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Want Shale Contracts? Start Now
CAMBRIDGE, Ohio -- Only one thing is worse than loading a truck at 2 a.m.: Seeing your competitor load the truck at 2 a.m.
So warns Brooks Miller, vice president of regional sales for Ken Miller Supply as he summarizes a day of how-to advice for business owners and managers seeking contracts in the emerging oil and gas industry.
“If you want to be successful supplying these shale drillers, you have to be available all the time,” Miller says. “These people are spending $20,000 a day for a drilling rig. So if they need something at two in the morning or July Fourth weekend, you better be ready to service them or else your competitor will.”
Miller told those attending the packed Ohio Shale Energy Conference April 11 in Cambridge that demand for his company’s products has gone up 10 times since the shale industry arrived.
While adding higher-grade ancillary items and upgrading equipment to meet production got the Wooster supply company’s “work boots in the door, paying careful attention to customer service kept the dollars coming,” Miller says.
The conference, convened by the Consortium for Energy, Economics & the Environment in the Voinovich School of Ohio University, featured speakers from companies prospering from the shale industry and government and education leaders creating a supply chain database and network. (See related story, page 10.)
Understanding how to capture and execute a contract from a big oil company takes considerable work, says Michael Levett, senior director and vice chairman of the board of directors at CDC Development Solutions, a consulting firm based in Washington, D.C.
CDC works with industries worldwide to develop local supply chain resources.
“The first thing people have to understand is that the big buyers of goods and services, the big oil companies and their tier-one suppliers, are very demanding,” Levett says. “They have very high quality standards and they have many requirements.”
Levett, the keynote speaker, has worked in many parts of the world to develop supply chains in the oil and gas industry. “At the beginning of any region’s experience with the oil and gas sector, there are many similarities,” he says.
There will be good jobs that, one hopes, will be filled by the Ohio workforce but the real goal, Levett says, is for companies to capture recurring contracts with big oil companies that don’t have to hire locally unless they do so for public relations purposes or to save money.
Many companies based far from Ohio already meet the industry’s quality standards and demands, he warns, and are working with the big companies.
“The big win for Ohio won’t be the capturing of one or two contracts by a company in Ohio. It will be capturing the next two or three or four contracts,” Levett says.
“The winning strategy is being prepared to compete for and win that contract because you’re the best,” he advises. “You must have the best practices, the best policies, the best financial controls, and live up to high-level standards. It’s a best-in-show mentality. You have to be best in your class; then you have to be best in show. Those big companies have the usual suspects they hire. Some of them will always win the contracts, but there’s an opportunity for Ohio companies to become the usual suspects. And that should be your goal.”
Levett suggests companies upgrade their operational and strategic plans and build more business alliances. Regional leadership is vital to implement a centralized business support center, “a clearinghouse where all the rules and all the opportunities are made clear. Someone has to coordinate information, access to players and manage expectations. It’s a team effort,” he says.
“The state can help, the university system has to be involved, and the industry will weigh in. The big oil companies want their suppliers to be good at what they do. They’ll help prepare you.”
William Moore, vice president of sales and marketing at The Westerman Companies, stresses the necessity of speedy delivery in addition to high-quality products. Westerman, based in Bremen, makes, sells and services oil and gas production equipment.
“Quality is a must,” he stresses. “You must produce it right the first time and every time.”
Finding a niche and developing a product that solves a problem for oil and gas producers is a good way to land new business, Moore says. He suggests doing your homework and due diligence on the companies coming into the shale play and the processes they use.
Mike Archer, president and CEO of Pioneer Pipe/Pioneer Group, says strict attention to safety, industry certifications and timely responses to customer requests will enable local companies to maintain any initial contracts they secure.
“This market is moving so quickly that we have to be able, as a supplier, to react very quickly and to do that you have to have enough capacity in your facility,” Archer says.
Pioneer Pipe, based in Marietta, is actively involved in the western Pennsylvania and northern West Virginia Marcellus shale plays.
“Our company is a great example of what we think is coming to Ohio in terms of job creation and opportunities for companies in our region,” Archer says. “To date, we’ve created about 75 positions in our company for projects in the Marcellus Shale.”
The executive director of Carroll County Chamber of Commerce, Amy Rutledge, says she’s learned the oil and gas companies work at a different speed than the rest of the business community.
Carroll County is home to one-third of the well permits issued in Ohio, and four of Chesapeake Energy Corp.’s five commercially producing wells.
“The oil and gas company might not know what they want, but they wanted it yesterday. So you have to anticipate and try to figure it out. Then go above and beyond what they ask,” Rutledge says.
“The oil and gas companies know some people want to gouge them, and they just won’t put up with it,” she adds.
Matt Sheppard, senior director of corporate development for Chesapeake Energy, says most decisions on vendor hiring are made at the district level where his company operates.
“I always stress to vendors that you have to be patient, you have to be flexible, and you have to demonstrate capabilities to work in the industry,” Sheppard says.
“There are a lot of companies in this industry that will be looking for people. It’s not just one drilling company or one midstream company,” he adds. “It takes a lot of people to do this work.”
Those who fear it’s too late to get started in the shale industry are mistaken, says Larry Wickstrom, state geologist and division chief of the Ohio Division of Geological Survey. “We’re probably two to three years away from defining the whole play,” he explains.
“We have 21 drilling rigs in the state now capable of drilling 200 wells this year. In three years, we think 1,000 wells will be drilled every year in [the Utica shale] play.”
EDITOR’S NOTE: To apply to become an approved vendor with Chesapeake, visit AskChesapeake.com and search “vendor registration.” Other large oil and gas companies offer similar opportunities to register at their websites.
This story was first published in the May print edition of The Business Journal. CLICK HERE to subscribe.
Copyright 2012 The Business Journal, Youngstown, Ohio.