Chinese Oilfield Service Company Adapts to Mexican MarketWed, 01/20/2016 - 11:53
Q: As a Chinese company working in Mexico, what have been the main challenges and opportunities identified in the local market, and what services do you offer?
A: China Oilfield Services, or COSL, our parent company, is one of the leading comprehensive service providers in China, where we cover almost 90% of the market share in the upstream oil and gas offshore services. We have four core sections, namely Geophysical Services, Offshore Drilling Services, Well Services, and Maritime Transport. We have been in the Mexican market since 2006, offering offshore drilling equipment, employees, and crews. Developing our activities in this region required overcoming various challenges. Entering a new country is never easy at first, and the biggest test for COSL in Mexico was communication. In order to ensure an easy transition for our employees to Mexico, we offer them cultural sensitivity training before they are expatriated, and since 2014, our Chinese employees can also undertake Spanish language classes. Another challenge we faced concerned the sourcing of human capital, but with time, we have become renowned in the Mexican market and no longer need to actively seek out talent. Making the most of this opportunity, we now also offer HR services for new market entrants. We have worked in places such as Australia, Indonesia, the Middle East, and Norway, allowing us to offer extensive and relevant training programs for employees, both onshore and offshore. Rather than adopting a country-focused approach, we take a global approach.
Q: How has the low oil price impacted your offerings and activities?
A: Just like it has with any company, the current oil climate has brought us its share of challenges. As a response to the fall in oil prices and consequent budget cuts, we had to suspend two out of our eight offshore drilling units, leaving us with no more than six in the Gulf of Mexico. Nonetheless, we maintain a confident and optimistic attitude to the future, and for this reason, we have chosen to avoid making redundancies. In fact, we are hiring more recruits to prepare for a future recovery in the market. Our four competitive advantages allow us to adopt a strategy quite different from that of most companies. First of all, we are comprehensive service providers, which means we offer more to our clients than specific providers could. This is also a more costeffective solution, because we provide all the services our clients need in a bundle and at a reasonable and competitive price. Opting for this type of service also reduces the cost in terms of management and communication, as clients only have to work with a single company. With this in mind, COSL believes integrated services will become increasingly popular in the current environment in Mexico.
The second advantage we have over other market players is that we maintain relatively low production costs. With COSL, clients benefit from a cost reduction of at least 20% compared to established US or European firms. Thirdly, we enjoy a good safety record and reputation throughout the industry. Finally, because COSL is a state-owned company, we have a healthy cash flow thanks to the strong support from the Chinese government, allowing us to face risks and challenges in unfavorable market conditions. In spite of the adversity, we will maintain our participation prospects in the deepwater phase of Round One. Five years ago, our parent company started developing its own business in this segment, and we continue constructing more and more deepwater drilling units in preparation for better times.
Q: Apart from relying on the financial support you receive from the Chinese government, what is your strategy for continued growth?
A: Our strategy is to sell one of our ideas to our international clients. This approach began in 2014, as we had already predicted the drop in oil prices to a certain extent. The idea is that oil companies should establish close ties with offshore service providers. COSL is preparing for this new structure of partnerships by supporting everything our client may need. We are adopting a reactive approach to the fall in oil prices and the ensuing budget cuts, showing our clients we understand their concerns. We now accept delayed payments, increasingly use financial programs, and help oil companies find financial funds or support from different institutes so our clients can maintain their business activities. We strive to understand client needs and future outlooks.