Airat Sabirov entered the Faculty of Control and Automation by chance at the age of 17 and never regretted about it. Having gained experience he resigned from his job at the age of 34, sold his car, country house and started his own business on production of automated metering systems for gas and oil industry. The efficiency of these systems has been tested by Russian and Tatarstan big businesses, ensuring him revenue in the amount of 4.1 billion rubles. The general director of the GKS company reveals peculiarities of work in oil and gas industry and kickbacks, tells how large companies work in crisis and many other things.
“WALKED ALONG THE EMPTY TECHNOPARK ALL ALONE”
- Airat Ildarovich, why have you chosen such a specific business to work in?
- Automation and process control is the area of my specialization. I entered the Faculty of Control and Automation by chance. At that time it was a new qualification, and the guys from that department told me about it with great interest. I liked it, and I still do (smiles).
- Is it true that you sold your country house and your car to start your business?
- Yes, I did.
- How much was your total startup capital and what were your first steps?
- I had 350 thousand rubles. First, I thought of renting an office, but got to know about the opportunity to settle at the Technopark. I received a governmental grant and became the first resident of the Technopark “Idea” and used the office during 3 months for free. However, the construction works were not finished, the last repair works were in process, but in order not to lose time, I asked the director Mr. Sergey Yushko to open an office for me. During two months I walked along the empty Technopark all alone (laughs). Then, when different delegations came to the republic, they were shown the Technopark and told: “Here we have this guy”. And Rustam Nurgalievich visited us as well.
“I REALIZED I HAD NO WAY TO DEVELOP”
- What ideas did you have when started your business?
- At that time private investors appeared, and they actively invested funds in gas and oil industry. They needed to know exactly how much gas they gave to “Gazprom” and how much they were to be paid. For understanding: gas condensate is a liquid mixture of hydrocarbons, released from the land with gas, and is used in petrochemical industry for fuel production. The composition of the mixture is changeable, so, it has to be measured constantly. We developed a metering system for the volume of supplies, which reduced inaccuracy from 1,5% to 0,25%. We proved that our metering equipment was more accurate, and we received our first contract with the company “Northgas”. Then Farkhad Timurovich (Farkhad Akhmedov, the “Northgas” co-owner – author’s note) wanted to know exactly how much gas out of his gas fields he gave to “Gazprom”. In general, it is the independent companies that pushed the development of Russian automated metering systems. The situation was caused by the market demand.
- But in order to get the contract with such company you needed connections. Did they remain from your old job?
- Before I created my own company, I had spent ten years working for “Incosystem” that works in similar niche, that’s how I was familiar with the specifics of work and many representatives of the oil and gas industry. In “Incosystem” I reached the position of a deputy technical director and realized there was no way to develop.
- Leaving the company you must have taken the people you worked with to create your own company, didn’t you?
- Yes, and I created this team myself when I worked on the new business area at “Incosystem”. I recruited about 15 promising students and with the 7 of them we are still friends, we work together and trust each other.
“CHANGE A LETTER OR A COMA AND IT IS YOURS”
-You said once you make an emphasis on innovative ideas in production. What is your innovation?
- For example, ultrasonic flowmeter is such innovation. We have the highest competence of this area in the country, we are asked for explanations, and we develop software for flowmeters.
- Do you cooperate with Universities and researchers?
- Now we have plenty of PhD in Technical Sciences, and those who haven’t become them are just being lazy. We work in a real sector, create our own usable models and give proposals for changes in regulatory framework. I have become a PhD in Technical Sciences recently. The material gathered in a folder, and it was pity to lose it. I passed PhD defense within 5 years. I should have done it long ago, though in our country nobody really pays any attention to whether you are a PhD in Technical Sciences or not. The brink has disappeared. Now I am a chairman of the State Attestation Commission, and students pass me their thesises. Having PhD in Technical Sciences and practical work experience, I have something to tell and teach them.
- Were there cases of theft of your technology?
- We live in Russia, and theft of technology is a rather abstract concept. Yes, we have developed several programs, which we have patented and put on the register. But in Russia you change a letter or a coma and it becomes yours that is why we never really worried about it. We develop a usable model, and then we do not follow it. What for? We go further. Someone may follow us.
