9.4 Learning a New Mentality - Caspian Drilling Company: U.S.-Azeri Joint Venture

Winter 2001 (9.4)
Pages 80-81

Learning a New Mentality
Caspian Drilling Company: U.S.-Azeri Joint Venture
by Shaig Bakirov

Caspian Drilling Company (CDC), a joint venture between SOCAR (State Oil Company of Azerbaijan) and Santa Fe International, was formed in October 1996 to provide drilling services in the Caspian area. CDC currently operates Azerbaijan's two semi-submersible drilling rigs, now named Dada Gorgud and Istiglal.

In his role as General Manager for CDC, Shaig Bakirov has learned firsthand about differences in the way drilling was managed during the Soviet era and the way it is conducted today, according to Western standards. Here he speaks about these two disparate approaches and the sort of mentality that Azerbaijanis need to have to adapt to the recent changes.

In 1995, the management of SOCAR decided to establish a joint venture related to drilling services. After the tender process in 1996, we decided that our foreign partner would be Santa Fe International Corporation. We completely finished this process on October 16, 1996, creating Caspian Drilling Company (CDC).

Dada Gorgud drilling rig Left: Dada Gorgud drilling rig which was upgraded by CDC.

Since then, our CDC consulting team has worked to upgrade Shelf-5, which was finished in October 1998 and given the name Istiglal (Independence). We've also upgraded a second rig, called Dada Gorgud. Now both rigs operate to an international standard and drill in water depths of 780m (2,500 ft), well TD is 7,800 meters (25,000 ft). So far, between these two rigs, we've drilled approximately 60,000 meters, about 15 wells. As projects pick up, we plan to be drilling subsea production wells in addition to exploration wells.

Money Matters
Naturally, we are encountering major differences between the drilling business of today and that of the Soviet period. It used to be that the Oil Ministry of the USSR had two oil and gas production divisions, offshore and onshore, which carried the responsibility for all of the Soviet territory in the Caspian region. Thus, the oil and drilling business in Azerbaijan was managed by the Moscow Ministry of Oil - there was no such thing as SOCAR.

The managers in Moscow decided how much money we could spend. In a way, this made it easier on us, because we didn't have to worry about questions like, "Where can I find the money?" or "Where will I find projects?" We never had money problems. We received money from the central bank account of the USSR Oil Ministry.

We didn't have to concern ourselves with making money, either. There was no incentive to increase profits - in fact, it didn't matter if we showed a profit or not.

All of our projects were assigned, and we had to execute the plans exactly. After considering the condition of the rig, the expected down times and the necessary repairs, we would tell the Oil Ministry that we would be able to drill, let's say, 30,000 meters per year. But after that, without consulting us, somebody from Moscow would revise the plan to increase that amount to 40,000 meters per year. That's where we would run into some serious problems.

The Soviet planners would say: "This is your plan, and these are your commercial issues." But there was no contract, no obligation there. Nothing. Each month we reported to the Board of Directors on what we had done within that month. If you couldn't fulfill the plan in one month, two months or quarterly, they would demote you and substitute someone else. It was a normal phenomenon.

Staying on Budget
As far as a budget, we would tell the Ministry, for example: "For this project, we need $100." But the person who approved the project could arbitrarily say: "No, I only have $20. That's enough for you." There was nothing we could do about it. Naturally, this resulted in a very poor operation.

Today, by international standards, you are never allowed to spend more than you have in your budget. So we are very concerned about staying within our limits. We put a great deal of effort into planning our yearly budget and determining how much we will need to spend.

It takes us three months to put together the budget for each year: getting input from rig management, from the maintenance supervisor, from the supplies manager and so on. The general, operational and financial managers establish, review and approve the budget before making recommendations to our company's Board of Directors.

Importance of Azeri
During the Soviet era, all of our directives came to us in Russian. But today, everything that comes from SOCAR is in Azeri Latin. President Heydar Aliyev issued a decree this past year in August (2001) that Azeri should only be written in the Latin alphabet that was adopted in 1991, instead of the Cyrillic. I started using the Azeri language myself in the office beginning in 1998 and I've been using the new Latin alphabet for the past five months.

When we hire office personnel, we expect them to have excellent English and Azeri. Knowledge of another language, such as Russian, Turkish, French or German, is also helpful, but we consider Azeri and English as essential.

It's not easy to find people who know both languages well. Usually, the Azerbaijanis who have excellent English tend to be Russian speakers. Azeri is a little difficult, especially grammatically correct Azeri. Everybody here knows how to speak simple "street" Azeri, but I'm talking about written, literary Azeri. We can't send SOCAR or some other government office a crude, coarse, illiterate letter written in street Azeri. This is the face of our company, and we must present ourselves professionally.

