Growth potential in Abu DhabiJanuary 20, 2021
Klaus Schick, managing director of ILF Consulting Engineers, talks to The Energy Year about the pandemic’s impact on the company’s UAE operations and the latest on its downstream and water treatment projects. ILF provides engineering design and project management consultancy in the oil and gas industry as well as in water and environment, infrastructure and energy.
What was the impact of Covid-19 on ILF’s operations?
To be quite honest, on a group level it was much less severe than we expected. At the local level, the situation is different. Due to the nature of the business in the UAE, our model is to basically live off short-term contracts. Our main client, ADNOC, usually asks for projects to be finalised in half a year, and sometimes less than that. So, our modus operandi in this market is finishing one contract and starting with another right away.
We had to reduce our staff by around 20% to adapt to the decreased workload, of course. And we saw a drop in our turnover of 25% as we were forced to reduce our margins by 50% in some cases. However, we were still able to achieve a positive result in 2020, so from that point of view it was a little bit like falling off a cliff in the dark and, luckily, landing in the water.
Now, my bigger worry is about 2021-2025. So far, what was helping us was not having projects cancelled. No clients went bankrupt. But you simply don’t know what the aftermath of the pandemic is going to be.
So you believe the true consequences will come in 2021 and onwards?
I think the impact will last until 2025. If you take a look at the energy consumption curve during 2020, you will see a point where the pandemic hit and consumption has not bounced back up yet. Everything indicates that it won’t go back to the previous level any time soon, unfortunately.
How do you assess ADNOC’s actions to counterbalance the effects of the pandemic?
I think the UAE’s government has done a fantastic job in general, compared to other countries. With regards to ADNOC, from our perspective, the ongoing projects continued and the company was pretty fast and flexible in implementing remote working schemes, so those projects were not really affected. On the other hand, of course, the short-term projects that were coming in on a regular basis suddenly stopped, but there is nothing they could do about that.
Tell us about your projects in water desalination and water treatment in the region.
The schedule for the Jebel Ali reverse osmosis plant was mainly dictated by Expo 2020 Dubai, so now with that date being shifted, the date for commissioning became less urgent and the project is still ongoing. There have been some changes in the project execution and so this will be ongoing for a little longer.
From this office, we are also running the Al Basra water project in Iraq. This is a desalination plant combined with a water transmission system. Also, because of the pandemic the FEED has been delayed due to the fact that the required site visits and site works could not go forward as planned. However, this project has, over the past 16 months, generated a considerable workload for our office here in the UAE.
Moreover, we have also been quite successful in the past 18 months in terms of wet infrastructure, as we call it. We basically strengthened our position with ADSSC [Abu Dhabi Sewerage Services Company].
We are not yet at the point where we would like to be in terms of infrastructure in the region, but we are hopeful 2021 will bring some growth in this particular business division.
What growth drivers do you see happening for ILF’s engineering in the green energy sector?
When it comes to solar energy, the local market is quite competitive in the UAE. In addition, compared to oil and gas, there is not a lot of engineering competence required in the solar business. In the beginning you have a few strategic decisions on panel and location selection and so on but, overall, it is a very niche market where most of the front-end engineering design has already been done.
The UAE are frontrunners in this respect and it’s now known to anyone who is in solar that the UAE is a market where there is a lot ongoing, so for us the time is over and we will be looking into frontier markets that also need this early know-how.
That’s where I see the future for us: in solar. Of course, we are always interested in what is happening in Abu Dhabi and the UAE and we would like to continue our position here.
Tell us about your projects in the UAE’s downstream sector.
Firstly, we are the project management consultant for a large-scale refinery project for ADNOC which is currently in the pre-FEED stage. We hope that this will be continuing as it is extremely exciting to be part of this project. Secondly, we will try to build on our long-lasting partnership with OMV, which increased its shareholding in Borealis [from 36% to 75%] to create additional opportunities with the ADNOC-Borealis joint venture Borouge. We have great expertise in petrochemicals and we hope that we can continue supporting those clients as a professional and reliable engineering partner.
What is the company’s strategy for 2021-2022?
In September 2020, ILF transferred its global headquarters for oil and gas to the Abu Dhabi office, so we have significantly increased the portfolio of countries we look after and we believe that will give us huge growth potential as an organisation. We are hopefully looking at a staff of 500-plus employees in the mid-term future.