The baron’s baby

“If you go back and take newspaper clippings from the last thirty years, you are going to see history repeating itself,” he says. “I’ve been in the business since 1965 and it always comes around again that people say oil reserves are going to run out but new reserves keep being discovered – with oil prices now at US$70 per barrel there is an incentive for people to gamble and spend more and more money to get to the most remote areas to find new reserves.”

Starting out

Leaving his job as a petroleum engineer at Halliburton in 1977, Alalawi set up his own company along with his two best friends. The business now employs over 1000 people and stretches over 18 countries from Turkmenistan to Algeria. In simple terms, ASE is in the oil services sector. “I’m not in the drilling business, if they find oil and want to start producing it, that’s where I come in,” Alalawi explains. Despite Alalawi’s frank dismissal of what he calls the “doomsday scenario” that oil reserves will struggle to keep up with growing global demand in the coming years, the facts are there to be seen. According to the US government’s Energy Information Administration, worldwide oil consumption will rise from 80 million barrels a day in 2003 to 98 million barrels a day in 2015. By 2030, this figure is expected to stand at 118 million barrels. With the Chinese boom one of the main drivers in the world’s soaring oil demand, there will be increasing pressure on oil drillers from the Middle East – an area that will provide 69.4% of China’s imported oil by 2020 – to extract harder to reach resources. Although many of the multinational giants such as Shell have diversified into looking at renewable energy sources, this is not an idea that Alalawi will entertain.

Instead, he is more focused on accommodating ‘drillers’ striving to reach previously uncharted territory.

In Abu Dhabi, an area where natural gas production is expected to rise to 6 million cubic feet a day by 2008, previously untapped ‘sour’ gas reserves will soon be exploited, with ASE at the centre of the operation. Until recently the extraction of the gas wasn’t considered commercially appealing due to the expensive process of treating the hydrogen sulphide-rich gas. This looks likely to change however, thanks to a partnership between ASE and the Abu Dhabi National Oil Company (ADNOC).

“We’ve been involved with ADNOC in doing some initial tests of the sour gas reservoirs,” says Alalawi.

“For us and ADNOC it’s going to be more expensive because of the depth and the safety aspects as sour gas is poisonous. Also, ADNOC will have to decide what to do with the yellow mountain of sulphur left over,” he adds.

Despite the project costing more revenue than extracting standard natural gas, Alalawi still seems confident that the venture will bring profits and be a success.

If you mentioned the word oil to any executive in the region over the last six months, invariably the conversation would turn to the much talked about US$70 a barrel oil price. So what does the man who admits he’s “seen it all” in the oil industry predict for the future of oil prices? “I think in the next five years the price will fluctuate between US$50 a barrel and US$80, but it will never go below the US$50 mark.”

While rising oil prices can have a huge effect on companies that extract oil however, Alalawi insists that the effect on his business is indirect and minimal. “Obviously we are in a very volatile area here politically and the politics of world powers are not very encouraging towards creating stability, however, I am in a very fortunate position because my core business is to help oil companies test wells, not to discover oil, so whether oil is being produced at US$10 or US$50, the oil companies will have to have me doing the tests.”

Skills shortage

Despite there being no shortage of available workforce in the Middle East the oil industry, like the region’s construction and logistics industries, is currently suffering from a shortage of adequately skilled workers.

“One of the biggest challenges we all face in the industry is overcoming the very, very short supply of skilled people. In the past, we would hire people based on contracts but we found it was a slow growing process. We decided that to accelerate this we needed a human factory where we take people from university, train them and churn them out like a production line,” says Alalawi. “Now, I can go to the head of the factory and say ‘by next year I need 20 people’ and it’s his obligation to get them ready,” he adds.

Since launching his oil services empire, Alalawi has slowly overcome many great challenges and witnessed at close hand, the ever-changing fortunes of an industry that is intrinsically linked to political instability. In all his years in the business however, he cites his biggest challenge as dealing with negative attitudes from the multinational oil giants operating in the Middle East and North Africa.

“The challenge we have always faced is credibility problems. The question the multinationals always ask is can a local company perform to the standards of multinational service companies like Halliburton?” he explains. While appeasing the demands of the global giants may be his biggest challenge, Alalawi is also charged with the task of creating his own global empire. Traditionally operating from the Middle East, the company now has its sights firmly set on conquering the Central Asian region. ASE’s first major assault on the market is a deal with Hilong, the biggest drill pipe manufacturer in China. “People want to produce more oil, but what’s delaying them from moving faster is the delivery of drill pipe.

By signing with Hilong we can shorten the delivery period substantially – you can cut a month off on shipping from China compared to the US and pipe delivery time from the US is 24 months compared to Hilong who can deliver in six months.” As well as building trade ties with the vast Chinese economy, Alalawi has also outlined his strategy to capture a piece of the CIS market. “We have a small operation in Turkmenistan but we are talking with our partners right now to set up a joint venture to establish ourselves in Kazakhstan which, with the biggest oil patch in the CIS, will be the biggest business opportunity in that particular region.”

Having grown the company from scratch, Alalawi remains extremely cagey about the financial workings of ASE. He refuses to unveil any details about his potentially lucrative deal with the Chinese Hilong group and admits that even the development of the region’s first energy trading platform (Energy City Qatar) would not persuade him to take his company public.

With ASE still built around the three Yemeni friends that originally launched the company 30 years ago it seems Alalawi’s business is a traditional one. While all about Alalawi the hype over depleting oil supplies rumbles on, he remains undeterred that the industry can survive for generations to come: “I’m an optimist and have to stay that way to go on with my life,” he says.