Zaid Awad, head of the Middle East and Africa Region for SNC-Lavalin, discusses the infrastructure contractor’s regional plans.
The drop in international oil and gas prices over the last few years has had a dramatic impact on the economic outlook of the GCC countries, with all six members forced to deal with a shortfall in revenues, while also running a fiscal deficit.
While this has forced governments to look at alternative sources for funding, the knock-on effect for the construction and infrastructure development industry has been the cancellation or postponement of less urgent projects, while new project awards have also seen a significant drop in 2016, compared to the previous year.
Although some GCC countries have strong reserves and healthy sovereign wealth funds to tap into, there has been a definite shift towards implementing a thorough restructuring of existing economic and market structures, while also looking for additional sources of revenues through cost savings and efficiencies.
As such, the general support for the regional construction industry is likely to come from countries with initiatives that allow them to diversify from the oil & gas industry, while clearly laid out and implemented transformation plans (such as the Saudi Arabia, UAE and Qatar Vision 2030 plans) will also be a major help.
Furthermore, the presence of high-profile mega-events such as Dubai Expo 2020 and the 2022 World Cup in Qatar will also allow contractors in those countries the opportunity to win work that will support the successful hosting of those events.
However, certain sectors will see strong investment from regional governments as a consequence of the aforementioned diversification away from oil and gas and the increased need for social infrastructure that supports a growing urban and young population. These support sectors – health, education, power and water, energy and transport – are likely to be major sources of opportunity for established infrastructure and development contractors, such as SNC-Lavalin.
“It goes without saying that times are tough and that the oil & gas industry is in somewhat challenging times because of the oil prices,” says Ziad Awad, head of the Middle East and Africa Region for SNC-Lavalin Group. “The decrease or significant fall in oil prices will definitely impact the different parts of the investments or industries. However, I would say that the GCC really provides an opportunity because it is able to weather the challenges better than any other region.”
Looking at the oil & gas industry, Awad says there is an opportunity for contractors associated with the field to succeed, if they position themselves correctly in the market.
“As you know, the Middle East continues to produce oil at a maximum capacity. With that comes a lot of work, in terms of maintaining that capacity. There’s quite a bit of maintenance potential and sustaining of capital work that is needed, and I think that SNC-Lavalin is in a great spot – especially after the acquisition of Kentz and Valaris, and the successful integration of both those companies, which was completed in 2016. We believe that we have significant experience and are well positioned to support our clients and help them meet their aggressive targets going forward.”
Having joined the company three years ago, Awad has been given a mandate by SNC-Lavalin’s senior management to help the different business units deliver on all their strategies. He studied engineering at Nottingham University and also has a PhD in International Economic Relations.
Furthermore, he has also worked across the whole value chain, in regions as diverse as the Middle East, Africa, the Far East and Europe. Therefore, he is ideally positioned to help build on SNC-Lavalin’s ambitions for the Middle East.
“I’ve worked in a multi-business unit environment, where you actually need to leverage a sense of ‘each one for the benefit of all’, and that’s similar to what we’re doing here at SNC-Lavalin,” he says. “We’re a multi-business unit and environment where it’s important to focus on the individual business units, but we must also be able to offer an integrated approach and basically become a one-stop shop. That takes a lot of work, in terms of integration and putting the right structure in place.”
“My first job with SNC-Lavalin was actually this one. I was put in charge of heading up the regional operations. Basically, my mandate was to put the right platform in place for the different business units to deliver all their strategies.
“When you look at what SNC-Lavalin can build across different industries, it’s really quite impressive. We’ve built a number of projects – back in Canada – across the infrastructure, power, oil & gas and mining and metals spheres. So this was a very interesting job for me, because the challenge was how can we leverage this strength and potential to make sure that we actually work closely with our clients here in the Middle East, and really add value in a manner that differentiates us from our competition.”
With a workforce of 10,000 workers in the GCC, and a strong presence in Saudi Arabia, Qatar, the UAE, Iraq, Kuwait and Bahrain, this is clearly an objective that SNC-Lavalin is taking very seriously. All of the company’s business units are active in the region, with Oil and Gas, Infrastructure, Mining and Metals, and Power all supported by the contractor’s investment and financing arm, SNC-Lavalin Capital, which supports PPP and other client-sought financing models.
Overall in the GCC, the company won more than $1.1 billion in new work (mostly in the energy sector) in the first half of 2016, while over the last 10 years it has worked on more than 300 projects worth a total of $12 billion.
Given the state of the regional economy, its investment and financing arm has become increasingly important to the success of its operations, as clients look to involve the private sector in the funding and execution of projects.
“We see more and more will on the client’s side to work with the private sector in these critical times. Budgets are squeezed because most GCC countries are operating at a fiscal deficit and basically there is less revenue coming in. As such, they need help to fund some of the very important projects [that are planned].
“So they’re turning to the private sector and we try to work very closely with them. We’re seeing that need to help our customers, in that sense. SNC-Lavalin is in a great position to do that. We already have great experience with Canada, working with PPP solutions and similar financing models. So hopefully, our international expertise with PPP and our local know-how and experience can ensure that these styles of financing models are structured in a way that suits the local environment.
“It’s very important to have that. Every country has different needs, therefore it’s very important to have an overall view. But at the end of the day, you structure something that’s suitable for that particular customer or country.”
