with Zi Shilong, President Director, COSL Indonesia
COSL is very active in China, but has recently pursued an internationalization strategy. What is the source of COSL’s interest in expanding beyond China?
All companies need to pursue a strategy of targeting overseas markets, to expand business and become stronger and larger. Now is a good time for COSL and other Chinese companies to target markets abroad, because China presently has a very strong economy, and there is high investment particularly in developing the domestic manufacturing base. COSL has already been in China for 30 years, which means there is great opportunity and capacity for expansion abroad. In the first phase of expansion, COSL worked exclusively with Chinese companies such as CNOOC and PetroChina. Now, in a step forward, COSL is starting to work with international majors, such as ConocoPhillips, Chevron, and other PSCs.
Many Chinese companies choose Indonesia as a preferred first destination because of its proximity, vastness of the domestic market, and presence of international oil majors, making it a good place to become known and establish contacts. Do you share this same mindset?
In some ways, yes, but every Chinese company is different. COSL has had international activities for 10 years, in drilling rigs and offshore businesses, and is not a new face in international markets. COSL came to Indonesia five years ago, to investigate the potential of the large population and rich natural resources. For some of our activities this is already COSL’s number one country, and we continue to be interested in developing our full business lines in Indonesia.
The Indonesian market has many established players from around the world. How does the oil and gas community receive Chinese companies? Culturally speaking, is it easy to integrate and do business within Indonesia?
Culturally, China and Indonesia are similar, and integration is not too difficult. Every country COSL encounters will be different, but these differences provide challenges as well as learning opportunities, and in time COSL will earn the same respect as local players. COSL has offered the local oil and gas community reasonable cost and comprehensive service. We strongly believe that the existence of COSL in Indonesia will be mutually beneficial to Indonesia and China.
Indonesia’s government is trying to attract investment to increase exploration and production activities, after several years of declining output. What is your assessment of the investment climate in Indonesia? How optimistic are you that this upstream dynamism will help you improve your business?
Demand for oil in Indonesia is very high, and the production is not keeping pace, as can be seen by the country’s failure to meet its OPEC quotas. Naturally, Indonesia’s government is trying to push oil production. As everyone can see that Indonesian government has put a great effort to increase its oil production, the demand of oil service will increase accordingly. It is interesting to work here because of the big market, but with a global shortage in oil-related equipment, internal demand means that COSL’s equipment may sometimes be most efficiently used elsewhere. COSL will continue to expand its business in Indonesia, and my headquarter has committed to increase its investment in Indonesia in the coming years.
COSL has several business lines, not only in drilling but also in well services, transportation, and geophysics. In Indonesia, which of these business lines has been the most dynamic growth contributor?
So far, COSL’s two most important business lines are drilling and well services. We don’t yet have support vessels or seismic operations in Indonesia, but we are working towards bringing seismic services in late 2008.
Within two years you will have a complete range of services available in Indonesia. You mentioned that usually COSL tends to initially work with Chinese companies when first entering foreign markets. Can you tell us more specifically about your partners in Indonesia?
In the first phase COSL pays more attention to Chinese oil companies, but in this case has also sought out companies like Pertamina, with whom we have developed a strong relationship and are already involved in one project. However, COSL does not intend to focus on a single type of partnership, but prefers to establish relationships across a variety of companies with different sizes and profiles. At this stage in our Indonesian strategy, all companies have the same importance to COSL.
A recent COSL milestone was the in-house creation of the enhanced logging imaging system, which has won a tender to be used in well logging in Indonesia. What does this say about the state of COSL’s technology?
Chinese companies are not renowned for technological innovation. However, after 30 years of hard work in the industry, COSL has some first-class technology in some well and logging techniques that compare favorably with international companies. COSL will continue to improve and introduce more of these technologies to Indonesia in the future.
Chinese companies are well-known for being cost-effective. Is this true of COSL, and what are the company’s other competitive advantages in Indonesia?
COSL is different than other Chinese companies, because over the last 30 years, we have worked together with not only CNOOC and PetroChina, but also with majors like ConocoPhillips from whom we learned a lot throughout those years. Therefore, when people say that COSL is a Chinese company, it is true in a sense, but COSL is really an international company. COSL’s management is like a Western company, only better, because it is more cost-effective and Chinese employees work harder. Also, China has a strong manufacturing base, and three or four excellent universities that have specialized programs in oil drilling and production. This provides a very good chance for COSL in attracting fresh talent, and to make long-term relationships with high-quality equipment suppliers.
What is the current mix between Chinese and Indonesian employees in your Indonesian operations? Do you need to adapt your management stile to accommodate new Indonesian employees?
COSL’s current operations employ 20 Chinese and 40 Indonesians. It’s important to note that the two cultures are not very different, compared to the difference between a Western and a Chinese person, for example. However, when working in China, there are political and social differences. In China, there is little concern for image and public relations, but in Indonesia I personally spend almost half my time worrying about these kinds of issues. However, this is the case with most companies, and COSL is not unique in this respect.
COSL is fairly well-known internationally, but what is COSL’s reputation here in Indonesia, and where would you like it to be?
Compared to big international service companies who have been in Indonesia 20 or 30 years, COSL needs to make a greater effort to build up its name and reputation. So far, COSL has tried to maintain good performance in servicing our customers. Some international competitors may say that Chinese companies are not first-class or up to international standards, and COSL needs to help change that impression. To this end, we are taking part in Indonesian Oil and Gas associations’ activities like participating in 31st IPA (Indonesian Petroleum Association) 2007 Convention and Exhibition, and of course we surely will be participating in the 32nd IPA 2008 Convention and Exhibition and advertising in magazines, and COSL’s reputation is increasing as a result.
There are international trends toward deepwater exploration in remote areas, and many Indonesians say the future is in deepwater fields in the Eastern part of the country. How prepared is COSL to meet the demanding needs of such projects?
Deepwater services are also in high demand in China, and COSL has plans to develop the business there first. COSL is preparing for deepwater operations, but there is no strategy as yet to expand this kind of business in Indonesia, because the first step will be to develop the competency locally, then introduce the technology to other countries.
COSL has been building a reputation in Indonesia for a year and a half. With the capabilities of a Western company combined with Chinese training and cost-effectiveness, what would be a dream project for COSL in Indonesia?
COSL wants to be involved in integrated project management, to service the entire project life-cycle. We perform this activity in China, extending beyond drilling to transportation, seismic, and other services. COSL’s advantage stretched out in the ability to perform services over the whole life of the oilfield, from beginning to end.
How does COSL headquarters respond to the prospect of Indonesia growing and getting better in the coming years?
It’s not difficult to pitch a good project to top management. China and Indonesia have a good relationship and it’s easy to make headquarters invest more in this country. Because all our decisions are based purely on economics, there are rarely problems as long as the projects are good.
COSL’s dream is to have the same position in Indonesia as in China. COSL is a dependable and very competitive service provider for oil companies. I trust that COSL and China will both profit from a very bright future.