid-2014?
Two petrochemicals projects, Al Karaana and Al Sejeel, have been paused and there are no upcoming large oil and gas-related EPC projects in sight. 2015 should be a year of small and medium-sized new projects and maintenance for brownfield and shutdown activities. This is a trend that has been common during the past few years. EPC contractors operating in the oil and gas industry will tend to diversify their portfolios in order to stay abreast of competition and follow the national trend.
Qatar’s economy is reaching a healthy stage of diversification. Some large, non-oil and gas projects hold great potential for EPC companies that are willing to diversify their activities, particularly towards work on the FIFA World Cup 2022 in Qatar. The country is gearing up for this event with a number of large infrastructure projects.
The economy is going through fundamental shifts, but the oil and gas industry will provide EPC contractors with many projects in the future, and some ongoing and upcoming tenders should hold opportunities. The industry will grow, maybe not at the 2014-forecasted pace, but EPC companies can still find new work.

For more news and features on Qatar, click here.