Can we change our mindset?

Though in many countries Integrated Services (IS) is the only way to conduct business, Magdy Wedad, Managing Director of PICO Energy Petroleum Integrated Services, clarifies the values of implementing the IS concept in Egypt

In 1978, PICO Petroleum Services (PPS) became the first private Egyptian enterprise to offer oilfield services for the local oil and gas market. At that time, this sector was reserved for giant multinational companies. PICO found a niche to blend between high-tech-imported equipment and local know how.
Starting from a small entity of eight pioneers, a workshop in Shukeir offering basic services, it has grown to a have over 2000 employees, and became a full-fledged service provider with presence in five countries.

What has PICO IS achieved so far and how do you evaluate the period from 2006 to 2010?
Before I give highlights of our acchievments during this period, we need to talk about the market and the challenges we all faced recently. During this period, we had a hype phase and then a steep decline when the global crises hit first and then the local cash flow problem we all faced last year.
However, despite these challenges and the fragmerntation, price orientation as opposed to value orientation of the market, we have drilled more than 20 wells offshore in “Integrated Services” manner. The result for our customers were phenomenal. Their average cost for identical wells went from 14 MM to 8 MM with much better well integrity. We are going regional with this concept.

Furthermore, we established a full fledged Drilling Fluid Company (DFT). We gathered the best expertise available and in short time we have been recognized by the major companies. We have been technically qulaified and competed against the giant multinationals in high tempreture high pressure wells. This is a remarkable achievement. Our ambition is beyond regional, rather global.

We added two service lines to our portofolio, Coil Tubing, and testing. We acquired the best equipment avialable in the market, as we believe that the market here deserves much better  equipment, despite low pricing sometimes. But we cannot use 20 years old equipment and expect average results. It is waste of our clients money and time. Therefore we went for the best against the common advice we recieved.
As for the international Market, we built the biggest well intervention Liftboat in the world. PICO 4 is a game changer when it comes to offshore well intervention.

What about PICO in 2010?
We are very focused. One more Service Line to be added to our protofolio.

What new segments will you introduce to the market in 2010?
We are keeping this for ourselves at the moment but you will be the first to know. It will be a surprise for many players in the market

You mentioned going regional with IS. Why isn’t “IS” focusing on establishing a market share in Egypt first before going regionally?
The mindset in Egypt is price orientated not value driven. We still believe we need 25 contractors to drill one well. 25 contracts. You cannot find one out of the 25 contractors to take responsibility of bad preformance. Other countries embrace the concept of IS. Globally there more and more wells drilled in IS format. There are countries like Mexico, which drill only in IS format or turnkey. We still need the courage to chaneg our mindset. But the overall preformance in drilling in egypt is extrmely below world average and in actual fact very costly, despite the cheap prices.

Did you implement an IS contract with any of your customers including third parties services and made a success? 
Several times, I like to recall a dear customer to us Centurion (Dana Gas now). In 2002, we introduced the concept for the first time in Egypt. We believed in the concept, our customer and ourselves,….we went as far as renting the rig, and financing the whole project on our own. Most of the services came from Halliburton & PICO.  The first well was much below expectation, above budget and required much time. We incurred major losses and the concept began to be questioned by our Board memebers. The last well was done at 60 % of the cost budget and 40 % of the time. We succeeded and were one of the reasons for the rapid success of centurion in Egypt

Do you see you will be able to succeed with concept of Integrated Service in Egypt?
It is a matter of time. It is a new trend now and it makes perfect sense. We adopted the concept from Mexico and we applied it on a regional basis. And we were the only company, apart from the four major integarted service providers, that was entitled to participate in a Mexican IS tender, 500 wells. We also were included in a tender of 170 wells and were placed third. That’s why we established PICO Mexico which mainly relies on the IS concept. Internationally, the concept of ‘IS’ is alive and in many countries it is the only way to do the business. However, we are still trying to prove the concept here in Egypt.

Do you think that the integrated services sector is facing complications in Egypt?
The concept itself is not well understood in the country yet as there is always a resistance for change, and people are not familiar with it. They need time, the model and the success stories in order to make this shift. As this shift needs some time to become a reality, but i believe it is happening.
We achieved amazing results with our customers. The Government itself established a company to provide IS. We are confident it will take off.

How would you compare the services that you provide today with your competitors?
In  all our service lines – the main three elements of any business success are human resources, the technical resources, and the culture, character or attitude to mingle both factors. For equipments, we use only top notch equipments and seek no cost savings as we focus ont the quality of our service.
Regarding the personnel, we have young characters who will become leaders, and can aquire knoweldge easily. The culture is focused on the role of the management to create the right culture to produce productive people in a healthy environment.

Did the financial crisis have any affect on your business?
It did have some effects; one of them is on the scale of PPS services. For PICO IS, it slowed down the business a little bit but it didn’t change our path, moreover it didn’t change our objectives.
Actually, I can say that it was a very good chance for PICO to purchase equipments with good prices. During the downturn period, we succeeded in establishing our companies and win a few contracts with some JV companies.

Do you see the market is in need of the services you provide?
Egypt is such a dynamic market that is very lucrative and very tempting for the investors by the fact that we have over 70 companies operating. For us, we shall asssure quality in how we provide our service as the industry lacked abit the quality it provides during the past period. Also we shall show our customers more commitment through sharing the risk, we provide a successful job, we get our bonus, we don’t, we shall get our penalty.

Can you announce a success story that happened along the period?
Look at our preformance in IS and compare to tradional contracting. We have drilled more than 20 wells offshore in “Integrated Services” mode. The result for our customers were phenomenal. Their average cost for identical wells went from 14 MM to 8 MM with much better well integrity.  We saved directly more than $21 MM and indirectly much more. Most importantly we did it in almost 60 % of the time compared to historical data. Not a single side track.

Are there any upcoming contracts that you are considering to sign in the coming period?
Yes, but we are focusing on some potentaiol IS contracts which we may sign  in a neighbouring arab country.  Other contracts are several tender contracts for Mud, testing and Coil Tubing.

What is your investment volume for the last two years and in 2010?
It exceeded $100 miilion in the last two years. As for 2010, we will invest around $35 million on new equipment and regional presence. As I told, we plan to surprise the market here before the year ends.

By Ahmed Morsy
Christine Nabil


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