October 13, 2012
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№ 9 (September 2012)

Russian oil field service companies seek quicker payment

Russian oil and gas field service companies are not happy with the situation they find themselves in which effectively makes them creditors to their production company clients, service company reps unanimously said during the Neftegazservis-2012 conference held October 9 in Moscow.

By Elena Zhuk

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"Russian service companies feel pressure from clients, Deloitte manager Olga Osharova said, "payment periods range from 60-90 days". According to data Osharova shared with OGE, the forecast for growth in the Russian market was 20-25% from 2003-2008, 15% in 2010-2011 and is forecast to be about 10% in 2012.
Commenting on the structure of the market, Osharova noted that predictions of intensive company mergers and acquisitions in 2009 did not bear out. Although some large companies are continuing to spin off their service assets, there are some exceptions. For example, Bashneft has announced its intention to consolidate assets. Another current trend, Osharova said, is the drive to forge alliances such as the Geotech-Integra-Schlumberger partnership.
Speaking at the conference, Union of Oil and Gas Equipment Manufacturers President Aleksandr Romanikhin told attendees that they should not fear the presence of international companies on the market. He said that global companies have been on the market for a long time and their presence is not a problem just as Russia's joining the WTO would not be a problem. Romanikhin said that to the contrary, this would foster "increased transparency in the rules of the game" which would be more beneficial than imposing tariffs on imported equipment.
On the other hand, Romanikhin said more attention should be paid to real issues such as delayed accounts payable and lower prices for services. Tagiryazan Gilmanov, the vice president of Ru-Energy Group for oil service companies, said that the trend to delay payments was nothing more than "deceit and lack of respect for service companies". Gilmanov said that one of the negative consequences of tender dumping was lowering the real cost of production. Rustam Alakbarov, the director of the services purchasing department at TNK-BP Management, agreed. "We must fight dumping", he said. 
Commenting on proposals voiced at the conference to set unified prices for services in the sector, Alakbarov said that this could only be done in individual, more simple cases. "Prices for drilling services are often the consequence of applying different technologies and approaches", he explained, adding that the relationship between price and quality would in time even out on its own.

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