Fracking Idiots

Via Tim Worstall, The Daily Telegraph dishes up some quality journalism on the subject of fracking:

Plans are being made for fracking to take place under Sherwood Forest where an ancient oak stands where according to legend Robin Hood and his merry men rested.

Ineos, one of the world’s biggest chemicals company, is poised to start looking for gas under Sherwood Forest, Nottinghamshire, in a move which could lead to it seeking permission to frack the area.

So are plans being made to start fracking, or is Ineos looking for gas?  Which is it?

Fracking is the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside.

The Government has committed to fast tracking permissions for exploratory work amid forecasts that trillions of cubic feet of shale gas may be recoverable from underneath parts of the UK.

Fracking is not the same as exploratory work, which takes the form (at this stage) of seismic surveys which do not involve drilling.

Documents show Ineos – via their land surveyors, Fisher German – have been in correspondence with the Forestry Commission since August 2016, regarding access to their land.

Access in order to drill?  No.

If these plans progress, Ineos’ seismic surveys would pass within a few hundred yards of the Major Oak, a 1,000-year-old tree near the village of Edwinstowe.

Pass within?  These people have no idea what form a seismic survey takes, do they?

According to local folklore, it was Robin Hood’s shelter where he and his merry men slept and hid from the Sheriff of Nottingham in the 15th century.

In a 2002 survey, it was voted “Britain’s favourite tree”.

Information The Daily Telegraph considers more important to impart to its readers than the differences between carrying out a seismic survey and drilling a well.

Guy Shrubsole, a Friends of the Earth campaigner, said: “Is nothing sacred? By hunting for shale gas in Sherwood Forest, Ineos is sticking two fingers up at England’s green heritage, all in the pursuit of profit.

“The public wants to protect their English countryside and prefers renewable energy, not dirty shale gas, which will only add to climate change.”

And on the last day of 2016 a self-appointed expert declared what the public wanted, a practice which hitherto seemed doomed following high-level episodes of catastrophic wrongness regarding Brexit and Donald Trump.

Ineos confirmed that it was looking to start work in Sherwood Forest but insisted that great care would be taken to protect the Major Oak.

Tom Pickering, Ineos’s Shale operations director, said: “Any decision to position a well site will take into account environmental features such as the Major Oak and the planning process would also consider those issues.”

No decision on fracking under Sherwood Forest had yet been taken, he said, adding that Ineos would “undertake an extensive exploratory programme of seismic data acquisition across our wider licence area to better understand the subsurface geology including the fracture systems”.

Asked how Ineos would protect the trees of Sherwood Forest, Mr Pickering added: “When we do drill a vertical ‘coring’ well in the area, there are many general and specific environmental protections in place and we will of course abide by them.”

There was a time when journalists asked difficult questions that forced companies to reveal information that had hitherto been kept hidden.  Nowadays, journalists ask questions which can be answered by a cursory ready of a company’s website.

Share

More Ruling by Decree from Barack Obama

Apparently Barack Obama doesn’t think America resembles a banana republic quite enough, and is keen to do something about that before he leaves office.  From the BBC:

Outgoing US President Barack Obama has permanently banned offshore oil and gas drilling in the “vast majority” of US-owned northern waters.

Permanently?  Just like that?

Mr Obama designated areas in the Arctic and Atlantic oceans as “indefinitely off limits” to future leasing.

The move is widely seen as an attempt to protect the region before Mr Obama leaves office in January.

Apparently eight years in office wasn’t long enough.

Supporters of president-elect Donald Trump could find it difficult to reverse the decision.

I imagine Trump’s supporters would find reversing Obama’s decisions difficult, yes.  Trump himself?  Maybe not so much.

Canada also committed to a similar measure in its own Arctic waters, in a joint announcement with Washington.

The White House said the decision was for “a strong, sustainable and viable Arctic economy and ecosystem.” It cited native cultural needs, wildlife concerns, and the “vulnerability” of the region to oil spills as some of the reasons for the ban.

