Phil Cherrie – Regional Sales & Marketing Manager, Oil & Gas, Sandvik EMEA
Phil Cherrie, regional sales and marketing manager of Sandvik Materials Technology’s business unit in the UAE, highlights how the high hydrogen sulphide content in Middle Eastern natural gas wells makes the region the most important for the company’s oil and gas business.
Sandvik products and services are separated into three business areas: Sandvik Machining Solutions, Sandvik Mining and Rock Technology and Sandvik Materials Technology. We know that globally, the Sandvik Machining Solutions segment is the largest, with 18,000 employees and USD 3.67 billion in sales. How does that trickle down to the Middle East?
“The Middle East and Africa region accounts for about 10 to 15 percent of global turnover. However, we have a global focus and aspire to grow across the globe.”
The three business lines are independent of one another and I represent the Sandvik Materials Technology side of the business. These three different business areas have their individual growth spots around the world; inherently due to the nature of their core offering corresponding to the unique needs of the regions around the world. The Sandvik Mining and Rock Technology business area, for instance, enjoys excellent results in Africa, while our machining solutions business is strong in countries with large engineering centres such as Germany, UK or France, as their main customers are in the Automotive and Aerospace industries. The Middle East, however, is the most important region for our oil and gas business within the materials technology business unit, hence we have established our Europe, Middle East and Africa (EMEA) headquarters here in Dubai.
Which areas do you see as being the biggest growth drivers in the future?
In Sandvik Materials Technology, we see the Corrosion Resistant Alloy (CRA) business as a great growth driver for us. We acknowledge that the majority of the Middle Eastern gas fields are sour gas fields with an unusual high level of hydrogen sulphide (H2S), hence these countries rely on advanced CRA solutions for the lasting use of equipment and machinery for gas production; and these are exactly the kinds of solutions we provide!
There are two other business areas within our oil and gas segment where we are covering significant ground in the region as well. In the offshore segment, we are the market leader in stainless steel umbilical tubing and have supplied more than 100 million meters (320 million feet) of umbilical tubes to all major fabricators and oil companies over the last 20 years. Nonetheless, the Middle Eastern region’s offshore segment does not provide the sizeable tubing business we generate in other, rather dedicated, offshore regions in the world such as Egypt.
Furthermore, we have increased our capabilities in the downhole tubing and casing segment through a global alliance with Tenaris. This alliance allows us to offer complete solutions to clients operating in highly corrosive environments where traditional carbon pipes cannot be used. Supplying the CRA pipes along with Tenaris’ connections and proprietary Dopeless ® Technology supports the needs of our clients. This segment is another growth spot for the Materials Technology division of Sandvik in the Middle East.
The Middle East and Africa make up 15 percent of the group’s USD 9.5 billion turnover. How would you like this percentage to evolve in the coming years?
The Middle East and Africa region accounts for about 10 to 15 percent of global turnover. However, we have a global focus and aspire to grow across the globe. The oil, gas and energy markets, for example, represent a significant share of our materials technology business unit—however, for the tooling side of the business, the engineering industry is much more significant and the relative share will be different. We remain focused on growing our materials technology business unit in EMEA, and we expect all the other business units to enjoy similar success in their respective key markets.
We see that recently Sandvik has secured contracts here in the UAE as well as Egypt. What is the significance of these contract victories?
For our regional operations, these contracts were game changers! As a company, we always strive for increased visibility of our solutions to end users, and due to the nature of our products, this is not always easily achieved. We have also been focusing on the region and want to be recognized as partners and total solution providers, and these projects are an opportunity for us to really demonstrate our capabilities and consistent commitment to the region. What’s more, given the global downturn of the industry in the aftermath of the landslide in commodity prices in 2014, these contracts represent a significant income stream for our global oil and gas business; in offshore Egypt alone we could secure EUR 100 million (USD 105 million) in projects involving all of the product lines in the materials technology segment— a genuine testimonial to our expertise and excellent client experience!
As R&D is one of the drivers of success for Sandvik, can you expand on any current activities in the area that are helping the company to achieve and maintain market leadership positions?
R&D is an important part of Sandvik’s DNA. Our company will be 155 years old this year and annually we have always invested two to three percent of the company’s global turnover back into R&D, hence over 8,000 active patents have been developed across our portfolio of business units. We are constantly working in proximity with our customers to understand and address current needs and anticipate future needs. In oil and gas, for instance, that means supporting production in increasingly deep and high pressure environments by developing a high-alloy duplex steel called Hyper Duplex stainless steel. It is characterized by excellent chloride corrosion resistance and combined with very high mechanical strength. The patented grade meets the challenges our customers face in the deep and high pressure wells. We focus on proactive R&D, as shown by the developments made pre-industry downturn. Having strong R&D capabilities has always been part of the company’s philosophy and will remain a significant part in the future.
What are the key differentiating qualities that make Sandvik stand out when compared to potential competition?
When the effects of the commodity price landslide hit the industry in 2014, collaboration with clients and partners was extremely important for us. Industry-wide, companies sought pathways to reduce costs, save projects and lower the break-even point. By being based here in Dubai, we gained proximity to some of our most valued customers which allowed us to discuss specifications and areas of improvement; solutions ranged from a more effective way of technology usage to cost impacting redundancies. For us as a company, our integrated structure on the materials technology side of the business—from the melting of steel to the finished product—kept us afloat. The latter allowed us to differentiate us from other companies through integrity and traceability as well as quality of our materials.
Additionally, our alliance with Tenaris, which has been active for over 13 years now, is a substantial justification that highlights the commitment of both companies to this alliance! This alliance creates a unique package offering to our customers which inevitably brings an efficiency increase for the end users. Tenaris and Sandvik have both shown a proactive approach in this alliance by finding ways to understand the mutual benefits and form a successful partnership surrounding those.
Sandvik’s global CEO Bjorn Rosengren recently announced that regional heads were to be given more accountability – how has that impacted your day to day business, and to what extent are recent successes attributable to these organizational changes?
We are currently going through a global decentralization process pushing accountability for P&L into the business—therefore, the projects we had are not necessarily a result of these changes; it is always our ambition to win contracts regardless of the company structure we may follow. Nonetheless, it has enabled my team to be more responsible as it pushed our business more into the proximity of our customer needs. This, in return, increases accountability and thus speeds up our business as responsiveness to our customer needs is significantly increased—this translates into increased business down the line. Moreover, this move also brought us increased efficiency in the back office and administrative process, as we can ensure to be as lean as possible. Having a lean management is important across all industries—not only in oil and gas!
What are some of the opportunities you recognize across the region?
We have a structure in place to seize valuable opportunities offered in all the countries of the region. The Kingdom of Saudi Arabia in particular is becoming increasingly attractive and we will enhance our interaction and presence in the market. Our philosophy is that we always aspire to be the partner of choice and this philosophy spans across the entire region. Furthermore, we want to be visible to partners, clients, and authorities across the region. Our products can be very easily integrated into other products, which is why we ensure visibility is in all our operations.
What are your ambitions for Sandvik in MENA in the next three to five years?
Our aim is to always be the preferred solution provider for our customers and for more companies to recognize the value we bring in the CRA arena. Using the Abu Dhabi National Oil Company (ADNOC) as an example, our ambition is for Sandvik to become synonymous with CRA and an established understanding among national oil companies that we are the right partner for any endeavour in this line of business. Through our close proximity to our customers and strong R&D capabilities, we will be able to continue to anticipate clients’ challenges and tailor unique solutions ready at hand for when they occur.