The Athens-based contractors solution to increased competition in the projects sector is to target specific niches where it enjoys a competitive advantage
No company in the Middle East understands the evolving nature of the regions projects market better than Consolidated Contractors Company (CCC).
The Athens-based firm has maintained a constant presence in the region since the early 1950s and has successfully negotiated decades of political and economic change to emerge as arguably the most important project company in the region.
With an office in every Arab country, CCC works on schemes in the oil and gas, chemicals, power and water, and construction industries. This year, its total workforce numbers more than 130,000 and projected turnover is more than $4.5bn.
After five years of economic upheaval across the world, Samer Khoury, CCCs president of engineering and construction, is optimistic about the opportunities in the GCC.
2014 will be better than 2013, and we will [see] a mini boom in 2015 in all sectors
The consolidation has occurred. What needs to be spent on what sectors [has been decided], so now the [GCC countries] have a plan, he says. The past years they were doing designs and studies, now it is the implementation phase. I dont think we will reach [the levels seen in the] 2008 boom years; but 2014 will be better than 2013, and we will [see] a mini boom in 2015 in all industries.
The opportunities on the horizon create myriad challenges for contractors. The first and most obvious one is competition. Even as the volume of work available increases, pricing on projects remains tight, leaving little room for profit margins.
CCCs solution to the problem is to focus on niche areas where it enjoys a competitive advantage. These specialist market segments are split across two broad sectors: oil and gas; and civil infrastructure. For oil and gas, the challenge is remaining competitive as new players come into the market, eroding margins.
We have seen a deterioration in the quality and number of contractors that have been allowed to bid in the Gulf, says Khoury. The Aramco bid slate now is very similar to the Kuwait bid slates of the past five years. They have now introduced [South] Koreans, Indians and, gradually, you are seeing the Chinese. That has forced CCC to go into the very highly sophisticated projects or megaprojects, and remote locations.
For technically challenging work, CCC now looks to work on process units that require a contractor with experience. For a petrochemicals complex, we will do the process unit itself, which is highly sophisticated and which we can afford to take at better margin than the rest of the plant, says Khoury. This is the heart of the plant, where the partner will want someone like CCC that is reliable and can do it on time.
The second market niche for the firm is working on schemes in remote locations such as Turkmenistan. CCC is very good in logistics, he says. We can operate in no mans land and in tough terrain. We can build camps from scratch. Our people will accept living in remote locations, away from civilisation.
An additional niche that CCC is developing is brownfield work. In April, it formed a joint-venture (JV) company with Japanese contractor Chiyoda Corporation, named Chiyoda CCC Engineering, which will be based in Abu Dhabi and will target brownfield projects.
The Chiyoda [JV] is something different. It is another niche. We found there are lots of brownfield plants that have been built already, and preferably by Chiyoda, and these plants are 20-25 years old and they need to be revamped, debottlenecked and optimised, says Khoury. [Right now the operation] is not very big, 100-150 people or so, and our area of focus is mainly Abu Dhabi, the rest of the [UAE], Oman, Bahrain and Iraq. It is targeted at specific clients.
Ports, airports and metros are a niche for us; the good thing is they are not one-year jobs
The market for civil construction is even more competitive than oil and gas as international companies come to the region looking for work. At the same time, local companies are growing and taking on bigger projects. You have to accept it, there are plenty of local contractors in the Gulf, says Khoury. That was not the case 10 years ago in Saudi Arabia, Abu Dhabi and Kuwait. Even in Qatar, where very few existed 10 years ago, there are now plenty of local contractors.
The solution for CCC is to identify market niches where it remains competitive and can charge a premium for its services. For infrastructure, we want to go a step higher, so we are focusing on megaprojects that are in the range of $1bn plus, says Khoury. We look at three sectors. The first is airports, the second is ports and the third is metros.
Like its oil and gas schemes, CCC is working on these projects with partners. I dont think there is much expertise locally of handling these mega jobs. You need partners and we try to [develop] long-term relationships with [our] partners, says Khoury.
