Ajit Menon Vice, President & Managing Director, Southeast Asia, Baker Hughes, Singapore
Baker Hughes was one of the pioneering oilfield service companies to shift their headquarters north from Singapore to Kuala Lumpur. Ajit Menon, Vice President & Managing Director for Southeast Asia, explains the thought process behind this shift and highlights the numerous competitive advantages Malaysia holds over Singapore in its quest to be the region’s premier offshore hub.
With a longstanding background in the region, you have witnessed Baker Hughes’ presence in SEA grow significantly. What have been the three main engines driving the company’s strong growth?
Baker Hughes had a steep change in 2009 when we reorganized the company under a geographic leadership structure known as GeoMarkets. This transition has been a central growth factor over the last few years.
Today, the Asia-Pacific region comprises 17 countries divided into five culturally aligned GeoMarkets. Through this approach, the company became integrated at the Managing Director and Director level. This structure is designed to strengthen our business relationship with our clients and offer a single, integrated face to our customers. Prior to 2009, the organizational structure was centralized with various entities and product lines within the company reporting directly to Houston.
Through GeoMarkets, decision making within the company has become decentralized and streamlined, enabling us to be more efficient and responsive to our regional customer base. Indeed, since 2009, our South East Asia business has more than doubled its revenue. In South East Asia, we now have eight countries under our remit.
Capitalizing on the GeoMarkets structure, our South East Asia business network has expanded significantly. In addition, by contrast to our previous organizational structure, we are now able to forge strong alliances, such as our successful joint venture with a national oil company in Vietnam, and have been able to implement flexible business models. Finally, we have seen a large increase in our local content, in terms of people, infrastructure and services.
Considering SEA is a huge, fragmented region with many internal complexities, how difficult is it to manage a range of operations in such an area?
Managing such a region is a profound challenge; however, personally I have worked in many of the countries in South East Asia, so have gathered experience of management in the area.
Baker Hughes in South East Asia has a diverse and local work force, which helps us understand the business customs of these countries. Also, in the countries we operate in, we have developed a positive track record and reputation, which is built over many years. Such local presence has helped foster good relationships with our partner countries and clients. Furthermore, we have established strong management structures in most of the local markets we operate in, enabling us to overcome internal challenges in an effective manner.
By having such a locally focused structure, is the cohesion of the regional strategy impaired?
The countries of South East Asia are striving to boost production through two principle methods: deepwater E&P and enhanced oil recovery (EOR) of existing fields. The bulk of the regions low hanging fruit hydrocarbon resources have been extracted, supplementing the industry shift towards increasingly technical approaches to development and production.
With the sharing of natural resources and the marked improvement of the logistical infrastructure, the region does share commonality, which helps instill cohesion to our regional business model. Naturally, there are local market differences, particularly at a lower level and that is partly why we have needed to build up our local presence and coordinate country specific strategies. Nonetheless, our company strategy remains the same: we want to be the trusted, technical partner for our clients.
What are some of the company’s core projects in South East Asia?
We have a diverse array of projects and have effectively been involved in every deepwater project in South East Asia. We have worked with deepwater big oil players in Brunei and Malaysia. Our share in deepwater actually exceeds our overall share and this upstream segment is an area in which we have always been a market leader, particularly on the drilling and evaluation side.
Furthermore, our drilling and wireline market presence in Vietnam is substantial; we are serving a myriad of operators there. Finally, as the market has opened up and sanctions have been lifted, we have turned our attention to Myanmar and are actively positioning ourselves to take advantage of its budding upstream potential. These activities are just a small portion of our regional operations.
What is your assessment of the upstream market in this region?
The regional energy appetite is gargantuan and this in itself will drive the market in the long term. Our impression of the market, based on what we know from our customer’s long-term plans, is very bullish. The region needs to supplement its energy needs and economic growth, and is investing considerable amounts to ensure productivity is maintained. For instance, Vietnam has a surging local demand, in addition to burgeoning export demand.
