Since the subprime mortgage crisis triggered the global economic crisis, the drastic changes in the international situation have had a profound impact on the development of domestic enterprises. Petrochemical contractors in particular have experienced many business ups and downs.
At present, in the domestic petrochemical industry under the environment of overcapacity, more and more project contracting enterprises choose enterprise transformation, or expand their business overseas, in order to maintain the operation and development of enterprises. Here I would like to talk about some of the problems encountered by our engineering contracting enterprises in "going out" to expand overseas markets. As an international engineering technical service provider, how did we overcome these difficulties? I hope these useful experiences can be shared with you.
The impact of international economic situation on domestic petrochemical industry
At present, the international crude oil, energy market oversupply serious, oil prices remain low. In the face of persistently low oil prices and slow growth in consumer demand, oil companies have been forced to slash investment in oil and gas exploration and development (E&P), cut back on new projects and slow the pace of production. These measures have had a significant negative impact on the global oil and gas industry, affecting the entire oilfield engineering services market, resulting in a reduction in market activity, supply and demand imbalance, falling prices, and a serious contraction in market value scale.
Global macroeconomic growth is slowing and oil prices remain low
As crude oil prices continue to fall, overseas petrochemical industry owners generally have a tight budget, oil companies cut back on exploration and development investment scale, a large number of projects suspended or postponed. The demand for overseas oilfield engineering and technical services decreases, the service price drops, and the market shrinks seriously. Overseas customers are more and more sensitive to bidders' offers, and the price becomes the most important basis for bid evaluation. Therefore, the quotation of each supplier is lowered to adapt to this trend, and the competition among suppliers is becoming more and more fierce.
The demand for overseas oilfield engineering and technical services has decreased, and the service price has declined, resulting in a serious contraction of the market
Oilfield engineering technical service is an important part of the upstream business of oil and gas exploration and development, and it is the concrete means to implement the investment plan and operation plan of exploration and development. Therefore, exploration and development investment is a direct factor affecting the size of oilfield engineering service market.
In 2014, global investment in exploration and development increased, and the market scale of overseas oilfield engineering and technical services continued to expand, reaching US $45.593 billion in 2014, up 9.2% year on year. North America, accounting for 46%, is the largest overseas oilfield engineering service regional market, followed by Europe/Africa/CIS market (24%), Middle East/Asia-Pacific market (19%) and Latin America market (11%).
As the global investment scale of oil and gas exploration and development declines significantly, the overseas oilfield engineering and technical services market will be faced with reduced demand, reduced raw material costs and lower service prices in 2015, and the market size will shrink severely. It is expected that the full-year overseas oilfield engineering and technical services market will close at $352.468 billion, a year-on-year decline of about 21.8%. The decline is larger, broader and longer than the situation after the outbreak of the financial crisis in 2009, and the recovery is slow.
The recent overseas oilfield engineering service market will continue to be volatile and depressed, and the recovery prospects are bleak
According to the analysis and judgment of the International Monetary Fund, IEA and other organizations as well as the public opinion on the global economic development situation and the trend of the crude oil market, the factor of economic growth is difficult to increase the crude oil consumption in the short term, and the oversupply of the crude oil market will continue, and the international oil price will continue to be low.
In this context, oil and related products companies operating profit is declining, it is difficult to fulfill the 2015 exploration and development investment plan and implementation of the planned construction projects, so continue to cut or delay construction projects, stabilize the balance of payments, may be their most realistic approach. This approach will continue to weaken the entire E&P industry and further compress the oilfield engineering services market, which will most likely force oil companies to downgrade their E&P investment plans for 2016, leading to more serious consequences. This will be the biggest obstacle to the recovery of the international oil and chemical engineering services market.
Reviewing the overseas oilfield engineering technical service market in the past year, due to the reduction of service workload and service price, some resource countries have been strengthening market protection, resulting in the tightening of the low-end service market, and the business space of some international service providers has been squeezed. Some service providers have to shrink their operations or even withdraw from the international market, which leads to increased market concentration and monopoly.
The picture shows the difficulties and solutions in the process of "going out"
In the face of the current economic situation, our enterprises are also facing unprecedented challenges and competition. Due to the downturn in the domestic petrochemical market, DDTS has also invested more energy in the overseas market. In the course of more than 10 years of development, DDTS has undertaken dozens of overseas projects of different sizes, and its clients are distributed in North America, Europe, the Middle East and other popular overseas projects, which has accumulated a lot of overseas project experience, but also encountered various problems. For example, in the start-up stage of undertaking a project in Saudi Arabia, we identified more than 70 risk points and made risk plans in advance. However, in the implementation process, we still encountered unexpected problems, which were finally solved one by one. Here are a few examples to highlight how we have faced and solved the problems encountered in these overseas projects:
The international situation is so fluid that it is difficult to predict the impact on the project
In Middle East projects, news of oil production cuts, war, etc., can lead to reduced client budgets and project delays, which can also affect ongoing projects. Some projects have waited more than a year for phase 2 to start after phase 1 ended. These problems are difficult to foresee and there are high risks, which have a great impact on enterprises undertaking projects. Therefore, when undertaking overseas projects, it is necessary to conduct comprehensive analysis and research, comprehensively consider various possible risks, how to avoid risks and emergency plans after risks, so as to be prepared.
