Nasrollah Gharesifard – Country Manager UAE, Qatar, Oman, Norwegian Energy Partners
The Country Manager for Norwegian Energy Partners UAE, Qatar & Oman (formerly INTSOK) explains why his affiliate has grown to be one of the most important for the organization amidst dwindling commodity prices.
You first came to the UAE in 2000 and have now worked in the country’s oil and gas sector for almost two decades. What would you consider to be the main developments the sector has gone through in that time and how has this impacted Norwegian companies here?
“There is plenty of oil in the UAE, but what the country needs is natural gas for electricity production and the question of where to source it from is yet to be answered.”
For Norwegian companies, technology has always been the key driver; not only in the UAE but the region at large. The present reservoirs are large and eventually you will reach a stage in which you need to implement certain technology in order to extract more hydrocarbons, therefore, technology has certainly been the entrance to the UAE and region at large.
The second major development is the policies surrounding natural gas; not only in Abu Dhabi but in all the Emirates! There is plenty of oil in the UAE, but what the country needs is natural gas for electricity production and the question of where to source it from is yet to be answered. The discussion has been going for a decade now and has even increased further as Dubai and other emirates have developed with electricity needs skyrocketing in parallel.
Last but not least, the changes and transformation ADNOC as the national oil company has gone through during the years is another major development. Many of the NOCs in the region such as ADNOC, Saudi Aramco, and Qatar Petroleum, are best characterized as ‘one of the most important organizations nationally.’ They control large parts of the economy and manpower in their respective country, hence why structural changes of the NOC –due to fluctuating oil prices for instance—affect the entire country. In a nutshell, I would argue that technology, gas policy, price and changing NOCs have been the major factors impacting Norwegian companies in the UAE and the wider region.
What kind of Norwegian technology specifically has been the key driver?
It has always been about taking more from the reservoirs. If you look at the countries within the region and compare it to Norway, you will see that Norway has the highest recovery rate. To put this in perspective: If we were to be able to recover five percent more of all of the reserves worldwide, there would be a new Saudi Arabia. Only one percent increased recovery already translates into billions of dollars, hence why the technology Norwegian companies can offer has always been such a significant driver.
Would you say that the image of Norwegian companies over time has developed into one of a genuine partner providing the best solutions?
Very much so! Norwegian companies are known for highly innovative niche products that can do ‘miracles!’ That, however, also makes market entry often more difficult for us as we do not have the cheap solutions. We need time to showcase that we are the cost saving solution in the long haul as we provide long term value; now that we are deeply embedded with ADNOC already, I believe the process of being recognized as value adding partner by other companies will be much more rapid. Moreover, Norwegian companies not only have superior technology that adds value, we can also be partners for needed cash solutions which makes Norwegian companies a one-stop shop solution provider.
The landslide in commodity prices certainly changed the procurement behavior of many oil and gas companies. Considering that many of the Norwegian payers are SMEs and bring highly innovative but costly technology, how did you ensure these companies get a chance in the tender processes?
There is no doubt that the landslide in commodity prices has hurt the Norwegian companies as well. When setting up your business in the UAE, you need to spend money for a year or two before you earn and obviously, oil companies were much more generous when the oil price was over USD 100.
When we were faced with the new price reality, we realized we had to refocus on our strengths. Our thoughts were, that even if the commodity price crashes, certain operations must be done either way; the players will want to do these at a lower cost, but they will do them. Abu Dhabi, for instance, plans to increase production to 3.5 million bpd, if they want to reach that level they will need to purchase.
Therefore, in the first instance we advised our members to market what we knew was needed and would be bought. In the second step, we assessed how we can become cheaper. The answer was ready at hand, we had to start providing solutions rather than just a product. If you scrutinize the interests of Emirati businesses—especially state-owned enterprises—you will find that they are interested in local employment and local content. Therefore, many of our member companies started hiring locally and increased local sourcing, which made us much more popular; especially so, while all the IOC’s reduced local manpower as the commodity prices went down. Thus, we found ourselves in a position where we were the players bringing the innovative technology which really adds value to the client’s operation and additionally served societal interests by employing locally and thus be cheaper within the entire economical context. Frankly, the equation is simple: if you start bringing niche technology and local content to the table, price will become the second or third issue discussed—even amidst tumbling commodity prices.
ADNOC, as the major oil company in the UAE, is currently following a strategy of consolidation, merging many of its subsidiaries and centralizing procurement. To what extent are these developments challenging to your members?
I am confident that in oil and gas, sometimes merging is a good development. In our case—and I am sure this is the same case for many others too—if we bring a company to ADNOC and this company has technology for onshore and offshore it will go through the same accreditation process multiple times. Therefore, the positive side of ADNOC’s consolidation efforts is that it makes my job much simpler. Now we are in a situation where there is only one organization to discuss with, not the multitude of individual subsidiaries we faced before.
The downside is that it creates a certain vacuum. Sometimes establishing a certain relationship is work of years and such a relationship can disappear during consolidation. You will need to start building that up again from its grassroots; therefore, we as organization are currently mostly concerned by how we can help SMEs to rebuild this relationship swiftly. To conclude, while you may have to rebuild a relationship, the overall process gets much more efficient which will benefit the business of the supplier too.
