U Achu, General Manager, Dyarco International, Qatar
The general manager of Dyarco International discusses the company’s partnering strategy for the oil and gas sector, and the best way to minimize investment risks across the sector.
What exposure does Dyarco have to the oil and gas industry today?
Dyarco’s parent companies, Al Faisal Holding and Ebrahim Al Neama & Sons Holding Group, had their first exposure to the oil and gas industry through a partnership with Maersk Oil. Then the company moved into the downstream through a partnership with Chevron Phillips. In this partnership Dyarco was the initial consultant and technical service provider, helping the company to establish its relationships in Qatar in order to start the joint venture Q-Chem.
As this joint venture developed, our role with Chevron Phillips started to decline, and it was at this point that we took the decision to enter the business of support services to the oil and gas sector, partnering with Oilfields Supply Center Dubai, a Government of Dubai-owned entity, with one of the biggest yards in Asia: a 600,000m3 area in Jebel Ali, Dubai. Today, Dyarco is a 50/50 partner for all the company’s operations in Qatar. Through this partnership, we provide support services to all of Qatar’s main oil and gas companies, from Qatar Petroleum to RasGas. Dyarco also has companies in its portfolio that train Qatari personnel in the oil and gas segment, working with major players like QP.
These are the few areas in the oil and gas sector where we are currently focused, but we are not closed to new opportunities, provided that they serve an interesting niche.
Do you have a target market cap for the type of companies that you would like to partner with?
One of our parent companies , Al Faisal Holding, is a very large group and are more equipped to work on projects that require a large capital outlay than Dyarco, which is not suited for such projects: although we could find the capital if we needed to, the reality is that such large projects would not fit well into our portfolio. Our primary concern, when looking for new partners, is that we can ensure that our return on investment is as fast and high as possible: I am looking for projects that have an efficient route to returns, rather than wanting to invest in projects that will bear fruit only in ten years.
Dyarco needs to maintain its current profile so that it can continue to move in corridors that are narrow, that our parent company cannot walk in. We don’t want to walk in the larger corridors, where our name means little and the value that we can add is negligible. In smaller corridors, our strength is our efficiency – how fast we can move.
We recently signed an agreement with Klondike, an Irish company. It was a good fit: their product is new and innovative, and they are looking to grow their business in Qatar. The risk we take with the company is calculated: we know that their products have a future, and we believe that with our active participation the business can grow.
How does Dyarco choose its partners?
The most critical factor in choosing a new partner is finding a company that can fuse with Dyarco easily when it comes to culture. We don’t want the biggest challenge in the first three years to be learning how to work together – we want this to be understood from day one. We look at the reputation of our partners in their home markets, and also pay a lot of attention to recommendations from the embassies in Qatar. If we spot any problems with our chosen partners once we have made the deal, we approach them early and proactively. This has only happened twice in the history of our company, but we have very quickly made our feelings known in both cases, and given the companies the freedom to break off the partnership. Both times, we made an exit without any problems. We are very transparent as a company, and we have a reputation to maintain in order to continue doing business here – this is one thing we cannot compromise on.
When you have identified a market niche, how do you approach finding partners to fill it?
Once we have identified an available opportunity, we begin to look for companies and technologies that can work with us in order to fill that gap. If we find a best fit, then we will move as quickly as possible; sometimes it happens that we find several companies that could fill the gap. If and when this happens, we look for ways to work with both, while at the same time avoiding conflicts of interest. Sometimes, our partners will want to work with us even if there are overlaps. For example, we have three different suppliers of the same valve in our portfolio of partners, and yet we continue to represent all three in the market.
Sometimes, we can convince our partners to grow their Qatar business into certain areas that we have identified. A good example is with Jotun, a paint and coatings company. After working with them to grow their business, Jotun is now the number one decorative paint company in Qatar. But we identified a new opportunity with their environmentally friendly marine paints, which are very popular in Europe and Southeast Asia but not used here. They agreed, and now we are growing this business with their product.
With the push towards Qatarization, the training and education area of you business must be quite interesting right now. How much opportunity do you see in the oil and gas segment in this particular niche?
Our main target sector is oil and gas, but the market has definitely shrunk since we embarked in this area, thanks to a tie-up between Qatar Foundation and some leading universities. However, whilst public sector companies might prefer to work with a public sector institution like Qatar Foundation at a higher cost, we are still hoping to find opportunities in the private sector.
With so many different possible ways of growing the company, how did Dyarco come to have this culture that you have outlined?
My thinking is always based around spreading risk. I have 26 different units in Dyarco, which means that if one area under-performs one year, the risk is spread, and the other areas can compensate and the bottom line will not be too badly affected. We follow each unit very closely, to make sure any upcoming bottlenecks or challenges are visible and planned for.
One of the reasons we are so cautious when it comes to risk is the confidence the owners of the company have in its management, which we do not want to jeopardize: since I took over the company, they have only ever seen consistent growth year on year – maintaining this and expectations for Dyarco is therefore high on our list. Having units diversified across various sectors helps us to achieve this – we can always accelerate one unit to compensate for another in another sector in order to reach our targets.
What do you see as the biggest trends that will impact your business in the oil and gas sector in the years to come?
Qatar has a very good chance for the future: demand for gas should continue to grow around the world, and many of the other major producers in the world face a number of roadblocks in order to meet the demand. Once we see this, we can start to plan as a company: a good manager understands what factors will impact his business tomorrow and plans ahead as much as possible. We always try to understand what the demand conditions for our products and services will be one year from today.
In terms of Qatar’s changing demand conditions, the biggest threat is shale gas, but the country has tried to mitigate it as much as possible by lowering costs and finding new trade partners outside of markets where shale is being produced. They also have a lot of leverage over their own industry, bringing as much as possible into the country, from their own LNG fleet to reciprocal investment with international partners. This has created an excellent business network for Qatar.
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