Alan Michaan
General Manager
Alquímicos de México
View from the Top

Widening Range of Chemical Solutions

Tue, 01/22/2013 - 14:51

Q: Alquímicos is present in many different segments of the oil and gas value chain. Which advantages does this business model offer?

A: Alquímicos has moved away from the traditional distribution model and focused on being an oil and gas supplier that works at the product level, service level, and solution level. This is something that no one else is doing in the region, and based on the meetings I have had in Houston, it seems like no one is doing it in parts of the US either.

Most chemical distributors and suppliers focus on a few niches in the oil and gas industry, such as mud chemicals, cementing, fracking and well stimulation, and downstream products. Alquímicos along with GTM, our holding company, are putting together a full range of products and services that range from drilling to refining and everything in between.

Q: How has this approach been received by the oil and gas industry?

A: Our division is only six years old, but it has been so successful that our customers have asked us to open offices in other countries, such as Brazil. The first step was to scale up the operation with volume driven commodities – such as barite, cement, and frack sand – which created the scale that allowed us in turn to create value for our customers, our suppliers, and for ourselves. We then started to add other products, that have a higher degree of specialization, such as barite for mud, and then xanthan gum. This was an easy way to create value by using existing products to introduce new ones to customers.

We also realized that we needed to have a certain distribution service level in order to succeed in the oil and gas market. Distribution of chemicals in other industries is generally a 9-5, Monday-Friday job, but not in this particular sector: delivery times need to be short and products need to be available all day, every day. Therefore, we had to move out of our comfort zone and transform ourselves into an oil and gas distributor. This meant creating logistics bases that are open 24/7, and are located close to the areas where our products are needed. Our strategy was very successfully launged in Ecuador, Colombia, Peru, and Mexico, and we now offer the same service in Argentina and Brazil. The next step is having a complete product portfolio while maintaining the balance between having a full inventory for each base without overstocking the products that will not be used.

Q: What is the smart way to manage this inventory?

A: In Mexico, we look at trends, from shale gas in the north, to current and future investment levels at Chicontepec, to deepwater and well stimulation. We go field-by-field and region-by-region assessing the trends. Obviously it would be impossible to cover all the markets in each region. In order to be successful as a young division we must learn to choose our battles.

Q: What difference does it make that you can develop your business strategy and plan your inventories on a regional basis?

A: It creates scale, which is important. There is a big difference between buying 1,000 tonnes of a product and being able to negotiate for 10,000 tonnes to distribute across Latin America. We budget on a country level first, but for key products for the oil and gas industry we centralize the negotiations. We also have support from the group, because some of the products used in the oil and gas industry have shared applications with other industries that we serve. Finally, we can often use our inventories in one country to fill the gaps in the supply to other countries. In emergencies, moving products within the region is much more efficient than importing from elsewhere.