LONDON // While Britain got to grips with freezing temperatures recently, Bryan Bunn, the managing director of UK firm Nortech was enjoying the relative warmth of an Abu Dhabi winter.
Mr Bunn was spending a few days in Nortech’s UAE office, which opened several months ago in Abu Dhabi, with a staff of about 10 people.
The engineering, procurement and construction business based in the north-eastern English town of Darlington has been working in the region for about 18 months and recently formed a joint venture with its UAE-based partner Al Dhabi Contracting.
The company has been working on two onshore gas processing contracts for Abu Dhabi Gas Industries (Gasco) – the upgrade of a flare system at one of Gasco’s major onshore gas processing facilities and the other project management and front-end design services for the replacement of parts of one of Gasco’s other facilities. Nortech works in the oil and gas industries and related fields, providing design and engineering solutions.
“In our business you need geographical diversity so that you can withstand the cycles of oil and gas.”
A few years ago Nortech thought it would achieve geographical diversity by working in the US shale industry – while readying itself for shale operations in the United Kingdom – but the collapse in the oil price put paid to that.
Now it is finding that the Middle East market offers richer rewards, despite the higher barriers to entry. “Even in the current climate with the lower oil price, the potential in the Middle East is significant,” says Mr Bunn.
“There is a significant integrated supply stream here: on shore industry in petrochemicals, refining and polymers. You could liken it to the old ICI [UK chemicals major] model, back in the north-east of England, but on a much larger scale.
“The skills we have are recognised here and there are significant market opportunities, but you have to play the long game. You can’t enter and expect to be successful overnight.”
Mr Bunn would have been exploring opportunities in the UAE without June’s Brexit referendum result, but the dramatic decline in the pound has suddenly increased the attractiveness of British companies.
Despite a strong rebound on Tuesday following the prime minister Theresa May’s announcement that the country would leave the European single market as part of its Brexit strategy, the pound is still a long way off its pre-Brexit levels and likely to remain so.
Indeed, Deutsche Bank predicts the currency could still weaken more than 10 per cent.
“As a result of Brexit the UK has become more attractive for overseas investment because we are 20 per cent cheaper. Previously we used Indian engineers and designers to support our exports and reduce our average labour cost, but now our UK engineers are even cheaper than the support solution in India, which is contracted in dollars.”
“That means clients can tap into greater expertise in the UK for less,” Mr Bunn says.
A project that may have cost £10 million [Dh 44.5] a year ago, can now be done for £9m, Mr Bunn says.
The impact of that is being felt by contractors, heavily used in this sector, who can no longer expect the rates they were paid when oil was twice the price it is now.
Mr Bunn says he wants to futureproof his business, as best he can. Nortech probably made 10 per cent of revenues from overseas last year. In three to five years’ time, he expects that to be between 25 and 35 per cent.
“Things are harder to get into here [in the UAE] but when you do it’s significantly bigger. When you go fishing, you can catch a whale. In the UK, you can only catch a sprat. In the UK now a small job is about £5m; here a £50m project is considered small.
“Our plan is to focus on establishing a presence here in Abu Dhabi which gives us that beachhead for further development in the region,” Mr Bunn says.
“We’re regularly approached about opportunities in neighbouring Emirates but we’re not ready for that just yet.”
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