Hiring Ratios
Besides hiring people who are fluent in Azeri, I also believe we should hire a majority of Azerbaijanis. Our country has a population of 8 million people. About 500,000 of them - roughly 5 percent - are of other nationalities, like Russians, Lesgians, Tatars and Georgians.

Our company should maintain this same ratio: 95 percent of our employees should be Azerbaijani, and 5 percent should be from other nationalities. But in reality, we have 25 percent non-Azerbaijani workers right now.

Part of the reason for this is that we kept about 75 percent of the original crew from the Istiglal and Dada Gorgud drilling rigs. From that 75 percent, 25 percent were non-Azerbaijanis. So today, if a Russian leaves our company, we try to hire another Russian. And if an Azerbaijani leaves, we prefer to hire another Azerbaijani. We are not going to fire all of our non-Azerbaijani workers just to achieve a 5 percent ratio.

At first, in 1996, everyone wanted to hire Russians. Someone had told them that Russians made a better workforce than Azerbaijanis. It was the wrong interpretation. But I've managed to change the mind of our management. If we hire 250 local employees, that means we are responsible for supporting 250 families, about 1,000 people. We couldn't establish a joint venture and then decide to only support other nationalities; that would be wrong. Most importantly, all newly hired employees should be competent no matter which nationality they are.

Focus on Safety
During the Soviet period, we talked about safety, but there was no real action, and no one paid attention to this matter. Today, safety is one of our most important issues. For the first time, we have a special training manager offshore, who covers safety as part of each employee's training.

Before, we didn't have safety supervisors on drilling rigs. But now we have two for each shift: a Safety Officer (a foreigner) and a Safety Officer Assistant (a local employee). Besides buying safety equipment, like lifeboats, life jackets and fire extinguishers, we hold a number of safety meetings before each job or task gets started.

Employees contribute to job safety through a special Stop Card system. If a worker sees that somebody is doing something wrong, he fills out a Stop Card form and places it in a special box. Each day, the Safety Officers pick up all of the cards and read them. If something serious comes up, they organize a special meeting to try to rectify the problem. Following the guidelines established by the Health Safety Environment Management System (HSEMS), we're proud that we've been able to achieve our safety goals.

International Standards
We need to reach international standards. As the saying goes, "I'm not so rich to be able to afford cheap goods." What's the point of buying a cheap shirt if you are only able to use it for one month? The same thing applies to drilling for oil. If we use Russian drilling bits, for example, they may be cheaper than bits that are manufactured in the West. But we have to change them again and again, losing valuable time when we could be utilizing the equipment.

Here in Azerbaijan, we have three types of workers. First of all, we have those who are highly educated but are always waiting to be told what to do. Their mentality is always to let the managers direct and advise them in their work.

A second category of worker is also highly educated, but is unable to adapt to new ways of doing business. They think that their way is best, questioning, "Why do we need international standards? Why do we need to follow these foreigners' instructions? I have just as much education and experience as they do." They refuse to change their mentality.

The third type of worker is highly educated and open to change. They have the patience to learn and are willing to admit that, "Hey, this is new for me, I need to learn this. Here's something I can add to the knowledge I already have." These are the people who have the mentality to change and be open to new ways of doing business. These are the people who will eventually replace the expatriates.

Wealth of Experience
Shortly after our joint venture got started, we organized special courses - English for Azerbaijanis, Azeri and Russian for foreigners. Once a month, we tried to teach foreigners about the Azerbaijani mentality, Azerbaijani national traditions, practices and national trends. Our foreign managers are invited to attend Azerbaijani national parties so that they can see Azerbaijanis in their own settings.

In general, Azerbaijan is a good place to work. Foreigners soon find that the Azerbaijani people are hospitable and kind. You can't find an enemy in their faces. They're not xenophobic. Eventually foreigners also come to understand that Azerbaijanis have the ability to improve very quickly: to learn languages, to remember details.

At first, the foreigners didn't realize that Azerbaijanis were so experienced in oil. They figured that they knew all the answers. The foreign supervisors thought: "This is a new area for Azerbaijan. We have good knowledge and experience. These guys are just starting out. We'll have to teach them all the time and push them." But they had confused us with other parts of the world.

Azerbaijan is like a school for oil business. During the Soviet era, we were training oil workers for Siberia, Grozny, Tatarstan, Bashkortostan, Turkmenistan and Kazakhstan - all of the oil specialists, whether for drilling, producing or refining, came from Baku. Now other countries are recognizing the vast experience that Azerbaijanis have in relation to oil.

Shaig Bakirov is General Manager of Caspian Drilling Company, a joint venture between SOCAR and Santa Fe International Services. He has been working in the oil industry since 1970.

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From Azerbaijan International (9.4) Winter 2001.
© Azerbaijan International 2002. All rights reserved.