A non-traditional market

Kuwait

TOGY talks to Aiman Bohendi, general manager of Eastern National Oilfield Services (ENOS), about the effects of the dramatic fall in oil prices on the services sector, the advantages of operating in the Kuwait market as an entity with specialised local knowledge and the influx of international companies into the local hydrocarbons industry.

Established in 2004, ENOS provides logging and completion services for Kuwait Oil Company. The company is primarily active in the upstream. ENOS is the wireline logging arm of Senergy Services, a Kuwaiti company that belongs to Senergy Holding.

• On lean operations: “Our headquarters for all of our operations, even outside of Kuwait, is this office. Everything is centralised to this location. We are pretty slim in terms of overhead and our people are hand-picked to have the exact knowledge we are looking for in the industry. We look for employees with international knowledge and with KOC exposure. We are focused in that area and that has given us an excellent advantage over other operators in the market.”

• On the new contract with KOC: “We began working with KOC in 2013 and we have just been awarded a two-year contract providing the same scope of service with room to introduce many advanced services that we have been eager to provide to KOC, enabling us to solve some of their existing challenges.”

Other than pricing, what variables does Kuwait Oil Company (KOC) consider when choosing contractors?
KOC has improved many of its systems and continues to be a world leader among NOCs responsible for delegating operations to contractors. The company employs a job distribution model that is used primarily for regular operations. This system allows KOC to maintain transparency and equality, ultimately allocating contracts depending on variables such as prices, contractor co-operation and the quality of work. It is a unique system that we have not seen anywhere else and they ought to be applauded for it. There may be plans in the works to patent the system.

What is your outlook on KOC’s projected investments?
With the fall in oil prices, it’s no secret that oil companies are looking for more affordable and economic solutions. Eastern National is a very strong company on that front, especially in Kuwait. The company is lean with very little overhead.
We have projects outside of Kuwait that support us and we are a part of a bigger organisation, so the strategy for us approaching KOC since 2013 has been to be more competitive on prices while providing top-notch quality services. We believe that KOC is pleased with both our prices and our service quality.

Many companies have been forced to slow down as a result of the economy. KOC has not. Can you discuss KOC’s surge of activity?
KOC continues to move forward. The company did not slow down its operations, in contrast to almost everyone else in the region. As international players vie for market share in Kuwait, costs improve for KOC as the competition from multiple companies drives the prices down and increases oil production. KOC is still targeting its expanded production figure.
Kuwait is not just another GCC country and KOC is not a traditional client. It is not an easy approach. It is not easy to enter the Kuwaiti market. This is evident in the number of contractors invited for each services tender and how many end up actually bidding. Many of them withdraw because they cannot predict the market.
ENOS has a huge advantage because it is a Kuwaiti company that started outside of Kuwait. The firm’s international background builds on the experience of its parent company and partnerships. Our history of working internationally and the know-how improves our reputation as a Kuwaiti company. We had an advantage in that area where almost all others do not.
We began working with KOC in 2013 and we have just been awarded a two-year contract providing the same scope of service with room to introduce many advanced services that we have been eager to provide to KOC, enabling us to solve some of their existing challenges.

What is the biggest obstacle for oilfield services companies in winning a contract here?
For international companies, the lowest price they can provide would be somewhat above their cost after overheads and additional costs are accounted for. This is not possible in Kuwait. In order to enter the Kuwaiti market, operators are essentially required to re-engineer the way they approach the business. You have to optimise everything and think outside of the box.
Operators must have a great deal of insider information in terms of how to optimise. Companies entering the market would not know about the hidden costs related to infrastructure, for example. Kuwaiti companies have an advantage given their local experience and know-how. ENOS works with KOC in almost all aspects of the market; we see everything around us. International companies entering the market will have a challenging task ahead of them.

Why has there been a recent influx of international companies into Kuwait?
International service companies are coming to Kuwait because there are not many other options. The market is forcing them to come. Anywhere there is a client that is not slowing down and is still paying, they will be after them.

Has the entrance of the international operators driven down the prices of services? Has ENOS been affected by this?
Once you have a contract, it is a set contract. There has been an increase in adjustment orders and operators have been negotiating new contracts. So, yes, we do feel that. Operators are forcing the prices down. That was our strategy entering Kuwait when the oil price was more than USD 100 per barrel.
We can easily say that we are the most competitive services company in terms of price and value in Kuwait. Many services companies are struggling, but ENOS continues to do well and expand.

