Companies are moving beyond Europe and the Americas to new territories in Asia. Mary Ching looks at the downhole tools market.
The LOCK series of products, (from left to right), SAFELOCK, TIMELOCK, STORMLOCK, and LASTLOCK.
The international downhole tools market includes many types of hardware with diverse applications. Drilling tools, flow and pressure control, impurity control, handling tools, and downhole control system comprise the major market segments. Downhole tools applications namely formation and evaluation, well drilling, well completion, well intervention, and oil and gas production also constitute its global market segments.
North America still leads the downhole tools market, but many companies are expanding their presence in Asia. Countries such as Malaysia and Indonesia are strategic gateways to Asia, in close proximity to other Asian markets, with attractive financial and tax incentives for companies spreading their Asian wings.
Recent trends show that many multinational companies and investors choose Southeast Asian countries for their regional headquarters in the Asian downhole tools business.
In the past, Hong Kong, Singapore, and Shanghai have been the default choice but now many companies are exploring other locations as costs escalate in those three cities.
Archer Well Co. is one of the companies currently moving into Kuala Lumpur and Jakarta offices to set up operation bases for Asian expansions. The company was formed in 2011, after Seawell acquired Allis Chalmers Energy Inc. Archer’s products and services include drilling services, production optimization, well integrity, intervention, and decommissioning. The company also has a portfolio for design, manufacturing, operation, and installation of high-end tools and services within well barrier and well integrity.
Expanding into Asia
Archer’s Tornar Circulation Magnet technology has a lifting capacity of 1000kg with full contact.
With experience spanning over forty years in the operations of major basins within Europe, North and South America, Archer is now venturing into Asian markets. According to Andre Kjonnerod, Region Manager, Oil Tools Asia Pacific, Archer Well Co. (Australia) Pty. Ltd., after having established in Australia, Papua New Guinea and New Zealand, the company is now expanding into Asia.
“Archer is currently moving into Kuala Lumpur and Jakarta to penetrate the markets in Southeast Asia. We have recently started an operation base in Kuala Lumpur as a hub for Asia, from here on we plan to explore other markets such as Brunei, Thailand and Vietnam,” remarked Kjonnerod. “We are also in the process of training a pool of expertise in Australia, Norway, and the U.S. who will return to help us grow in the Asian countries.”
In conjunction with the company’s expansion policies, Archer is also targeting to shift its Asia Pacific operation base from Perth to Kuala Lumpur within a year’s time. Kjonnerod commented that, “Naturally, we are more inclined to choose Malaysia as a regional hub, as opposed to Australia, because of its closer location to our headquarter office in Norway. We also foresee Malaysia to have a significantly larger market than Australia.”
According to Kjonnerod, Archer has about 70% market share in the LOCK retrievable bridge plugs in Australia, a very specific and necessary tool for Australian clients. The company expects Malaysia to contribute to its business growth more than it did in Australia. “Australia has a smaller market for our products compared to Malaysia,” he added.
Apart from that, the opening of a workshop in East Malaysia will mark another expansion strategy from Archer. The workshop, situated in Labuan, is currently being constructed with expected completion by the end of 2014. The workshop will serve as the facility for Archer’s tools to be built and as a product assembling point. It will also cater to most of its clients in both Peninsular Malaysia and East Malaysia. “And as soon as we gain a foothold in Peninsular Malaysia, hopefully, we will embark on an operating base in Kemaman Supply Base (KSB), Terengganu, which is part of our expansion plans in Asia as well,” stated Kjonnerod.
Globally, the company operates 32 platforms, owns and operates two MODUs (Archer Emerald and Archer Topaz), and owns and operates 77 land rigs. Archer has 8500 employees worldwide with operations in more than 100 locations throughout the world. Kjonnerod said, ”Archer has always been focussing on a very niche market and a niche portfolio. Our products are unique compared to others, and even when other companies have similar products, they are very different in the way they are rated and qualified according to standards.” Tools are reported to be engineered in compliance with ISO 14310 and 14998 VO standard.
The Tornar tool is one option in Archer Well Co.’s premium products portfolio.
Downhole Products achieving higher turnover in Asia
Another global company, Downhole Products, which opened an Asian regional headquarter base in Kuala Lumpur last year, reported its double-digit turnover achievement consecutively in its Asia Pacific region. Prior to this, the company reported that it was a logical move to commence a regional operation in Kuala Lumpur as Asia recovered from economic recession more rapidly than any other regions in the world.
BOP cleaning after milling operation.
Downhole Products recently announced that after its opening of the new office in Jakarta, the company’s year-on-year growth has exceeded 45%. Its strategy to operate in Jakarta proved to be an important step in “ensuring the company is correctly positioned to capitalize on emerging markets.”
Alex MacGregor, Asia Pacific Regional Manager, Downhole Products said, “This excellent result has been achieved due to considerable investment in both people and operations, meaning that we are now in a stronger position to support and service our clients’ needs and expectations.”
Elsewhere in the region, Downhole Products also operates offices in Australia, Brunei and Vietnam. “Since we opened the Vietnam office a year ago, we have been extremely impressed with the level of growth and opportunities, and we look forward to expanding this by recruiting more people to join the team.”
Since its inception in 1994, Downhole Products, a British-based company with global headquarters at Portlethen near Aberdeen, Scotland, designs, manufactures and supplies casing accessories and completion tools for the drilling industry. The company is in its 20th year of operation and is known as one of the market leaders for downhole tools such as centralizers, reamer guide shoes and cable clamp protectors. According to Ian Kirk, President and Managing Director, Downhole Products, “We anticipate the success we have seen in Vietnam to be replicated in our newest office in Jakarta, further underlining our strong position in the region.”
Subsea BOP cleaning for Troll field.
Challenges in marketing downhole tools
Despite the Asian region being flagged as a growing market, there are setbacks in chartering new territories. According to Kjonnerod, challenges are always present to reach the intended client or communicating the intended message to the clients. “Most of our products are new developments of products that have been in existence for a long time. It remains a challenge in changing the mindsets of the clients, to convince them of new and improved versions of tools that they have been using – new technologies, which is what drives us as a technology company.”
Not to mention, for Archer, there is always competition against some of the world’s largest oilfield services companies such as Baker Hughes, Halliburton, Schlumberger, and Weatherford. “We compete with each of these companies in certain products portfolios. For instance, in casing exit, we compete with Weatherford, Baker Hughes, and Schlumberger but not much with Halliburton as they don’t have casing exit. We also compete with Baker Hughes on retrievable bridge plugs and others, but we have a larger range of sizes than theirs, so we don’t compete 100% in all segments, only in a certain particular segment,” explained Kjonnerod.
Another issue lies in the bidding of contracts in different countries when it comes to the tendering processes. “Coming into a new country with a limited portfolio poses to be a challenge to secure contracts. The technical and legal aspect of bidding for contract in a foreign country requires utmost scrutiny as well. It’s a tedious process,” he added. This sum up that marketing downhole tools in Asian countries is not always a straightforward task.
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