Counterarguments such as jobs and energy independence from the rapidly imploding Middle East were presumably not considered.

But while Canada will review the move every five years, the White House insists Mr Obama’s declaration is permanent.

Read that again – “Mr Obama’s declaration is permament” – and remind yourself this is the USA and not Venezuela or Zimbabwe.

The decision relies on a 1953 law which allows the president to ban leasing of offshore resources indefinitely.

Really?  Which law?  The BBC doesn’t tell us, I suspect because this law allows for no such thing.

During the election campaign, Donald Trump said he would take advantage of existing US oil reserves, prompting concern from environmental groups.

But supporters have already suggested that any attempt to reverse the “permanent” decision outlined by the law would be open to a legal challenge.

Leave aside the idiotic belief that an administration can bind its successors and that a mechanism exists which allows Obama to declare something into law but doesn’t allow the next president to reverse it.  Let’s look at the fact that these idiots never learn.  If indeed Obama is allowed to make laws simply by issuing decrees from his office that completely bypass Congress and cannot be reversed, then Donald Trump is going to avail himself of those exact same powers in just over a month’s time, isn’t he?  Is that what everyone wants?

Reacting to the Arctic declaration, Friends of the Earth said: “No president has ever rescinded a previous president’s permanent withdrawal of offshore areas from oil and gas development.

That’s probably because no former president has been idiotic enough to do such a thing via last-minute declaration as he’s packing his bags to leave.  But I’m glad the clowns at Friends of the Earth understand the concept of precedent: they might find Trump is using this word a lot soon suffixed with the phrase “set by Obama”.

“If Donald Trump tries to reverse President Obama’s withdrawals, he will find himself in court.”

In which court?  On what charges?  Perhaps the BBC could have asked Friends of the Earth such basic questions.

However, the American Petroleum Institute said “there is no such thing as a permanent ban,” and that it hoped Mr Trump’s administration would simply reverse the decision.

Ah, finally somebody sensible.

Oil firms will still want to explore for further profits, though.

And there was me thinking oil companies explored for reserves.  Such high quality journalism is what Brits are forced to pay £3.5bn a year for.

And the next secretary of state, Exxon’s Rex Tillerson, may offer the industry a route round the ban by paving the way to an Arctic drilling deal with Russia.

What garbled rubbish is this?  Obama’s declaration – assuming it is worth anything – concerns US arctic waters.  Drilling in non-US waters is no more “getting around the ban” than drinking in a bar in Paris is “getting around” the Saudi ban on alcohol consumption.  And the “Arctic drilling deal” they refer to is an exploration pact between ExxonMobil and Rosneft, not “the industry” and “Russia”.

Very little oil drilling currently takes place in the Arctic region, as it is more expensive and difficult than other available options.

Well, yes.  It’s almost as if Obama’s declaration is mere posturing.

Share

Shock as World Learns Rex Tillerson is an Oil Company Executive!

This is amusing:

Leak reveals Rex Tillerson was director of Bahamas-based US-Russian oil firm

screams The Guardian.

Rex Tillerson, the businessman nominated by Donald Trump to be the next US secretary of state, was the long-time director of a US-Russian oil firm based in the tax haven of the Bahamas, leaked documents show.

Tillerson – the chief executive of ExxonMobil – became a director of the oil company’s Russian subsidiary, Exxon Neftegas, in 1998. His name – RW Tillerson – appears next to other officers who are based at Houston, Texas; Moscow; and Sakhalin, in Russia’s far east.

I’m not sure what the issue is here.  Presumably the dolts at The Guardian had never heard of ExxonNeftegas, unlike pretty much everyone else in the oil industry who pays attention, and thinks it is some sort of shady shell-company set up to launder Putin’s personal cash float, or something.  The reality is a lot less interesting: ExxonNeftegas is merely the consortium set up to operate the Sakhalin I project, as its website tells us:

Sakhalin-1 is comprised of Russian, Japanese, Indian and American participants and is operated by Exxon Neftegas Limited, a subsidiary of ExxonMobil — the world’s largest non-governmental oil and gas company.

