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Vallourec brings customised technical solutions to the Middle East

Jan 14, 2018
6 min read
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Philippe Crouzet, chairman of the management board at Valloureec, speaks to Pipeline Magazine’s Nadia Saleem about the company’s new direction in the Middle East


What is the significance of the Middle East market for Vallourec’s global business?

We are positioning the Middle East at the centre of our policy and strategy as well as investments because we consider the region to be committed to growing at a consistent level, which is important to us.

The policies of the governments in OPEC as well as NOCs in this region have shown more continuity and been much more consistent compared to others.  They have continued drilling here, while many IOCs have reduced capex considerably.

We are talking about hundreds of million dollars in investments by the NOCs in the Middle East, this creates stability and continuity to grow our business here. We bring products from Europe, Brazil, and China and finish the production in the GCC because it is the centre of the most resilient oil market and the most committed to sustainable growth.

We are in close communication with NOCs in the GCC and we are developing long-term strategies with them. That is why we have decided to locate our Asia and Middle East regional offices in Dubai.


You’ve recently signed an agreement with Badr El Din Petroleum Company (BAPETCO). What other such opportunities are you pursuing?

Tendering activities by GCC operators are ongoing and there is more to come. Saudi Aramco has quarterly tendering with plans for mega-tenders for years to come. We respond to these tenders and are hopeful of success in the future.

Other opportunities here include ADNOC and Kuwait Oil Company’s multi-year tenders.

We believe we have the unique opportunity to supply for the whole chain.


Where in the Middle East do you see opportunity for growth in the current challenging market?

Gas is a top priority for all our customers and this leads them to look for tight gas as well as oil. We have a great experience there, being the leading supplier for tight oil and gas in North America. Offshore drilling for gas is as well one of our specialties – for our customers, this is new here and an opportunity for us.

It is a way for them to ramp up production and for us to increase our footprint.

Secondly, GCC customers are willing to manage their capital much more efficiently now. This was not a priority before when cash was abundant due to high oil prices. We can bring many solutions that we have developed globally for our customers to manage inventories and reduce bulk capex.

These arguments were sort of out of the picture in this region before, but even Saudi Arabia is raising debt financing and they are concerned about how to deploy capital.

Additionally, our customers want to keep growing their downstream business and be less of a raw product supplier. We see business growing in that area, with more demand for pipes and our distribution expertise.


What sets Vallourec apart from others? What is your core strength and advantage?

As Vallourec, we are able to bring more value to our customers. Firstly, we bring competitiveness. We have restructured our business to concentrate on the most valuable assets in Europe and we have added new capacity in China, precisely designed and dedicated for customers in the Middle East.

So it is Vallourec’s fully-owned Chinese products that support Middle East NOCs. This is supporting our regional offices in Dubai, Abu Dhabi and Dammam, Saudi Arabia, where products from Brazil and China are finished.

Our second advantage is product innovation, which itself has two aspects: we offer our customers a wide range of drilling products and we are capable of manufacturing those products in the region, where localisation is more important.

Thirdly, we plan to support our customers in the region by extending our services offering. This is new to GCC but growing rapidly in other regions. NOCs are considering refocusing their resources on the core business of production as well as downstream. We are increasingly offering a package that includes not only our products, but also services to manage their inventories. This is something our GCC customers are considering for more value extraction.

We are also trying to encourage front-end innovation to better understand on what customers are struggling and provide new solutions.


Are you having to specialise products for GCC customers?

We have industrialised products for Aramco in our Dammam facility on their request. These are products required for drilling under the city of Dammam.

These products were originally designed for United States shale, but we have expanded them to Indonesia and now the Middle East. This shows our production setup is world class.  

There is higher demand for specific products from NOCs in GCC because they have higher technical requirements now in order to reach the same production level as before. Oil is not that easy here anymore and the maturing fields demand EOR as an example. Additionally, sands become more corrosive over time, so people here are more aware of the environment and corrosion rates.


Are you noticing new industry trends in terms of contracts/procurement?

Regional clients are increasingly looking at long-term contracts to facilitate an integrated and optimised full value chain.  

Typically, NOCs would work on one-year frame agreements, but large inventories are a concern for them because they are looking to reduce blocked capital by shortening the supply chain.

We are working with NOCs to see how we can package the products and services to deliver them when they are really needed. This will provide better visibility and require less capital.

Also, our customers are looking to optimise their assets and pipes are an asset. This is in terms of design, cost, and use of assets. That is what we can bring to the table for our Middle East customers to integrate into their supply chain.