How China Became a Major Producer of Oil And Gas Equipment

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China, the world’s most populous country, became the world’s largest energy producer in 2009, the largest energy consumer in 2011, and the largest net oil importer in 2014. One factor that has bolstered China’s influence in the global energy market is its emergence as a major player in manufacturing and exporting low-cost, high quality drilling equipment.

When I started my work 15 years ago, China was a very different market in the upstream division (exploration and production) of oil and gas. Because major oil-producing countries exclusively purchased equipment with American and European standards, China was barred access to the international market. These standard requirements, at the time, could simply not be met by Chinese companies.

At the same time, countries like Iran were experiencing gaps in the industry after regional warfare disrupted their oil and gas sector. After the Iranian revolution in 1979, oil and gas experts couldn’t recognize the needs of the industry and external constraints prevented expansion. Instead of purchasing equipment, Iran would rent, having no standard for ordering equipment. This weakness was left unconsidered and unresolved for decades.

As an Iranian professional in the oil and gas industry, it was my mission to standardize financing and leasing methods for countries like Iran, and create a road map to resolve these crippling issues.

After recognizing the many unsatisfied needs of the Iranian market, my company started working to address them. At the same time, we evaluated the weakness of the Chinese market in the upstream division of oil and gas. As it turned out, the solution came in linking these subjects together.

First, we helped Chinese manufacturers produce equipment based on European and American standards. This was a huge unmet need of Iran’s market at the time, and Chinese companies had very limited experience with production and the exportation of oil and gas equipment. Still at the early stages of adopting international stages, their activities were limited to China’s domestic market and several other countries.

Helping China shift focus from importation to production was a breakthrough for them as much as it was for their buyers. Costs decreased, and massive job creation led to economic growth. Joint ventures with American companies allowed Chinese manufacturers the benefit of Western technology combined with low labor costs. The record of production for Chinese companies in exportation now exceeds 1,000 rigs; Chinese yards are now building more jack-up rigs than all other yards in the world put together.

At first, many traditional countries around the Persian Gulf were skeptical about using Chinese equipment, but China built trust in the market by offering high-quality products comparable to American and European equipment, but at a much lower price. Products made in China with American quality were introduced in Saudi Arabia, Russia, Iran, Africa, Kuwait and Venezuela, which began to order from Chinese manufacturers in the upstream division.

This increased the sale in upstream along with downstream (refinement, distribution, etc), as the same Chinese manufacturers once struggling in the market started to produce more.  Due to the increase in operating activities my business created, the number of Chinese manufacturers increased tremendously. China created joint ventures with American companies, making them one of the biggest producers of equipment in the upstream division in offshore and onshore equipment.

The boom in China’s economy was helped by the many factories and jobs created to produce equipment and sub-equipment. These factories flourished thanks to China’s major economic strengths: hard working citizens, strong infrastructure and consistent methodology. One cause for concern, however, has been China’s low level of consumerism, which accounts for just 28 percent of its GDP (as opposed to the U.S. 76 percent). Lengthening vacation time was one policy introduced to remedy this.

Encouraging spending has helped the economy grow even more, and experts surmise that consumer spending could reach $67 trillion over the next decade if shopping sees a greater boom. Energy consumption has grown even faster than consumerism: In 2014, China’s oil consumption growth accounted for about 43 percent of the world’s oil consumption growth, more than one-third of the global demand.

A lot has changed in the past 15 years in China, the Middle East, United States and across the globe. The competition for market share of oil and gas equipment, which used to be between American and European companies, has shifted to competition between Chinese companies in the last five years. I contribute this success to the reverse engineering method adopted by Chinese manufacturers.

Today, China is highly invested in research and development to help create more jobs and technology in an upstream market. These investments supported China’s subsequent rise to the second largest manufacturer and exporter of oil and gas equipment and services in the onshore and offshore division. China ranked as the second greatest supplier of oil to their domestic market, a trend expected to continue up until 2025, improving both the country’s GDP and its oil consumption. Because growing demand for oil outpaces their domestic production, China is also building strategic oil reserves to ensure supply remains stable.

China is also the world’s greatest carbon emitter, so the nation has set into motion ambitious plans to diversify their energy sector with renewable energy sources like solar and wind. But as the population continues to climb, it’s unlikely this will hinder oil and gas industry’s significance. We can likely expect the mutually beneficial relationship between Chinese manufacturers, oil-producing nations and suppliers to remain strong, steady and lucrative.

Featured image: Asian Development Bank via Flickr.

Reza Mostafavi Tabatabaei is an entrepreneur, investor, activist and international businessman who specializes in the oil and gas industry. He is an admirer of Middle Eastern art, culture, and philanthropy, which you can read out more about on his adjacent website RezaMostafaviTabatabaei.org

5 Steps Great Leaders Take When Things Go Wrong

A great leader is usually defined by what they do in the times of distress as they know that those heavy decisions not only have an affect on themselves but the people they lead. When things don’t necessarily go as planned, these are five things great leaders do to make the most out of the situation in route to a positive outcome.

Great leaders accept that failure is inevitable:

“The only real mistake is the one from which we learn nothing” – Henry Ford

If you’ve ever tried at something, you’ve experience failure to some capacity. But failure is a major step in the road to success. Every accomplishment or failure is a learning lesson, success and failure are both great teachers. Leaders listen when mistakes are made so that they can better their decisions the next time a similar circumstance arises.

