A consultation has been launched on innovative proposals to create a collaboration venture aimed at boosting Scotland’s export performance and helping the oil and gas supply chain expand in the challenging Middle East market.
HFI Consulting International plans to introduce a bridgehead cluster venture (BCV), bringing together a group of companies to establish up to three joint ventures in Abu Dhabi – a region that continues to offer significant expansion opportunities for advanced technology in the energy sector.
The consultation exercise exploring the level of interest in the project will be formally launched to mark the inaugural Energy Exports Conference taking place in Aberdeen on June 18 and 19, where opportunities in the Middle East will be a key theme.
HFI managing partner Hugh Fraser, who has been helping Scottish firms internationalise in the Middle East for almost 20 years, said the model provided an innovative solution to some of the main barriers preventing business from exporting their technology and know-how to the region.
“Bringing together a group of synergetic and non-competitive companies to collaborate with a local partner in Abu Dhabi under the BCV model not only mitigates the start-up risks of an individual approach, but also consolidates costs and overheads and maximises the chance of success,” said Mr Fraser, who is a member of the GlobalScot network of business experts brought together by Scottish Enterprise to help companies expand in international markets.
“Abu Dhabi and the wider United Arab Emirates remains one of the world’s most prospective energy markets and is often the springboard for wider expansion in the region. However, it is a challenging market to enter and to develop within, especially for small and medium-sized enterprises with limited resources. Historically, failure rates or instances of under-performance against expectation are too high.
“In my experience, businesses rarely fail on account of their technologies, products and services. It is the result of external factors such as timelines and associated costs being underestimated, lack of a full-time local presence and local partner challenges.
“More recently, the drive of many Middle East countries to put localisation and in-country value high up the agenda has made traditional agency and distributorship models increasingly ineffective and obsolete.”
Mr Fraser believes there is scope for around 10 oil and gas service companies to form a BCV – with as many as three clusters being launched simultaneously. Each cluster would be appointed its own locally-based general manager.
Three local partners in Abu Dhabi – Al Yaseah Group, Leaders Oilfield Services and SAMCO – have already agreed to join the initiative and will play a key role in assessing and accessing market opportunities for the participants.
The key objective of the model is for the firms to generate US$1.5m to US$2m of first gross revenues within 12 to 24 months of commencement. There would then be an option for the participants to continue with an in-country registered and licensed legal entity, giving them a platform to generate US$5m a year.
If the consultation shows there is both an appetite and commitment from firms to join the clusters, it is anticipated that the ventures will be launched at the high-profile Abu Dhabi International Exhibition & Conference (ADIPEC) in November this year and initiated operationally on 1 January 2020.
The Scottish Government recently launched a 10-year plan to boost the nation’s export performance, with the aim of doubling the value of exports from the current level of £32bn. Mr Fraser said that new and innovative routes to market need to be considered in order to move the needle.
He added: “The figures on export performance speak for themselves: the current approach needs to be overhauled and it’s time to do things differently. This business model aims to radically reduce the timeline, costs and risks associated with the route to market and to maximise the chances of success.
“No one should doubt that it is a major challenge to pull together, launch and implement a successful BCV, but the ultimate rewards are there to be accessed and the model can be replicated in other territories.”
Based in Aberdeen and Dubai since 2003, HFI Consulting International supports advanced technology businesses operating in the oil and gas, renewables, power and water sectors to grow in international markets.