Yugo Hashimoto
President
Sumitomo Corporation de México
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Insight

Avant-Garde Tubular Goods Ensure Leadership Position

Wed, 01/21/2015 - 11:30

The adoption of cutting-edge technology has spread like wildfire across a wide range of industries and oil and gas is no exception. Avant-garde practices are beginning to be seen in heavy oil extraction, the production of shale gas, and deepwater operations. For decades, the local industry was mainly focused on shallow waters, a market largely served by suppliers that have neither the technical capacity nor prior experience in the abovementioned areas. While companies drive off the beaten track in search of ambitious missions, Yugo Hashimoto, President of Sumitomo Corporation de México, considers this domain to be precisely the greatest potential for his company’s penetration into the sector. “Having accumulated international experience in oil and gas activities, we are well positioned to consider new opportunities in this country,” he states.

Sumitomo Corporation de México, the subsidiary of the Tokyobased holding group present in 67 countries, is involved in different businesses ranging from the manufacturing of consumer goods to the distribution of steel. With regards to the exploration and production of hydrocarbons, the firm has developed major projects both in the North Sea and the US. It has also earned the honor of being the first Asian company to enter the shale gas niche. “We have a wide presence in this industry with a well-established supply chain management system, and an extensive customer base centered on longterm agreements,” says Hashimoto. Indeed, its tubular products business segment is comprised of Oil Country Tubular Goods (OCTG), which focuses on manufacturing and distribution, midstream, and downstream activities. Their oilfield equipment division is led by HOWCO, the company’s subsidiary in the US, which produces downhole and subsea components for both shallow and deep wells. Furthermore, Sumitomo has noticed that the stringent rules required for the transportation of oil and gas make it challenging for companies to find high-quality products that suit their needs, such as coal, chromium, nickel, and high grade stainless steel pipes. In the US and Canada, Sumitomo already has various distribution channels for such products, such as Premier Pipe and Pipeco Services. It would therefore like to replicate this success in the country, as Mexico has long been a strategic growth market for Sumitomo. “We will not compete with domestic pipe suppliers in Mexico as we intend to provide high-end products by targeting areas where domestic suppliers are unable to satisfy demand,” admits Hashimoto. One Sumitomo product that stands out is the carbon line pipe that, despite having an initial higher cost, reduces a project’s overall cost after evaluating the savings provided by its durability and usability. Hashimoto also believes that these pipes could find their niche in deepwater and in the distribution of materials such as sulfur or nitrogen. “We can contribute to these areas because of the tough working environments and the demand for higher standards. However, we need to wait until the tenders are released before we can fully determine the nature of our involvement,” Hashimoto explains. Besides pipe supply, Sumitomo often coordinates other aspects such as logistics and coating operations to basically offer a turnkey solution. “In order to convince potential clients that these high-end products are the best option for their projects, we must offer a complete package. This strategy has been already employed in the US and has given us a significant share of the pipe supply business there,” says Satoshi Watabe, General Manager of the Metal Business Department of Sumitomo Corporation de México. “You must always package the products and the services together, so that the operation of the pipeline is more cost efficient for the client.”

Finally, Mexico must address national security concerns such as oil theft, which Sumitomo is well aware of. According to figures released by PEMEX in 2014, 2,481 illegal taps were detected, marking a 30% increase year-on-year. Notably, most of these taps were located in the state of Tamaulipas, an area of great importance for the future of the sector due to its large shale gas resources. The figures are grim, with current losses exceeding US$1 billion. In this respect, Hashimoto advises companies to carry out extensive research in order to gain a realistic perspective of Mexico’s security issues. “We work with a series of consultants to assess the risks and define the degrees of safety in which we can operate. This applies not only to our future oil and gas ventures, but also to our local manufacturing facilities.” While less experienced players might hesitate to plunge into this burgeoning market, Sumitomo remains undeterred, the opportunities are there for the taking, and those with experience and knowledge will certainly thrive.