06.11.2014

API Creates Common Language in Global Arena. Oil&Gas EURASIA Magazine, 11’2014

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As Russian companies advance into foreign markets, they are more and more embracing certification standards under API. Though API stands for the American Petroleum Institute, today, API does 80 percent of its business in countries outside of the United States.
Its biggest customer has in the past been Italy given the large “cottage industry” of small and medium size equipment manufacturers that seek API certification to qualify as suppliers for projects all over the world. Russia has been a close second place in terms of volume of certificates sought from API, and in 2013 Russia nearly overtook the Italians.
Russia has even initiated a project to assist Russian exporters by adapting GOST standards to a new system that puts GOST more in sync with API.
The reason is simple: API standards are becoming an international standard. Not only is certification  according to API demanded in global projects; API offers a common standards language that transcends national boundaries. So if national oil companies in Russia and Brazil, for example, are working together, rather than argue about whose domestic certification systems are best, both sides simply agree on API as both sides are already familiar with these standards.
Oil&Gas Eurasia recently polled Russian manufacturers who have gotten API certification for their production to get their view on the standards issue.
The first question we asked petroleum industry players in Russia related to reasons that pushed their companies toward API product certification.
According to director of Foreign Trade Dept. at Trading House PTPA (Penztyazhpromarmatura) Vyacheslav Volkhin, there were two key issues for the Penza-based valve manufacturer. “Firstly, it was our desire to promote our products in foreign markets, and secondly, to meet the Russian consumers’ growing demand for API-certified valve products,” says Volkhin, adding that the API certification helped his company enter new markets in the Middle East, Asia and Latin America.
API_1.pngAccording to Alexander Obozny, deputy head of R&D Department, HMS Group, such decision is dictated today by the events taking place in the industry.
“Within the past 10 years we see an increasing number of requests for API-compliant equipment from our customers including the Russian ones. Consequently some part of equipment is manufactured in accordance with national standards while the product line of API 610-compliant pumps is extended in parallel,” Obozny said. “It particularly refers to heavy-duty process pumps used in the oil industry, where their application is economically justified since price of such equipment is significantly higher than price of conventional pumps.”
HMS Group’s capacity to move in step with the times and monitor current tendencies in the market is already bearing fruit for the company which has considerable experience in supplies of the pumping, compressor and skid-mounted equipment to international markets. “The holding has been expanding its presence in the Middle East recently. For example, there is major project is being implemented this year of supplying the centrifugal multistage double-casing injection pumps of a BB5 type for water flooding of the oil reservoirs at West Qurna field (Iraq). The pumps are fully compliant with the latest edition of API 610 standard,” adds Obozny.
TMK, one of the global giants in pipe manufacturing, understands well that possessing API certificates is a necessary precondition for oil and gas equipment manufacturers seeking to supply pipe to international oil and gas companies. “The whole world works in compliance with API standards and if a company wishes to deliver its products to forteign markets, it will be difficult to do without certifying them according to API,” TMK said in a written statement.
The Volzhsky Pipe Plant, which is part of TMK, had been licensed to manufacture and sell pipes as per API Spec 5L and API Spec 5СТ standards as far back as February 1993 (nine years before merging into TMK), becoming the first pipe plant in the CIS to do so.
Currently, all plants of TMK’s Russian division hold API licenses for their respective product ranges. Generally, these are licenses for manufacturing tubing and casing pipes (API Spec 5CT standard), as well as and pipes for oil and gas pipelines (API Spec 5L).
Additionally, Sinara Pipe Plant and TAGMET Works are licensed to produce drillpipe (API Spec 5DP standard), while Orsk Machine-building Plant is certified to manufacture tool joints (API Spec 5DP standard).
“But you shouldn’t think that once you obtain an API license the plant can use it and you can sit back and relax. According to API procedures, inspection audits are conducted annually in an effort to verify compliance, and once in three years a recertifying audit takes place. Periodically, new editions of the standards are published and each company needs to take these changes into account when going through the recertification phase,” TMK said.
Meanwhile, the issue of API licenses for products (API Spec 5CT, API Spec 5L, API Spec 5DP) is accompanied by an audit of the company’s quality management system, which should comply with requirements of API Spec Q1.
Providing excellent service to top-level clients was behind the decision of the Russian subsidiary of Austria’s Schoeller-Bleckmann Darron Ltd. (SBDR) to take up API certification.
“I wanted to secure the tier 1 segment of customers via quality and the best value for money that they get from SBDR – therefore API certification was the logical consequence for providing top QA. Moreover I am using it as a marketing tool in order to differentiate SBDR from competitors,” SBDR general manager Manfred Fostleitner told OGE.
According to Fostleitner, API certification should help SBDR make a bigger impact in Russia and the former Soviet Union countries, targeting customers among all top directional drilling service companies such as Schlumberger, Baker Hughes, Halliburton and Weatherford, as well as quality minded Russian directional drilling companies. “Without API certification we would not have contracts with these companies,” adds Fostleitner.
For VNIPIvzryvgeofizika, a company based outside of Moscow, API certificates have secured a pass into projects carried out by the former TNK-BP (acquired by Rosneft last year).
“The requirement to certify equipment–cumulative perforators–for casing perforation as per API RP 19B was listed in TNK-BP’s corporate Rules for conducting perforation work at the company’s wells,” VNIPIvzryvgeofizika general manager Alexander Merkulov says. “At that moment it was an issue that had been forced upon us, but ultimately having the API RP 19B certificate allowed use of domestically manufactured perforation systems by the service companies working for TNK-BP.”
In the end, Merkulov adds, his companу’s products generated demand among geophysical companies working with TNK-BP in Russia. The API RP 19B certificate has been taken into account ever since in filing bids and considering bidding proposal for acquisition of perforators in Kazakhstan, Azerbaijan and Turkmenistan.

