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July 5, 2008
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Home / Issue Archive / 2007 / October #10 / Weatherford’s Man in Russia Shoots for a “Hole in One”

№ 10 (October 2007)

Weatherford’s Man in Russia Shoots for a “Hole in One”

Russia’s $10 bln-plus oilfield service market could, according to some estimates, expand by a factor of 10 or more over the next decade.

By Pat Davis Szymczak

The fast pace of this growth is fostering a rebirth of Russian manufacturing. For global oilfield service and supply companies, it is an opportunity to plant their flag in Russia or to take their existing Russian and CIS operations to a new level. The latter is the case of Weatherford.

“Weatherford has set a goal of doubling in size worldwide in four years. One of the few places left where this sort of growth can be supported is the former Soviet Union.” These are the words of Kamil Zakirov, Regional Vice President for Russia who spoke recently with Oil&Gas Eurasia.

In February Zakirov was assigned the job of making growth happen. To ensure his success, the depth and breadth of Weatherford’s global resources were made readily available for a territory that includes Sakhalin Island in the Russian Far East and former Soviet states such as Kazakhstan and Azerbaijan in the Caspian Sea region.

Technologies Key to Growth Potential

The growth potential comes in large part from places like Western Siberia, where thousands of mature wells, box-pattern drilled 30 or more years ago, are creating the world’s most dynamic market for the latest technologies in primarily artificial lift and enhanced recovery. Growth potential also will come from the ability to deliver technologies that can survive in one of the industry’s last frontiers, a place where winters can last nine months and see temperatures drop to –58 F (–50 C).

On Sakhalin Weatherford is involved in record-setting projects such as Sakhalin I, operated by Exxon Neftegaz Limited (ENL) in partnership with Russian national operating company Rosneft and Sakhalin Energy, in which Shell recently handed over control to Russia’s state-owned gas producer, Gazprom. Weatherford partnered with ENL to drill and complete the world’s longest extended-reach horizontal well. One record involved a well-saving casing exit made while sidetracking at 26,000 feet (7,925 meters), of which 20,000 feet (6,096 meters) was horizontal or near horizontal.

Acquisitions: The Growth Groundwork

“Five years ago Weatherford Russia had maybe five employees. When I started in my role as Vice President for the region, we had 235. Now, a little more than half a year later, we are over 2,000 people,” says Zakirov.

About half of Weatherford’s growth in the former Soviet Union has been by acquisition. In the Caspian Weatherford acquired GIS, Kazakhstan’s largest wireline company. In Russia recent purchases include the directional drilling company Techinformservice, located in Izhevsk in the Ural mountains, and NGKS, a pipeline testing and inspection company outside of Moscow. NGKS adds magnetic-flux leakage (MFL) and ultrasonic technology (UT) inspection tools to the current offering of Weatherford’s Pipeline & Specialty Services group.

Weatherford has also acquired a 33 percent interest in Borets, the world’s largest manufacturer of electric submersible pumps (ESPs). “This furthers our financial investment in indigenous suppliers,” says Zakirov. The acquisition provides a nice ‘give and take’ arrangement. Weatherford gains the ability to expand within the country while, at the same time, this helps extend technology outward to other countries.

“We are the world’s largest artificial-lift company; but on the ESP side, we have been small compared with our competitors—although we do our own cable manufacturing as well as control equipment and gauge,” Zakirov told OGE. “Bringing together the strengths of both parties is a natural collaboration.”

Creating a Growth Business Model

But acquisitions are only part of the picture. Zakirov sees his most important role in creating a dynamic environment in which a solid foundation can be laid for growth. This goal has meant creating entirely new businesses so as to grow the company organically.

Alfredo Sánchez, Technical Manager for Fracturing Technologies, left Houston earlier this year and returned to Western Siberia, where he has worked extensively. He returned to Moscow to facilitate Weatherford’s entry into Russian fracturing and coiled-tubing markets. Given the sheer number of wells requiring enhanced recovery technologies to remain in production, Russia is not surprisingly also the world’s largest fracturing market.

