April 24, 2010
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Home / Issue Archive / 2010 / March #3 / NOV Downhole Russia Chief: "Clients Like Options"

№ 3 (March 2010)

NOV Downhole Russia Chief: "Clients Like Options"

   And NOV Downhole is going to give them plenty by launching its first service facility in Russia.

   Mitch Good is an avid golfer and, judging by the trophy-laden shelves in his office in downtown Moscow, a successful one, too. Following a string of recent acquisitions by National Oilwell Varco, it is likely though that Good, the Russia and CIS area manager for NOV Downhole, would gladly trade all of that silverware for the corporate title of the best provider of downhole tools in Russia’s oilfield services industry.

By Bojan Šoć, Pat Szymczak

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   The Houston-based giant last June put all of its downhole assets, including Good’s former company, ReedHycalog, under one umbrella. Despite a recession-plagued 2009, these synergies are expected to propel NOV Downhole’s business worldwide with Russia being a key part of that strategy.

   During an hour-long interview with Oil&Gas Eurasia editors, Good and the company’s strategic account manager Mikhail Mayorov tried to explain in detail that strategy, which rests on better customer care, quicker response to clients’ needs and the traditionally high level of NOV product quality. According to our hosts, the cornerstone of the new business model will be the company’s service facility in Western Siberia, scheduled to open this summer. Its launch will promote the numerous advantages of “providing solutions” instead of “selling plain hardware” – the path most often taken by tool manufacturers chasing a quick buck. “Clients like options and we plan to provide many,” says Good.

OGE: How will customers benefit from the structural change within NOV?
Good: When we became NOV Downhole in the middle of 2009 we had a downhole tools business and a drill bits business. The two go together very well. Among other things it enabled us to offer bundled services where we can provide a bit and a motor to a customer. As separate entities, ReedHycalog would provide a bit and Downhole Tools would provide the motor.
Mayorov: The idea was not only to bring together those brands, but also to provide the complete bottom-hole assembly (BHA), so we can outline the BHA for the customer, provide him with a solution for different purposes, be it hole enlargement or drilling different types of rock in different regions. Instead of many separate acquisitions, we now have one brand. When we’re talking NOV, we’re talking solutions for the customer, not a range of products.

OGE: What product range can you offer to clients?
Good: Our product lines are vast. Certain land rigs around the world are low cost operations where clients don’t look for the most expensive highest-torque motor that they can find with a $150,000 bit on the bottom. On the other hand you have complex operations like offshore drilling where you have drilling packages worth several hundred thousand dollars per day or more – those clients want high-end technology and as a company we can provide that, we can cross the whole spectrum.

OGE: When is the integration of new assets into NOV Downhole going to be completed?
Good: It’s an ongoing process which started in June 2009. Some of it happened immediately. There were some synergies that we put together the day after the announcement. Some of the other things take a little more time to put together, we continue to cross-train our sales and engineering staff.  We need to understand what product lines do and be able to spot opportunities thus providing solutions for our customers.
OGE: Many tool suppliers see the localization of repair and maintenance activities as the key element of the strategy to improve client services. Have you explored that option?
Mayorov: Our immediate plans include setting up a service facility in Nizhnevartovsk. We will provide full-scale servicing of tools we rent and sell to our customers in Siberia.
Good: It is very difficult to have any kind of rental business in Russia without the ability to service your tools. As you know, importation formalities can be very time-consuming and challenging and if you’re exporting and importing tools back and forth to a repair facility outside the country, supply lines are long and it’s not an efficient business model. So we’re putting together a facility in Nizhnevartovsk where we’ll be able to service our tools and offer more flexible packages to our customers.

OGE: What’s the current status of that project?
Good: The facility is built. Previously, it had been occupied by another company and we are taking over. Currently, we are in the process of moving equipment to the facility and hiring and training our technicians before we can get started.

OGE: How many employees are going to work there?
Good: The facility will host four divisions of National Oilwell Varco. We are continuing to increase NOV Downhole staff working there. We don’t have an official launch date yet. Right now we are sharing space with customers and preparing them for the solutions that we’ll be able to bring once we have a functioning facility in Nizhnevartovsk. It’s logical – you can’t have a rental business without a facility and you don’t need the facility without a rental business.  The facility will provide us the ability to support a more widespread rental business where we have the opportunity to rent a broad range of tools all over Russia.

OGE: Once it’s launched, you will apparently be able to slash the average tool turnaround time. How quick do you think it will be?
Good: It will depend on the type of tool, where it’s located and what maintenance is necessary. If it’s fairly routine maintenance, we would have a spare parts supply in stock and be able to rapidly service the tool and send it back to the field  
Mayorov: Being able to repair tools at our own facility will allow us to work much faster. We keep a stock of spare parts and tools. That’s very important because customers always start by asking: “What do you have on the ground?”

OGE: Where are your technicians based?
Mayorov: Some of them are based in Russia, but occasionally there are certain cases when we need to bring in NOV specialists from overseas locations to service the tool.
Good: Our goal is to be self-sufficient within Russia, to have Russian people working in our Russian entity, dealing with our Russian customers and reducing our reliance on other NOV facilities round the world.

OGE: How do you handle training issues?
Good: We have a fantastic training facility in Dubai that is NOV’s Eastern Hemisphere training facility. We usually send people for training to Aberdeen, Dubai or Canada or other locations, depending on where the tools are being manufactured.

OGE: You have spent a year in Russia now. Are you familiar with the pattern when local buyers opt for cheaper products with shorter run lives to Western equivalents that are more durable, but also have a price tag that bites?  
Good: Yes and no, it completely depends on the application. In Western Siberia, for example, drilling is very soft, so the latest and greatest drill bit and tool technology aren’t really required to drill there. In other parts of the country, Orenburg, for instance, drilling is a lot more demanding. In places like that we definitely have an advantage with our products, because we have premium technologies.   

OGE: Are Soviet-era inventories depleted? Is the industry at a crossroads when companies will need equipment and will have to buy abroad since local inventories are running short?
Mayorov: Back in the Soviet Union people were paid not to make something great, but just what was necessary. That’s why the old technology lagged behind Western manufacturers who were more advanced in all departments – be it geophysical, drilling or well completion products and applications. Old inventories indeed are running short and customers will soon have to face the choice of buying the new or keep struggling with the old. The main change though is that today we’re in a competitive market opposed to the command economy era when the only thing that mattered was meeting the targets with little – if any – regard to the efficiency of your performance.

OGE: Do you expect the current economic hardships to sway your clients toward rental rather than purchase?
Good: We’ll see what happens. What we know for sure is that offering more flexible solutions with tools – whether it’s bundled services, or the way you structure your rental package, etc. – will appeal to customers. They like options and we plan to provide many. If the option is “take it or leave it,” they’re not going to be nearly as inclined to look at it as when you give them a “shopping list” and they can pick and choose what suits their business model. All our customers have different goals and objectives. If we can learn what they are trying to achieve, what their long-term goals and objectives are, we can then tailor our business model to help them achieve those goals and objectives.

OGE: Who do you see as your major drill bit competitors?
Good: All the major international suppliers are here in Russia plus the large Russian manufacturers. Some Chinese manufacturers have entered this market as well.

OGE: How was 2009 for NOV Downhole?
Good: One thing that affected us was the exchange rate. We are a legal entity in Russia and we do most of our business in rubles. Without any doubt, that had a negative impact on us in 2009. At the same time when the ruble depreciation was hurting us, we had customers who were in financial difficulty asking us for discounts. One thing that our service facility will allow us to do is to tailor business models to customers in different financial situations.

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