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Technical Focus

Varel International, an independent manufacturer and supplier of high-quality drill bits, servicing the global oil & gas and mining/industrial drilling markets, sees the Middle East playing a crucial part in its future growth.

D e l i v e r i n g v a l u e t h r o u g h t e c h n o l o g y V people have been hand-picked for their skills, technical knowledge and local knowledge and for their ability to understand customer needs. As we continue to grow very quickly, customer service will continue to be a top priority for our organization. AREL INTERNATIONAL IS the world’s largest independent manufacturer of premium drill bits for the oil and gas industry. In 1999, the original owners sold the company to current CEO, Jim Nixon, at which time he recruited several drill bit industry veterans to join a new management team. During the next few years, this group restructured the company’s engineering and manufacturing processes and expanded its product offering to include polycrystalline diamond compact (PDC) bits. How can you maintain the growth enjoyed so far in the Middle East? We are very proud of the growth we have achieved in the Middle East. We entered this market in 2000, and have grown it to serve customers in Saudi Arabia, Kuwait, Oman, Qatar, UAE, to name a few. As the company became increasingly successful, it began to attract some of the industry’s leading drill bit experts to develop new technologies and to build relationships and performance histories with the company’s impressive list of global customers. To continue this growth trend, we will expand our sales and service network across the Middle East. We will continue to be flexible and agile, while attracting and training talented personnel who are dedicated to delivering value and solutions to our customers. All the while our commitment to and development of new, differentiated technologies will help us expand our business in this region. We will continue to develop drill bit technologies and features that maximize drilling optimization and thus efficiencies for our customers, especially those operating in the Middle East. Jim Nixon, CEO of Varel International - the fastest- growing drill bit company in the world In 2005, another important milestone was reached when Varel was purchased by private equity firm, KRG Capital Partners. The purpose of this being to perpetuate the company’s growth and opportunities. It took eight years of consistent effort by our management team and employees with incredible support from our customers to make Varel what it is today - the fastest growing drill bit company in the world Today, Varel International is recognised as the largest independent drill bit company in the world. Oil Review recently spoke with Jim Nixon about the reasons behind the company’s success. In which parts of the Middle East do you see the greatest potential for sales? The Middle East as a whole is a very important market for the future growth of our industry and for Varel. To date, we have very strong commitments from many regions in the Middle East. Looking ahead, I would say that Saudi Arabia has the highest potential for growth. This projection is primarily due to the shear size of the country and its massive reserves. But other countries, such as Kuwait, Egypt, UAE, to name a few—all have been increasing their drilling activity and will continue be important regions to the global drilling market. Varel has gone from strength to strength since you acquired the company. How did you turn things around so quickly? Believe me, it wasn’t quickly, nor was it easy, but we are very proud of all that we have accomplished. We bought the company from the Varel family in 1998 when it was primarily a roller cone company for mining and industrial drill bits. It took eight years of consistent effort by our management team and employees with incredible support from our customers to make Varel what it is today - the fastest growing drill bit company in the world. But these efforts compounded to help us build our foundation to be a leading global drill bit company. During this process we focused much of our attention on: when you pull rather than push materials through a manufacturing process. While this process has been operational for more than a year, and we have seen incredible improvements in product cycle times and product delivery timelines, I believe that we have yet to fully comprehend how efficient this process will make us and how it will positively effect our current customers and help us attract new ones. What trends do you see emerging in drilling technology? Unfortunately, for our customers, I see well construction costs continuing to increase; but advances in drill bit, drilling equipment and technology, such as motors and RSS systems, can improve drilling efficiencies and help reduce and contain costs. Generally speaking, drill bits are sometimes seen as commodities, yet their performance has a direct affect on drilling costs. If, for example, a customer is drilling at 6,000 meters deep and the bit quits performing, the trip time alone will cost them one to two days Doubling our PDC business—we have invested heavily to increase the capacity in our PDC manufacturing facilities in Houston and Tarbes, France. These investments have resulted in new equipment, more skilled personnel and a significant increase in monthly output. Enhancing our quality systems—ensuring that we are aligned with the finest raw material suppliers to make certain that our final products are of the highest quality; that we have the most efficient processes—in the office, in the plant and in the field; and that our plants have the well-trained people and the right equipment to ensure manufacturing and delivering efficiency. Focusing on customer service—our commitment to continuous improvement to our customers is important to us. It is this philosophy that ensures that we have the right people in the right place at the right time. Our Implementing lean manufacturing for our roller cone business—lean manufacturing is

86 Oil Review Middle East Issue Five 2007

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