Swiss firms profit from oil boom

Rising oil prices means more investment in the industry Keystone

The rapid rise in oil prices to more than $70 (SFr85.5) a barrel may concern many segments of industry, but some Swiss firms are profiting from the trend.

Companies that produce and maintain equipment for oil and gas production, such as ABB, Sulzer and Burckhardt Compression, have seen sales and revenue climb significantly as a result of the boom.

Swiss-Swedish industrial giant ABB generates around $3 billion a year in revenues from the oil and gas industries. The company produces a range of equipment from electrical systems, motors, speed drives and quality-control systems involved in extraction and processing fuels.

The oil boom was largely responsible for driving profits up to $735 million last year, compared with to a net income loss of $35 million in 2004, and sales up 8.9 per cent.

“There is now a striking argument for companies to spend a lot of money in [oil] exploration,” ABB spokesman Wolfram Eberhardt told swissinfo.

“We benefit from this directly because we manufacture equipment for this industry. And we also benefit indirectly because it generates a lot of cash, particularly for Middle East countries, who can spend more money on other projects we are involved in such as electricity infrastructure.”

ABB also designs equipment that helps reduce harmful carbon emissions. This month the company won a $50 million contract to produce an underwater electricity link to oilfields off Norway. This follows a $26 million order last December to automate a power station in Italy that will produce clean coal.

Sulzer

Winterthur-based Sulzer sales increased to almost SFr2.5 billion last year from just over SFr2 billion in 2004. Orders in its Chemtech division that manufactures equipment to separate crude oil soared 90 per cent in the first quarter of 2005.

The firm also produces high-powered pumps to extract oil and has developed special coating materials to allow equipment to function more effectively under extreme conditions.

“The rise in oil prices has definitely helped us,” Sulzer spokeswoman Verena Gölkel told swissinfo.

“If the oil price rises above $40 a barrel, then it becomes interesting for companies to invest more in this business and that means increased orders for us.

“Our recent growth has been primarily in the United States market and we expect good business influences to continue for the next two years,” Gölkel added.

Going public

Burckhardt Compression has generated such impressive growth on the back of rising energy demand since splitting from Sulzer in 2002 that it intends to list on the Swiss stock exchange.

The company is a world leader in the field of gas compression and has customers in the oil refining, chemical and petrochemical industries.

The company recorded sales of SFr168 million in 2004, up three per cent on 2003.

swissinfo, Matthew Allen

In brief

Energy demand will rise by 60% in the next 25 to 30 years, according to a 2004 World Energy Outlook report by the International Energy Agency.

Meeting this demand will require around $568 billion of investment a year between 2003 and 2030, the report estimates.

The oil price rose to nearly $74 a barrel on Thursday amid fears that Iran’s nuclear stand-off with the West could disrupt oil supplies.

Key facts

ABB was formed in 1988 with the merger of Swiss company BBC and Swedish firm Asea. The group operates in about 100 countries with around 105,000 employees.
Sulzer started life as the Sulzer Brothers Foundry, Winterthur in 1834, producing pumps and textile machinery. The company is now active in over 120 countries with around 10,000 employees.
Burckhardt Compression traces its roots back to 1844, was bought by Sulzer in 1969 and became independent again four years ago in a management buyout. It employs some 540 staff.