Building the Reputation of Chinese Drilling Equipment

TSC Offshore started operating in Mexico in the beginning of 2013, bringing its products and services to the oil and gas industry. With a very confident entry strategy, the company expects to turn a profit in the next six to eight months and open three offices in the country. Nevertheless, the lack of a brand name and reputation are challenges TSC Offshore has to overcome in order to be successful in the Mexican market.

TSC, which stands for Total Solutions Company, is listed on the Hong Kong stock exchange and has been known as Emer International Group since 1995. The name was changed in 2008 with the purpose of better reflecting its core philosophy. Since then, TSC Offshore has become a global product and service provider to both the onshore and offshore drilling industries worldwide. While maintaining manufacturing capabilities in China at Qingdao and developing a new plant at Xi’an, TSC has become a global company with corporate offices in Houston and manufacturing facilities in China, UK and Brazil.

Identifying itself as an American company is crucial for TSC’s entry in every new market. Back in 1995, the company started as a representative selling Chinese equipment in Houston. Solis acknowledges that this strategy was not very effective since it led to the purchase and reselling of poor quality equipment, which hurt the company’s reputation in the US market. This called for a change of plan to focus on quality. The partners reinvested their profits into the company to acquire their own manufacturing facilities in China, hire engineers, and start making their own designs. “Our CEO always reinforces that we are an American company, we do manufacture in China, but our quality control processes are as good, if not better, than other American or international manufacturers,” stresses Tony Solis, Vice President of International Sales & Operations for TSC Offshore.

With its eyes set on Latin America, among other emerging markets, TSC decided to bring Tony Solis on board. He has over 30 years of experience in NOV and is convinced TSC is ready to enter the Mexican market, because many potential customers in Mexico already are clients of the company in other regions, which makes it easier to start selling to them. Before starting operations in Mexico, TSC already had customers in the country that were managed from Houston. “Now we will be able to provide a local service,” Solis explains. “Companies prefer to buy local. It does not matter if we offer them the best price from Houston; they do not have the time to wait for the product to get here and they are ready to pay the difference.” Moreover, the company also has contact with distributors that have direct access to Pemex, such as Comincal and BZN. We are already selling our products to these companies, which also have strong ties with other contractors such as Weatherford and Halliburton,” specifies Solis.

The company opened its first office in Ciudad del Carmen, which will be dedicated exclusively to offshore drilling, TSC plans to open another office in Villahermosa during the third quarter of this year, with the purpose of servicing onshore drilling projects in Tabasco, Chiapas and part of Veracruz. 2014 will see the opening of a third office in Poza Rica, focused 99% on onshore operations in Veracruz and parts of Tamaulipas while Tuxpan will serve to support offshore operations.

The company’s incursion in Mexico looks like an easy market entry, but Solis is not overconfident. In his view, entering the Mexican oil and gas industry is not as simple as it sounds. On one side stand the US companies that import low quality Chinese products; on the other, supergiants like NOV that offer premium products. Solis sees TCS as a company that now leans towards the latter group, even if it is still small in comparison to its competitors. Even if the challenge of not having an established brand name still stands for TSC, the company has been gradually gaining a place in the industry in the past 24 months, thanks to collaborations with companies such as Seadrill, Noble, Transocean, and Nabors. These relationships have now become essential: they are a reference and a tool to make TSC’s name known in the global oil and gas market.

Mexico is not only viewed as a potential market. With cost of manufacturing labor in China increasing each year, the possibility of opening a manufacturing facility in the country increases. “I was told when I came on board, that our cost of manufacturing is going to go up because, in a 2-3 year period, the wage increase is going to be something like 85% over what it was in 2012. All of a sudden, the advantages that Chinese manufacturing offered are not going to be there anymore. This will bring a more equal balance to the competition in this market.” Solis also points out that Mexico fares very well in comparison to the US and China on labor costs, engineering, and construction in general: “As China’s advantage slips away, Mexico has a great opportunity to stand out in the market.”