BAKI FAHLASI: INTRODUCING NEW EQUIPMENT
Caspian Energy (CE): Mr Feyziyev, could you briefly review the development of Baki Fahlasi Machinery Plant OJSC?
Islam Feyziyev, Chairman of the Board, Baki Fahlasi Machinery Plant OJSC: Baki Fahlasi Machinery Plant is a large enterprise specialized in manufacturing of oil and oil-chemistry equipment and related spare parts, providing services and producing consumer goods.
Over the past 106 years, Baki Fahlasi has gone a significant way from a small workshop with limited capacity to a large machinery plant that contributes significantly to the economy of the Republic of Azerbaijan.
In order to liberalize economic activity, increase entrepreneurship participation and attract investments, Baki Fahlasi Machinery Plant OJSC (Azneftekhimmash OJSC's subsidiary) was established in 2001 on the basis of Baki Fahlasi state-owned enterprise. After restructuring, Baki Fahlasi continues its dynamic development.
CE: What is the situation with manufacturing and sale of finished products?
Islam Feyziyev: I can say that we fulfilled all the objectives set for the year 2006. The production plan has been implemented at 104%. Volume of commodity output increased 120.3% compared to the similar indicator of year 2005.
As to the shipped products, all 104% of manufactured goods have already been transported. Regarding the stock goods our enterprise had manufactured before, the consumers received a total of 164% of production. Thus, the shipped goods actually outpaced manufactured products by 60%. It should be mentioned that the products manufactured mainly before 2005 were shipped out from the warehouse.
CE: What is your opinion about the overall results of operation in 2006? What are the main development perspectives for the enterprise in 2007?
Islam Feyziyev: Concerning the results of 2006, I would say that as in previous years, we set the objective to master new equipment. The similar objective has been set for the year 2007. In the end of each year, our specialists monitor the success in implementing any process. One of the 2006 objectives was the production of 100 ton carrying capacity mobile repair and drilling units (QK-100) to be placed on chassis produced in Minsk Wheel Tractor Factory (MWTF). Today I feel proud to state that we have completed this task.
At present our enterprise also produces QK-60 and QK-80 units that are capable of drilling wells with depth of up to 1,200 and 1,500 m and performing well repairs at the depth of 3,500 m. These units are mounted on chassis of KRAZ-65101 and KRAZ-65053 trucks.
In 2006, Baki Fahlasi OJSC also performed as a general founder of Baku-Drogobich Avtomobil Kranlari MMC, which is one of the main sites for joint operations. This joint venture has already launched operations as per the program we developed.
Regarding new manufacturing divisions, we are drawing the project on developing a new sector. According to this project, 125 ton carrying capacity mobile repair and drilling units (QK-125) on MWTF chassis will be produced.
For now all these operations are unique for the country. The new units will be produced in a more upgraded way and of better quality. This is the reason why we are studying the positive experience and practice of equipment manufacture both in the West and in the East.
In 2007 we have established even bigger objectives to raise the amount of production by approximately 40% compared to 2006. In this connection, we suggest broadening marketing researches and production operations.
CE: One of the basic competitiveness criteria in oil equipment market is production certification. What are the standards accepted at the enterprise?
Islam Feyziyev: One of the most important objectives the enterprise has set for the year 2007 was implementation of API standards in respect to mobile drilling units. Alongside, we performed certain operations in 2006 to certify pumping units manufacturing by API; in this respect all provisional work has been completed and several stages of internal audits performed. In the nearest time we expect API audit commission, and by the results of 1 quarter of 2007 we are planning to complete the pumping units certification process.
In 2007 we are planning to certify our mobile drilling units in compliance with international standards. Preparatory works have already been started. The program aims to complete all these works by the end of this year.
CE: To what countries do you export manufactured products?
Islam Feyziyev: We export manufactured products to CIS countries. These are mainly Kazakhstan, Uzbekistan, and Tajikistan. Recently we received business offers from Kirghizia, Ukraine and Russia. As independent states they are aware of the high quality of goods manufactured nowadays. We receive more and more offers every day.
During the USSR time Baki Fahlasi Machinery Plant exported the manufactured production to 27 countries of the world, whereas now, as I stated above, we are carrying out work so as to get international quality certificates and be able to export our goods to world markets. Thus, our target for future is to enter the world markets and enhance our competitive status. I think in the near future we will arrange marketing so as to export products manufactured by our plant to CIS countries and overseas. Partially we have been already carrying out the marketing works. In this regard certification on the basis of international standards is of high priority for us. Upon completion of the certification process our production will hold a niche in the international markets.
CE: To what overseas countries do you plan to deliver export-oriented goods?
Islam Feyziyev: As you know, obtaining of international certificates is now always required in the territory of CIS states as certification passed in the home republic is considered enough. However, it is impossible to reach countries of the West, East and other world markets without having worldly-recognized certified goods. In 2005-2006 we received business offers from Syria, India and Vietnam. These offers mainly concerned our possible participation in tenders in case we have appropriate API standards. We keep on working in this direction so as to be able to take part in tenders to be held in future in various countries around the world.
CE: Very often foreign companies prefer to import required goods, whereas API-certified products are manufactured at Azerbaijani plants. What are the solutions to this problem?
Islam Feyziyev: At the moment we work in the conditions of market economy. Its main criterion is the production of competitive goods. There are such cases when foreign companies offer products manufactured by our plant in the home market. We have faced this situation. Nowadays I view these offers positively as it is very important to produce competitive goods. Today a customer sets two main criteria before a producer. The first is quality, whereas the second is terms. If a supplier meets these criteria, I think there will be no need to import goods to Azerbaijan as cost doubles during transportation.
At the same time there are representations of foreign companies working in the country. They manufacture goods in the production centers located in the territory of head offices. Having representations in Azerbaijan they will import products manufactured abroad to meet the needs of the country. There are various ways to cease such import in view of supporting local entrepreneurship, in particular, to set various custom dues on products manufactured in the country, etc. However, this does not always justify itself.
CE: What goods manufactured by your plant may be offered to international markets and be competitive?
Islam Feyziyev: These are pump jacks, drilling and repair rigs as well as all goods produced at the plant. We are ready to compete on quality, delivery terms, service maintenance as well as other parameters.
CE: When will Baki Fahlasi Machinery Plant launch production of lorry cranes?
Islam Feyziyev: This is very complicated equipment. Its production requires a stepwise programme. At the moment our technical potential does not allow to implement the full production cycle. This year we carried out simultaneous work to set up production of new equipment in several directions. For comparison, 60-tonne and 80-tonne drilling repair rigs produced since 2004 and 100-tonne rigs produced since 2006 along with the autocrane production project are 2-3 times more complicated than autocranes. But simultaneous implementation of this equipment, as I stated above, exceeds out technical capacities.
Therefore, we set the target to gradually implement autocranes production. We started working in 2006 and plan to complete this programme by late 2008 and establish the full cycle of autocranes production. The first stage covers rendering services to operating and inactive autocranes and creation of the testing stand for autocranes. At the same time we are going to carry out marketing researchers on possible volumes of sales of finished products in the region. The second stage provides implementation of some technological processes in the production cycle. At the third stage we plan to implement the full cycle of autocranes production with various capacities.