Taking a global perspective, we can see that the landslide in commodity prices has depleted many markets traditionally interesting for Norwegian companies—such as Brazil for instance. To what extent have these developments increased the significance of your region to your member companies?
There is no other region in which we expanded as much as we have here. Traditionally, places such as Brazil are very important for Norwegian companies, we have many investments placed there and rank among the largest producers; the same goes for other locations . However, when the prices tumble like they did, companies will—and need—to look at which region offers most possibilities. This region was the Middle East with the UAE being its hub.
If you establish your business in the UAE, you will have access to a market which produces 34 million bpd. It is a similar paradigm to Houston, for instance, if you establish your business there you will have access to the Mexican market. In our case, if you establish your business in the UAE you will have access to Saudi Arabia, Kuwait, Qatar, UAE, Oman, Iran, Iraq and more. Looking at the whole area, the region remains attractive despite low oil prices.
Speaking of low oil prices, one needs to understand that a ‘low’ oil price is not ‘low’ for everyone. If it costs you USD 60 per produced barrel then a price of USD 50 will be low for you; in this region, however, production prices are much lower—some of the lowest in the world! Of course, it is not as profitable as it was when the price was above USD 100, but it is still profitable.
Moreover, my members are commercially minded, they look at the UAE and see the region. They see the ease of establishing themselves in the UAE and understand that next, they could easily go to Saudi Arabia, Qatar, etc which produce significant oil and gas or, if they don’t mind the risk, even to Iraq. The territorial possibilities are much greater than they are in other regions of this world.
Do small and medium sized companies need to establish themselves in all of the countries in the region, or is it enough to use the UAE as a hub and export operations?
The method used is highly similar to how a large organization would do it. You look at the region and pick a place to start; I always advise Norwegian companies to start in the UAE because here you have everything: the embassy, over 100 other Norwegian Oil and Gas SMEs to network with. Just like in Abu Dhabi, you will need an agent to represent you in most of the countries in the region. The companies then start to build themselves a network of representatives and we as organization can assist with that as we already know many names of agents where the due diligence is there as it was done before. Soon the companies will find themselves with project managers across the region, at which point they simply need to start building their organization around that structure.
How long does it take for such a company to establish themselves in the UAE?
There are a few factors to consider before I can accurately advise a company on how long it will take them to establish themselves here. It will be different if the company decides to set up their first regional entity in other locations instead of the UAE for instance.
Secondly, it depends on how you will run your operations in terms of staffing; whether the company will have permanent staff on the ground or only visiting staff makes a significant difference. We Norwegians are extremely good at technology and innovation, but would need to work on the cultural and sales aspect. Hence why, how and by whom your operations will be managed here is a significant factor.
In the UAE and the wider region, sales are a lot about drinking tea together and building a relationship. What’s more, to build said relationship you will need to break the previous relationship first, because whatever it is you want to sell they will already have it. You will need to explain why you are a good choice and not just why the product is; as mentioned before, one possibility to would be to explain that you create local jobs and bring the best technology.
Finally, if a company comes and asks for help I will place them in a good position to achieve whatever their endeavor may be. One of those aspects will be that I connect them to someone who has already done what they want to do and are willing to share their experiences. As we have more than 100 members in the UAE we are well placed to share experiences between old business and newcomers.
Taking these three aspects into account, I am confident that any company that does what is advised and works hard can set up their business successfully in around one year.
“I am confident that any company that does what is advised and works hard can set up their business successfully [in the UAE] in around one year.”
Norwegian companies are known and reputed for their mass expertise in the offshore segment. Considering that in 2018 the UAE will see another offshore concession round, to what extent will this impact the Norwegian business in the country?
Frankly speaking, while there is no doubt that we are known for our high offshore capabilities, most of the companies within our organization can do onshore too. Therefore, I would like to highlight that Norwegian companies can do both: onshore and offshore!
Having said the former, the offshore concession coming next year and the changes it will bring are highly interesting to us. For the offshore concession round, we are already in the starting blocks, ready to move and meet upcoming demand. We are confident that ADNOC will place even more emphasis on the right technology once the offshore E&P is commencing, thus there will be a manifold of great opportunities for us.
On January 1st 2017 you rebranded from INTSOK to Norwegian Energy Partners thus including renewable and green energy players under the umbrella of your organization. Some commentators say that renewable technology and hydrocarbon technology enjoy a certain level of synergy. What is your opinion on the possibility of synergies of both segments?
I see significant synergies between renewables and oil and gas. As a new organization it is also up to us and our members to achieve this synergy. If you scrutinize Norway’s past, you will see that we have always innovated some of the newest technology in the oil and gas sector and moreover had smart government backing in exporting this technology. We have done things nobody else has. Take our offshore segment for instance, we went to drill in depths nobody else has, at the same time have the lowest emissions in the world and reduced E&P costs in the Norwegian continental shelf by 30 percent. Considering what we have achieved in the oil and gas sector, I am gladly taking the challenge to go into renewables too.