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
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
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.
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."
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
- Cultural understanding.
- Business understanding -- fiscal systems, understanding
- 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."
book is available to members for $54.95 through the AAPG