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with Kevin Illingworth, Country Manager, Expro China

21.05.2012 / Energyboardroom

Mr. Illingworth, can you please begin with an introduction to yourself, and a brief overview of your career to date?

I started working in the oil industry when I was 19 years old, in Aberdeen. We were quite lucky in Aberdeen, as the oil-rich geography ensured that there was a good profession to enter into.

I actually started with Expro. I was given a position in the slickline product line—one of Expro’s main offerings. After working in this division for 12 years, I then progressed into a well-service role, which involved overseeing all of the product lines that become involved after the completion of well drilling.

I then moved to Baker Oil Tools. There, I took on a completion-based role, which involved, firstly, offshore-running completions; I subsequently stepped onshore as an operations manager.

Baker moved me to Malaysia, and I was in Kuala Lumpur for one year and a half. There, I had a marketing-oriented position. Next, I moved back to Aberdeen, and stayed there for a couple of years; afterwards I moved to China.

Initially, I came to China on a five-weeks-on, five-weeks-off rotation in Shaanxi province for Weatherford. We were working in the Inner Mongolia area on a Shell project. I soon moved by family to Beijing, and accepted a managerial position in the capital for Weatherford.

I then moved to Shell China, and worked in the company for three years. It was after that experience that I finally arrived, two years ago, at my current position with Expro.

How much had the Expro Group changed by the time you returned to the company?

Quite a lot. Expro’s competitors, today, are the top four global oilfields services providers: Baker Hughes, Weatherford, Halliburton, and Schlumberger. While we remain much smaller than they are, we also pursue a strategy of offering products that are significantly more niche. Expro, as a company, is always very good at quickly reacting, and adapting, to customer needs. This offers us a competitive edge in the market.

In February of this year, Expro officially opened its new operations base in China, in the Shekou industrial zone. Let us first examine a bit of the history that lead to this milestone. What has been Expro’s involvement in this region to date?

The China market is quite unique in terms of the way its national oil companies are structured. Sinopec, PetroChina, and CNOOC each have individual subsidiary companies that are the equivalent of entities like Expro and Weatherford. There is hence a major domestic service provider presence, and the market is very difficult to penetrate—the NOCs prefer to give business to their own branch organizations.

Where we, as foreigners, can make a difference is in terms of new technologies and the experience we bring to the table. 10 or 15 years ago, Expro was trying to compete in China in very traditional niches. Today, Chinese companies are themselves very capable in those areas, and this avenue of business has largely gone away; now, we focus on areas where we can truly bring added value, such as cutting-edge technological segments.

We have this advantage, and we also have a major project in the South China Sea for Husky. Our deepwater subsea landing string and our large bore slickline have both been utilized for Husky’s Liwan project.

By the time Expro unveiled its China base, the company already had operational facilities throughout the Asia region—in India, Indonesia, Brunei, Thailand, Malaysia, Vietnam and Australia. Why is this commitment to China coming so late? Were there particular challenges in the market limiting your expansion here, or a simple lack of opportunity?

I would call it a bit of both.

The company underwent a major restructuring five years ago, and, at the time, a number of business decisions were made. There was a lot of capital sitting in China, and management wanted to inject some cash into the company. The only way that they could actually extract this capital from the China market was closing down the domestic subsidiary. Management did so, but retained an office as a representative entity for our Malaysian operations. Expro then dabbled a bit in the market, winning a few smaller contracts as a rep office.

The major change in our approach to this territory was spurred by our participation in Husky’s development in the South China Sea, which is the first deepwater project ever initiated in China. We knew that this was an area that really played to our strengths. We spent the last 18 months in preparation for the Husky project and the execution has only just begun. Our clients have now completed their first well, and are currently working on the second well. It is a very exciting time for us—we are deploying a lot of resources toward this operation.

My thinking, when I first joined Expro in China, was that we absolutely must set up a company entity again. We worked hard in our first year to do so. Now, we are in a position where we may call ourselves a recognized, Chinese entity.

How challenging was it to set up the company again?

It was extremely challenging. There is a wealth of work that must be done in China to get an organization to a stage where the government, and relevant agencies, are satisfied with what the organization plans to do. We worked closely with Ernst & Young, our global service provider on such issues, to get to a stage where we could submit a strong application, in whose success we could be confident.