For airports, CCC has developed a partnership with Turkeys TAV and together the two have been successful at securing work on new airport projects across the region. The partnership has been successful in Libya, Abu Dhabi and Muscat, with more work currently being sought in Saudi Arabia and Kuwait.
CCC is also working with partners on ports projects. In Oman, it built the new Duqm port under a $800m contract with Turkeys STFA and Belgiums Jan de Nul. In Qatar, it recently completed an even larger $1bn port development at Ras Laffan as an engineering, procurement and construction contract with Belgiums Six Construct. Also in Qatar, CCC recently secured a $400m package for the construction of the container terminal at New Doha Port.
[Port] jobs need two things to be successful, says Khoury. One is either in-house design capability, which we have partly, or design engineering firms that will work under you, but you take on the design liability. The second part is the marine dredging portion and CCC has very good relations with firms such as STFA and Jan de Nul that we do repeated business with, so we can take these big risks.
While airports and ports have been built across the region for decades, metros are something new. Metros are the new game in town, says Khoury. Dubai was a pioneer and was followed by Saudi Arabia, where we had the chance of winning one of three packages.
The contract CCC won was for lines 1 and 2 of the Riyadh Metro, as part of a consortium with US-based Bechtel and the local Almabani General Contractors for the civil works and Germanys Siemens for the rolling stock.
Valued at nearly $10bn, the five-year contract is one of the biggest construction projects in the region, requiring 30,000 men at its peak. Although metros are a new direction for CCC, much of the work will be familiar. It is civil infrastructure. The lines are 60 kilometres [long], with only 24km underground. Everything else is above ground; that is our work the bridges, infrastructure, utilities and 40 stations. What is a station? It is like an airport, and this is our bread and butter. Metros are something that we will be used to doing in the region.
For future work, CCC is pricing the Gold Line of Doha Metro and is prequalifying for work on Abu Dhabis upcoming metro project. If it can win work on these schemes, it will secure steady cashflow for the coming five to 10 years. Ports, airports and metros are a niche for us. The good thing about this is they are not one-year jobs, they are three or four-year jobs that span over a nice time.
Operationally, one of the main challenges that working in the region brings is developing local talent. In Saudi Arabia, clients now expect contractors on major projects to train and develop local people. This is particularly important in areas where unemployment is a problem. It will no longer be meeting a quota; it will not be paying people to stay home. You will have to create opportunities for Saudis to work in your organisation in a meaningful way that will help your company and the country. You have to reinvest, says Khoury.
Once these personnel are trained, they then have to move to new projects. They have to learn to be mobile. Unfortunately, [people in] Gulf countries have to live in reality. They have to understand that life is sometimes [about making] sacrifices, so they have to move from one place to another to find projects, says Khoury.
Going to new places to work is something CCC is familiar with. Outside the Middle East, the company is working in three geographical markets. The first is Africa, where it has had a presence for more than 30 years and operates in the mining, and oil and gas sectors. The second is Central Asia, where the company is working on oil projects in Azerbaijan, Kazakhstan and Turkmenistan.
The third is Australia, where CCC has been able to leverage the experience and connections it gained working in Qatar, as the Gulf state became the worlds largest liquefied natural gas [LNG] exporter, with an export capacity of 77 million tonnes. I can proudly say every single [LNG] train in Qatar was built by CCC. So when Australia declared they wanted to reach 100 million tonnes of LNG, we thought we have to go there, says Khoury.
2011 President of CCCs engineering and construction division
1997 Executive vice-president for operations at CCC
1990 Moved to CCCs head office in Athens, Greece, and worked in various departments
1987-90 Responsible for all CCCs operations in Kuwait
1984 Graduated with a masters degree in business administration from the University of Southern California in the US
1978-81 Studied civil engineering at California State University in the US
1977 Obtained a high school diploma from the American High School in Kuwait