Egypt, new dimensions, new frontiers

Mr. Moustafa Shaarawi, Chairman and CEO of Petrojet Egypt -

"The Nile Call For Distinction"

Interview with:

Mr. Moustafa Shaarawi
Chairman and CEO

Cairo, May 30th, 2000
Could you give us a brief overview of Petrojet's activities?
Petrojet is mainly a construction company, working in the oil industry. We cover oil refineries, oil and gas production and processing, infrastructure, utilities, sites, chemical projects such as fertiliser production facilities, and some industrial projects.

We are the construction arm of the Egyptian Petroleum sector. We did the construction for most of the petroleum projects in Egypt.

What are some important financial figures of Petrojet, such as annual turnover?

The average turnover, over the last three years has been EGP 1.5 billion. Last year we had a heavy workload, so this figure rose to EGP 2.2 billion.

Do you expect this year to be better?

It will be better, according to the economic parameters, but we expect a little less work this year. We have sufficient work, but we are looking to improve our productivity and our performance. In this way we can make the same profit with less turnover.

I understand that the Ministry has invested US$ 3.5 billion, since 1982, to upgrade existing plants. What major investments has Petrojet made in the last few years to improve efficiency?

I have been Chairman here for only eight months. I have a new strategy for the company, to develop it into an international organisation. Doing this involves ensuring that we meet all the international quality standards, and becoming more competitive in the global arena. Next we have to develop productivity and performance, and enhance our company systems. We have a development plan for the company:

First of all, we need to improve the communications system; we want local area networks in each major sector of the company, in all areas of Egypt, linked together with a wide area network based in Cairo. This will be a very effective network.

Secondly, we are improving our management system, using computer networks to facilitate the management and reporting processes. To do this we have to upgrade our human resources. We have language and computer labs in each branch of our company, and a lot of the focus here is on teaching English, because it is undeniable that English is the language of technology.

We have contracts with the British Council to provide this training, and we have six language labs, and six computer labs to facilitate this. We are increasing the number of computers in the company, and in the last six months we have bought around 300 PCs. Next year we will buy another 300. We are developing our managerial systems, which are mainly computer based, and then we are ready to start adopting modern management systems. This is about the development of people and resources. As a business we are looking to have two separate cost centres.

Third of all, the future of offshore work lies in deep water, and we lack deep water technology. We are looking to have all marine activities separate from our other activities, and then we will select a technological partner to work with, in order to develop this marine technology. This will be managed as a separate company, a subsidiary of Petrojet. We need to be able to compete in the deep water arena - and we have many competitive advantages here in Egypt. We have the equipment and the resources, and if we can combine this with a company which has the deep water technology, then we will be in a good position.

Are you looking to increase your R & D potential here in Egypt?

Yes, this will take the form of a separate company, again a subsidiary of Petrojet. We are putting a lot of work in and it should be ready by the end of the year.

We are looking for a partner who has the know-how to develop capital goods, such as heat exchangers and air coolers, pressure vessels and so on. This would be a third subsidiary, and we would be looking to compete not just in Egypt but in the whole Middle Eastern area. By creating these subsidiaries, we are breaking down our potential problems into small, manageable chunks, so that they are easier to manage.

We are going to be very big, and we are chasing after international markets. We are looking to establish a network of alliances with international companies, to work with them as a sub-contractor or a joint venture partner for construction.

Are you also bidding on the project to extend the Kalag and Khossous wastewater pumping stations in northeastern Cairo ?

Not necessarily. We have a system here, the ISO system, and I am the head of the committee which is deciding whether to bid or not. We look at the parameters, and the margins, and if it is looking good, we will bid. It is all under consideration at the moment.

At the moment we are working with British Gas on a large project in the Mediterranean, the West Delta Deep Water Project.

The licensing round for this deep water acreage is coming up very soon. How are you co-operating with BG to develop the opportunities here?

We are working with British Gas on several other projects, close to this area, namely the Rosetta Gas Field Development, where we are the main contractor for construction work. We have been constructing the on-shore work, as well as the platforms, jackets and decks, in addition to the subsea lines and onshore pipelines. Within a few weeks the on-shore plant will be under commission. This work has been very good for our image as a company, as our performance has been very good. Our international partners are very happy with this, and we have a new slogan, which is: "customer satisfaction".

One plan that has been under consideration for some time now, since 1997, is the pipeline from Alexandria to Libya. What is the status of this project now?

We are ready to build this project, but it has not yet been confirmed. The funds are not yet available, and as soon as the two Governments decide to start, we will be ready to begin work immediately.

Are there any other projects under consideration at the moment?

Yes, we have built around 14,000 kilometres of pipelines in Egypt to date, all of different diameters. We built the whole crude oil network, as well as the gas distribution network. These two networks are still growing, so we have considerable amounts of work on this front.

Especially with all the new gas reserves that have been discovered... How is Petrojet involved in the oil exploration business?

