Interview with Short Allerton

Introduction

On the 10th of Sept 2015 I caught up with one of my earliest mentors, Short Allerton. Short is well known in the Oil and Gas industry. For those who have not met him yet I highly recommend you find a way to. Among Short’s many achievements he was BP Exploration’s Planning Manager and their Chief Geophysicist in the 1980’s, he was a co-founder of Dragon Oil and has been an independent advisor to service companies and the boards of various VC backed ventures. He is one of the most inventive people I have had the pleasure to know and he has no fear of telling it like he sees it. I sought out his opinion on what we can do to fix the North Sea basin and below are some of his thoughts.

Gareth: So Short, you’ve forgotten more about the North Sea than most people have ever known. What do you think about my stance that draining the North Sea should be a priority for the nation?

Short: Your article caused me to recall when I first went to work in Russia in the mid-90s for Schlumberger. The oil companies I met had no word for ‘profit’. They only talked about ‘revenue’. After all, who needs to be concerned that producing 100 barrels of fluid to extract 1 barrel of oil was ‘unprofitable’ if the barrel of oil could generate ‘revenue’, and that was what the oil men were measured on, while the means of production (pumps, electricity, separation) was just a ‘cost’ to the centralised ‘command-and-control’ system. You must remember that, to achieve your aim, commercial realities must be met.

Gareth: OK, I understand that we need to be commercial about it. Although we must be careful to consider a national, rather than company, accounting point of view. What do you think is necessary to do this?

Short: I think both perspectives need to be respected. If your vision is to find ‘smart’ ways to extract more hydrocarbons at these low oil prices, it will require more than new technologies. To be commercial will mean more than squeezing the profits of service companies. You seem to imply in your article that the biggest gains (both in production and thus in revenue, even profit) will come from savings made by owners of assets working in a different way to take advantage of each other’s infrastructure. I think you are probably right.

If you are trying to generate momentum behind interested oil companies working together to come up with win-win schemes through cooperation, then I can admire your initiative.

Gareth: OK, thank you for your support. What do you think the keys to success will be?

Short: To do this will need someone with a near total ‘overview’ of what those assets are and how they might work together.

In my experience, most oil company personnel are focused on their own assets, and it’s rare to come across anyone with the wider perspective. It was true back in 1985 and I’m pretty sure it is now. Perhaps the best people to be in that position are the O&G experts or the industry advisers to the Government. Perhaps this is the role of DECC or even the OGA? I know they publish some data on their website about the infrastructure installed, but I am not sure how useful this information is.

Gareth: So, what you are suggesting is what I’ve been taught to call an information gap. You’ve been in this industry for longer than most, do you have any experience in a situation where an overview of information was valuable?

Short: 30 years ago, I happened to be in a position to grasp a reasonably complete picture of the North Sea oil business. I was able to use that grasp to ‘map out’ a future timing of when the various gas discoveries industry-wide would come on stream, based on an analysis of the gas demand growth in the UK, the impact of Norwegian sales to the UK, the decline rate of existing producers, the price per therm to bring on new discoveries etc, etc, etc. This analysis shaped our exploration and production strategy in the North Sea for the next several years.

I was able to do this because I was in charge at the time of the subsurface exploitation of 25 BP fields spread throughout the Southern, Central and Northern North Sea and Western Margins and I had a great team working with me. I’m sure our analysis did not work out as I predicted – that isn’t my point. However, it gave us a ‘direction’ – when and how to invest, and where (and why). I had an overview of the data and could see the connections. I am sure that with all the small discoveries and interdependent satellite sub-sea developments it’s much more complicated now.

Gareth: So what do you think it will take to “make it happen”?

Short: I have the feeling that to get this off the ground, someone has to come up with a ‘killer app’ – a scheme that brings the assets of two companies together in a win-win solution. Once it’s been shown that it can work, hopefully more of the rest will be tempted to follow – or at least to talk, listen and think – and see the potential.

