Canadian firms chasing Saudi business left in limbo

The diplomatic row with Canada is a concern for Canadian companies seeking work in the Kingdom such as GDLS, maker of the LAV 111 armored vehicle. (Supplied)
Updated 07 August 2018
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Canadian firms chasing Saudi business left in limbo

  • Trade had been increasing in recent years
  • Kingdom a major investor in Canada education

LONDON: Canadian companies chasing contracts in Saudi Arabia fear a high-level row between the two countries could dash their attempts to win work in the lucrative market, a former diplomat has said.

Saudi Arabia on Sunday froze all new business and investment transactions with Canada and expelled an ambassador as part of its retaliation to Canada’s calls for the country to release civil society activists detained in the Kingdom.

Saudi Arabia said this “interference” in its domestic affairs was a violation of sovereignty.

“The short-term impact is uncertainty for Canadian companies, especially those entering the Saudi market for the first time,” said Omar Allam, a former Canadian diplomat, who now heads up the Canada-based consultancy Allam Advisory Group, which advises on doing business in Saudi Arabia and the wider GCC.

“The significance of any given risk, of course, depends upon the context of the investment decision.”

While Saudi Arabia is not one of Canada’s main trade partners, trade and investment flows between the two countries have increased in recent years.

A total of 1.45 billion Canadian dollars-worth of goods were exported to Saudi Arabia last year, according to Canadian government statistics for merchandise trade. This compares to 916 million Canadian dollars-worth of exports in 2013. The Kingdom was Canada’s 22nd largest export market for merchandise trade last year.

Construction and engineering firms SNC-Lavalin and Fluor, as well as defence company General Dynamics Land Systems (GDLS), are just some of the more high-profile Canadian businesses with longstanding business relationships and interests in the Kingdom.

SNC-Lavalin has worked on numerous contracts — often for Saudi Aramco — developing the Kingdom’s refineries, petrochemical plants and other infrastructure projects. It won a SR160 million Saudi contract ($42 million) in May to expand Jabal Omar Development Company’s district cooling scheme in Makkah.

Meanwhile, Fluor has project-managed the development of the $8 billion Umm Wu’al phosphate project for Ma’aden Wa’ad Al-Shamal Phosphate Company which started production last year.

GDLS has previously secured contracts to provide tanks and associated equipment to the Kingdom.

Canadian companies active in the construction and engineering sectors are eager to win work in the Kingdom as Saudi Arabia pushes forward with its infrastructure spending plans.

There are at least two Canadian firms already preparing to exhibit at one of the largest construction trade exhibitions in the country, Saudi Build, to be held in Riyadh in October.

However, Canadian representation at the event is smaller than that from many other nations, including Germany, Portugal or China.

Sectors such as automotive manufacturing are seeing growth in the Saudi Arabian market, with Canadian exports to the Kingdom rising 27.2 percent last year, government figures showed. This contrasts to the overall decline in automotive exports from Canada in 2017.

A spokesperson from SNC-Lavalin told Arab News: “SNC-Lavalin has conducted business successfully in the Kingdom of Saudi Arabia (KSA) for over five decades, and currently see no immediate impact to our existing operations.

“We greatly value the relationships that have been built and our contributions to the KSA. We trust that this situation will be resolved at the earliest opportunity.”

General Dynamics Land Systems declined to comment on the situation when approached for comment. Fluor has not yet responded to Arab News’ request for comments.

Saudi Arabia has also invested heavily in Canada’s education system, Allam said.

According to the Saudi Canada Business Council, there are approximately 20,000 Saudi students currently studying in Canada.

Saudi Arabia’s Education Ministry is working on the preparation and implementation of an urgent plan to facilitate the transfer of Saudi student scholarships to other countries.

“In the past 10 years alone, Saudi Arabia has invested over $10 billion dollars into the Canadian education system. This provides an annual boost to the Canadian economy and generates new tax revenues,” Allam said, citing his own research.

Saudi Arabian Airlines announced on Monday that it was immediately suspending all reservations on its flights to Toronto and suspending all flights to and from Toronto from Aug. 13, according to the Saudi Press Agency.


Oil rises after US Navy destroys Iranian drone

Updated 19 July 2019
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Oil rises after US Navy destroys Iranian drone

  • The International Energy Agency is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day
  • Speculators have exited options positions that could have provided exposure to higher prices in the next several years

TOKYO: Oil prices rose more than 1 percent on Friday after the US Navy destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows, again raising tensions in the Middle East.
Brent crude futures were up 82 cents, or 1.3 percent, at $62.75 by 0100 GMT. They closed down 2.7 percent on Thursday, falling for a fourth day.
West Texas Intermediate crude futures firmed 61 cents, or 1.1 percent, at 55.91. They fell 2.6 percent in the previous session.
The United States said on Thursday that a US Navy ship had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.
The move comes after Britain pledged to defend its shipping interests in the region, while US Central Command chief General Kenneth McKenzie said the United States would work “aggressively” to enable free passage after recent attacks on oil tankers in the Gulf.
Still, the longer-term outlook for oil has grown increasingly bearish.
The International Energy Agency (IEA) is reducing its 2019 oil demand forecast due to a slowing global economy amid a US-China trade spat, its executive director said on Thursday.
The IEA is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Fatih Birol said.
“China is experiencing its slowest economic growth in the last three decades, so are some of the advanced economies ... if the global economy performs even poorer than we assume, then we may even look at our numbers once again in the next months to come,” Birol told Reuters in an interview.
Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd but had already cut the growth forecast to 1.2 million bpd in June this year.
Speculators have exited options positions that could have provided exposure to higher prices in the next several years, market participants said on Thursday.
US offshore oil and gas production has continued to return to service since Hurricane Barry passed through the Gulf of Mexico last week, triggering platform evacuations and output cuts.
Royal Dutch Shell, a top Gulf producer, said Wednesday it had resumed about 80 percent of its average daily production in the region.