with Kishore Sundaresan, Managing Director, Kongsberg
Mr Sundaresan, could you start by introducing KONGSBERG’s business model in India?
KONGSBERG is a Public Sector Undertaking (PSU) from Norway, with the state holding over 50% of the shares. Kongsberg has four major business areas: Maritime, Oil & Gas technologies, Defense system and Protech systems. My office Kongsberg Oil 6 Gas Technologies Pvt. Ltd. (KOGT PL) in India focuses on the Oil & Gas business.
Kongsberg Oil & Gas Technologies (KOGT) serves the oil & gas industry with a range of high performance information technology solutions for drilling operations, production, reservoirs and the subsea environment.
We optimize oil & gas operations, through data management, simulation, integration and analysis tools, as well as consultancy and services – all leading to improved operational and financial performance.
KOGT PL has been established in India as a subsidiary of KOGT. Our Oil & Gas efforts in India started with the buying of Fantoft Technologies by Kongsberg Maritime in 2006, but as of January 2010 KOGT is a separate business area .
In India, we started as a team of four people in 2006, and since then have grown to over a hundred in the Maritime and Oil & Gas business areas. Some parts of software maintenance or development are outsourced, which adds another 30 engineers working for KOGT out of Bangalore.
KONGSBERG is committed to be in India for a long term, given the fact that KONGSBERG is constructing our own office building of 26,000 square feet in Navi Mumbai, where we will be moving in by early next year.
Now that both business areas are well established in India, what kind of synergies are you able to create between Maritime and O&G?
There is tremendous synergy between the business areas in India and we encourage and support each other. Our products also complement each other and hence it is much easier to go to the market together. Indian market itself has lot of synergy between upstream, downstream, offshore, onshore etc. as far as both Maritime and Oil & Gas sectors are concerned. I have actually been myself in the maritime field for several years.
How has the affiliate performed recently?
It has been a very positive growth, on the upper side of a 45 degrees slope.
The learning curve is one of the country’s most significant advantages. India gathers a very large number of graduates with many youngsters with a good level of education. The average age of employees in these offices is just over 30.
India’s growth especially in the service sector has prompted a large increase in graduate engineering schools thereby creating a large availability of educated youngsters.
In addition to the availability of the workforce, what have been the main growth drivers for KONGSBERG in India?
Kongsberg Oil & Gas entered the market with a significant delivery to Reliance Industries KG D6 field. This successful delivery has ensured good reference from RIL.
One of KONGSBERG’s strength is successful project management. Our values have been a pillar of strength for us,, which may be the reason why KONGSBERG is one of the best performing companies in the Norway stock exchange.
The attrition rate is literally next to nothing in KONGSBERG India’s offices, much below the national average.
As of today Kongsberg Oil & Gas Technologies has three major subsidiaries: US, UK and India.
The offshore sector has really picked up in India, especially since the KGD6 discovery, and the timing for KONGSBERG was ideal, considering the company entered the market at the time of the discovery. What is your action plan to be part of the growth in India?
You have correctly pointed out about our timing. It is true that with offshore exploration increasing KONGSBERG’s business will also increase and hence we are quite upbeat about the market in India.
It is broadly assumed that the Indian market is highly cost sensitive. In fact, the market is highly cost conscious. For a good product, the market does not mind at all to pay the price as long as they get value for the money spent. As an example, international brands such as Mercedes or BMW are having robust sales in India.
India is extremely smart when it comes to technology. Indian Companies are well aware of the latest available technologies.
Therefore KONGSBERG is very confident to succeed in India.
Mr Konig of Weatherford told us that the tendering process is a bit restrictive in India. There is not enough flexibility to allow the addition of new products and services. So you would not agree with this statement?
I would throw a different light into this. I have worked abroad and came back to India after a few years, and it has been interesting to see what the graph is between the government holding and private parties coming in.
The decision making cycle with the government is much slower for obvious reasons: there are various levels of approval process, a lot of bureaucracy, but it is normal. This increases the cost of sales, and as a result some Companies lose patience. Let us assume that the market is 30% private, 70% government. 30% can happen immediately and generate fast cash flows, but if you need volume, you have got to wait.
It is not that the market is not ready for the technology change; it is only a bit late. There are many external and internal factors which drive the decision making process.
I believe this is a blessing in disguise: it forces one to plan and stick to the plan, which is the secret of a good project management. Ultimately, the slow decision making process makes people think twice, three or four times.
The development of offshore operations in Brazil, with Petrobras alone set to spend more than $108 billion on E&P through 2014, has been one of KONGSBERG’s late focuses. Petrobras’ operations demand a variety of tasks to be accomplished including exploration, surveys, drilling and creating FPSOs, as Mr Havelsrud of KONGSBERG Brazil was telling us. Similarly, to what extent does KONGSBERG’s growth in India rely on the Indian NOCs?
When a Company comes in, it is interested by these significant public investment plans.
KONGSBERG is the technology company whose product and services lead to improved operational and financial performance.
Some time back, BP would never have thought coming into the country. Statoil did not have the patience to wait for ONGC to make the decision. I cannot say today who’s loss it was, but the future will tell us. All I can say is that when you work in a country like India, one needs to have patience.
One year of cost of sales in Norway can be equal to many years of cost of sales in India. As a foreign company you need that patience.
There is no doubt our sales will grow significantly in this market.
Even though this office concentrates on upstream, we see many opportunities downstream as well. In KGD-6, we have our pipeline management system running there, as well as our production management system and Operator Training Simulator.
After a two years assignment at Kongsberg Maritime, you are managing director of KOGT PL (or: The Oil & Gas business in India) since September 2010. How challenging is it to manage an Indian affiliate under a Norwegian umbrella in terms of conciliating both work culture?
As long as the values are primarily understood, there is no particular problem in managing this aspect of the corporate life. If I may say, it does not matter what the color of the skin is.
India itself has within its borders very different cultures. Just imagine a German and British in the same room having lunch together in France. That’s exactly India: every state is completely different from one another, the language, the food, everything. We Indians are used to this cross cultural context.
Based on our values, we grow on it. After that, the market takes care of itself.
To bridge the gap between languages, we have set up a Norwegian language course in this office. This initiative has improved the communication between the head office and the Indian office.
Looking forward, what is your strategy to position itself as a partner of choice for offshore operations, in face of an ever-increasing competition, to ensure growth in the country?
Our growth will be depending on the O&G growth in India, as technology providers to whoever will be exploring.
On another note, we will be making a tremendous impact on the bottom line of KONGSBERG globally. India with its educated and young talent pool is apt for outsourcing.
We are essentially service providers which will always need talented and educated work force. The team can exponentially increase its size thanks to India having a large pool of the required work force.
What is your final message to the readers of Oil and Gas Financial Journal: ambitions for growth and development of KONGSBERG India over the next 3 to 5 years?
Come to India. The country has always been a land of opportunity, possibly since much earlier than Christ. Yes it is difficult, but once you are here, there are terrific benefits for both your company and the country.