$quot;You join us here in Kuwait at a very exciting time,$quot; Amer Huneidi began. $quot;The Middle East economy is very buoyant due to the high oil prices and there is a lot of project activity throughout the Arabian Peninsular which is driving demand for industrial gases. Our group of companies are benefiting from this and I am pleased to announce that we have recorded growth over the past 3 years - averaging 20 percent per annum. We are in the middle of a major re-structuring which I would like to discuss and this hopefully will lead to further rapid growth over the next 5 years,$quot; he stated confidently.
How did the Huneidi Group begin?
The Hunedi family's interest in industrial gases began when Mr Huneidi's father Salim left Palestine in 1948 following the conflict in the area.
$quot;He came to Kuwait and was very interested in the fledgling industry here,$quot; said Mr Huneidi. $quot;He won a construction contract and realised that he needed supplies of oxygen - but there were none readily available. There was one company that owned a small oxygen plant - the Kuwait Oil Company.$quot;
KOC had surplus oxygen, but there was a waiting list, so Salim contacted the MD of KOC, a British expatriate. He proposed that he should take over the plant and run it on behalf of KOC. He would ensure that the company received their required oxygen supply, and would sell the surplus to the merchant market - effectively becoming a trader in oxygen. This led to the formation of Kuwait Oxygen Company in 1953.
$quot;Demand grew over the next two years, and my father bought his first ASU from Germany, commissioned in 1956. The company became the first privately owned producer of oxygen in the Arabian Peninsula. Other private companies seemed to follow the lead and by 1956 there were plants in Saudi Arabia as well. It would be easy to say that we have never looked back since then but as you know from recent history, life has not been easy for Kuwait or the region over the past 20 years.$quot;
Soon after Kuwait Oxygen Co. was established, the Kuwait Oil Company objected to the company using the initials KOC, so Salim had to rename his company in English to become the Kuwait Oxygen and Acetylene Co. (KOAC).
In 1974, Salim Huneidi formed Kuwait Industrial Gases Corporation (KIGC) to produce gases and liquid and cater for the expanding petroleum industry. KIGC is located in the Shuaiba Industrial Area, which includes all the main refineries and petroleum installations. As part of this set-up KIGC has a pipeline linking it's production facilities with the refineries.
Later, in 1977, Salim Huneidi decided to expand outside of Kuwait and invested in a gases operation in the United Arab Emirates (UAE), establishing Arabian Industrial Gases Co. (AIGCO) in Sharjah.
Amer Huneidi joined the company after graduating in 1986, entering the sales department. His role was to expand business in Iraq, at the time a fast growing market for speciality gases. $quot;By 1988, our business in Iraq was larger than in Kuwait with increasing orders to produce and distribute gas for Iraq.$quot;
$quot;Everything changed though in 1990!$quot;
The first Gulf War and the impact on KOAC/KIGP
On the 2nd August, Iraq invaded Kuwait and life for Kuwaitis and other residents changed dramatically. Not only was there devastating effects for local business, and damage done to major facilities but also many people fled the country.
$quot;While the occupation lasted 7 months,$quot; said Mr Huneidi, $quot;our company was closed down, our business in Iraq finished and our family fled along with many others.$quot;
He returned three days after liberation by the allied forces. Within a year, however, the company had begun operating again - but with difficulties.
$quot;Before the invasion we had 100 people working for us, many expatriates from neighbouring countries and India. It took three years to get back to the same level of business within Kuwait.$quot;
Many of the company's customers had gone under. While re-construction took place, it was slow to kick off. Meanwhile the remainder of the Gulf region had moved on - it was boom time in other countries and Kuwait was being left behind.
Fortunately, the investment made in the UAE in 1977 gave the company a platform to develop after 1990.
KOAC and KIGC - what's the business?$quot;As I mentioned at the start, KOAC is the cylinder end of the business and we have a modern cylinder filling facility here in Shuaiba. We truck in liquid gases from our ASUs nearby to fill cylinders and produce our other needs.$quot;
KOAC owns and operates a 6tpd CO2 plant, a nitrous oxide plant, an acetylene unit and a small electrolysis hydrogen generator. The company is expanding its gas mixing capability. The company has a fleet of 20 cylinder trucks and recently introduced palletised cylinder handling to improve efficiency and safety. This has lead to a kaban cylinder handling process which is being continuously developed. The company currently processes 1,500 cylinders a day. KOAC also has an old cylinder handling depot in Shuwaikh, near Kuwait City.