“A YEAR LATER WE RECIEVED A CONTRACT FROM “GAZPROM”
- As for today you have taken your position in the market. What difficulties did you encounter at the beginning?
- In oil and gas industry you can not just introduce something new. To introduce a new idea you have to change industrial standards and change the letter of the law. When we develop flowmeters, it is not just a set of equipment, but also correctly projected pipelines that is why we developed software first and then gave our recommendations on changes of GOSTs as they all became obsolete, and nobody wanted to update them, and as a result industry suffered and the efficiency of work decreased.
- At the beginning the main difficulty was in the lack of money. Authoring systems were expensive. In the second year of operation we received a contract from “Gazprom” for 380 million rubles. Nobody wanted to risk, and they required bank guarantee in case we decided to receive the advance payment and play fast and loose. We had to apply to Kazan banks. The bank “BTA-Kazan” was the only one who helped us; it guaranteed our client the return of an advance payment. In my opinion, it was around 60 million rubles. I met personally with the chairman of board Mr. Mudaris Idrisov. He looked into my eyes and said: “If you are ready to mortgage the house you live in, then everything will be fine”. We fulfilled our obligations, didn’t play fast and loose and earned money for operating capital.
- How did you meet with “Gazprom”?
- We got acquainted with “Gazprom” thanks to the contract with the “Northgas”. We coordinated technological documents on flowmeters that joined the pipe of the gas monopolist. “Gazprom” decided to upgrade condensate metering system, they knew about inaccuracy of their metering. “Gazprom” wanted the system to monitor constantly the indicators of mixture in the pipe. This would have enabled them to adjust production technology, understand better what to make out of it and where to send it. They used to take a sample of raw material, send it to the laboratory and receive the results only 2 days after. We used a chromatograph which measured liquid gas phase. It took us three years to develop our final chromatograph.
- Who did you develop it with?
-The D.I. Mendeleev All-Russian Institute for Metrology (VNIIM) was our flagman. They knew how to decompose and measure blend compositions of mixtures and what is needed for it, and for our part we provided them with the equipment.
- How did “Gazprom” treat your results at the beginning?
- They have a standard phrase: “Ok, try it on independent companies and then come to us”
- There are a lot of engineering companies in Russia. Why are you better than others?
- We never lose heart. It is very important, because sometimes it seems that you come to a dead end.
- What is your last year revenue?
- Our revenue was 4,1 billion rubles.
- What is your profitability?
- Around 20 per cent.
“A MALAYSIAN SAT THERE LOOKING BLANK AND DID NOTHING”
- Does your impressive revenue consist of “Gazprom” orders?
- “Gazprom” is one of our clients, “Novatek”, “Lukoil” and “Rosneft” are no less important for us. We work all over Russia. We have even restored the destroyed during the war oil refinery plant in Bosnia and Herzegovina. Now we develop good relations with “Tatneft” thanks to Rustam Nurgalievich. I was invited to the board of directors of OJSC “Tatneftekhiminvest-holding” to tell about my company. The idea of the invitation was the following: “we have brought you up, we have given you higher education, an opportunity to develop at the Technopark, and now you work with “Gazprom”, yet not with “Tatneft”. It was last April. Today we have big projects with “Tatneft”, “TAIF-NK” and “Kazanorgsintez”.
- What projects are you developing with “Tatneft”?
- We mainly work on fire protection, safety instrumental systems, and flowmeters for “Taneko”. Moreover, we work for them as experts in automation. One “Taneko” installment has ten various systems and each of them has 40 thousand parameters. Such technological industries require creation of distributed control systems and development of information flows.
- What sum are we talking about?
-The total project cost is hundreds of millions of rubles, and this is just design work, yet we don’t know how many systems we will implement.
- What are you doing for “Kazanorgsintez”?
