Saudi Arkad forms oil, gas venture with ABB

Bloomberg

Saudi energy services com-
pany Arkad, which is building
a nationwide pipeline netw-
ork for oil giant Saudi Aramco, will expand outside the kingdom in a venture with ABB Ltd. that opens the doors to business in North Africa and the Gulf region.
Arkad signed a deal to acquire a majority stake in a new joint venture with ABB’s oil and gas engineering, procurement and construction unit, Managing Director Hani Abdelhadi said in an interview. The project will give closely held Arkad a foothold in Algeria, Kuwait and the United Arab Emirates, he said. Both Arkad and ABB declined to disclose the size of their respective stakes and the value of the transaction, which they target for completion in December.
“It has been our goal since the beginning to become an international company,” Abdelhadi said. “Through an acquisition, it’s easier market access than trying to go and set up in each country.”
Arkad is expanding at a time when energy-services companies worldwide are struggling to cope with lower crude pri-ces, which have driven oil
and natural gas producers to slash investment. Crude is
currently trading at about half its 2014 peak, and Schlumberger Ltd. and Baker Hughes, the two largest oil service companies, have blamed lackluster earnings on the reluctance of North American explorers to boost their spending. The oilfield services business was the worst hit in the three-year crude-market crash.

‘GROWTH OPPORTUNITY’
For Zurich-based ABB, a provider of power and automation technologies, the deal promises new opportunities in Saudi Arabia, where Arkad’s main customer is Saudi Aramco, the world’s biggest crude exporter. “We see this as a clear growth opportunity,” Per Erik Holsten, managing director of ABB’s global oil, gas and chemicals business, said by ph-
one from Oslo. ABB “wasn’t
getting enough scale” with its existing energy contracting
operations, he said.
Arkad, based in the eastern Saudi city of Al Khobar, is currently building a gas pipeline system for Aramco that will span more than 1,100 kilometers (685 miles) from Saudi Arabia’s Eastern Province to Rabigh on the Red Sea. The network is part of the country’s Master Gas System that aims to supply gas as a replacement for the oil
currently used to generate electricity, and also to send gas to petrochemical plants.
Arkad expects to generate 2 billion riyals ($533 million)
in sales this year.
Abdelhadi declined to give
estimates for 2017 income or
projections for future sales and income. Arkad, established
in 2011 as Saudi KAD, was
re-named in February.
The joint venture, to be called Arkad-ABB SpA, will be based in Milan at the headquarters of ABB’s existing oil and gas EPC business. Abdelhadi and Holsten declined to identify any of the venture’s clients.
Arkad’s expansion aligns
with Saudi Arabia’s Vision 2030 plan of diversifying the economy and creating jobs thro-
ugh small and medium-sized businesses at home and abr-
oad, Abdelhadi said. “We would carry the Saudi flag out of
the kingdom.”