Over the past 12-18 months oil and gas companies have been operating in a suppliers’ market. Prices for services and supplies have risen due to industry-wide material and labor shortages that have contributed to project delays and bottlenecks. Consequently, oil and gas companies are frustrated-but apparently more from late deliveries than from high prices, according to a recent report from EnergyPoint Research, Houston.
The company provides independent data about the oil and gas industry’s satisfaction with the products and services it buys.
The firm’s 2007 Drilling/Wellsite Equipment & Materials Customer Satisfaction report summarizes results from its recent customer service satisfaction survey covering manufacturers and providers of drilling and wellsite equipment and materials.
The independent survey, which was conducted from January through July 2007, is based on 2,319 evaluations by 636 respondents representing 176 exploration and production companies, drilling contractors, and upstream consultants worldwide. Suppliers were evaluated in the areas of total satisfaction, pricing, performance and reliability, engineering and design, availability and delivery, personnel, postsale support, and corporate capabilities. In its report, EnergyPoint pointed out, “One of the more fundamental aspects of the value equation for customers, [including oil and gas companies], is the ability of a supplier to deliver products on time and as specified.”
A drilling contractor, one of the survey respondents, said, “Major equipment suppliers have been very weak performers for us. Quality issues are a major concern along with failures to meet promised deliveries.”
Another respondent said, “Suppliers need to be more honest with customers rather than simply telling us what we want to hear. This is especially the case when it comes to delivery times.”
In fact, many survey respondents this year rated suppliers lower for making delivery commitments they were unable to keep.
EnergyPoint contends, “Providers who have avoided overrepresenting delivery capabilities to buyers over the last couple of years, often at the risk of losing short-term business, have arguably enhanced their long-term relationships with these same companies.”
Delivery issues
Several suppliers during the past 2 years have experienced varying levels of deliverability problems. Some of them identified in the EnergyPoint survey include Oil States International, Technip-Coflexip, and National Oilwell Varco.
National Oilwell Varco fared the worst, according to the survey. The company was rated last overall in the area of product deliverability.
Projects that have had delays due to supplier issues include the $1 billion Thylacine-Geographe gas development in the Otway basin off western Victoria operated by Woodside Petroleum; the Millennium gas pipeline project in Canada and the US operated by Columbia Gas Transmission Corp.; and, one of the more recent, the Long Lake oil sands development 200 miles north of Edmonton, operated by Nexen Inc.
Nexen said labor problems have delayed construction and start-up at Long Lake and increased the project’s capital cost by 10-15% above the previous forecast of $5.3 billion. It explained that the project’s sulfur-recovery unit is now slated for completion in first-quarter 2008 because of lower than expected labor productivity and difficulties securing sufficient labor, particularly pipefitters, to work on the sulfur-recovery unit (OGJ Online, Sept. 4, 2007).
Top suppliers
Although this year the majority of the oil and gas suppliers surveyed saw their customer satisfaction ratings fall due to eroding quality, nagging production delays, and deteriorating service, some were still able to deliver.
Derrick Equipment, Houston, which manufactures solids and waste control equipment for oil and gas drilling, ranked number one overall in total customer satisfaction in the EnergyPoint survey. Derrick scored particularly high for product engineering, reliability, and performance. And in the words of one survey respondent, Derrick’s field personnel are what make the company stand out. The company received specific acclaim for the initiative and service-oriented nature of its personnel and management. “There’re always there when you need them,” the respondent said.
Smith International, which captured the position of second place overall, stood out for its high-quality products, on-time delivery record, and presale and postsale service and support.
Rounding out the top five in the survey’s overall rankings were Davis-Lynch, a manufacturer of downhole cementing equipment and the top-rated supplier in EnergyPoint’s 2005 survey, along with tubular goods manufacturers Sumitomo Pipe & Tube and Vallourec & Mannesmann.