A Perspective on Venturing Abroad

'On-the-Ground Advice'

You've heard it all before: The deep water Gulf of Mexico requires deep pockets, the United States is all drilled up, what's left behind is too small to be economical, yada, yada, yada.

Maybe, maybe not -- but don't look for any going-out-of-business signs just yet.

The obvious domestic elephants might be gone, but there are plenty of opportunities to keep the oil finders busy -- particularly if they're willing to forsake the comforts of home and stake their claims overseas.

Indeed, international ventures are becoming commonplace for an increasing number of both small and large companies, thanks to the dazzling array of available technical tools that are just as applicable in, say, West Africa as in the United States.

The domestic oil and gas industry has continuously honed E&P technology over the years to be able to explore and drill in evermore hostile environments and to economically produce the ensuing discoveries.

Initially, the technical tools were essentially under lock and key within the major companies. But when these large firms began shedding their R&D labs in the 1980s, the service companies stepped in to take up the threatened slack, quickly moving to the forefront in technology innovation.

As a result, sophisticated technology tools became available to smaller companies for the first time, liberating them from the need to operate only on familiar territory because they know the geology and accompanying quirks. Access to technology opened up the whole world as an exploratory arena for most any size company with astute management.

Somewhat ironically, however, the oil finders who venture confidently into foreign lands to ply their trade learn quickly that technology know-how is but a piece of a very big pie.

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You've heard it all before: The deep water Gulf of Mexico requires deep pockets, the United States is all drilled up, what's left behind is too small to be economical, yada, yada, yada.

Maybe, maybe not -- but don't look for any going-out-of-business signs just yet.

The obvious domestic elephants might be gone, but there are plenty of opportunities to keep the oil finders busy -- particularly if they're willing to forsake the comforts of home and stake their claims overseas.

Indeed, international ventures are becoming commonplace for an increasing number of both small and large companies, thanks to the dazzling array of available technical tools that are just as applicable in, say, West Africa as in the United States.

The domestic oil and gas industry has continuously honed E&P technology over the years to be able to explore and drill in evermore hostile environments and to economically produce the ensuing discoveries.

Initially, the technical tools were essentially under lock and key within the major companies. But when these large firms began shedding their R&D labs in the 1980s, the service companies stepped in to take up the threatened slack, quickly moving to the forefront in technology innovation.

As a result, sophisticated technology tools became available to smaller companies for the first time, liberating them from the need to operate only on familiar territory because they know the geology and accompanying quirks. Access to technology opened up the whole world as an exploratory arena for most any size company with astute management.

Somewhat ironically, however, the oil finders who venture confidently into foreign lands to ply their trade learn quickly that technology know-how is but a piece of a very big pie.

This is not just a matter of different geography, but a whole new world fraught with unknowns of varying magnitude.

Success may await the hardy souls who are patient and adaptable, but foreign shores have their unique laws, business practices and relationships that, if ignored, can just about guarantee economic loss, failure of a venture and perhaps worse.

Requirements for a successful international venture run the gamut from carrying off complex contract negotiations to understanding, respecting and abiding by the nuances of the local culture.

Without any tried and true guidelines to help navigate these uncharted avenues, the E&P community has had to rely essentially on "street smarts" just to get a good foothold in a selected international locale, much less pull off an economically successful venture from start to finish.

But help is now available.

A Stimulating Offer

AAPG recently published a hefty tome to be used as a ready reference for information regarding the business aspects of international E&P ventures. It likely will prove invaluable to oil and gas companies hoping to move out of the domestic arena and into new frontiers.

International Oil and Gas Ventures -- A Business Perspective was the brainchild of the book's three editors: George Kronman, a senior managing consultant at Landmark Graphics; Don Felio, a consultant in international business and petroleum ventures; and Thomas O'Connor, a petroleum management advisor in the private sector.

Over time, each member of the group had gradually moved away from his technical background in geology to become involved in the business side of the international E&P arena. As a result, they all had the opportunity to view a slew of non-technical failures -- as well as successes -- firsthand.

"The idea for the volume was conceived during a discussion about the increasing focus of human resources into international arenas," Kronman said, "and we concluded there was a need for a reference work where the numerous non-technical issues facing the international E&P community could be addressed.

"With the trend of declining reserves and production in North America, Canada and Western Europe, the new big fields are going to be found overseas, but you must understand how to conduct business there," he continued.

"The objective of the book is to provide valid, on-the-ground advice on how to approach the business side of the international E&P sector of the world petroleum industry.

"We think the book will stimulate thinking and challenge many existing ideas."

Wanted: Perceptive Geologists

Some of the non-technical issues that can override even the best of technology applications to undermine an international project, according to Kronman, include:

  • Inadequate contract negotiations.
  • Lack of understanding and appreciation of local business practices and social culture.
  • Failure to understand and manage the values and requirements of host governments and individuals from other cultures.
  • Not properly executing operational plans.

Indeed, a perusal of the book's content quickly reveals that technology is not an issue here. Instead, the critical themes are:

  • Relationships.
  • Cultural understanding.
  • Business understanding -- fiscal systems, understanding contracts.
  • Environmental and operational issues.
  • Managing resources in terms of money and people.

Failure to address any of these points will cause an international project to falter or possibly even fail, according to Kronman.

The book's international scope is underscored by the inclusion of myriad viewpoints and advice from potential host governments and other overseas professionals as well, addressing such questions as:

How do these potential host governments perceive the new industrialists they meet during their negotiations?

How do the expectations and aspirations of the host governments mesh with the economic expectations of companies new to the international exploration and production scene?

"We all three leveraged our many contacts, and the people who contributed to the book were industry experts and experienced leaders who poured in a lot of expertise," Kronman said, "and we wound up with world-class articles.

"The volume is not a "how-to-do-it" manual but a series of closely-linked observations by people who have lived with the issues they describe," he continued. "Our objective has been to learn from both sides of the negotiating table, and the papers are about people first, nationalities second and companies third -- they are about relationships."

The articles represent a cross-section of the E&P industry, with editorial contributions from attorneys, managers, geologists, major and independent companies, oil field service firms, academia, national oil companies and consultants, among others.

A section of case studies yields insight on the good and the bad encountered on actual projects.

"We see this book as having universal appeal to all concerned," Kronman emphasized, "majors and independents, national oil companies, government and banking people and even the ancillary industries that support E&P."


The book is available to members for $54.95 through the AAPG Bookstore.