- Now there is a reconstruction. We audit pressure, temperature sensors, generally speaking, we accompany equipment. It is convenient for them to work with us as they lack specialists, and when we come, we check everything: chromatographs and all the equipment that has to be checked. Sometimes it becomes ridiculous. One day “Kazanorgsintez” rang us and explained their difficult situation: American specialists came to start out a compressor but could not do it. Can you imagine this? They developed it but could not turn it on. We came to the site. We saw a Malaysian sitting there looking blank and doing nothing. He said he received several hundred dollars per day and was to stay there. People did not know what to do with him (laughs). And the problem could be solved only by those who had already launched several systems of this type. We resolved the problem. Then we received another call from “Kazanorgsintez”, they said: “We paid the Americans several thousand dollars, you came and started it out within 5 minutes and didn’t charge us anything”. This is the very essence of partnership. We do not need money, let us work – this is our motto.
“EARNING MILLIONS, WHY WOULD ONE NEED KICKBACKS?”
- What are the specifics of work with national large companies compared to the Tatarstan ones.
- We receive the information mainly from official websites of potential customers. As for Russian large companies such as “Lukoil”, “Rosneft” and “Gazprom” all the information periodically appears in national press, and you can see everything. The situation in our republic is very interesting, though year by year the information becomes more available. By the way, we are accredited by “Transneft”, though this is the most closed company. It appeared thanks to the pipes laid by the military men in the 50-60s. There is a striking order in everything there. When we disrupted the delivery time by a day, we were put penalties in the amount of 24 000 rubles. Then I realized that this company could teach order anyone.
- What is the situation regarding kickbacks and the level of corruption in your industry?
- For example, we came to the “Northgas” and started working with the owner. What kickbacks to the owner? All the owner wants is that the gas is measured correctly. In “Gazprom” the decisions are made on the level of general directors, and they are interested in final result. Why would a general director who earns millions need kickbacks? May be there is corruption somewhere, but regarding our issues the decisions are made on the level of directors. To be honest, until now we have avoided all these issues, and I am proud of it. We were created in the Technopark “Idea”; and this is a project of the Russian Federation and the brainchild of the Tatarstan president, everyone knows about our origin.
Also, I would like to say that I have absolutely no pull. When I came to the Technopark, the president remembered me. I would like to thank him for his support of a talented company, as we are such company.
“A PROJECT IN THE FAR NORTH”
- What is the average price for engineering services of the GKS?
- It is difficult to say; though several times we were in the situation when our prices were above the average market price, customers chose us, as we set decent prices for the works we carried out. If the price is low, then it is damping.
- Are there many damping companies?
- Yes, there are a lot of them. Their task is not to do their job, but to receive money. Such companies are noticeable in tenders. A customer understands this and tries to work with proven people. However, there are plenty of cases when such companies receive advance payments and disappear.
-What is your largest project? What was the cost of that project and what did you do?
- Currently we are carrying out an order of a gas company in the far north; the project cost is around a billion.
“TWO REASONS TO CHOOSE BUGULMA”
- When did GKS set a production site in Bugulma? Why did you choose Bugulma?
- In 2007 we bought a garage and workshops there; the total territory was 500 square meters. There we started to assemble our first automated metering systems for hydrocarbons for oil and gas companies.
We had two reasons to choose Bugulma. Firstly, we bought the building for a penny. Secondly, there is a college there. In Kazan there are no colleges that produce good specialists in the area of mechanical assembly and welding. Moreover, when “Transneft” moved to Kazan, many workers in Bugulma were left out of work. And as we offer good salary, these specialists have come to us.
- How much did you invest in production site?
- Initially we invested internal funds in the amount of around 5 millions. Now I am proud that we do not use credit, though we have open credit lines in “Sberbank”, “VTB” and “Alfa-Bank”.
- When did Bugulma start up its own factory?
- Yes, the factory started operation a year later in 2008. Our volume of work no longer let us fit in the existing site. We sold the storehouse and bought a building, the total territory of which made 2,5 thousand square meters, and we called it workshop No1. In paper it was a half ruined Hungarian onion storage that is food storage. In the middle of the workshop there was an underslung crane that suited well for our metering systems. We spent around 50 millions on equipment and reconstruction works.
In 2011 we realized we no longer fit in our facilities, and we built the workshop No
“WE BUY EQUIPMENT ABROAD, RUSSIA DOES NOT PRODUCE IT”
- What is an overall production capacity?
