In 1996, it went against the flow and invaded the drilling market, by being the first true Egyptian-Chinese joint venture in the drilling sector. Maintaining an outstanding record throughout the past eight years has placed the Egyptian Chinese Drilling Company (ECDC) as the second largest drilling company in Egypt. Ayman Abbas, Managing Director of ECDC shares this fascinating story of success with Egypt Oil and Gas Newspaper and expresses his vision concerning the development of Egypt’s rig market.
Where does ECDC’s investment in Egypt’s rig market currently stand?
ECDC was founded back in 1996; it is the “first real” Chinese joint venture in Egypt between China National Petroleum Cooperation represented by Great Wall Drilling Company (GWDC), China’s largest international trading contractor with more than 100 rigs worldwide, and two Egyptian partners including INTRO and UNIVEST.
The first Chinese rigs were received in 1998 and the company has formally started functioning since then. Throughout the past eight years, we achieved an outstanding track record; we have drilled more or less for everyone in the market.
Does ECDC have any expansion plans in 2007?
We are planning to increase our rig capacity to reach 10-11 rigs in 2007.
Where does ECDC stand amongst its competitors in the market?
We are the second largest drilling company after Egyptian Drilling Company (EDC) in the Egyptian market. Thanks to the minister’s policies, we now have an open market where competition, in my opinion, has become a very healthy phenomenon, yet it needs regulations.
What were some of the complications that you faced in creating a joint venture in Egypt?
It was very hard at the beginning; everyone was against Chinese equipment, as the oil market here is very traditional. Most of the people believe that it is much safer to use what they know and are not open to try new ideas.
Due to this mentality and an unstable market at that time, it was difficult to convince people with our services and that there is a new drilling contractor ready to operate.
One of the other major problems we faced was the Chinese government’s strategy. Chinese contractors had always been drilling for the government; they did not know the sophisticated drilling requirements to serve a client. We wanted to get the best out of China leaving their government complexities aside. We did overcome this obstacle by appointing the most experienced drilling contractors in the market and creating our own operational manual, managerial system and marketing material.
Also, we had a communication problem between the Chinese and Egyptian employees working on the rig. In order to avoid this miscommunication, we appointed Egyptian officers for the positions that are directly dealing with clients. Also, rig specifications were subject to changes; we had to make some modifications in order to meet the needs and requirements of the Egyptian market.
Selling points were another difficulty; there is a common belief that Chinese products mean cheaper prices, but this was not true as we were seeking high quality equipment. Many other competitors bought Chinese rigs at very cheap prices, but sadly, many accidents led to the death of several workers as they lack safety factors. We were very careful in our rig selection as we aimed at filling the gap in Egypt’s rig market during that time and found our selling points through the initiation of close bonds with clients.
Concerning the pricing issue, how do you mange your daily rates compared to EDC, the dominant drilling company in the market?
We are more or less at the same price level as EDC; we do not really have a difference in the price issue. I invest more on the people doing the service and in the service itself, making sure that I give the best service to my client is better than saying I am 10-15% cheaper.
How do you view the rig problem in Egypt?
The major drawback that we must stress on is the low price rate of rigs in the Egyptian market, which are 30-35% lower than other surrounding countries. Why would a rig company sell me the needed equipment at a cheap price in Egypt, while its price in Sudan, Algeria and Saudi Arabia, for instance, exceeds the average of $22,000, this is a huge problem as there aren’t enough rigs operating in the market. A dramatic change in daily rates and government’s pricing strategy should be implemented in order to regain a healthy rig market.
Another weak point is the lack of personnel; most of the skilled and experienced Egyptian workers prefer working in the Gulf where they get paid 3-4 times as much as they get here with better offers and facilities. This shortage does not only affect me as a contractor, but the market as well.
For the benefit of the sector, we have to pay more attention to fresh graduates and train them well in order to create a new generation of specialized petroleum engineers.
Unfortunately, we lack specialization in the petroleum engineering educational system. In Chinese universities, for instance, graduates can get a degree in petroleum engineering with a specialization in rigs only. I believe we should follow this Chinese educational specialization.
At ECDC, we offer different types of courses at our ECDC Training Center as a way out, to solve this lack of experience.
Do you think the recent rig construction agreement signed with China is a final solution? Does this agreement affect you?
If I find a good rig supplier just next door to me, I would definitely establish a relationship with him, as I can get full technical support and services. Concerning the effects of this Chinese agreement on the market, I believe if it maintains the market stability and avoid having unneeded extra rigs; this will positively support the development of Egypt’s drilling market. Otherwise, contractors would search for another stable market to implement their business and clients will be the ones negatively affected.
However, I don’t believe that our economic status whether in the Egyptian market or the surrounding countries can afford such an agreement. The current worldwide demand is almost completely addressed by all rig manufactures and the demand for rigs could possibly decrease on the long run.
We have to conduct many in-depth studies of our market and get a focused future vision before implementing this agreement. I believe by 2008 the market will not need extra rigs and the region of Africa and Middle East cannot accommodate a rig manufacturer.
What would you like to see improved in ECDC?
I would like to see ECDC serving more countries and producing more specialized and skilled personnel. Moreover, I would like to train fresh graduates and create more job opportunities for them in the rig sector.
Also, we have started the implementation of ISO (International Standards Organization) three months ago and I would love ECDC to receive this certificate.