Shamis Al Dhaheri – Group Managing Director, Ali & Sons, Abu Dhabi
Shamis Al Dhaheri of Ali & Sons explains the group’s evolution over time, the reasons for shifting from supply-side to service-side, and how to navigate what is a competitive and turbulent market.
Could you please start by introducing Ali & Sons and how the group has evolved over time since its initial establishment in 1979?
My father established Ali and Sons 37 years ago. We started out as a small family business orientated firmly towards the oil and gas sector that, even back then, constituted the mainstay of the local economy. Having diversified the business incrementally over time, we now generate revenues of around 2.3 billion Dirhams (626 million USD) per annum and possess an overall workforce of 5,000 blue and white-collar personnel. The hallmark of our success has been a close attentiveness to ‘business continuity’ and ‘well-structured, sustainable growth.’ This is what perhaps differentiates us from the Kamikaze-style spirit of some of our competitors.
The decision to start off in the oil and gas industry made a lot of sense given that hydrocarbons constitute the UAE’s and especially Abu Dhabi’s major source of income. We were keen to embed Ali and Sons within the national economy so that we could be an active contributor to the nation’s wealth and development. We were seeking a win-win scenario in which our own success would simultaneously deliver benefits to our country.
Today we’ve very well diversified and the Ali and Sons group covers a broad range of industries from automotive to property to retail, but the oil and gas sector continues to be important to us, contributing around 20 percent of our overall bottom line.
What is the scope of your capabilities and market offering to the oil and gas sector?
We actually cover a great many bases across the oil and gas value chain from medium upstream to downstream. At the outset, we focused on the trading-side by collaborating with international manufacturers to assist them in introducing their technologies to the UAE and in developing local market share. For the past 15 or so years, however, we have been shifting much more to service provision. Rather than delivering technologies in raw form to the end users we’re focusing on adding value and the provision of customized turnkey solutions and fit-for-purpose engineered projects.
Currently our priority is to develop more of a foothold in the drilling services domain and specifically on what is happening down-hole rather than above ground as that is the area holding most potential for real-value addition and where we see ourselves as delivering a unique contribution.
Tell us more about Ali and Sons’ strategic shift from supply-side to service-side and the rationale behind this decision…
This is, I think, a typical trajectory for many firms. When you set out with a new business you tend to minimize your risks and keep to the simple end of the spectrum, but over time you start acquiring specialized knowledge that you then want to leverage. Over time, we have managed to situate ourselves closer to our customers and to better understand their challenges to the point where we now see ourselves very much as collaborators with and partners to our clients. We are able to use our collective brainpower and accumulated experiences to deliver considerable savings to our clients and to come up with innovative solutions specifically tailor-made to the challenges that they are encountering. This is highly appreciated especially in the current climate of cost savings where actors across the oil and gas spectrum need to operate more efficiently and achieve more with less.
The returns to be made from trading oil and gas technology are always going to be limited. There’s only so much revenue that can be made from buying and resale because the margins are slim. Naturally as our company has grown the overheads have increased and there has been a strategic need for us to divert our attention to those areas where the margins are much more attractive. That essentially means gravitating towards areas where we can come up with smart ideas and pioneer innovative approaches that will deliver high impact for our clients. When we benchmark our competitors, it is clear that most of those that have been experiencing exponential growth have weighted their emphasis on service provision rather than trading. Our strategy is to follow suit.
Each year we strive to develop one or two extra services that we can add to our portfolio and what we seek to do ultimately is to integrate these services into dedicated business units. This year, for example, we’ve been working on a solids control environmental project devoted to reducing the mud that comes out from the drilling operations. It’s a specific service where the competitors that we are going up against are the household international oil field service brands such as Baker Hughes. We are keen to commence offering directional drilling services as well. For that niche, however, the business model would be slightly different as our hope would be to complement the existing work of the big multinational OFS firms.
What other developments have been keeping you busy lately?
We’ve been busy supplying five topdrives to NDC. These are mission critical components fundamental to the success of the client’s operations and lie at the heart of the drilling process. Client satisfaction has been especially high in this particular area, as our technologies have proved highly reliable with practically zero downtime reported. We are therefore expecting significant levels of repeat business. We have also been very active supplying mud chemicals to the industry.
Over the last year and a half the global oil and industry has experienced a lot of turbulence with the dramatic drop in prices. How have you been navigating this new period and where do you seen new opportunities unfolding?
The oil and gas industry typically enjoys a very sustainable and enduring market. Oil and gas actors generally do not turn up in a market to do a single job and then up sticks and leave because in many cases they have sunk considerable investments into projects and infrastructure. Some of the international players may well be buying up each other, but there is little sign of these companies shutting down their operations. This means there are still many clients out there with needs to respond to. Nor do we envisage any reduction in the competition simply because of the falling oil prices. What we are encountering, however, are requests by our customers to reduce our rates and an industry-wide race to the bottom on prices.
Our goal as a service supplier is always to support our customers. Many of our clients have been awarding us business for three decades so we are ready to pull out all the stops to assist them during this difficult period. We are eager to demonstrate that Ali and Sons is not just a fair weather friend, but rather a trusted and reliable partner so will do all that we can to accommodate their demands.
There will also be entirely new opportunities to grasp. We are continually on the lookout for potential acquisitions that can strengthen our core competencies and enhance the value of our service offering. It could make sense, for instance, to acquire specialists in drilling technology that will help us further our footprint in that niche. This is the sort of strategy that has worked well for us in the past when we took advantage of a down market to purchase a Canadian specialist in air drilling which is incidentally how we came to possess Indonesian assets. We will be keeping a close eye on similar opportunities this time round.
What other trends have you been noticing?
The general trend is to focus on the bigger fields, to reduce capex and increase opex. The overall picture across the industry is becoming quite clear: existing operations are generally continuing more or less as planned, but new developments are being put back on the shelf or postponed. Nevertheless, from our own perspective, there are a lot of critical jobs that still need to be performed and work volumes remain as high as ever in the EPC and drilling segments. The real question is about how to perform these activities smarter and more cost-effectively.
You’ve talked about how the oilfield service sphere remains a crowded market despite the price pressures. How are you going about differentiating Ali and Sons from the competition and marking yourself out as a ‘go-to’ partner of choice?
We differentiate ourselves by placing ourselves closer to the end customer than the alternative actors present in the market. We spend considerable time listening to the needs of the customer, understanding the challenge posed and in ensuring that their needs are catered to on time and on budget in the most efficient manner. We see our collaboration with them as a virtuous circle: the more that we can assist them in their turnaround time and in lowering their operational costs, the more oil they can produce and the more work there will be for us to do in terms of repeat business.