We also had to marry the China side of things with the internal Expro Group side of things. We had to be satisfied that we had conducted the necessary amount of due diligence, and that setting up this entity was the correct move to make from a business perspective—the financial investment needed to open the company was quite substantial.

Today, we are still quite small, but we are ambitious. We see ourselves as perfectly positioned to become the main provider of deepwater subsea safety systems in this market, and also, hopefully, to become the main provider of slickline systems. I believe that China has the potential to be a major growth market for us.

What do you expect to be the role of your joint venture with China Oilfield Services Ltd. (COSL), with whom you worked on the Husky project, in ensuring business growth in China?

The joint venture company’s core product line is well testing—another of Expro’s largest offerings. With the well testing products coming from the JV, and the subsea safety and wireline systems coming from the Expro, we are able to provide a comprehensive package to clients, across surface well testing, wire line, and the subsea landing string. Today, clients such as ours are increasingly looking for an integrated solution from a single service provider.

The decision to form a joint venture with COSL dates back from before my time here. Both companies have been interested in each other for a long time, and a lot of work went into forging this collaboration.

The asset that Expro brings to the partnership is our technological strength. Conversely, the benefit that we receive from the venture is that COSL is owned by CNOOC. CNOOC owns most of the deepwater blocks in the South China Sea, and our partnership with their subsidiary strategically positions us as one of their preferred service providers.

What parallels can you draw between the North Sea and the South China Sea?

The parallels are clear: deepwater in each region is a challenging environment. Subsea safety systems are critical to being able to operate the well in a safe manner. We are market leaders in this field, and we feel that we can bring our technology here in order to provide a superior level of safety. The experience, too, that our offshore crew has in driving HSE is excellent. HSE is an area that the industry must be particularly careful about in working with deepwater assets.

Do you believe that the offshore sector in China will truly evolve as quickly as the authorities are claiming?

If the authorities are serious about achieving a greater degree of self-sufficiency in the energy sphere, they would do well to push the development of this sector as much as possible. The South China Sea will be absolutely instrumental in bringing China closer to this goal.

This is a country that drills 30,000 wells per year. What role do you believe the China market will play for the Expro Group going forward, and what growth targets have you set in parallel with the offshore emphasis called for in 12th 5-Year Plan?

As a global company, Expro has set fairly ambitious growth targets within its own five-year plan. We plan to double our business size.

We in China are yet more aggressive: in my first year with the company, we tripled the business from year one to year two. We are looking to quadruple our business over the course of the Group’s five-year plan.

Having spent a number of years as an expat manager in this environment, what advice can you give to your counterparts about how to successfully manage operations in China?

The first thing you need is patience. You also must have an understanding of the culture—Chinese culture is certainly quite different from Western culture.

What does not change, however, is the fact that anywhere in the world, a company must understand what its clients want. You can only discern their needs with open, face-to-face communication. On our part, we are lucky that we can approach our clients both from the standpoint of the Expro Group, and the JV—the latter is particularly effective for domestic clients.

What about staying ahead of competition? We’ve discussed Expro’s technological prowess. How much of a technological window do you believe you have? How long can you maintain a lead in this market?

We certainly look to stay a step ahead, and we have the right products to do so.

However, it is a difficult business. Companies need to ensure that they are investing actively into R&D. This is especially true in a market like China, where the domestic companies have quite a lot of expendable capital, and they spend a great deal on developing new technology.

On the other hand, international companies continue to have an edge. One of the first contracts that I worked on with Shell involved a Chinese well service company that spent a lot of money to procure the absolute best equipment in order to deliver the job. However, unfortunately—and this is something that I believe is slowly changing in China—the company did not know how to properly utilize this equipment. Therefore, they spent a huge amount of CAPEX up front, but then had to also expend a large amount of OPEX as well.

What is your final message to the international readers of Oil & Gas Financial Journal?

Firstly, I would like to say that I am quite happy with the way Expro has supported me, and the way the company has realized that China is a market that requires a firm commitment.

Something I have learned from my time in China is that this is not a market that a company can simply dabble in. You must be in all the way, of you will be out. This requires a significant financial commitment, and it requires the infrastructure to cover such a vast country. It requires you to have equipment on the ground. I am very confident in the commitment Expro has made to the Chinese market—and I am happy that we have a major contract to support this commitment!

China is, quite surely, a very challenging environment to work in. However, if you dedicate yourself fully, and have the technology to bring added value to the region, then you can absolutely achieve success.



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