Jack Zhou Minghua, Executive Director, and Jin Qingyong, President, COSL Drilling Pan Pacific, Singapore
Jack Zhou Minghua, Executive Director, and Jin Qingyong, President of COSL Drilling Pan Pacific, discuss the company’s key strengths, why quality rigs are more important than the quantity of rigs, and why recruiting solid local and international talent will continue to be a key focus point for the company in the future.
What are COSL Drilling Pan-Pacific, Singapore’s core areas of activity and what geographical areas do you over see?
Jin Qingyong (JQ): As a contractor, our insistent aim is to focus on our primary business of providing offshore drilling assets and services. That is the foundation from which we seek to expand and develop our business into different geographical areas beyond Southeast Asia (SEA), but also in the Middle East and the Gulf of Mexico (GOM). For COSL Drilling Pan-Pacific, these regions will represent our core target markets going into the future.
As a company that has begun to look outwards towards international markets in the past decade since its listing in 2002, what role has Singapore played in the development of the company from an international commercial and compliance point of view?
Jack Zhou Minghua (JZM): Singapore represents an open and transparent financial hub in the region and is a leading international exchange center. Although it is a small country with virtually no resources, it is able to enjoy many spin-offs and benefits as a result of its positioning as a financial center. The country’s seamless financial policies and transparency is highly advantageous for companies such as COSL and encourages us to use Singapore as a base for regional financial operations. In particular, Singapore offers a highly competitive tax environment and allows for the effortless flow of finances that cater to our regional operations which we have been taking advantage of managing a great deal of our company’s financial flows through here.
In addition to this, COSL is also currently constructing a global supply base in Singapore. Not only will we be able to take advantage of Singapore’s excellent logistics infrastructures and geostrategic location, but the supply base will position us closer to offshore manufacturers as well including the world’s largest rig producer, Keppel. Furthermore, as the COSL Group continues to expand, we have a strategic motivation to establish a purchasing center in Singapore, and the United States, in order to position ourselves closer to our major suppliers. This will allow us to decrease our costs and enhance our relationships with the high concentration of suppliers here while also strengthening our R&D capabilities.
In terms of human capital, what kind of increase in workforce do you expect to accommodate the growth of your operations?
JQ: Because COSL Drilling Pan-Pacific is solely focused on offshore drilling, our parent company has recently established another subsidiary, COSL Oil Tech. This new entity will in turn focus on the development of our R&D centers, human resource management as well as other oil field services. Over the next couple of years, we expect that division to increase its manpower by at least another 100 people.
Currently, our Singaporean operations employ approximately 45 people, half of which are locals working in the administrative and commercial roles. In addition to this we also employ a healthy mix of western expatriates and Chinese nationals from our head office in Beijing.
In terms of Singaporean talents, there are indeed some limitations that we have to consider. Singaporean’s tend to pursue more business-oriented positions such as in finance or management. However, there is a real lack of technically competent local human resources. Hence, we often face great difficulties when it comes down to staffing our rigs with Singaporean engineers and are forced to outsource those skills from primarily western countries like the UK.
What is the current status of your fleet utilization? And how is your fleet positioned with respect to safety and compliance?
JQ: Each of our rigs in our portfolio are currently very busy and under contract. We have four rigs operating in the Middle East, three in the SEA region and one in the Gulf of Mexico. Although we continue to receive a strong demand for our rigs from international markets, we are currently unable to satisfy each request because the supply of our rigs is lagging the demand. In order to satisfy this high demand, COSL has invested in two new rigs that we expect to receive over the next couple of months. One will be deployed to the Gulf of Mexico and the other to the SEA region, increasing our fleet to ten rigs. In addition to this, Africa, and West Africa in particular are promising markets, which we fully intend to get into once we have the rig capacity in the future.
JZM: In terms of technology and safety considerations, the rigs we are about to receive meet the highest industry standards. Whereas some drilling companies from China might currently be looking to compete on a price basis, to some extent sacrificing quality, we have been working diligently towards elevating ourselves to the standards of the international community since we began the internationalization of our organization some three decades ago. As such we are committed to, and expect, a high level of safety and quality in all aspects of our assets and operations. We try our best to ensure that all of our facilities are updated with the latest standards. This allows us to focus on the premium markets and compete in the international arena. Our commitment to quality is reflected in the type of customers we serve today. For instance, this includes BP in Malaysia, a company known to have some of the highest technical, operational and QHSE requirements.
How would you assess the competitive environment in the SEA region and how do you set yourself apart from others?
JZM: Given the strong upstream investments in the regional upstream sector, this has attracted many industry players to seek a share of the pie. There certainly is a fair deal of competition from both international and regional players alike.
Looking at the global market trends of offshore drilling contractors, we see that an increasing number of international players venturing into deepwater activities, and divesting their positions in the jack-up rigs sector. Primarily, they are doing so in order to capitalize on the premium rates earned on deepwater drilling rigs despite the significant investments required. This leaves only a few global drilling contracts across the world that are capable of delivering specialized services with a proven and successful track record. Experience after all is essential in our industry and this is something we have been continuously developing over a number of decades, and will continue to do so. Moreover, as a Chinese company, with over 6.9 million Chinese graduates last year, we also have access to a growing pool of experienced and technically competent human resources. With the global ‘talent crunch’ which is causing many international companies to struggle in staffing its operations with competent people, this also places COSL at an advantage now and over the longer term.
As a fast growing company in one of the world’s fastest growing economies, China and COSL therefore have the financial resources to build the rigs it needs to cater to the global industry’s growing demands for cutting edge jack-up rigs. In addition to this, we have a diverse pool of experienced professionals that can support our growth. Moreover, we are committed to continuously enhancing our track record of operating in the international arena working with the industry’s largest and most demanding players. Whereas our American counterparts, for instance, might have the financial resources and industry experience, they do lack the human capital needed to support the continued expansion and development in the jack-up drilling rig sector.
Considering the company’s significant growth ambitions in Singapore, what goals will you be working towards over the foreseeable future and where can we expect to see COSL Drilling Pan Pacific in over the next few years?
JQ: We intend to shape Singapore as the definitive branch of the COSL Group for the region and beyond. This will not only be limited to our drilling activities, which we have already established here, but also in terms of our overseas operations going into the future.
JZW: COSL has adopted a very long-term strategy with respect to our growth ambitions. The industry we serve is characterized with some highly promising growth prospects and COSL is very well positioned to capitalize on these. COSL is not looking to make short-term profits from investing in on going market trends alone. Instead, COSL is a company that is looking to invest in the right and high quality fleet of assets while also investing in the development of its operational capabilities and technical expertise. This is what sets us apart from the rest.
JQ: In this regard, Singapore has proved to be the ideal launching pad from which COSL can work towards these long-term goals and establish itself as a truly international company. In terms of its policies and human resource management, among others, Singapore offers a Western style business platform in an Asian environment. There is a great balance between Mandarin and English speaking people, for instance. As a Chinese company, Singapore provides us with the ideal platform from which we can transition into the Western markets. In this way, not only is Singapore the gateway to Asia, as many Westerners tend to say, but it is equally Asia’s gateway to the West.
JZW: Indeed, although the costs associated with doing business in Singapore have been on the rise in terms of office or land space and human resources, the country more than makes up for that with the structural advantages it offers. Companies based in Singapore are exposed to a thoroughly international environment, seamless and transparent legal and financial systems and an efficient regulatory environment that is highly supportive of business development.