Any discovery can be equated to more business for us. We are happy with any new discovery, since it is invariably followed by a development programme, and then construction work. At the moment we are particularly happy because the oil exploration authorities here are very active, very competent, and very successful.
We have a good image with the Government, as well as international companies such as British Gas, Shell, BP Amoco, Agip, Ropsol, and so on, so we stand to gain from new discoveries. Because we are an EGPC company we are informed of all of these discoveries as soon as they happen, and this gives us the edge over other companies. Some of our work comes by direct order, and on other occasions we have to compete for it, but either way, we have the competitive edge, and we can complete the work for a good price.

Having said this, what is your downstream strategy, particularly regarding the development of LPG (Liquid Petroleum Gasoline) ?

We have a lot of work in refineries. Many companies are contacting us, with reference to LPG, and when this business really takes off, we will be ready for it. We have the experience, and we have the expertise, and we are always ready to take on new challenges.

A lot of these huge projects are undertaken by international consortiums. What is Petrojet's strategy to form these consortiums?

Our strategy is to provide products which meet international quality standards. When we do this, our image with our clients and other contractors will be very good. We must impress them with quality work, completed on time at a good rate. In this way our reputation will work in our favour. In short, we have to be competitive. We are very keen on customer satisfaction, as it allows us to keep our customers, and work with them again and again.

We are improving the internal structure of the company, to increase our capabilities, and information technology plays a great part in this. Most of our work is in Egypt, but we are also trying to move abroad, to obtain some part of our revenue from outside the country. We have a good range of products, and we can do most activities related to the industry; on-shore, off-shore, pipe laying, processing, fertiliser plants, infrastructure, facilities - absolutely everything, really. Our workload is dictated by the number of projects available, and for this reason we need to be diversified enough to be involved in all possible projects.

Are you also involved in the NVGC (Nile Valley Gas Company) project?

Yes, we are presently bidding on the pipeline project.

How are you developing work in new markets in Africa and the Middle East?

Again, this comes back down to the internal structure of the company. We are building our expertise in these fields, and ensuring that all of our staff are attuned to business development abroad. Our name is well known, but this is not enough, so we are increasing our efforts to reach out to prospective customers. We have a lot of contacts in the Gulf area, and we need to have the courage to bid in these arenas. We are learning from the bids that we have put in abroad in the past, and we are becoming better and better at this aspect of our business.

Are there any big projects you are considering in Africa?

In Africa, we are a little conservative. We are waiting for the right business opportunities, where we are sure that the funding will be forthcoming. We have to protect ourselves, as we are unfamiliar with the area. The Middle East is another story - we perfectly positioned to increase our business operations in this area.

How do balance the need to ensure environmental regulations, and the need to remain cost-efficient?

We are very environmentally aware, and we follow all the rules, very strictly indeed. The critical parties here are the engineers and the owners. We only implement what other people design, and other people operate. We are very careful in the way that we implement these projects. Environmentalism is not just the buzz word of the moment, it really matters. The Ministry of the Environment here in Egypt is very active, and we follow their lead.

What opportunities exist for foreign investment in Petrojet?

This is a very high priority for us, and the bidding is about to start. We are presently in the pre-qualification stage. There are a lot of Government rules and regulations that we have to follow, to keep everything legal, and this takes time, but in the next few weeks we will issue an international bid for partners. We are not selling assets, we are selling business opportunities, and we feel that this is a distinct advantage. We have good facilities, a large operational area, skilled labour and low costs. All we need from a foreign partner, really, is technology.

When we met with the Minister last week he mentioned that five or six companies in the sector are going to be privatised. Is Petrojet going to be one of these companies?

This is not an issue. We are able to compete in open, international markets, and in fact we do so already. Privatisation poses no serious problems for us, and besides, it is a Government decision.

Privatization should take place gradually - it cannot happen overnight. There needs to be a steady flow of shares into the private sector, not simply an immediate sale. There could be opportunities that stem from privatisation, and we are looking forward to taking part in them.

You mentioned that you have changed the management structure over the last six months. Could you tell us about your management strategy?

I am a believer in the management of change. If you cannot change, you will not survive.

You need to have the three Cs: Concept, Competence and Connections. Concept involves vision, mission and strategy. Competence - if you are incompetent, you won't succeed. Competence comprises of both knowledge and experience. It is very important to improve the competence of your workforce, as it is them who drive change. Connections are really about IT, in this day and age. This is a risky area, because few people are able to select the right, relevant information, which is vital for success.

I understand that you have only been with Petrojet for eight months. What did you do prior to this, and how did you become chairman of Petrojet?

I have worked for many industries. I am an engineer by trade, with a higher diploma in information systems and statistics, and prior to Petrojet I was Chairman of the engineering company ENPPI. I have studied management in the US as well. I am an avid reader, and I always try to improve my knowledge and keep up to date with the latest trends and developments. I always participate in the international conferences and workshops, in order to broaden my horizons. I feel that to succeed you have to love your work - successful people are invariably those who love their work. It is all about discipline, persistence and patience. With these three qualities I believe you cannot fail to succeed.

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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine.
August 7th 2000 Issue.
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