MEED: How was Topaz affected by the global downturn and how do you foresee the coming 12 months?

Fazel Fazelbhoy: 2009 was a slow year in terms of attracting new orders. Insecurities in the market have meant that many projects have been delayed or have been re-bid. However, in the engineering business, so far in 2010,
a lot of orders have come in, especially for engineering, procurement and construction projects in Fujairah. We’re particularly strong in Fujairah thanks to a solid, historical track-record and a significant investment in a 30,000-square-metre fabrication facility, commissioned in 2009.

Projects are hitting the market, and the oil and gas-focused ship building units are benefiting from numerous contracts secured in the first quarter, so 2010 looks to be a markedly stronger year than 2009. The marine repair and ship building units will continue to struggle through 2010 with weak demand and order deferrals driven by soft global trade and low economic activity.

There are three main areas for growth in the marine business: to add tonnage, fleet or company acquirement, and to have a young fleet. The average age of our vessels is 7.6 years against a global average of 14.2 years, but fleet modernisation is an ongoing battle. Our renewal programme continues with constant new asset acquisitions and disposals of older tonnage. Topaz is also following Abu Dhabi’s plans to build a pipeline from Abu Dhabi to the east coast. There will also be a dedicated facility for 25 million cubic metres of oil storage in Fujairah. This is not a commercial project, it is meant as a plan B in case political tensions in the region [rise]. Any kind of blockade in the Straits of Hormuz would block 40 per cent of the world’s oil shipments.

Does Topaz have plans to enter new markets?

The era of easy oil is over. Large onshore fields are pretty well developed and depleting. We believe future oil will be deep, distant, difficult and dangerous. For example, the Brazilian Tupi field’s reserves are around 5-7 kilometres down and about 300km from the shore. The new deep-water markets with tremendous potential are Brazil and West Africa.

[Brazilian oil producer] Petrobras has launched a $174.4bn strategic plan up until 2013, 91 per cent of this will be spent in Brazil and we hope to be present in Brazil as soon as we are able to. In West Africa, Angola is a deep-water market and Ghana has had some new finds right now.

How significant is Iraq to your operations?

The Basra terminal is one of the lifelines of Iraq and the country is going to need massive development going forward. Together with Khawr al-Amaya oil terminal, it is vital to Iraq’s prosperity and economic stability. Along with the rest of Iraq’s oil and marine infrastructure, it is in a dire state and will need massive upgrades. This provides opportunities for a company of Topaz’s capabilities in both oil and gas and marine services. But the safety of our employees is our main concern and so far we’ve been reluctant to take any major steps to set up a permanent presence there. But as Iraq settles into a peaceful, democratic [nation], it will need construction materials and the best way to get them there is by boat. Topaz currently has three bids under way with a total value of $200m for the construction of tanks in Iraq.

How does the price of oil affect your business?

In the offshore marine market, a steady oil price is critical. It is not as important how high it is as much as how stable it is. Volatility in oil price leads to uncertainty, which then leads to a paralysis in decision making. Of course, it’s better to have oil at $80 a barrel rather than $40, but stability is key.