Mohamed Hegazi – CEO, TGT Oilfield Services, Abu Dhabi
“TGT Oilfield Services: Making Noise in the Industry”
Mohamed Hegazi, CEO of TGT Oilfield Services, outlines the company’s fascinating development: its genesis from Russian university R&D to the 2003 relocation of global headquarters to the UAE and the 2011 Private Equity (Lime Rock Partners) investment. All of this drove the transformation of TGT from a research and technology company that provides services to a service company that offers fantastic R&D in their niche focus on Well Integrity, Reservoir Characterization and Cross Well surveys.
Could you start by introducing TGT to our readers?
TGT has a very interesting history. We evolved from Russian university research and development (R&D) to where we are today. After the fall of the Soviet Union in the late 90s, many technology developments accelerated including university-led initiatives, one of which was Kazan State University. The emphasis was on researching how to best characterize and evaluate downhole oil and gas production and field wide performance. Unlike the Middle East, most wells in Russia are particularly challenging with lower per-well productivity. The local industry had to develop affordable technologies that adapt to local economics. TGT was formed in 1998 to commercialize this technology as it developed, with an initial focus on temperature and hydrodynamic modelling and significant decades of Research pioneered and inspired by Professor Nikolay Neprimerov, TGT chief scientific advisor who this year celebrated a healthy 95th birthday and subsequently led by his student Dr Arthur Aslanyan, TGT’s chief technology advisor. Today, we continue to draw on a rich pool of scientists and academics from Kazan State University to lead our innovative R&D efforts.
TGT does not compete with larger service companies but rather provides complimentary technologies and applications and a totally new way of looking at sub surface data.
R&D technologies are not always easily commercialized, particularly from Russia to the outside world. As technology and computing power improved at incredible rates, TGT was able to scale up its offering. In 2001, TGT commenced international activity with Dubai Petroleum and other regional operators. At the time TGT also looked to explore opportunities with Petroleum Development Oman (PDO) and established headquarters in Muscat. PDO were particularly impressed with our work, and in 2003 awarded us a long-term contract, a strong recognition of our unique added value. In 2013 the contract was renewed for another period. This relationship provided us with an excellent base to conduct business in the region. As this contract started to help expand the company, our headquarters were moved to the Sharjah free zone in the UAE in 2003.
What have been the key developments for the business since you joined in 2012?
TGT has essentially been – and continues to be – an innovative technology company. Our origins have had a big impact on our culture and DNA. Since 2012, there has been an important shift from an R&D company that provides services to a service company that is backed by fantastic R&D. Customers ultimately chose TGT because of the solutions we offer, and not for our R&D capabilities per say.
TGT was founded on the concept of understanding marginal reservoirs and field wide performance. The Russian Oil industry develops fields, not with a well-by-well focus, as done elsewhere, but takes a more holistic picture of the reservoir. There is strong government policing for managing field development plans. Every oil company in Russia is obliged to report annually on their field development plans, which are then scrutinized at an extremely detailed technical level. In terms of data collection, TGT’s approach has been to collect data across a multitude of wells, while integrating them on the go into our customers’ dynamic models. Such an approach has yet to be fully embraced in the GCC but is gaining quick momentum especially as fields decline and oil prices become challenging. Traditionally, companies collect data and update their model every few years. However, I am convinced that the downturn in the oil market will encourage such an approach, because in today´s climate it is no longer sustainable to have out-dated models. Given that our technology comes from our own technology centre, they are extremely proprietary and unique not to mention cost effective compared to other offerings. We have a light footprint, and totally focussed on technology and geoscience competence. The flexibility this provides is of considerable competitive advantage.
When I look at how TGT’s business has progressed from 2012 until today, we have grown six fold. We are working in twice as many countries with a growing work force. This is a testament to Customer acceptance and appetite for our solutions. In total, we have a very unique setup; our Technology Centre represents around half of our employees. This is a big commitment and speaks loudly of our determination to continue to innovate and lead the market. We spend a large proportion of our running costs on technology development and innovation and actively participate in Industry technical events and have dozens of SPE publications.
After a career with Schlumberger spanning over two decades, what was it in particular that attracted you to TGT in 2012?
What attracted me can be summarised in 3 words: game changing technology.
Ultimately, it is the tremendous, undeniable uniqueness of TGT´s technology that attracted me, coupled with the quality and dedication of our fantastic staff. There is a market for our services and innovation and I am excited by the potential we have to genuinely improve and help the oil and gas industry and make a difference by bringing a totally new approach to our Clients.
