FLUOR DANIEL: Saudi strength spurs action elsewhere

25 July 1997

FLUOR DANIEL's presence in Saudi Arabia goes back to 1947 when the Californian company won its first pipeline contract from Aramco. Fifty years later, the list of project references in the kingdom has mushroomed to over 400. By any standard, the company has plenty to be pleased about when it comes to Saudi Arabia. Now the experience gathered there is being used to spearhead a major expansion effort in the region.

'Our strategy is to take that base of expertise and reputation, built up in Saudi Arabia, and penetrate the rest of the area,' says the president of Fluor Daniel Middle East and North Africa, Eddie Lewis.

The company is set on promoting much more than the oil and gas capabilities for which it is best known in the area. As part of the diversification programme, it is also aiming to use its market knowledge to promote its other core businesses - anything from equipment leasing to telecommunications, power generation to environmental services.

'We don't just want to be known for our petrochemical, process and petroleum skills,' Lewis says. 'There are about 30 operating companies in Fluor Daniel, each with its own industry focus. We are looking to bring them in, combining their technical expertise with our experience.'

With headquarters in Irvine, California, Fluor Daniel is the engineering, construction, maintenance and diversified services arm of the publicly- listed Fluor Corporation. Fluor Daniel's operating profit of $320 million in 1996 was the highest in its 107-year history; the order backlog was worth more than $15,000 million. It was also highly diversified by sector and region. International business was up for the ninth year in succession (see charts).

Since March 1996 Fluor Daniel Middle East and North Africa has operated out of a new regional office in Dubai. Headed by Lewis, the office is planned to boost the company profile beyond the borders of Saudi Arabia.

'In Saudi Arabia, everyone knows of Fluor Daniel,' says Lewis. 'But there are 31 other markets in this part of the world, so we needed some focus.' Part of the promotion process has been to expand the regional sales and operations team to cover all markets in the area.

Fluor Daniel is using the new organisational structure to target prospective business opportunities. The company follows a selective bidding strategy. In principle, it prefers to be responsible for a project in its totality, although the project structures preferred by a client may not always make this possible.

'Whether we pursue a project or not depends on certain criteria, for example the number of bidders on the list, the cost of bidding and the economic feasibility of the project,' Lewis says.

Saudi Arabia remains Fluor Daniel's largest market in the region. Since 1988, it has been involved in many of the key development projects undertaken by Saudi Aramco and Saudi Basic Industries Corporation (Sabic), and its affiliates. These have included the $2,400 million northern area crude expansion programme, the methyl tertiary butyl ether (MTBE) plant for National Methanol Company (Ibn Sina) and the Saudi Petrochemical Company (Sadaf) expansion programme.

More recently, Fluor has done the basic engineering on the $650 million aromatics complex in Jubail for Saudi Chevron Petrochemical Company; it is also project managing the Saudi Yanbu Petrochemical Company (Yanpet) expansion programme. And it continues to provide construction management services for the main campus, health services' centre and other facilities at King Abdul-Aziz university.

During the past four years, the emergence of a petrochemical industry in other Gulf states has created new opportunities. Orders have been won on three grassroots projects for newly created local/foreign joint ventures. In Qatar, Fluor drew up the front-end engineering and designs (FEED) for the $425 million Qatar Fuel Additives Company (Qafac) complex at Umm Said. In Kuwait, it has been acting as the project manager for the $1,400 million Equate petrochemical scheme.

The UAE has been particularly positive. In early February Fluor was confirmed as project manager for the Ruwais petrochemical scheme, planned by Abu Dhabi National Oil Company and Copenhagen-based Borealis. The award was the company's second substantial contract in Abu Dhabi in the space of 18 months - it clinched the FEED contract for the Ruwais refinery expansion in October 1995.

Fluor Daniel's international network has played a key role in the company's recent run of good fortune. Says Lewis, 'Our success in the region is the direct result of our ability to provide experienced people from more than 100 electronically-networked offices around the globe. We execute the work from wherever the talent is - whether that's in the US, the UK, the Netherlands or the Philippines.'

Having proved its credentials in the Gulf, the company is also tracking gas and petrochemical projects in Algeria, Egypt and Pakistan, as well as Yemen.

Nevertheless, it is the Gulf, where another wave of investment in oil, gas and petrochemicals is on the horizon, that holds most promise. Lewis expects margins to improve from recent lows as more new projects come to tender. At the same time, he believes that more of the company's global clients will become investors in the region, providing additional opportunities.

'We like the synergy we get from being a global company,' he explains. 'The relationships the company has developed with clients from other parts of the world allows us to be very helpful when those companies come here to invest. Similarly, we are seeing our regional clients moving overseas. Several GCC countries are planning to invest in the Indian refining industry.'

The strategy of assisting its global clients has also produced results outside the hydrocarbons sector. When a major US-based consumer products company decided to set up a diapers plant in Jeddah, Fluor Daniel was brought in to execute the work. Further work was secured when the manufacturer modified and expanded the plant.

Other US customers have also contracted the company to carry out regional construction projects. Fluor Daniel provided management services for General Motors' new battery plant in Saudi Arabia's Eastern Province, for example. In Egypt, it is involved in a pharmaceuticals project.

Developing non-oil activities is a priority for the engineering and construction company in the region. In Kuwait, it is following a planned prison project and a wastewater facility. Fluor Daniel Power is carrying out two contracts in Saudi Arabia and is pursuing opportunities in the gas-to-energy field.

Fluor Daniel's regional growth strategy is nothing if not ambitious. However, Lewis is undaunted by the prospect of pursuing three key ambitions: consolidating the position in the Gulf hydrocarbons sector, expanding the regional reach and broadening the range of business activities.

'Our strength is our reputation, our experience and our people,' he says. 'I can take you to our Al-Khobar office and show you our eastern expatriate staff, some of which have 20 years of experience working with us in the region. That depth of talent and commitment is critical when executing a job for a client.'

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