As discussed earlier, extracting new pools of hydrocarbons is going to become increasingly challenging. The two big future plays in the region will be the shift towards deepwater E&P and an increase in EOR activity. For example, through analyzing Malaysia one can see a number of business models sprouting up that had never existed before: risk sharing contracts and alliances in terms of production enhancements.
Drawing on investments, how is Baker Hughes positioned to capitalize on these shifts?
Our supercenter in Malaysia is a 100,000 sq. ft facility on nine acres of land; this complex will be capable of supporting all our services. Also located in Malaysia, the initial phase of our manufacturing plant is 30,000 sq. ft. The IT hub facilitating the Eastern Hemisphere is located in Kuala Lumpur. We also recently established a regional real time operating center covering Asia. Ultimately, we are investing and upgrading a range of facilities throughout this GeoMarket: Malaysia, Singapore, Brunei, Vietnam, Thailand, Philippines and Myanmar. This is a work in progress.
The drilling services market is a competitive arena, with many companies increasingly pivoting to take advantage of the attractive upstream market in Asia. What are the durable competitive advantages Baker Hughes has over its competitors?
We are one of the preeminent global technology companies in what we do. Our focus is to continue to develop and invest in the latest and most innovative technologies that reduce uncertainty for our customers and help them become more efficient. Despite rising competition, we will be well positioned if we play to our technological strengths and proceed to attract the best human capital in the market. Ultimately, as attested by our considerable internal investments, we are determined to maintain our place at the top of the oilfield services table.
In a competitive market, how does Baker Hughes ensure that it attracts and retains the best talent?
Maintaining a highly competent work force is paramount to the company. To achieve this, we run a number of initiatives. Firstly, we collaborate with many local universities, such as the University of Technology Petronas. Our involvement includes activities such as the sponsorship of students, the establishment of a company exhibition centre and we offer an internship scheme for students. We also have the LEAD program, which is effectively a fast track career development scheme. It is a highly comprehensive initiative that endeavours to enhance the leadership qualities of our employees and graduates. Indeed, in Malaysia and Vietnam we are blessed with a rich and increasingly competent talent pool.
Through having a comprehensive and collaborative recruitment structure, as well as effective training and development programs, Baker Hughes continues to attract and retain the best local talent in the market.
What is Singapore’s strategic role in Baker Hughes’ regional operations?
Singapore was traditionally a hub for us, and today it maintains a number of important functions. In addition to being a logistical center, it is a hub for Assembly, Maintenance and Overhaul (AMO) for the wider APAC and Middle East region. We also have a state of the art manufacturing center located there. The regional management that used to be there are no longer in Singapore; it is now positioned in Kuala Lumpur.
What is the Achilles heel of Malaysia; can Malaysia continue to attract offshore service players in the long run?
Malaysia is a massive market for oil and gas, that itself draws the industry here. Coupled with the impressive infrastructure here makes it an attractive country to do business in. In terms of setting up the business here, we did not bump into very many obstacles; the transition was very smooth. To be frank, unless something drastically changes I cannot see any standout Achilles heel.
Crucially, to maintain an upward growth trajectory, Malaysia must ensure it continues to produce a continuous pool of well trained, competent and hardworking workforce. Fortunately, through the Economic Transformation Programme (ETP), the government is spearheading the development of the certain industries, such as oil and gas.
How important to the company’s long term growth strategy are Baker Hughes’ activities in South East Asia in terms of both revenue and business sustainability?
South East Asia is a critical growth engine of the company. The entire Asia Pacific and Middle East regions are central, and that is testified by the impressive growth and profit figures. Naturally, we are always competing for resources and the Gulf of Mexico is experiencing a second boom, but as long as we maintain the right return on investments, we will be in a strong and healthy position.
For all our major partners, we want to be a trusted technical partner. In this region, we want to continue to augment the business and maintain our robust return on investments.