Great leaders confront failure:

Evaluate the situation head on because confronting a failure can turn it around into a success in another form. Don’t shy away from your mistakes or keep them at bay because your own wrong decisions could prove to be your best teachers.

Great leaders are vulnerable:

You’re human! Everyone has made mistakes, it’s moreso about how you respond to these mistakes. Great decision makers don’t hide their mistakes because everyone is susceptible to them, but you can also be vocal about how you’ve responded and overcome. Admitting to your mistakes creates an environment where your team can openly admit failures to and be welcoming to advice that will help them in the future.

Great leaders recover fast:

Often the burden of a mistake can linger and result in future issues. Leaders don’t let this burden them because it can have an adverse affect on their team and the environment they operate within. Seek to recover and use the things you’ve learned to help steer a faster track towards where you want to go.

Great leaders are aware of their responsibility:

Know your duties and how they differentiate from others because decisions or actions may be called of you and you only. Appreciate the duty that comes with the responsibility because you are making decisions not only for yourself but decisions that directly affect your business or your team. Keeping your responsibilities in mind helps you stay focused on what’s important.

 

Abu Dhabi Bio Jet Fuel Project Nears Test Stage

Abu Dhabi seeks to make a move towards a more community conscious airport in Renton, Washington. Boeing, in works with Etihad Airways has been working on developing a biofuel in emirate since early 2014. The goal is to produce a more environmentally friendly jet fuel that their airlines can implement and utilize in all of their planes

The counterparts are looking to expand the production of this bio fuel’s use as it nears it’s testing stage. Boeing and Etihad Airways have started construction for the fuel producing plant on a one-acre trial farm location. In Abu Dhabi, a plant called salicornia bigelovii generates oil that can be used to make the biofuel so it will be planted in the test farm. A Boeing executive says that the plant is expected to be completed in the next three to four months.

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The team expects a relatively soon turn around because they’ve also been in the works with Abu Dhabi National Oil Company’s Takreer and the Masdar Institute and Total.

Julie Felgar, Managing Director, Environmental Strategy and Integration at Boeing Commercial Airplanes, informed reporters that the new bio fuel will be put to the test soon. A small pilot project will run after the test farm’s construction is through and complete.

“We’ll take one year to 18 months to run through a couple of harvest rotations and see what the opportunities are in being able to scale that up,” Felgar told reporters.

This environmentally focused project is a great addition to Boeing’s arsenal. But Boeing is majorly active in this particular industry as The Abu Dhabi project is just one of 19 global biofuel projects underway for the organization. Their team has the inherent focus to develop jet aviation fuel based on biological processes like agriculture or waste in route to reducing the industry’s carbon footprint.

 

The State of Health Care in Iran

The Iranian president, Hassan Rouhani, has promised health care for the entire country for the next four years. Rouhani asserts that the health care plan would be partially backed from funding created through cutting government subsidies.

Reza رضا مصطفوی طباطبایی

Rouhani spoke in a live broadcast interview on Wednesday, Sept. 30th about his mission to create a nation where Iranians are protected under a universal health insurance program. In route to bettering the country’s state of health, Rouhani said that at least five million citizens who are living under the poverty line will be attended to first.

Rouhani continued to say, “Our people face a number of difficulties in their health protection and when they enter a state-run hospital they usually have to obtain their medicine, tests and medical equipment from other places.”

Iran’s health program financing is often referred to as ‘mixed-financing’ because there are different financial privileges for different types of fundraising. General revenue financing, social health care insurance and out-of-pocket payments make up the health care system of Iran, but these plans mainly constitute secondary coverage for those residents insured by social insurance.

In Rouhani’s interview, he also apologized to Iranian citizens who have suffered through certain environments. With this proposed new health program, he plans to fix both health and social issues.

In the current healthcare system, it is difficult to reach universal health care, especially for those living in rural areas of Iran. There have been multiple studies that point to vast inefficiencies in the healthcare system in Iran’s rural society, representing an impairment of the current institutions put in place.

Rural healthcare is a priority at the World Health Organization (WHO), as the issue has led to much international discussion. Though half the world lives in rural areas, most do not receive the same care as their urban counterparts. Though the demands of these rural communities are demanding this inequality be resolved, there is difficulty in its implementation. Chiefly, the health problems in rural regions are different from what individuals experience in urban areas. In the ideal state of “universal health care,” one would expect there to be uniformity across all healthcare institutions, but this is simply not the case. More often, the impoverished regions obtain less quality in their healthcare systems.

Iran’s healthcare system is set to improve the health care institutions in rural areas by establishing health houses responsible for a specific rural region. These health houses are equipped with a staff of healthcare providers called, behvarz, that are employed by their local communities. The behvarz have been instrumental in improving the healthcare system in Iran though various rural community healthcare systems are experiencing difficulties trying to keep up with the changing landscape of Iran’s volatile political, social and environmental ecosystems.

Considering the difficulties that the healthcare system is facing in rural areas of Iran, individuals are encouraged to donate and volunteer. Funds and time can be donated in various capacities: education of healthcare providers, institutional developments, new health house construction, new technology development and community volunteering.

Reza Mostafavi Tabatabaei has focused his philanthropic endeavors on developing healthcare institutions in the underdeveloped regions of Iran. In assisting in the development of new health houses across the country, Reza has aided in improvements in the industry; however, there is still much more that can be done to improve the healthcare system in Iranian rural communities.