Infrastructure sharing in troubled times

I didn’t go to OE this year. I don’t think I was alone. From the reports I’ve heard things were quite subdued, except there were many people looking for work, apparently we are approaching 70,000 lay-offs in the UK Oil and Gas industry since 2014. Reports in yesterday’s guardian suggest that there is still more job cuts to come. This report in CITY AM – shows how the perception in London is being shaped and the urgency of the situation is being lost. CITY AM quoted job losses of only 5,500, and for many of the casual money men down here, that is all they will read.

The oil price is low. I remember when it was less than 25% of the current price– this report from the independent reminds us of $9 oil. In 1998 we also had the Asian currency crisis which started in 1997, what could a 75% drop in price do? With the recent wobbles in the China market, and talk of the commodity super cycle that wasn’t in the FT, is market perception changing, and perhaps there is further to fall?

I was pleased to see that Andy Samuel was quoted welcoming the efficiency task force – but I fear that these cross-company committees will be slow and ponderous. I also fear that operators will see this as a way to try to squeeze supplier prices and hurt the value chain. In my opinion, urgent structural change will be required to enable us to extract the resources that lie under the North Sea. Urgent because we need to maintain the infrastructure that will enable the extraction. This is a national opportunity and one that requires a national regulated response.

Andy was quoted as saying “The ETF is taking a three pronged approach to drive greater efficiency under the themes: Business Process; Standardisation; and Cooperation, Culture and Behaviours.” – Well frankly I don’t think this will be enough. I think the OGA must act, and use the powers it has (or obtain the ones it needs) to enable this. Of course, action like this is for the brave. Look at the trouble the control of access tariffs had in Norway, with investors suing the state. There must be questions about this with the recent private equity stakes being taken in CATS , FUKA and SIRGE – in one way this simplifies the access rights and can serve the needs of the customer better, but in another it centralises power in a way that only quick regulatory intervention can balance.

Resource nationalism

A colleague whose opinion I respect, had an interesting reaction to my recent article “Can we get the last drop“. He said that perhaps I was being rather nationalistic, perhaps you agree?

Unlike the points made in this Forbes magazine article, when I say that I don’t want to enrich other countries I don’t mean we should act like Venezuela and nationalise assets. I mean that I want any wealth created by the extraction of the resource to be available in this country (as private, taxable profit). I prefer not to see national treasure being exported to other countries in return for a product that we already have. Further, I think if we don’t act soon we won’t be able to act at all.

When I reflected further I realised that every country where I had worked except the UK and main land Europe, there was a general acceptance that energy and resource policy was of national interest. Even the USA has trade policies that govern the export and import of crude oil and refined fuels. Of course, countries like Saudi Arabia and Kuwait have export policies that not only move the commodity price but also are used to generate political power by choosing which countries can receive exports and where downstream investments will be made.

I am no politician nor would I claim to be a student of history. I am not an economist. I am an engineer and a business advisor. To me it is obvious that now we have an opportunity to extract resources from our reservoirs. There is a small time-window before the necessary supporting infrastructure is removed. As a country and an industry we are fiddling while Rome burns. If we do not act quickly then narrowly defined considerations will result in our opportunity being forever lost. I don’t think this is right.

We need to find a way to extract the last drops. Do it in a way that respects commercial reality while protecting the environment. If we don’t then we’ll end up exporting more of our treasure than we need to and all the people who rely on (or contribute to) our state treasury will be poorer.

It’s a challenge but I am sure we’re up to it. What do you think?

(Diagram from slideshare.net with thanks to AngloAmerican reference: http://www.slideshare.net/angloamerican/anglo-american-resource-nationalism )

Can we get the last drop?

North Sea Oil and Gas is the property of the people from the countries that surround it – UK, Norway, Denmark, Holland, Germany. As a citizen of the UK I don’t want any more of my country’s wealth to be transferred to the citizens of other countries than is necessary. I think that this means extracting every last drop from this resource that we economically can.

There seems to be a number of issues that will stop this from happening. I hear many reasons that might account for it including:

  • High cost of production in the basin;
  • Inability for companies to co-operate on problem solving;
  • Individual companies optimising for their goals;
  • Lack of access to shared infrastructure;
  • Environmental impact; and
  • Decommissioning liabilities

I sense that if action is not taken soon, access will be lost to critical shared infrastructure. Should we get the last drops out of the North Sea? What do we need to do to make this happen?