Is that due to ENOS being a flexible and lean company with little excess capacity?
Exactly. That is the idea. Our headquarters for all of our operations, even outside of Kuwait, is this office. Everything is centralised to this location. We are pretty slim in terms of overhead and our people are hand-picked to have the exact knowledge we are looking for in the industry. We look for employees with international knowledge and with KOC exposure. We are focused in that area and that has given us an excellent advantage over other operators in the market.

Do you feel any pressure from Chinese companies trying to enter the Kuwaiti market and their pricing strategy? How has KOC lent its support in the face of this more challenging operating environment?
Everywhere [Chinese services companies] go they go by lowering prices. However, for us as a local company, KOC works to support us. This has been one of their mandates since the company started. Many GCC countries, such as Oman, promote local companies and this is an excellent approach for governments to take.
Currently, there are six contractors in our product line. KOC has continued to encourage us to increase the scope of work and bring in new technologies at both services quality meetings and quarterly meetings that we have with them.
We feel and appreciate their support and it is obvious for international companies that KOC supports local companies that meet their performance expectations. If not for KOC, this would be a totally different game for us.

Does ENOS have plans to expand regionally or internationally?
Now is not the best time for expansion outside of Kuwait. We bring in everything from outside for any other services that we do not have with KOC to have a bigger scope with different segments.
We are a part of Senergy Services, which has different companies in different fields. We are the wireline logging arm of the company. They are a Kuwaiti company that belongs to Senergy Holding. Eastern National is the only one of all the sister companies operating with KOC.

What is the scope of the contract that ENOS has with KOC through 2017?
Our current contract is wireline logging and providing production logging services and various case hole services for producing wells in North, South and East, and West Kuwait. We are doing all the work ourselves and for specific equipment we co-operate with others but we do not have any specific technical partners. Usually, new local companies have technical partners to build their history and track record. As we were established in 2004, we are out of that phase now.

Where does ENOS acquire new technology and new techniques for application in Kuwait?
We keep track of all new technology. Wherever we find a solution anywhere in the world that can solve any of the issues KOC may have with their wells, we provide it almost immediately and co-operate with KOC to provide needed technology.
International companies are almost always limited to their own technology. Local companies do not have that limitation. They are global and can go out and acquire equipment from anywhere, so it is not really an issue. We can bring any answer to KOC for any problem that we may see.

Which local content policies has KOC implemented and have they been successful?
Several years ago, KOC began a Kuwaitisation programme in which they require each new contractor to hire and provide training to a certain percentage of Kuwaiti staff. Once their training and tenure are complete, KOC has the option to recruit these individuals.
Today, KOC has experts trained by international service companies in almost every field, where they keep up with all new technologies and know all of these tricks and details. Strategically, this was an excellent move on KOC’s part and we are beginning to see the fruits of this policy materialise.

What kind of technology is KOC seeking from its contractors?
In the old days, wireline logging was limited to Schlumberger, who invented it more than 100 years ago. Later, some of the larger international companies adopted the same technique.
Today, wireline logging is almost a commodity, especially for the basic tools. Everybody has access to it and as such the scientific development of technologies associated with the technology have not been limited to international companies.
Schlumberger has always been the biggest investor for new technology and research and development for logging equipment, but they can’t think of every idea. There are many new companies in the world, start-ups, that have come up with new ideas and built on that innovation. There are things we never thought about before.
The more this science is open and the longer it stays on the market, the more you can do. There are many ideas that existed 20-30 years ago but were not feasible given the technological limitations of the time. The same thing happened with Apple’s iPhone. The idea was conceived in the 1980s. However, the product was not developed until later because the accompanying technology was not available. It is the same thing with technology development in oilfield services.

Kuwaiti oilfields are being depleted and KOC has been looking at more EOR and technology-intensive solutions. What is the role of technology in enhancing production?
That is why we are concentrating on finding new technology that can be applied to extracting heavy oil, lower costs for fracture services, or technology to stimulate wells without the cost associated with equipment for pumping and rigs. There are technologies being developed and enhanced and we are co-operating with some of the leaders in the world for them, so this is exactly the area we are focusing on.

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