Scaling new heights

Jackup master MIS is looking to buck global trends and emerge from the current squeeze as a billion $ company.

In the current climate there are few firms eyeing aggressive expansion, but Sharjah's corniche is home to one such local success story. With an order book bulging and a yard at full capacity, MIS in a charmed position as the industry reels from a year of shocks.

Kevin Hudson recently arrived to head the group as their chief executive officer, and acknowledges he's arrived at a tumultuous time.

"I arrived at Maritime Industrial Services (MIS) in October and hit the ground running. It's a very different market scenario from when I decided to join, just months beforehand, but I've always worked in this industry and I've witnessed contractions before," says Hudson.

"The market's cyclical in nature, but the crunch times I've worked through include those depressed market periods in the 70s and 80s, but to put the current situation in perspective, I don't think they were quite as bad as the current scenario. You could probably go back to the 1930s for a parallel situation," he says ominously.

"The problem hasn't come from one source; it's a combination of the economic crisis, and the collapse of the crude oil price. I think the right level for a barrel of crude oil is around US$75, because that's a sustainable level for the industry. $140-plus is equally as ridiculous as $30 in my opinion."

Hudson says that right now the market trying to find its balance, evidenced by the fact that it is now roundly accepted that the $140 environment was brought about not by solid supply and demand issues, but by market speculation.

"Now we've got a depressed market which is driving the price to an artificial low. It's not catastrophic because it will come back, but a severe market drop does come with risks," he explains.

The fear is that a depressed price drives whatever investment that is taking place towards the production side, because the motivator becomes getting product out of the ground to hit revenue targets.

"Exploration investment typically drops off, so no new reserves are found. All of a sudden the market wakes up to a supply shortage and the price skyrockets again."

That said, Hudson acknowledges that regionally that scenario is not as acute. "We're likely to see companies in the region retrenching investment into cheaper production. Experience shows that the multinationals and the national oil companies are quite strategic, so short term blips in the market don't throw their long term objectives off. I think everybody is applying caution to their business at the moment, quite rightly."

The growing need for domestic energy by the Middle East's largest producers will no doubt provide an impetus to upstream market which may insulate companies here from the worst effects of the global downturn.

"There is a growing need to produce energy, particularly gas in much of the GCC, and I don't think the export price of crude will dent those plans or those national growth ambitions."

Globally, however there will be companies and projects which will fall as casualties to the currewnt price environment. Hudson joined MIS from a Candian east coast fabricator, and the effects were already being felt in that market before he'd left.

"I was CEO of a rig building yard in Canada. Although the deepwater work there is carried out by semi-submersibles, there is still a sizable jack-up market. In fact most of the exploration that's bee done recently in the eastern waters off Canada has been done by Jack-ups."

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