- Now we account for 12 thousand square meters of production area. Soon we increase the volume and space by 1,5 times, and increase the turnover. On average, we produce three products per month, which means three systems, which were shipped to our customers in 96 euro trailers last year.
- Also, you have a production site in Kazan. Do you plan to close it due to active development in Bugulma?
- No, the production sites are of different areas of specialization. The Kazan production site develops software, and in Bugulma the sites create design documents, carry out welding and assembly of systems.
- What is the volume of production in Kazan?
- The volume depends on orders and their information capacity. On average, we produce up to 60 control and power cabinets.
- What equipment do you use in production?
- We buy machine tool stations abroad, as Russia does not produce them. But we use Russian lathe tool DIP 500 to process flanges. Perhaps, it is about 100 years old and weights 6-8 tons. We do not buy such equipment abroad.
- Who are your equipment suppliers?
- We have become official partners of Emerson Process Management, Siemens AG, Yokogawa Electric, Schneider Electric and others.
SOLAR BATTERIES ABOVE THE NORTH POLAR CIRCLE
- What are your plans for further development?
- Now we have started working on protection of boosting compressor stations from liquid fluid, mud and dust accumulating in main pipes. We install separators upstream of filter compressors. We have selected filtering elements and created design documents. Also, we have started working on independent power supply wind-powered generators, solar batteries, and we have interesting ideas regarding environmental monitoring of industrial wastes.
- Where do you plan to apply all this?
- At “Kazanorgsintez” and “Nizhnekamskneftekhim”. We have offered it to “Tatneft”. We have tested it and now we are implementing it successfully.
- Are you also planning to start using solar batteries?
- Yes. Actually, the generator of ideas was “Gazprom” in 1998. The company “Gazprom dobycha Yamburg” had 2-4 wells above the North polar circle, but to lay electric cables to power maximum 2-3 appliances would have cost 1,5 billion. So, they needed independent power supply. Ten years later “Novatek” faced with the same issue. They have Evo-Yakhinskoe field, where there are
NO LOSSES DURING THE CRISIS
- How did you survive the crisis? Did you suffer any losses?
- We do not buy and sell, that is why we had no losses. If some projects were frozen, we had to maintain the existing fields and systems, otherwise they would have collapsed.
Talking of implementation of new projects, of course, we experienced the drawdown. Our financial experts made a so called acceleration curve. In 2008 there was a straight line, no development, we just maintained the systems. In 2009 the curve went upwards.
- Did your customers try to pay less due to the crisis?
- All large companies tried it: they sent long letters requesting additional discounts. But we were within legal framework: we won tenders, which already included discounts.
WE PREPARE SPECIALISTS FOR OURSELVES
- You have plenty of vacant positions. Do you experience lack of specialists?
- Of course. It is always difficult to find experts in our area that is why we take many students for practice. Some of them stay with us and we continue teaching them, we prepare specialists for ourselves.
- How many people work for the GKS?
- There are approximately 150 people in Bugulma, the total number is around 350. We also have an office in Moscow and an affiliated enterprise in Kazakhstan that represents us.
- What is the average salary of your employees?
- The average is around 60 thousand rubles.
“THE MARKET BECOMES CIVILIZED”
- Assess your competitive environment. Who are you competing with?
- The environment is very healthy. The market becomes civilized. Now you don’t face with such situation when the winner of the tender is a company that has just a notebook and a pen. Now the left companies are those ones that produce something. It is pleasant to compete with them, because they also have new ideas.
- Who are your direct competitors now in Tatarstan and in Russia?
- In Tatarstan they are “Incosystem”, KER-Holding, a huge company that accounts 4 thousand employees. Our equipment suppliers such as Emerson, Honeywell want to work with us in the market as well. They develop engineering structures. We have to compete with Yokogawa as well.
- You left “Incosystem” with a part of your team, and some time later a part of your employees created PLC GROUP. Are your former employees your competitors now? What is their position in the market?
- We would call them competitors with a great reserve. They are clever guys, but perhaps, they left the wrong time. If they had done it later, once they had got more experience and connections, it would have been better. But I do not in any way judge them, as I did the same once myself.