So it was not a surprise that Weatherford decided to target Russia as the first country to take its four-year-old, U.S.-based fracturing business international. But there was an unexpected twist to the process. “We looked at the business plan and decided to add coiled tubing to it,” says Sánchez, a U.S. citizen with Colombian roots who happens to speak Russian. “Clients in Russia like coiled tubing for well servicing post frac. Our growth plan was to get a unit here and later expand into perforating, logging – anything else that would support the technology needs of our clients.”

Sánchez expects delivery from Houston of one fracturing fleet in the near term, with an additional two arriving early in 2008, to start work on five jobs contracted with state-owned Rosneft. Because Russia is a mature fracturing market, Weatherford needed to find its niche; so Sánchez and his team developed specifications for the Weatherford units that would outperform equipment currently used in Siberia.

These custom-built units have a chassis, heating system, pumping system and engine heating systems; so they can operate at –49 F (–45 C). “We did the same thing with the fluid,” says Sánchez. Weatherford developed a gel that requires no additional heating.

A typical Russian fracturing job takes about three days to pump because of the extent to which the crew has to be constantly mixing heated water and other fluids to keep things moving in the cold; but Weatherford will take only one day. And so, instead of the usual 10 fracturing jobs a month, the team can accomplish up to 17 jobs. “By having a crew in advance of the frac fleet, the wells will be prepared ahead of time; and with our specifically designed equipment, we will be able to roll up on location, rig up and pump the treatment, without wasting time mixing chemicals,” says Sánchez.

Moreover, the unit’s design will be easier to maneuver where there are no roads. Typical Russian fracturing units are Canadian imports of a tractor-trailer design, which is fine if there is a road to the job site; but in Russia, often these units need to be pulled through mud with a bulldozer.

The custom-built coiled-tubing unit keeps pumping at –36 F (–38 C), while the most advanced western-built units in Russia today freeze up at –31 F (–35 C).  “If you start a job in the morning and the temperature is dropping one degree an hour, that three degrees extra can help the client,” says Sánchez. “You can finish the job and not have to shut things down.” Weatherford’s first coiled-tubing unit is expected to roll into Siberia around February 2008.
Weatherford also intends to play the role of drilling contractor in Russia, having entered this business in 2005. This will allow for significant technology pullthrough with potential for total turnkey solutions in the future.

When Zakirov took over in February, Weatherford had 20 locations offering as many product lines throughout the former Soviet Union, from Komi in the Arctic part of European Russia to Sakhalin and to Kiev in Ukraine. At that time, all locations offered Weatherford’s traditional mix of core products and services—drilling equipment, drillpipe inspection, tubular running services and fishing services. And on the production side, Weatherford now covers more than 50 percent of Russia’s growing market for progressing cavity pumps, as the country’s domestic market has lagged in the development of elastomers and similar technologies.

The Growth of Technology and Training Centers

But while such core products and services will remain important, Zakirov sees Weatherford’s real future in providing clients with high-tech engineering solutions.

To move in that direction, Zakirov wants to set up a research-and-development center in either St. Petersburg or Samara, an hour’s flight from Moscow, to develop new products, technologies and engineering applications in Russia. The company already has such centers in the U.S. and Europe. “Our goal is to offer integrated engineering closer to the end user while engaging local talent that can better understand our clients’ business drivers and needs,” says Zakirov.

That goal also encompasses a network of training centers in cooperation with universities in Russia’s oil-bearing regions. “This is an investment in the young that will help us recruit in the longer term. My hope is that in some years’ time, when I visit a client, I might find myself meeting a former student who benefited from the training these centers provide,” says Zakirov.

Becoming Russian

Finally, to grow over the long term in Russia, Weatherford, like many international companies, knows it must become Russian: “As in any country, clients want you to address their needs in their language. We need to address Russian problems in our technical papers. We need to speak to Russians in the language that they better understand.”

Expatriate managers will always have a place, but their numbers will be fewer. And Zakirov, like many others in his position at international companies, is exploring domestic manufacturing options for Weatherford products.

“We are starting to exchange people between locations,” says Zakirov. “If you’re in the Caspian, you go to Sakhalin; if in Sakhalin, you go somewhere else. By the time Gazprom and Rosneft are ready to go to the Arctic, Weatherford will have the kind of in-house, Russia-trained specialists who can do the job anywhere in Russia and anywhere in the world.”

Copyright © 2007 Eurasia Press, Inc. (USA). All rights reserved.
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