Cultural differences, language communication barriers
The huge differences in culture, religion and language between the two parties of overseas project cooperation will directly lead to the difficulty of accurate communication between the two parties, and the problems of life style and time difference also lead to a lot of coordination in the way of work. When undertaking overseas engineering design service projects, our company will focus on communication methods. For example, in a project in the Netherlands, we sent engineers to the other company for field study overseas. During the months of getting along with each other, related staff of the project could understand the lifestyle, working methods and communication methods of both sides, and learn project-related knowledge and procedures. Clients send project managers to meet engineers regularly for communication and training to improve our design ability and build mutual trust.
There are many restrictions on visa approval and personnel exchanges are not convenient
Overseas projects involve frequent personnel exchanges, but the visa processing time is long and the time limitation is short, which increases the burden of the project. In Saudi projects, due to the special nationality of the visitors, such as Pakistan and other countries, it is often difficult to pass the Chinese visa, resulting in the shelving of the personnel exchange plan.
In order to avoid similar things, when undertaking overseas projects, DDTS tries to be ahead of customers in everything, try to determine the travel schedule with customers in advance, make arrangements for personnel and visa application in advance, and make early planning and less delay.
International settlement of overseas projects
In international business, the differences in bilateral and multilateral laws, policies, religions, cultures and habits caused by different countries and regions, as well as the restrictions on overseas business coverage of domestic banks, add to the difficulties of business settlement. Faced with these problems, our company has strengthened cooperation with overseas banks and sought suitable solutions for different pain points. Especially in the Middle East region, I have accumulated experience in the business of guarantee and offshore settlement.
There are differences between international project management and domestic project management
There is a big difference between the management of international engineering projects and domestic projects. Problems that are easy to solve in China become difficult to deal with abroad, which is easy to make enterprises that just participate in international projects afraid.
Chinese enterprises do not have a good grasp of foreign standards and norms, so they have to use Chinese standards and norms and other flexible methods, which have buried hidden risks or caused risk exposure or direct losses for the project. In the bidding stage, the bidding documents can not be written according to foreign design standards and specifications; In the design stage, the design cannot be carried out in accordance with foreign standards and specifications, and the design drawings cannot meet the requirements of the contract; In the equipment selection stage, one-sided understanding of foreign standards and norms, ignoring the differences in the region or country where the project is located and the specific technical standards and technical parameter requirements of the contract; In the construction phase, the construction enterprise cannot carry out construction in accordance with foreign construction standards and specifications at the initial stage of the project.
Our construction specifications claim system, through years of practice test, is scientific, reasonable, perfect, but our specifications in the international recognition, generally speaking, compared to the international standard of Europe and the United States, our specification requirements are relatively loose, is our technical personnel to strict requirements of the European and American specifications is difficult to adapt.
Contract management in international engineering management is particularly important, it is the weakest link in the implementation of international engineering management by Chinese enterprises. The contract of international engineering covers broad and complex contents, including bidding documents, bidding documents, general conditions of the contract, special conditions of the contract, general specifications, special specifications and drawing. Contract management is the main theme of international project management, which runs through the whole process of project management.
File management is also very important in international project construction. In addition to the conventional documents and files in domestic projects, it also includes all kinds of correspondence with engineers and owners, as well as construction logs, construction memoranda, meeting minutes and so on, which should be properly preserved as part of the contract documents.
In view of the above situation, we have made a lot of efforts in the improvement of staff skills, not only to understand and master domestic standards and norms, but also to do a clear understanding of foreign standards and norms. In the process of undertaking foreign projects, the project personnel are strictly screened, the project is checked step by step, and all documents generated in the project (including process files) are systematically and perfectly managed and saved, so as to achieve no omissions.
In short, under the current international economic situation, the reasons for the impact of Chinese enterprises are relatively complex, and the problems encountered in the process of undertaking overseas projects are various. Therefore, we should see clearly the practical problems we face when undertaking overseas projects, and look for favorable measures to alleviate the current situation. In the past decades, our international project contracting business has achieved a certain development. As long as we can find our shortcomings objectively and take the correct measures, I believe that China's international project contracting will continue to play an important role in China's economic development.