TGT’s success attracted interest from investors and Lime Rock Partners (Private Equity) invested in TGT in 2011. I joined the company a year later as COO, and in January 2015, assumed the CEO position. TGT’s backing by an Oilfield focussed private equity fund, appealed to me, as it signals true commercial value and potential. Many of the Lime Rock had previously worked for Schlumberger, so I had existing relationships with them, which was an important consideration.
What do you see as TGT´s other competitive advantages when it comes to differentiating yourselves from some of the more established names?
TGT focuses on actual measurements deep into the reservoir; we measure what many other technologies infer. We have built our offerings to complement existing technologies by adding a new dimension to something that many of the larger companies have not invested in. As a relatively small company, this is a particularly good business proposition, for many of the larger service companies; it may not be the case.
TGT does not compete with larger service companies but rather provides complimentary technologies and applications and a totally new way of looking at sub surface data. When we look to hire, the uppermost importance is the candidate’s technical ability and their enthusiasm to pioneer something new and exciting. Relationship building is important, but can only go so far. We sell technology solutions that are constantly evolving. We offer products that are of excellent quality and are very well differentiated and are totally agile in response to client needs.
One of TGT’s flagship technologies is Spectral Noise Logging. Such a tool is designed to record sound in a wide frequency with un-rivalled sensitivity. The tool can be effectively used to survey production and injection wells under both shut-in and flowing conditions. It allows us to listen to minute movements of fluid in the reservoir and track oil and gas. We have recently introduced our newest patented Spectral HD service and our Well Integrity Platform that represents a leap in this technology with higher sensitivity and superior resolution. I like to say that TGT is a company that is making noise in the industry!
Today, Russian based technology is well appreciated in the industry. Previously, one of the main stereotypes that people used to have about Russian technology was that it was not glamorous enough. Today, people understand that the key consideration is functionality and deliverables. TGT’s products are both novel and well equipped with very advanced software interpretation and modelling. I believe our products are superior to many of the industry offerings.
What have been the evolutions in your business in the different regions where you are present over recent years? Which regions have been most affected by the fluctuation in price of oil?
The majority of our technologies are physically developed in Russia but a lot of market input comes from our experience across the Gulf Cooperation Countries (GCC), North Sea and of course Russia. We maintain the larger part of our activity in these regions while successfully growing in South East Asia, North America and Africa. While we have suffered with others during the downturn, our services are precisely what our Clients need during this challenging period, because we help them maximize their production and optimize their reservoir performance with cost effective technologies, most of which are deployed rig less.
Our main issue during the downturn has not been declining need for our services, but rather the turmoil witnessed in client organizations and industry at large as we adapt to the new market realities. Today, the focus on increasing production and securing integrity of existing wells is strong. This requires a focus on two key areas: first, ensuring that the well is healthy, which is where TGT´s focus on well integrity comes into play; and second, ensuring that you capture all the possible hydrocarbons that can be produced from the well. These are precisely the answers TGT offers with answer products and not just measurements.
On a personal note, how would you say that your managerial strategy has evolved since you joined TGT?
In a company of TGT’s size, I have to be more involved in the technology development side, which has to be done at a much faster pace. Likewise, we all need to be more responsive to clients and quickly adapt our solutions to their evolving needs. Having our own R&D and manufacturing helps do just that. The number one challenge I have had at TGT has been to shift the culture from an R&D background, to one that always puts the customer first. Such an effort is already starting to display its fruits. In the future, my ambition is to see TGT as an oilfield service company that keeps the customer at the centre of its business, innovates new technology solutions and attracts top technical talent that is excited by something new and differentiated.
The GCC region is currently is undergoing a lot of changes, as highlighted by the replacement of the long-serving Saudi oil minister. What do you see as the key changes that will drive the business in the region over the coming years?
The shake-up that is underway in the industry is having a significant impact in terms of the number of expatriates, consultants and senior people active in this region. In the short term, I foresee a drop in competencies. As GCC countries increasingly nationalise key business areas, inevitably there will be a higher technical role for all service providers. Consequently, such countries will require more support from companies such as TGT, that are technically orientated, as opposed to companies that focus more only on service integration. In the future I expect our role to be more prominent as trusted reservoir advisors with our deep understanding on asset level. Today we are advising people who are technically experienced. In a few years I expect we will be advising people who are still learning as a generation retires from the industry. Our customers don’t just want diagnostics; they demand actionable findings that can be delivered cost effectively. The other shift we are witnessing in this region is an increasing difficulty in extracting oil coupled with a strategic interest towards gas production in the GCC. Gas tends to be harder to extract in most cases and is TGT´s speciality.
I believe the industry here is witnessing important transformations and my ambition is to position TGT to continue “making noise” and supporting this transformation to be a success for our customers and the industry at large.