However, as much as he welcomes this interest in PPP and alternative financing, Awad is quick to counsel caution, pointing out that these models are still in their infancy in the region.
“There’s quite a bit of work that still needs to be done in terms of regulation and in terms of being able to choose the right project. [Clients] really need to understand the model and the importance of having the right risk allocation across the different stakeholders, so that at the end of the day, this is one collaborative effort rather than just passing the risk from one side to another,” he explains.
Looking towards the future, Awad reveals that the contractor is focusing on improving its offering and support to its customers. Having established themselves firmly in the region through the opening of the regional headquarters in Abu Dhabi, the plan now is to support clients and help them meet their objectives to their full satisfaction.
“We aspire to be the partner of choice for our clients in the engineering and construction sphere, contributing meaningfully to their success. We remain focused on being agile to evolving client needs, delivering excellence and quality in a cost-effective and efficient manner.
“At a time when others are retrenching or scaling down, we’re actually trying to focus much more on this region. The Middle East is a strategic region for us and the company is quite focused on making sure that we build on our strong base here.”
“We’re targeting all sectors, from Oil and Gas, where we’re extremely strong and have a significant presence; to Infrastructure, where we have built close to 45 district cooling plants; to Mining and Metals, where we have built huge, large plants – some of the largest in the world – for DUBAL and EMAL smelting plants. In Power, we’re working quite a bit in the transmission and distribution sphere.”
Despite the reduced spending on non-essential projects, the governments of the GCC remain committed to large-scale projects and the must complete, iconic programmes and initiatives, with Expo 2020, the 2022 World Cup, Abu Dhabi Economic Vision 2030 and the economic transformation and diversification plans in Saudi Arabia among the most prominent.
“We need to continue to be agile and ready to listen to clients’ evolving needs so that we can deliver to their full expectations and satisfactions,” Awad says. “We can leverage our global infrastructure capabilities and experience to add value, especially in engineering and PMC services. Our expertise ranges from industrial to environment and geoscience, through to defence and logistics and power delivery, amongst others.
“Furthermore, we have in-region rail and transit expertise to draw on, as well as international experience, which will help us meet the growing transportation needs in the region. In Canada, we’ve built six of the nine light rail transit (LRT) systems, covering design, financing, construction and operation and maintenance.”
Looking beyond the immediate economic conditions, there are other factors at play in the GCC, with sustainability, green building and energy efficiency increasing in prominence across the region. Spurred on by an increasingly green-conscious population and leadership, governments, especially in the UAE, have been keen to push the sustainability agenda.
Awad is keen to point out that SNC-Lavalin is already ready to meet these demands. Its Sustainability and Beyond initiative continuously studies and explores the changing face of the engineering industry, as it moves away from offering purely technical solutions towards ones where community concerns shape project design.
“The aim is to track the evolution of engineering and document the most important lessons learned as they relate to improving social conditions and the environment,” he explains. “The initiative stems from our desire to assess how far SNC-Lavalin and the industry as a whole has come thus far in the journey towards building solutions that are better for society.”
“Projects should not only meet a need, but also be maintainable, culturally appropriate and suitably affordable. SNC-Lavalin has significant experience and can add value in end-to-end project solutions (Design, Build, Own, Operate and Maintain projects). If you know that you’re going to operate, maintain and maybe partly own an asset, then sustainability will be something that is considered early on and taken seriously, from design throughout the whole value chain.”
Awad adds that the company is already putting its money where its mouth is, with its involvement through its EPC recycling facility work for QatarGas, while its Power group is exploring opportunities in the renewable sector – including solar – to leverage the experience of the contractor’s global team.
Finally, looking at the future, Awad says he and his company are focused on delivering local solutions to local challenges, while leveraging its international experience. He asserts that doing so will allow SNC-Lavalin to differentiate itself from its competitors in a market that is increasingly challenging to operate in.
“We’re focused on delivering on our strong commitment to the training and development of locals where we work. We have trained around 500 Saudi Arabians in association with our sulfuric acid plant, which is being built in the north of the country. On the HSE front, which is a core value for us, we’ve held our global HSE conference in Dubai, in collaboration with our clients and stakeholders. This provided us with a great platform to share our experiences and continuously improve our performance.
“I think it’s all about clients. It’s about staying close to your clients. We believe in the region and we definitely want to be part of its success going forward. We have enough initiatives in the region for us to continue to innovate, and to be able to stay close to our customers’ needs and offer local solutions and local delivery, while leveraging our international experience,” he concludes.
SNC-Lavalin Projects won in the last 12 months
• Five-year engineering consultancy agreement from Oryx GTL in Qatar
• Asphalt production facility EPC from Saudi Aramco
• Infrastructure and processing facilities EPC for a gas field in the Middle East
• Engineering contract for operations support services from Emirates Global Aluminium (EGA), extending a 12-year fruitful partnership with work on DUBAL and EMAL aluminium smelting plants
• District cooling contract for the King Khalid International Airport from Saudi Riyadh Cooling Company (SRCC)
• Oil processing facility at West Qurna 1 Field in Iraq for ExxonMobil
• Wastewater treatment project for LAFFAN Refinery 2 for QatarGas
• Integrated facility management contract from Msheireb Properties in Doha