Over at the gas production facility (KIGC), the company still operates a 25 tpd liquid plant that is 20 years old but the main feature of the facility is the 460 tpd ASU which was built in 2003 and clearly dominates the complex. The company has ample space for development and for distribution storage. KIGC has just invested a large number of brand new semi-trailer bulk liquid tankers from Cryolor.
KIGC supplies gaseous oxygen to Equate to support ethylene glycol production. It also has pipelines linking up two all three refineries of the major refineries in the region. The company recently commissioned a 150tpd Linde liquefier to support the growing demand for nitrogen in the oil and petrochemical business.
What is the structure of the group?
$quot;At present, we have separate legal entities in several countries, these include Kuwait, UAE, Pakistan, Jordan, Qatar and Syria,$quot; said Mr Huneidi.
$quot;Our next investment outside of Kuwait was in 1995, when we moved into Jordan. We established Jizza Gas Co to supply the local market which was accelerating with additional business on the border with Iraq. The company is located in the Jizza industrial area near Amman and we installed an ASU to supply the market.$quot;
$quot;We expanded further in 2000 when we formed Jazzira Gas in Syria and invested in a small Cosmodyne unit which supplies liquid products to the market.$quot;
A more recent addition to the group in Kuwait is PWT International, a contracting company formed in partnership with PWT SpA of Italy, well-known in the field of computerized automatic pipe welding technology.
PWT has been involved in major cross country pipelines for oil & gas worldwide, and have currently major projects in China, Kazakhstan, and India.
$quot;In 2005, we established Pak Hi-Tech Gases (Pvt) Ltd aimed at supplying special gases and argon based welding gases to serve various projects and hi-tech industries in Pakistan. We have established a cylinder filling operation and also stock special gases. The facility is located in Rawat Industrial area near Islamabad, Northern Pakistan.$quot;
$quot;2006 was a critical year for the group in several ways. Firstly we signed a major on-site joint venture deal with Air Liquide. This has changed the make up of the group and is our first formal arrangement with a major international gas company. We actually formed a separate joint venture called Kuwait Cryo which is 60% owned by KIGC and 40% owned by Kharafi Group - an important construction group in Kuwait. Kuwait Cryo owns 50% of Shuaiba Oxygen with Air Liquide owning the rest.$quot;
The aim is for Shuaiba Oxygen to supply the new Equate 2 petrochemical project and the jv is investing in $80m in a 1,600 tpd ASU.
$quot;Finally in 2006, we formed a jv with the Al Jaber Group in Qatar to extend our presence in the Gulf. However, to cater for this growing presence in the region and to bring better management to the business we are currently re-structuring to bring all the companies under the ownership of a holding company - The Huneidi Group. The fast pace of development in the region also needs more experienced people to manage the change and the growth and so I am forming this holding company that will have a legal structure of its own and board members that will add the experience we are looking for.$quot;
$quot;I can announce to you that Stefan Schaeffer will be joining us as CEO (Stefan is an ex board member of the Messer Group and ex Air Products). He will be joined by JÃ¼rgen Clames, another ex Air Products senior manager. The ultimate aim of this restructuring is to undergo a form of IPO (Institutional Public Offering) in the future.$quot;
What experience does the company have?
The Middle East region can be best described as a consumer driven market - when a company needs gas, for whatever purpose, it looks around for suppliers and asks for price, volumes and supply capabilities. $quot;I have to admit that for many years we fell into the category of one of those companies that was reactive not pro-active but we have gained experience in the oil & gas petrochemicals business over the past 30 years and understand this market very well. However, we have become more pro-active as independent technical know-how and technology has become available.$quot;
$quot;The Huneidi Group now has 500 employees with 24 nationalities and we continue to increase the technical know how through effective recruitment. We have engineers that have experience of running 2,500 tpd ASUs and now we are taking on experience in application technologies. We are currently focusing on food and water treatment applications and expanding our medical business opportunities where we can. Recently we installed a VPSA at a ceramics (international glassware) factory in the UAE. We are definitely becoming pro-active rather than reactive.$quot;
The Middle Eastern market
$quot;The Middle Eastern market is in a rapid growth phase at present due to the high oil prices driving downstream project activity throughout the region,$quot; Huneidi continued. It is not only the higher oil prices driving projects, the Middle East is seen as an area to invest in by traditional western companies that are finding it more difficult to expand operations in western Europe and the US (due to tightening regulation and governance).
