Many local service and manufacturing companies have made extremely good business out of the oil and gas sector despite international competition caused by liberalization and a transparent tendering process, because their home market allows them to focus on quality while keeping prices low. However, this advantage initially acts as a double-edged sword for companies, as the international reputation for products in a market like India are that quality suffers in order to keep costs low. However, as the cases below show, it is not only possible to keep high manufacturing standards in India, but also to overcome this issue of reputation and perception by international companies and clients.
|UPES campus, Dehradun, courtesy of UPES|
One company that has capitalized on its Indian advantage is Jindal SAW, India's first and largest manufacturer of submerged arc welded (SAW) pipelines, with revenues of around $1.5 billion USD in 2010. According to Jindal SAW's managing director Sminu Jindal, "international markets already represent around 50% of Jindal SAW's revenues and we intend to continue expanding in fast-growing markets, especially through greenfield investments, and of course if any good acquisition opportunity comes along anywhere else we will take advantage of it."
|Manufacturing plant, Courtesy of Advance Valves|
For Jindal, the initial challenges related to the general perception that Indian products lack of quality were quickly overcome with high investments in quality and HSE standards. "This is a perception that we had to fight initially but eventually our products spoke for themselves. Jindal SAW's experience in the USA speaks volumes about how we managed to gain the confidence of our international customers. Our products faired exceptionally well and were in fact much above their prequalification criteria after which we didn't have to fight for recognition. Jindal SAW was the first of its kind to go not only for ISO 9000, but also 18000 and 14000."
|Uma Shanker, chairman and managing Director, Advance Valves|
Jindal SAW gained special recognition for its participation in Cairn Energy's Barmer Salaya pipe line (BSPL) project. The project involved the supply of longitudinal submerged arc welded (LSAW) line pipes for worlds' longest underground pre-insulated heat traced pipeline to transport waxy and heavy crude which otherwise solidifies at ambient temperature. "By undertaking this challenge and successfully completing the task," says Jindal, "Jindal SAW Ltd. proved its technical competence and execution capabilities to take on technologically challenging projects and accomplish their execution to meet the project's requirement. We were running on full capacity and to fulfill the requirement we had to set up new thermal insulation coating facility, new liquid epoxy coating facility, new hydrotesting facility for seamless tubes and sect tube welding facility involving complicated welding process – all from scratch. We did this and we also manufactured and supplied 590km of thermal insulated coated pipes all within 11 months – a record no one in the world had accomplished before."
|Raghav Jindal, managing director, Jindal Drilling & Industries|
Uma Shanker, chairman and managing director of Advance Valves, recalls the challenges faced by Indian manufacturing companies. In a concerted attempt to change the standard industry template, Advance Valves opted for an extremely transparent way of doing business that helped them win contracts with non-Indian companies. "We were encouraged knowing that you could be successful while disclosing the details of your technology—even as an Indian company. Sometime in the 1990s, the West started listening to Indian engineers. There was some resistance, but gradually they began to accept our capability."
Shanker believes that because of the high levels of quality permeating the local market today, there is now no distinction between international quality levels and Indian ones. "Indian buyers are as technologically demanding as global customers. The differences are vanishing more and more. Particularly with the global market—the supplier base, and the vendor base, and the engineering consulting base, are becoming more and more global; and the scale of operation in India is ever growing."
The fact that prominent Indian companies have been so conscious about the quality of their products and services and the safety of the environment and their employees has helped to break paradigms in international markets about how Indian companies are climbing the international value-added ladder while maintaining their cost-competitiveness.
Jindal Drilling, part of the D.P. Jindal Group, is another example of how Indian expertise has achieved international levels of quality. The company was incorporated in 1983 with a focus on providing quality offshore drilling and correlated services and today operates five jackup rigs and provides a wide spectrum of services such as offshore drilling, directional and horizontal drilling, mud logging, and manufacturing of seamless pipes.
Having built its business through working almost exclusively with ONGC in the Indian market, the company is now planning to spread its tentacles throughout the Indian market and beyond, as Raghav Jindal, newly appointed managing director of Jindal Drilling explains. "With the broadening of the Indian market, we will be looking at partnering with various new entrants. Jindal Drilling is bidding for tenders with some of the other already established companies in the market such as British Gas, Cairn and Reliance Industries and we recently did a drilling project for Cairn. Last but not least, Jindal Drilling will also target the international market and look into acquisitions abroad while participating in quality partnerships."
As part of its growing international recognition, Jindal Drilling recently received an award from Forbes Asia, rating the company as one of the top 200 companies on the continent that are under a billion in market capitalization. "That was a great achievement for the company. The ratings criteria are not specifically provided, but some of the noted areas are growth opportunities in the future, services, profit margins and turnover. There were only 37 companies selected from India, and just two or three from the oil & gas sector," says Jindal.
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