- How would you assess the market of services for oil and gas industry in general? What is the dynamics of its development? Where is it going?
- Regarding automation, it is developing very rapidly. In Germany people close the factory at night and go home, but production does not stop, everything is automated. If yesterday our oil companies measured the volume of oil extraction in transporters, today this is impossible. There are sealed closed metering systems everywhere.
Now people talk about the necessity of automated machining. For example, the temperature is -70 around the Gulf of Ob. There metal crumbles outdoors, and the system has to be designed in such a way, that as few people as possible is to be around the installation. This prompts development.
-What problematic areas in oil and gas industry do you see?
- Again, rapid development does not allow proper placement of objects in operation. Sometimes we do not have a project yet, but the company has started construction already. Hurry and fuss are just killing. Other times a flowmeter is needed for tomorrow, whiles we need to work on it for six months.
“I NEED A WIFE, NOT A BUSINESS WOMAN”
- Could you tell us, please, about your family. What do you wife and children do?
- I have four children. The eldest son Artur is finishing the fourth year at Kazan Federal University. He studies radio electronics, the area of our specialization. Also, I have two daughters: Azalia goes to school, she is in the 7th form. And Liliya attends a kindergarten. The youngest son Amir will be 2 years old.
- Do you put hopes on your eldest son regarding GKS?
- Can you really understand young people? I did not understand myself when I was 20, so he does not understand himself either. Now he is working as a system administrator at KFU. If he wants, he will come here, if he doesn’t I will help him to start something else. This is not the point, the point is that he is a good guy.
- What does your wife do?
- My wife Gulfia is a housewife. I have dismissed her from work. Coming home, I want to see her at home. She is an active person and she used to be fully involved in work. She is a Math teacher, she graduated from Kazan Pedagogical University, and used to work at school, then in a construction company and sell real estate. I stopped it all, because I need a wife, not a business woman. On the one hand, it is selfish of me, but I am comfortable this way, I am such a Tatar. But periodically I give her work she likes. For example, we have built a house in a village, we are going to decorate it - she does it very well. At some point this village disappeared, and we have started to regenerate it.
- How do you invest in development?
- I have had a dream for a long time: settle in a village close to the place where parents grew up. I am from Kazan, whiles my parents are from a village in Visokogorskiy district. Apparently, my soul likes a village. I used to spend every summer in a village when I was a child, now I want to be there. You go outside there and you see the stars, you go outside here, and you see no stars. So, I went to the head of the district to ask for a piece of land. He said: “Ok, then you are to invest in the died farm”. We did not deceive each other. I have a big house now, and people started to come back to the village. We haven’t finished construction of the road yet,
“WHEN THERE WAS UNCONTROLLED CRIME ON THE STREETS, I STUDIED”
- Your school years were in the 1990s. What were they like for you? What did you learn from that period?
- In the 1990 I finished school and entered the university. When there was uncontrolled crime on the streets, I studied. When I was a student, we never got involved in any affairs, we were not interested in it: we studied and enjoyed life. When I was doing my second year at the university, my son was born and I started to work as a watchman in a leather haberdashery factory in the Kirovskiy district. Then I was not up to it.
- Are you from a large family?
- We are three brothers. I am the middle one.
- How did you manage to pass by gangs when you were at school?
- You cannot pass it by. You walk to school and they catch you on the way. You fight and have your nose broken. I was tall, and not everyone dared to fight with me (laughs). I grew up in the Kirovkiy district of Kazan, where many gangs intersected. My parents are wise people; I started to do sports when I was in the fifth form at school. I played hockey, water polo, did swimming and then I started training on judo. When at school, I even won a prize in Kazan championship. When I was in the 9th form, bodybuilding came into fashion. Everyone started to build muscles and I started it as well in one of the first clubs in Kazan named after Kraevskiy opened by Andrey Bystrov.
- How do you spend your free time? Do you have a hobby?
- I like to spend my free time at home, but it happens rather seldom. I don’t know if it is a hobby, but I like sauna.
- Our traditional question: what are 3 suggestions for successful business?
- Luck, stamina and hard work. Luck is half of success.
