Rudolf Hess
President and CEO
R.H. Shipping
View from the Top

Turning the Downturn into Business Opportunities

Wed, 01/20/2016 - 13:29

The slump in oil prices is making players think twice before entering a tender, a trend that is reinforced by the fact that people still do not know the legal and commercial particularities to work with PEMEX. However, Rudolf Hess, President and CEO of R.H. Shipping, believes this is just the right time to enter the market because new entrants can get cheaper oil rigs and secure an advantageous position by the time the oil price goes up again. He also points out that the uncertainty has generated business opportunities for consultancy services, so the current environment can be capitalized upon.

As for the transportation industry, Hess is confident that rigs and jack-ups will be moved to Mexico soon, as his company has already secured four contracts for this activity and is negotiating a fifth. “With the opening of private investment in the Mexican oil and gas industry, more cargo will be moving into the country. We are ready to transport their rigs, spare parts, and to handle offshore logistics,” he boasts. Hess points out that the advantage of R.H. Shipping is that it can cater to any client, as it can charter a full ship or move modular oil rigs, semisubmersibles, and jack-ups. In the case of spare parts, which are always needed, the transportation company can move these in cargo containers, while urgent cargo can be deployed by air. In this sense, R.H. Shipping is a one-stop-shop that can also advise clients on insurance, customs clearance, and all services related to the logistics industry.

In 2015, R.H. Shipping managed to grow by 20% in spite of the oil and gas industry’s downturn. “Containers from Asia usually comprise 55% of our revenues, and freight rates in this segment have dropped dramatically, ultimately impacting profit margins. Fortunately, we were able to increase volume and a small percentage of our gross profits,” shares Hess. The most profitable segments for R.H. Shipping, however, was the oil and gas industry, domestic and international trucking, airfreight, and ocean export. At the end of 2015, the company moved two oil rigs, heavy boilers, and oil rig equipment for different companies. “We have been able to secure business that we had not been able to fix in previous years. Judging by the way things look, we are going to have plenty of work during 2016 and the years to come,” Hess comments.

The most significant project R.H. Shipping has been involved in recently involved a contract with a company form India to move pipes that will be used in IEnova’s Ojinaga-El Encino pipeline in Chihuahua. “We chased this project for a year and a half and were fortunate to secure it. We had to use four ships to move 10,000 tonnes and 40,000m3 of pipes each, the equivalent of a 110km-long pipeline. The project went perfectly and is helping us get new business. Now we have a presentation card we can show to new entrants, as we have demonstrated that R.H. Shipping can deal with any contingencies that may arise when working on a project of this magnitude,” asserts Hess.

Even though R.H. Shipping has had to adapt to the current market conditions, the company still has competitive advantages due to the scarcity of certain service providers. Hess says few logistics companies specialize in over-dimensional projects, and there is a lack of freight forwarders that specialize in projects on a global basis in a multi-modal way, like R.H. Shipping does. In addition to covering every aspect in project, the company can offer competitive prices because of its network of worldwide transportation providers. “A trait I see in my company as an additional advantage is the fact that we do not own any assets. Our only asset is our people. If we owned ships, we would have faced financial challenges by now, because the ship charter market is lower than what we would have to pay to the bank to finance ships,” Hess admits.

In his view, the most innovative aspect in his company are the experts working there. When Hess started the company, he brought specialists from Germany, but now R.H. Shipping trains its employees until they become experts. “I used to be the only person in my company negotiating charter contracts, but now I have people I can delegate these activities to, and the results are astonishing. People in the company are attracting new business constantly.” Now R.H. Shipping has 111 people in seven offices in Mexico, and ten in Houston. Additionally, the company has ten offices in China, one in Germany, and a global network of agents.