Mohammed Abduldayem, president and CEO of Earth Reservoir for Oil & Gas (EROG), talks to The Energy Year about the attractiveness of Saudi Arabia as a destination for establishing manufacturing facilities and the company’s key projects in localisation. EROG partners with international companies to introduce oil and gas products and services in Saudi Arabia.

Why is Saudi Arabia an attractive destination to set up manufacturing facilities?
The cost of setting up these facilities in Saudi Arabia is extremely attractive. It is mind blowing for foreign investors to discover that it’s 23% cheaper to build a factory here than to build it in the UK. Renting land in an industrial zone here can be as cheap as SAR 3 [USD 0.80] per square metre per year. That’s almost free.
If a company can prove to the Saudi Authority for Industrial Cities and Technology Zones (MODON) that its project will contribute to the GDP of the country and it will be environmentally sustainable, it can get that rent price. This is not possible anywhere else on this planet.
A company’s operating expenses can be reduced by as much as 75% in Saudi Arabia. Imagine the effect of that on a company’s gross margins and net profit. Even calculating the local taxes, it is still hugely attractive as an investment.
On top of all that, if companies build a plant and hire the employees in conjunction with the Ministry of Human Resources, the Ministry of Industry will waive the expat levy expense for the first two years.
With the support from our government, the sky’s the limit. We will be a billion-dollar company in the next few years, and we will continue to look into future partnerships for local manufacturing in Saudi Arabia.

What are EROG’s main projects for developing local manufacturing capabilities?
We are looking to transfer most of our agent-type relationships with existing partners into local manufacturing projects when economically viable. Three manufacturing facilities are being built as we speak.
We plan to commission a speciality chemicals manufacturing plant with our US partner Colonial Chemicals in Dammam in Q2 2023. We are honoured that a Michelin subsidiary company has chosen to work with EROG. This will be the first facility of its kind in Saudi Arabia because of its high manufacturing capacity and its chemical data reporting products.
Along with Maxwell Oil Tools, a manufacturer of composite centralisers and other drilling tools, we are developing one of the first non-metallic manufacturing facilities in Saudi Arabia. CDI Energy Products’ facility is going to be ready in Q4 2023. It aims to deliver critical service high-performance polymer components for the Middle East.

Is public financing an attractive option when launching a manufacturing facility?
The fear of the unknown is already mitigated by the different governmental entities that collaborate with investors. The greatest risk is the capital investment risk. However, if a foreign company complies with the requirements to localise the manufacturing of a value-added product and given they have a Saudi local partner, the Saudi Industrial Development Fund will lend 50% of their capital investment at no cost.
The local entity is already covering 50% of that risk. You would never be able to finance a project anywhere else with such minimal costs of financing.