From Standards to Contracts

Did the polled companies manage to achieve concrete, palpable results after certifying their products as per API? Have the sales of their equipment gone up, did they expand their reach to new supply markets?
“So far, when we talk about the actual results we can cite the example of our deliveries to Venezuela and Bulgaria. In other markets API certification helped us pass the vendor registration required by consumer companies,” says Volkhin (PTPA Trading House). “We need to note that API is a standardization system and the certificate allowing you to use the monogram on a certain product doesn’t automatically win supply contracts.” According to Volkhin, over the course of work and as new customer demands kept emerging, it became necessary to obtain new certificates (API6FA, 607, etc.), as well as to embed in its own system of specifications the requirements of various API standards. Such approach invariably provides opportunity to participate in many projects across the globe, but it requires additional in-house investments and time.
“Creating a new product always offers the prospect of entering new market segments that have a positive influence on the sales figures. For example, HMS Group is participating actively in modernization programs of the old pumping systems at refineries, primarily for application areas with heavy duty conditions, high temperatures and pressure. There is also a successful experience in supplying the pumping and compressor systems for oil & gas offshore platforms,” Obozny said.
“API certification is the minimum requirement for entry into any international market. ТМК supplies products to over 80 countries all over the world. Partially, it’s the consequence of our products’ compliance with international standards, including API,” ТМК said. “Without that significant growth of delivery volumes and geographical expansion of TMK’s sales in recent years wouldn’t have been feasible in principle.”
TMK does not only certify its plants as per API, but also takes part in development and rectification of existing standards. Since 2007 the company has been the official member of the American Petroleum Institute with a right to vote. At API, an executive standardization committee is in charge of developing standards. TMK representatives work on two subcommittees, one of which develops standards for threaded pipes for petroleum industry, and the other deals with quality issues in standardization.
VNIPIvzryvgeofizika also assesses positively the effect from API certification.
“The results of certification as per API RP 19B standard helped turn our attention to some consumer features of equipment that aren’t specified via certification as per the national SS-05 “standard”, which required development of new cumulative charges and perforators. This has promoted expansion of our sales and their physical growth,” adds Merkulov.

API – Lingua Franca in BRICS?

Concluding the survey, we asked our respondents to comment on the perspectives of API becoming the lingua franca in Russian products and services suppliers’ collaboration with national oil companies in BRICS countries. Is cooperation any easier when both parties use API instead of national standards? Respondents agreed that it’s an obvious plus, but noted that customers sometimes do prefer other standards.
“On the one hand, API is only the basic standard, which many well-known companies acting as buyers use as the foundation for creating their own corporate standards. On the other hand, the majority of foreign customers require suppliers, who they might potentially partner with, to submit API certificates,” says Volkhin.
According to Obozny, API certification in recent years facilitates establishing ties with clients in BRICS countries, “because the standard covers all the technical requirements for equipment and establishes the basic criteria of reliability and safety of operation.”
Fostleitner also agrees, adding that it might not be applicable so far to his company “since SBDR markets are limited to Russia and FSU countries.”
VNIPIvzryvgeofizika general manager thinks that API standards as a common language invariably promote penetration of Russian companies into BRICS markets. “The existence of a common, widely recognized tool for the comparison of stated performance features of perforators allows to determine precisely their competitive advantages and disadvantages and formulate understandable product requirements for both the buyer and the seller,” Merkulov said.

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