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Interview

with Morgan Zhang, President & CEO, TSC Group

14.06.2012 / Energyboardroom

Mr. Zhang, you have quite an interesting career profile — you studied drilling engineering in China, and received your masters in petroleum engineering in Alaska. As part of your 28 years in the oil and gas industry, you have worked for both China’s major NOC, CNPC, and an Alaskan company. Can you give our readers an overview of your East-meets-West career trajectory, why you made the career choices you have made, and how they have informed your vision for co-founding TSC Group?

I have graduated from the University of Petroleum in 1982 and after graduation I have worked for 5 years for CNPC, which back then was a part of the Ministry of Petroleum. Afterwards I moved to Alaska to attend a Master Programme for two years and then worked there for 6 years.

In 1995, I moved to Houston and started a company called EMER, the predecessor of TSC. The present name is actually very new, we came up with it in 2008 and the reason why we have changed the old name was to try to reflect even better the philosophy of the Company. Indeed, TSC stands for “Total Solution Company” and we are here to provide the best solutions for our customers. We do not call ourselves solely “equipment manufacturers”, we offer an entire range of related services.

We came in this market because we have seen that there is a lot of potential. We are different from the other Chinese companies because we have started in a foreign market (USA) and we are now what is called a “small global company” and not a Chinese local company. We have operations in China, USA, UK, Brazil, Singapore, Dubai, Russia. We have manufacturing facilities in China, UK and Brazil. And we are in the process of expanding our Brazil manufacturing facility and operation base.

China is still the major focus for us, because of the size of the market and the great business opportunities we have here.

There is a lot of technology challenge in the oil and gas sector, and we are trying to cope with this challenge by focusing on quality and high technology products and services. We don’t go for the the concept of “massive production”.

How does TSC position itself? How the East and West experience influences the business approach?

We are a global solution provider and the combined west and east experience offered us a very good understanding of both hemispheres’ markets. My background helped me to understand the global perspective and the specificity of the industry. Being Chinese, I also am able to understand Chinese market and the business culture much better than the foreigners here.

The resources here in China are tremendous, both when it comes to business and human resources. This is a big plus that you cannot find elsewhere.

TSC has, over the last two years, strengthened its position in emerging markets. How would you characterize your approach toward international expansion?

First of all I must stress that emerging markets are the future, due to the growing needs and resources of the population. When it comes to growing, emerging markets offer the resources and the workforce, therefore we seek to intensify our presence in these specific markets, consolidate and diversify our presence.

In 2011, the Group’s turnover comprised revenue from capital equipment and packages, oilfield expendables and supplies, and provision of engineering services, which accounted for 64.4%, 18.8% and 16.8%, respectively, of the total turnover. Many companies in your niche would like to see services account for a greater portion of their revenues, as the margins are quite a bit higher. Does TSC have plans to expand the share that services have in its revenue stream? If so, how is it approaching this expansion?

For the future, we are trying to extend the share of the services and I must tell that the share has already increased with 100% last year. We are aware that any product becomes a commodity in time, therefore the services are the ones differentiating. As a small company, although we expand, we are flexible in finding tailor made solutions for our clients, adapted to their needs and resources.

TSC’s partners and clients include prominent names such as Technip, Seawell, ExxonMobil, and Shell. What competitive advantages win you the trust and business of such companies—which have their choice of partners?

We have indeed contracts with prominent names. I think that what makes us the partner of their choice is the quality and the passion we invest in. For the customer to come back, you have to do a very good job and build equipment with lasting qualities.

In this regard, we have an interesting example in our company history, which happened several years ago; a foreign company basically rejected us because they had the idea and misconception that everything which comes from China was of bad quality. After 2-3 years they contacted us and we had a very good collaboration, and now they are only buying from TSC.

To summarize, you have to surpass client’s expectations and go the extra mile to complete the job well vis-à-vis competition.

When TSC reported its annual results for the last fiscal year, TSC Executive Chairman Mr. Jiang Bing Hua remarked that the group is well positioned to grow “exponentially” over the next five years. Can you expound for our readers the basis of Mr. Jiang’ confidence, and outline your growth strategy?

In the first three years, from 2005 until 2008, we have increased over ten times. Then the financial crisis came and in 2009 and 2010 we have tried mostly to keep alive the business. In 2011, we recovered and in 2012 we are back on track. But we also made a lot of changes in the last 3-4 years by building a different structure in terms of network, locations and facilities.

What do you believe TSC will look like when it is a billion dollar company?

When you do your best, God will do the rest. I think we will be there in 4 or 5 years. We have real chances to grow exponentially given our potential and market opportunities.

What has been the main challenge you faced as head of this company, and what has it taught you that you can pass on to future generations of China’s petroleum industry entrepreneurs?

What I can say specifically related to China, but not only is: you have to be innovative in all aspects; from product development to structuring of commercial framework to suit client’s requirements. You cannot grow your business by mimicking competition or by trying to become successful overnight. There’s a lot of hard work involved. Regarding the perception of Western investors and partners have on China, that here in China, innovation is NOT the highest priority.

I think we need to have a balanced view and have a global business mindset, TSC’s competency lies in combining Western engineering and research with Eastern manufacturing capabilities.

It is still a challenge to try to change this perception and to build long term relationships based on trust. But we will get there as we continue to deliver products with lasting qualities.

We will focus a lot on the technology and product development, and also believe that these enhancements will bring about a strong value proposition to the clients.

What would be your final message for the readers of Oil and gas Financial Journal?

Future partners and clients, I can say this: “Watch out, TSC will be a totally different company in a few years!”

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