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.


Saudi energy minister recommends driving down oil inventories, says supply plentiful

Updated 19 May 2019
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Saudi energy minister recommends driving down oil inventories, says supply plentiful

  • Oil supplies were sufficient and stockpiles were still rising despite massive output drops from Iran and Venezuela
  • Producer nations discussed how to stabilise a volatile oil market amid rising US-Iran tensions in the Gulf, which threaten to disrupt global supply

JEDDAH: Saudi Arabia’s Energy Minister Khalid Al-Falih said on Sunday he recommended “gently” driving oil inventories down at a time of plentiful global supplies and that OPEC would not make hasty decisions about output ahead of a June meeting.
“Overall, the market is in a delicate situation,” Falih told reporters before a ministerial panel meeting of top OPEC and non-OPEC oil producers, including Saudi Arabia and Russia.
While there is concern about supply disruptions, inventories are rising and the market should see a “comfortable supply situation in the weeks and months to come,” he said.
The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is de facto leader, would have more data at its next meeting in late June to help it reach the best decision on output, Falih said.
“It is critical that we don’t make hasty decisions – given the conflicting data, the complexity involved, and the evolving situation,” he said, describing the outlook as “quite foggy” due in part to a trade dispute between the United States and China.
“But I want to assure you that our group has always done the right thing in the interests of both consumers and producers; and we will continue to do so,” he added.
OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.
Russian Energy Minister Alexander Novak told reporters that different options were available for the output deal, including a rise in production in the second half of the year.
The energy minister of the United Arab Emirates, Suhail Al-Mazrouei, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not “the right decision.”
Mazrouei said the UAE did not want to see a rise in inventories that could lead to a price collapse and that OPEC would act wisely to maintain sustainable market balance.
“As UAE we see that the job is not done yet, there is still a period of time to look at the supply and demand and we don’t see any need to alter the agreement in the meantime,” he said.
US crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, data from the government’s Energy Information Administration showed on Wednesday.
DELICATE BALANCE
Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a price crash and a build-up in inventories, OPEC sources said, adding that Russia wants to increase supply after June.
The United States, not a member of OPEC+ but a close ally of Riyadh, wants the group to boost output to bring oil prices down.
Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of OPEC+, the sources said earlier.
Sunday’s meeting of the ministerial panel, known as the JMMC, comes amid concerns of a tight market. Iran’s oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.
Oil contamination also forced Russia to halt flows along the Druzhba pipeline — a key conduit for crude into Eastern Europe and Germany — in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.
Russia’s Novak told reporters that oil supplies to Poland via the pipeline would start on Monday.
OPEC’s agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under US sanctions and exempt from the voluntary reductions under the OPEC-led deal.
REGIONAL TENSIONS
Oil prices edged lower on Friday due to demand fears amid a standoff in Sino-US trade talks, but both benchmarks ended the week higher on rising concerns over disruptions in Middle East shipments due to US-Iran political tensions.
Tensions between Saudi Arabia and Iran are running high after last week’s attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the Kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen’s Iran-aligned Houthi militia claimed responsibility. 
Saudi Arabia’s minister of state for foreign affairs said on Sunday that the Kingdom wants to avert war in the region but stands ready to respond with “all strength” following the attacks.
“Although it has not affected our supplies, such acts of terrorism are deplorable,” Falih said. “They threaten uninterrupted supplies of energy to the world and put a global economy that is already facing headwinds at further risk.”
The attacks come as the United States and Iran spar over Washington’s tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased US military presence in the Gulf over perceived Iranian threats to US interests.