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Home / Issue Archive / 2010 / June #6 / Caterpillar Stakes Its Claim in Power Sales Through a Coordinated Dealer Network

№ 6 (June 2010)

Caterpillar Stakes Its Claim in Power Sales Through a Coordinated Dealer Network

   The man who founded Caterpillar first came to Russia in 1913 to sell tractors. The company's presence grew during Soviet times. And now, in the post-Soviet period, the company is taking a commanding position in Russia’s biggest revenue-producing industry – oil and gas. It’s approach has been two-tiered: building a dealer network to take care of local sales and service at a tactical level, while Caterpillar’s own management focus on strategic client relationships and coordination of dealer activities.

By Pat Davis Szymczak

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   This approach – which Caterpillar uses worldwide – has worked well in Russia and the Caspian, according to Craig Lange, managing director, Caterpillar Commercial Northern Europe Ltd., a group based in London with local representatives in Moscow and Novosibirsk. And the proof is in Caterpillar's ability to claim the leading position in key segments of the oil and gas engine market in Russia and the Caspian.

   “Our dealers are the way we go to market,” Lange told Oil&Gas Eurasia. “We have five dealers serving Russia and the CIS and the message we’d like to get across is that these are all long-standing Cat dealers. Our dealers run the entire Cat product line. For the petroleum market, we sell the Cat brand and we also sell MaK for the offshore. This covers the lowest to the highest ends of our product lines.”

A Dealer Network that Puts Russia in the EAME Nexus

   Cat dealers serving the Russian and Caspian markets also cross over into other areas of Lange’s responsibility – Europe, Africa and the Middle East (EAME). Those that Lange considers to be key are:
Zeppelin – Cat’s dealer for Germany and parts of Europe, which entered European Russia in 1998 and also covers Turkmenistan.
Mantrac – an Egyptian dealership which covers also parts of Africa and the Middle East as well as the Urals, West Siberia and Yamal.
Sakhalin Machinery – the dealer that handles Sakhalin Island under the name Sakhalin Machinery.

   Vostochnaya Technica – which also works in Spain, Portugal, South Africa and Angola. The dealer is strong in the mining industry, in Russia represents Caterpillar throughout East Siberia and through the mining centers of the Far East, such as Yakutia and Magadan.
Borusan – Makina – a Turkish dealer responsible also for Azerbaijan and Kazakhstan.

Amur Machinery in Khabarovsk region.

   In oil and gas in Russia, Caterpillar claims leadership in the sale of engines that are used in drilling (onshore and offshore), production, gas compression, and well services. “We’re talking about 40 horse power, all the way up to 8,000 horse power for the Cat brand,” Lange said. “For MaK, used offshore, we go up to more than 22,000 horse power.”

    “Our philosophy is to think globally and to act locally, and what our dealers have done over the last 11 years is to build up those local relationships,” said Lange. “They can afford to have the technicians on the ground that can be taking care of a sewer line in Tomsk one minute, and be flown to the Vankor oilfield the next. Our dealers partner with the EPC contractors, work with engineering design firms. They do things locally that Caterpillar could not.”

   “Our top sellers in the CIS are our family of 3500 engines, closely followed by our family of 3600 engines. The 3500 business cuts across all segments, though the strongest is in land rigs for drilling, production and gas compression,” Lange said. “Gas reinjection, gas transmission, gas gathering – that’s where we focus. This is closely followed by production and drilling for the 3500 engine.

   “For the 3600 family of engines; again gas compression is the No. 1 market; think of the Vankor field; the field is populated with G-3616 gas compression packages, reinjecting gas back into the well and sometimes pipelining the gas to the city for baseline power.” Caterpillar also has provided 3600 engine packages offshore, including a contract on Shtokman in the Barent’s Sea.”

   Lange said he finds well servicing in Russia to be “a very fragmented market. “There are still many Russian engines (still working in the field but from Soviet-era inventories – OGE). In the well servicing business, Caterpillar is a player in the workover rig market and coil trucks, and that’s with our C15, C18 and C9 engines primarily.”

   With regard to domestic competition, there is little in the high capacity engine market. “The range in which Russian manufacturers work is 800 horse power and below. That is the well servicing segment and for that, Russian domestic manufacturers have it all,” Lange said. “It’s when you get above 1,000 horse power that Caterpillar finds its niche.”

   As for the recession, Caterpillar managed because, as Lange put it: “In Russia we had a lot of carry through from 2008. We had orders on the books and we went ahead and filled those orders. Russia is still continuing to invest in Shtokman and we continued to deliver to that project. This year, we felt some impact from the downturn that happened in late 2009, but now, realizing that to stay the No. 1 oil producer, Russia needs to invest, they are poised to do so later this year, through 2011 and into the foreseeable future.”

   Caterpillar is watching the ongoing Shtokman tenders. Also, Lange thinks that at some point, Russian companies will turn back to development of brown fields. “We have been supporting the Russian government's desire to go back to those fields if they want to remain the top producer,” he said. “So Russia has been a very long-term interest to Caterpillar (over 35 years in country) and this will continue.”

   Turning back to the Cat dealer network: “We focus our dealers on the petroleum segment; localization of packaging and the building of alliance partners,” Lange said. “We expect to be No. 1 or No. 2 in any market segment and we do have some work to do in the production, well servicing area. We’ve asked our dealers to structure differently. We have not taken anyone out of our organization in the CIS during the downturn. We meet the local requirements for certification with all the key NOCs. We are GOST and GOST-R across Cat and MaK engines. For Caterpillar, Russia is not a project; it’s a journey and it’s a journey of success for the long run.”

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