Business / Companies

Manufacturer in global push

By Du Juan and Xue Chaohua (China Daily) Updated: 2015-06-23 08:14

Manufacturer in global push

High-end drilling equipment being tested at Lanzhou LS Group Co Ltd's industrial park, which was completed in October last year after 16 months of construction, with an investment of 18 billion yuan ($2.9 billion). [Photo/China Daily]

Lanzhou LS Group banks on overseas orders to boost revenue despite price drop

Energy equipment firm Lanzhou LS Group Co Ltd expects its overseas operations to increase in the next five years on the back of China's Belt and Road Initiative.

Feng Xiping, deputy general manager for international business at the Chinese oil and petrochemical manufacturing giant, predicted on Monday that overseas income would increase to 60 percent of the company's overall revenue by 2020 from its current level of 20 percent.

"Most countries along the Belt and Road Initiative are rich in energy resources, which will bring us business opportunities," Feng said.

LS Group plans to expand its global network by having subsidiaries in Brazil, India, Singapore and Algeria in place by the end of 2015. Last year, the company opened subsidiaries in Russia, Dubai in the United Arab Emirates and Turkmenistan, Feng said.

Set up in western China's Lanzhou, capital city of Gansu province, in 1953, the LS Group was one of the earliest State-owned companies to focus on manufacturing oil drilling and refinery equipment.

Last year, the company had around 50 orders for drilling equipment with a total value of $250 million. Turkmenistan alone ordered 15 drilling sets with a contract value of $156 million. This year, the country has ordered another 11 drilling sets.

"We are also preparing a tender for oil equipment orders in Russia in September through our branch in Moscow," Feng said.

"By cooperating with our local partner, we can benefit from their mature sales network and resources," Feng said.

LS Group hopes to double last year's overseas revenue to around $500 million in 2015, which will help compensate for sluggish sales in the domestic market because of overcapacity in the refining industry.

Earlier this year, Fu Chengyu, former chairman of Sinopec Group, the biggest crude refiner in China, warned about the risks ahead when he said the country's total crude refinery capacity will increase from 740 million metric tons this year to 910 million tons by 2020.

This will hit equipment suppliers as long-term global projects are put on hold because of low oil prices. On Sunday, Brent crude for August delivery dropped 14 cents to $62.88.

Falling oil prices have forced Chinese companies, such as LS Group, to look abroad to fill order books, even though competition is fierce.

"It is common to see eight Chinese firms out of the 10 bidders when you attend an equipment tender in foreign countries," Feng said.

LS Group will focus on high-end equipment in other areas, such as mining, and continue to strengthen its after-sales service to stay competitive.

"Even though falling global crude prices have led to sluggish sales of drilling equipment, demand for mining equipment has increased," Feng said without giving details. "This means our company's diversified products will help us survive the foreign market and keep growing."

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