The six rules of networking

Moderne verbindungen

Networking – how business is done

Everywhere I look I hear more and more about networks. Social networks, business networks, networking clubs, networking evenings, etc. etc. ad. Nauseum.

Networking is how real business gets going, how deals get done, how results are achieved. Done properly it is both efficient and effective. It is no coincidence that the most successful businesses and most powerful people turn up for important networking opportunities.

Many definitions of networking rely on collecting contact details from lots and lots of people. I feel this is wrong.

Networking means knowing who’s doing what, what they want to achieve, how to help and – importantly – having their permission to get involved. Likewise a good network also means people knowing what you want and them getting involved to help where they can. Effective networking is about helping each other to succeed. I believe that If you can do this then the universe will provide opportunities for you to create your own success.

Six Rules of Networking

1. Love your contacts

I don’t mean take an unholy fascination in your address book (though bad data should be avoided!). What I mean is to treat your contact list as if the people on it are your oldest and dearest friends. You must truly want the best for these people and gladly do what you can to help. If you can’t like someone on the list and you don’t want them to succeed, frankly, they are not in your network. Make that distinction and look on members of your network with generosity and love.

2. Find and respect boundaries

Respecting boundaries should be obvious. If someone says – don’t call me at home, or don’t use my mobile, or plain please don’t contact me again. Then respect it. Nothing will damage your reputation more than being known as an unwelcome persistent caller.

Likewise establishing where the boundaries are is important. To find out where the boundaries are just ask. I used to be surprised about how willing people were to help once they had been asked for their permission. Be careful as many senior people have mechanisms to stop you contacting them in the first place (PA’s etc). These people cannot grant you permission – so try not to get blocked out before you’ve really found out.

3. Be generous, give without expectation

Networking is sometimes described in terms that imply a trading of favours – I’ll do this if you do that. This is not how it works. You must give help and information to your network without any expectation of return. The successes you create for others will build your reputation and will attract generosity. The reciprocal format of exchange is created automatically by cross-linking from network members and its effect builds over time, it is not a one-on-one trade.

4. Add value every time you meet

The quickest way to have permission withdrawn is to become a persistent caller who brings nothing of value.

When you plan to call or meet someone do your research before you go, put yourself in their shoes and think of ideas that might help them. Give them ideas away for free when you meet.

If you meet someone unexpectedly, make sure that as you catch up on news you ask what sort of help they would appreciate to help them get to their goals. Then go find ways to provide it, don’t forget and follow-up quickly.

5. Don’t waste time (yours or theirs)

If you are building a network it will take time. Time is your only truly fixed resource. You cannot borrow it, or buy more of it. You only have around 2000 working hours a year, so make each one count.

Know how to help the member of your network and get there as efficiently as you can. Look to use group interactions (dinners etc.) where you can achieve increased impact for you and your network within the time allocated.

If a meeting is scheduled for 30 mins and you’re done in 20, then politely find a way to leave and give your contact some time back in their day, they will thank you for it.

6. Build network power

If the intent of your networking efforts is to create business value for members it needs powerful people within it. Power comes from the ability to marshal resources (through ownership, hierarchy, influence, reputation, etc.). The more powerful your network the more resources you can influence to support your agenda.

Spend time thinking and planning to help people with more (or different) power than you have. Be generous with your time to those less powerful than you, but effective (and therefore soon to be powerful people) are the ones that approach and plan to help you. Like you they should invest hours in people more powerful than themselves. It is not in your interests to invest your time to help those less powerful than you – therefore it is their duty to make the moves.

Spend time thinking how to make people in your network more powerful. They should appreciate the effort you are making, and your network will become more powerful as a result.

Conclusion

Networking is an important skill and with more business being done through collaboration it will become increasingly so. It is an activity that you can allocate time to and it’s an activity that you can monitor the success of. Build a good network and opportunities will come to you. You build a good network by giving generously to people that matter.