The smaller privately owned gas companies lack the technological skills to offer the on-site volumes these downstream investments need, but they do know the business culture and the local markets so it is not surprising that we are seeing an increase in joint ventures being formed between smaller gas companies and major international gas companies - we are a good example of that.
However, there is a growing need to regulate our industry from a safety stand point and the Huneidi Group is very keen to offer our contribution to improving safety standards across the region. In Kuwait we tend to follow British Standards in safety legislation but different GCC countries vary between having no standards they follow to adhering to European or US standards.
Huneidi is worried about two areas of activity, the lack of safety standards in the region and also the lack of commercial governance/practices that meet ethical standards seen in other regions.
Will a Middle East industrial gases association help? $quot;Certainly this would help to harmonise standards for operating in the industrial gases business in the region but it must work with (lobby) separate governments so that they are implemented in each country. I understand that an initial start has been made in the UAE where the gas companies have formed an Association. We certainly favour this development and we will participate as this evolves through our subsidiary companies.$quot;
Aggressive plan for growth
Normally privately owned gas companies are rather secretive about their size, market share and turnover. Mr Huneidi was very open when questioned about the size of his company and what were his plans.
$quot;In 2002, the company had a turnover of $15m in total. Kuwait accounted for two thirds of that and our activities in the UAE, Jordan and Syria made up the rest. In the space of 4 years we have grown to over $60m (in 2006).$quot;
The rapid growth is partly reflective of the general dynamics of the region since the high oil prices were established in 2004. However, it is also about the Huneidi Group's expansion plans outside of Kuwait.
The new plant we installed in Shuaiba (430 tpd) has both on-site pipeline supply agreements and liquid production facilities. This has been one reason for the rapid growth.
$quot;I can announce to you that we have an aggressive growth strategy planned for the group over the next 5 years. We aim to grow faster than the current market - at 25% per annum. This will be initially achieved when the new joint venture, Shuaiba Oxygen, comes on-stream in mid 2008. This is a major on-site supply project and the first significant one in the region involving a major international gas company.
How will this be achieved? $quot;First we would like to have a presence in every dynamic market that exits in the region. We will achieve this through continuing to seek on-site opportunities either directly (small projects) or with jv partners (large projects). We will also selectively invest in greenfield operations if the market growth opportunities are attractive.
$quot;Last year we were the first gas company in the region to offer a tank leasing business and international trading business when we formed Cryorent (based in Dubai). Most tank leasing is provided by oil & gas services companies or distribution companies but we felt that as a gas company we had both the knowledge of markets, where demand is needed and how to handle such equipment.$quot;
In one year of operation this has shown significant potential and growth, and we aim to be a global leader in the next couple of years. We already have a large fleet of IMO7 ( UN T75) portable ISO tanks both 20ft & 10ft and significant investment is planned in the coming fiscal year.
$quot;I am very much optimistic in the business opportunities that exist throughout the 17 countries that make up our view of the Middle East. Clearly, the news headlines dominate people's thoughts and concerns about the region but I have gone through 3 wars in my life and yet the business has not only survived but has grown significantly despite these serious interruptions.$quot;
$quot;Once the current turmoil in Iraq is resolved, Iraq itself offers huge potential. In the eastern Mediterranean region, I am optimistic that its closeness to Europe will present development opportunities when the turmoil in the region is also resolved. Iran also presents a great potential but relations between Iran and the west need to be improved for that potential to be realised but I remain committed to investing in the whole region over the next 5 years.$quot;
$quot;Well, the company has come along way since it was established by my father. The Company is looking for opportunities throughout the region. As you have already heard, I am re-structuring the company to present a new 'Group' image. The Middle East region is exhibiting rapid growth at present and we not only want to be part of that growth we have an aggressive plan to grow at faster than the market - our aims for 25% per annum growth over the next 5 years is very realisable. We are bringing in expertise that will be able to ensure this high growth strategy is delivered.
The increase in project activity, especially in the oil and petrochemical sector gives rise to on-site supply schemes and we aim to participate with relationships with major gas companies. However, we do want to stress that while the Gulf region may appear to be our region of focus, we have established Cryorent that has business activities that already stretch from the Gulf as far as Australia and Central Asia. We will focus on those activities that make business sense and meet our high growth expectations.$quot;