VECO: From Anchorage to Abu Dhabi

11 October 2002

A familiar name to those involved in natural gas and crude oil facilities and pipelines in America's frozen north, VECO has become increasingly well known to Middle East clients in recent years.

VECO was set up in Anchorage, Alaska, in 1968 to support offshore hydrocarbon development projects in Canada and the northern US. Having expanded its north American operation, the multinational concern soon started looking for overseas opportunities. Its first port of call was in the North Sea in the early 1970s, when it was awarded engineering and design work for offshore platforms.

In the early 1990s, VECO turned its attention to the Middle East. It set up an office in Abu Dhabi in late 1992 to support the engineering, procurement and construction management (EPCM) contract won by its Calgary office on the Bab acid gas recovery project.

Two years later, VECO Calgary broke into the Qatar market, winning an estimated $3 million subcontract from Athens-based Consolidated Contractors International Company (CCC) to provide detailed design, procurement and construction services on the Dukhan water injection project.

Buoyed by the Calgary successes, the Abu Dhabi office began bidding for more regional projects. 'In 1998, we started taking up projects in our own right. Senior engineers were brought in from north America,' says Fadi George Abbosh, president and general manager of VECO Middle East & North Africa (MENA).

The Abu Dhabi office's first successes were an effluent system upgrade at the Umm al-Nar oil refinery for Abu Dhabi National Oil Company (ADNOC), and a produced water management system for Zakum Development Company (Zadco).

VECO entered the major project league last year in Abu Dhabi, winning the project management consultancy (PMC) contract for both the first phase of the Northeast Abu Dhabi field development project and the onshore Bab field expansion. It also broke into the Dubai market, taking the PMC for the gas compression project at Margham.

The run of success has not been limited to the UAE, however (see table). It has won a number of front-end-engineering and design (FEED) contracts for Qatar Petroleum and several general engineering service (GES) contracts with Canada's Nexen in Yemen as well as with China National Petroleum Company and its subsidiaries throughout the region. The surge in contract awards has seen the company's office swell to about 120 people.

Such rapid growth has inevitably raised eyebrows among some of VECO's competitors, which have claimed a major reason for the company's success has been its ability to submit competitive prices for contracts based on locally available manpower. 'We are not resting on the laurels of our north American credentials,' Abbosh says. 'There is support, but we do not price work here [in Abu Dhabi] and say it is done out of our Calgary office.'

Rather, Abbosh attributes the growth to the company's selective bidding strategy. 'We started targeting certain projects and clients and went for those. We wanted to stay focused, rather than bid for all projects,' he says.

The company's extensive experience in pipeline engineering and project management is paying dividends in the UAE. It is providing PMC services on the 110-kilometre liquid sulphur line from Habshan to Ruwais in Abu Dhabi, and performing detailed engineering to Indian EPC contractor Dodsal on the 180-kilometre Al-Ain- Fujairah gas pipeline and the 20-kilometre gas pipeline from Ruwais to Shuweihat. 'We see this [the relationship with selected contractors] as a strategic alliance for future projects, not just in Abu Dhabi but in other countries in the region,' Abbosh says.

The upstream sector will remain the key market for VECO. However, it is also starting to target downstream opportunities, such as sulphur recovery and treatment units, tank farms, refineries and co-generation power plants of up to 80 MW.

Bidding for major EPC contracts is also on the agenda, although it is unlikely to happen immediately, given the severe competition from well-established players and the unlimited liability placed on international companies that are awarded lump-sum turnkey contracts in markets such as Abu Dhabi.

'We want to establish a firm base first,' says Stefano Raciti, business development manager in VECO's MENA office. 'Our strategy will be to consolidate the base of expertise we have established here and adapt our corporate project management and quality control procedures to the execution of work in the region, before we move into large EPC contracts worth more than $50 million. It will probably take 12-18 months before we are in that position. Until then, we will go on a joint venture or subcontract basis.'

Already well entrenched in the UAE, Qatar Yemen and India, where it has an established operation in Mumbai, VECO is looking to diversify into Saudi Arabia, Kuwait, Bahrain and Egypt. Projects being monitored include the industrial development programme planned at Al-Khafji in the neutral zone, the low-sulphur diesel production (LSDP) project at the Sitra refinery in Bahrain and the Egypt/Jordan gas pipeline scheme. Iran, Libya and Iraq are other possible new markets, when the political situation allows, but Abbosh says: 'Our strategy will be never to over-stretch ourselves. Our declared policy is to have satisfied, and hence repeat, clients.'

Ashok Dutta

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