Controlling growth in a piping hot market
Pipe manufacturers are niche success - once they get in with the right clients.
Operating in the piping sector in Dubai currently presents a nice dilemma for companies in the GCC. With major investment flowing into the region, companies are being presented with more choice over where to direct their focus. While construction is the most visible ongoing source of contracts, the oil and gas sector is notable for its benefits to companies who can work across various sectors.
According to Rami Mahmoud, regional manager, Middle East, Victaulic - one of the world's leading pipe joining manufacturers - the oil and gas sector is a more cost-efficient market to be involved with, as the effort required is less for a greater turnover. Unsurprisingly its biggest market is Saudi Arabia, driven mainly by the emphasis on oil and gas, petrochemical and other industrial sectors.
"It is more difficult to penetrate the market, but once you are in and part of the system, it is very smooth, while in the construction sector it all depends on the end user," says Mahmoud. "What makes or breaks it is the contractor. Some contractors are well organised and do a great job; they know what they want, they give you schedules and enquiries at the right time.
"When the contractor is not organised, it is much more of a challenge," he continues. "They don't know what they want, they don't have the drawings, and after you have waited months they call you and say they wanted it yesterday." Consequently Victaulic does not spend time looking for work from smaller firms as it simply raises too many questions.
Other companies too are looking to capitalise on this sector. Earlier this month, Interpipe announced plans to increase production of its seamless pipes for the oil and gas sector, manufactured in accordance with the API 5L quality standard. Recently the company's mills gained prequalification from two oil-producing companies, Kuwait Oil Company (KOC) and Abu Dhabi National Oil Company (ADNOC). Interpipe Niko Tube has been approved for inclusion in the KOC's list of manufacturers for oil and gas pipes produced in accordance with API 5CT. Interpipe Niko Tube and Interpipe NTRP have also gained prequalification from ADNOC. Rostyslav Chudnovsky, director of tubular sales for the oil and gas industry, says: "This opportunity allows us to extend our customer base and improve our sales geography in the Middle East market."
Any increase will be part of Interpipe's high expectations for the Middle East and North Africa region, where the company recorded a 50% growth in sales in 2006. "We're growing quicker than the market," says Oleksandr Kharchenko, director corporate affairs. "We're very focused on the prequalification process and hope to have more to announce before the end of the year."
Because of the number of companies looking to break into an already busy market, firms are facing logistical challenges of expanding in an increasingly condensed city. "Our biggest challenge is growing," says Mahmoud. "We are in a struggle to find space for storing materials. Dubai is a busy and expensive place. There is a market here; it is just having the resources to serve the market. But it is a good problem to have." The company opened its office in Jebel Ali in 2000, and has grown more than 500% in three years.
The Middle East market is one that is taking advantage of Victaulic's technology as it offers a faster, simpler, more efficient process, which relies on less skilled labour and is most importantly, weld-free. And this is one of the big reasons for using grooved pipes and fittings. Welding is a high-risk practice on building sites, especially when carried out in close proximity to flammable materials.
Health and safety aside, in a burgeoning industry, the greater efficiency of the system, which relies on nuts and bolts as opposed to welding, is perfectly in tune with the current demands being placed on all suppliers in Dubai.
"When you go taller and bigger and faster, this becomes more of an issue. If you are on a tight schedule, you cannot add 100 labourers to a site as there is no space; there are not enough elevators to move men and material and you cannot mobilise any faster. So the only way to do it is a faster approach, and a more efficient system. And that is one of the reasons why people use our products."
According to Mahmoud, using a Victaulic piping system reduces installation times by 50-60%, requires less labour and, more importantly, less skilled labour, as there is no need for qualified welders.
Victaulic is the inventor of the grooved piping system and the company remains focused on research into new solutions. An event in November is targeting senior technical professionals from various industries to gauge the challenges they face and come up with various solutions.
"The leaders in the market in every application are the ones who follow the latest technologies and solutions," says Mahmoud. The Middle East, for example, focuses on district cooling, which requires solutions that didn't previously exist in Victaulic's range of products.
The company has been involved in some key projects in Dubai including the Burj Al Arab, Emirates Towers, Dubai Marina and Jumeirah Lake Towers. It has recently been tasked with delivering valves to one of the biggest fire protection installations seen in Dubai at Dubai International Airport.
Emirates Airline commissioned the US $353 million (AED1.2 billion) facility, which sits on a 55ha site just north of the existing facility. Its eight hangars together form the largest free-spanned structure in the Middle East. The new hangars have been designed to house the new Airbus A380 and anticipated growth in Emirates' fleet, which is expected to double over the next seven years.
Due to the expanse to be protected, 12" (30cm) fire protection pipes traditionally used throughout the main loop were replaced with pipes up to 32" in size. Throughout the system Victaulic Zero-Flex couplings were used alongside Victaulic elbows and tee's and over 150 Victaulic Firelock 4" and 8" deluge valves. The valves were installed to enable maximum coverage throughout the hangars and the larger pipe diameter and increased proximity of deluge valves ensures the volume of water required for such an expanse could be dispersed through the system within seconds, if required. Mahmoud adds that the valves were on site four days after the order was placed - rather than the normal lead time of 10 weeks for this product. The expanded facility will be capable of handling a projected 60 million passengers by 2010.
Victaulic also have been working in Abu Dhabi on the Abu Dhabi National Exhibition Centre, which had to be completed in eight months from start to finish. Victaulic provided grooved-end couplings and fittings for the plant room, chilled water distribution and fire protection and portable water piping to begin fitting in May 2007. Again, as the lead times were short and did not require welding, couplings could be installed quickly and without limitations placed on a jobsite when welding is in progress.
With contracts being announced almost daily, the opportunities are numerous in Dubai, the challenge is securing growth while coping with ongoing demand.
"The potential is there and it is going to be there for coming eight to 10 years. Throughout history we have never had so much investment or money coming into the Middle East, so it can be easily sustained for at least 10 years. More of a concern is the lack of qualified people to sustain growth and challenges in growing logistically," says Mahmoud.