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16-18 June 2020 • Moscow • Crocus Expo

Russian oil & gas localisation case study – NOV-Kostroma

With sanctions hitting the industry, international oil & gas equipment manufacturers are starting to produce directly in Russia. National Oilwell Varco is one of these. The American multinational’s experience can teach us a lot about how to succeed in domestic Russian equipment manufacturing.
Russian oil & gas localisation case study – NOV-Kostroma

National Oil Well Varco in Russia

Workers at NOV-Kostoma factory

National Oilwell Varco (NOV) has over 35 years’ experience in supplying the Russian oil & gas sector. In the eighties especially, the firm worked with the then Ministry of Trade of the USSR to sell over 120 drilling rigs, and thousands of drilling and downhole units, to Russia, specifically for use in the Far North.
Since the USSR’s transition into the Russian Federation and separate states, NOV has subsequently supplied rigs and drilling technologies to all major layers in Russia’s oil & gas sector. Tatneft, Gazprom, Lukoil, Surgutneftegaz, and other majors, all use NOV solutions adapted to local conditions.
With the introduction of the Russian government’s import substitution policy, and subsequent localisation legislature, NOV noticed the writing on the wall. As a result, it began its own localisation efforts in 2016.
At this time, sanctions began to bite, cutting Russian companies off from the necessary drilling tools and rigs required for Arctic, deep-sea, and other drilling solutions needed to complete projects. NOV’s solution was to begin manufacturing in the heart of Russia.

NOV’s major Russian oil & gas equipment factory

NOV Kostrama winterised oil & gas rig

In 2016, NOV opened a 48,000 sqm production hub in Volgorechensk, Kostroma (roughly 336km northeast of Moscow), at a cost of $100 million. From here, it produces ISO 9000 certified rigs, downhole drilling solutions, and well-operations equipment.
“During NOV’s many years of experience in Russia/CIS, we continually demonstrate our commitment to quality and our desire to constantly improve our products.” – NOV, company statement.
All of the equipment built at NOV’s is suited to the Russian climate, off the back of the company’s prior experience supplying the USSR. It also adapted technologies developed in Canada, which shares similar weather to Russia’s coldest regions. NOV’s Russian-built solutions can operate in temperatures ranging from as low as -45°C to 55°C. 
At Volgorechensk, NOV is currently building or developing the following notable pieces of equipment:
• 5000/320 MT Bush Drilling Rig – This train rig features an electric top drive with frequency control, as well as block-echelon arrangement in a modular format, designed for cluster well drilling. It holds a conditional drilling depth of 5000m. 
As of 2017, localisation on the fully winterised 5000/320 MT Bush Drilling Rig stands at 50%. 2018’s goal is to bump this up to 60% before full component manufacturing and assembly is transferred to Russia.
• 225 MT Mobile Drilling Rigs – Plans to begin manufacturing the 225 MT Mobile Drilling rig at Volgorechensk are underway. This particular rig is an adaptation of an existing model, already in use for Canadian projects. 
Currently, NOV-Dreco, the firm’s Canadian wing, is heading up this project. The ultimate aim is to undertake rig base and mast manufacturing in Russia, re-suiting the 225 MT’s circulating system, pump unit, and electrical equipment block and preparing them for service in Arctic Russia.
• 100 MT Mobile Drilling Unit – Surgutneftegaz has purchased 100 mobile drilling units made by NOV in the U.S. Import substitution, however, means NOV is going split production with its Volgorechensk site. 
The Kostroma team is scheduled to handle manufacturing of each unit’s main components, including the chassis, overhead winch unit, mast, and attachments. NOV-Kostroma will also be handling final assembly.
Pumps, steel drill bits, and spare parts are also being made and repaired at NOV’s Kostroma facility.

What we can learn from NOV-Kostroma Russian manufacturing experience

NOV’s localisation efforts can teach us much regarding the Russian market. The big point is how technologies already trailed in similar climates can be adapted, and built, locally. 
For instance, the 225 MT Mobile Drilling Rig design is being adapted from existing technology, which has been successfully used across Canada. Canada is a world leader in cold-weather drilling/production; its geography shares many aspects with Russia that make E&P activity difficult. Through solutions such as the 225 MT model, it’s possible to bring international knowledge to Russia and boost its production output (and grow unit sales at the same time.)

Your guide to localisation in Russia

If NOV-Kostroma has inspired you, and you’re thinking about moving production to Russia, then download our practical guide on how to get started. Inside, you’ll find plenty of practical information on how to begin manufacturing essential oil & gas equipment in Russia, as well as a look at the benefits Russian-based production can bring.

Localised oil & gas equipment manufacturing in Russia: your how-to guide

MIOGE 2019: Russia’s no.1 oil & gas equipment exhibition

The Moscow International Oil & Gas Exhibition is the meeting place for the international community and Russia’s oil & gas industry. Over 560 companies trust the show to let them meet and do business with representatives from across the value chain.
Here, you’ll meet the players behind the Russian oil & gas projects listed above, as well as getting details on Russia’s project landscape from to 2025 and beyond. 
Find procurement, engineering and purchasing specialists exclusively at MIOGE.
Russian majors, including Gazprom, Tatneft, Rosneft and Lukoil, attend the show every year. Why? To meet new partners and suppliers of in-demand oil & gas equipment and technology.
Want more information on how MIOGE can help grow your business in Russia’s enormous oil & gas industry? Contact our team today.
All article images: © National Oilwell Varco