Anyone who has spent time in Yuzhno-Sakhalinsk would have seen the ExxonNeftegas building on the corner of Prospekts Mira and Kommunistichesky, and they would have encountered lots of young Russians employed by the firm each of whom had a business card with the company name and Sakhalin-1 logo printed on it.  (They may also have encountered a Canadian with more air miles under her belt than Voyager 2.  Let’s see if she’s reading this.)  Secretive it is not.

Maybe The Guardian takes issue with the fact that the information regarding Tillerson’s directorship of ExxonNeftegas had to be leaked for them to find out.  And they would have a point, were ExxonMobil not silly enough to include such top-secret information on their corporate website:

But as The Guardian tells us:

Though there is nothing untoward about this directorship, it has not been reported before and is likely to raise fresh questions over Tillerson’s relationship with Russia ahead of a potentially stormy confirmation hearing by the US senate foreign relations committee.

There is nothing untoward about this directorship, but as Guardian journalists didn’t know about it then it’s a scandal worthy of a newspaper column.

ExxonMobil’s use of offshore regimes – while legal – may also jar with Trump’s avowal to put “America first”.

Fair point, but it might be a bit of a stretch to complain that ExxonMobil isn’t insisting its Russian operations are headquartered in the United States.  The company’s registration in the Bahamas is probably new information to most: I knew about it because I have signed contracts with ExxonNeftegas Limited and their corporate address is stated in them (along with a stipulation that any arbitration will be heard in the courts of New York).  The incorporation in the Bahamas may seem odd, but it is not unusual.

ExxonNeftegas’ counterpart in that corner of Russia is Sakhalin Energy Investment Company (SEIC), which is the operator of the Sakhalin II project.  SEIC is registered in Bermuda, probably for much the same reasons ExxonNeftegas is incorporated in the Bahamas.  SEIC has been majority owned by Gazprom, the government-owned gas company, since 2007.  If there was anything untoward in these consortia being registered outside the Russian Federation on balmy island tax havens, the Russian government would likely have done something about SEIC by now given they have had control of the company for the past 9 years.  That they haven’t suggests there is nothing illegal or improper going on.  As The Guardian reports:

[ExxonMobil] said the oil firm had incorporated some of its affiliates in the Bahamas because of “simplicity and predictability”.

“It is not done to reduce tax in the country where the company operates,” Exxon said. “Incorporation of a company in the Bahamas does not decrease ExxonMobil’s tax liability in the country where the entity generates its income.”

Indeed.  Only among Guardian readers is this a story.

Share

ExxonMobil is doomed, says the NYT

Exxon’s Next Chief Will Lead a Weakened Empire

The New York Times confidently tells us.

With Saudi Aramco hoping to take over as the world’s biggest listed oil group and rival Shell coming up fast, Exxon’s days as Big Oil’s unparalleled heavyweight are numbered.

Hmmm.  Let’s see the details of Saudi Aramco’s IPO and let it actually take place before we start writing off ExxonMobil, shall we?  Are the reserves up for sale, for instance?

And Shell?  On what measure are they catching up fast?  Sure, their purchase of BG for a vastly inflated $70bn makes them the largest gas player, but 2015 saw them make $1.94bn profit against revenues of $265bn whereas ExxonMobil made $16.2bn from revenues of $259.5bn.  ExxonMobil’s return on capital employed was 7.9%, Shell’s 1.9%.  Granted, Shell employs 93,000 people and ExxonMobil a mere 73,500 but only people who get their information from the New York Times would see that as a good thing.

Shell is a sprawling behemoth which still needs to undergo some serious restructuring, and doesn’t seem to have much of a strategy other than to become the world’s biggest oil company by biting off more than it can chew.  ExxonMobil, for all its size, remains a tightly-run ship.

The company’s market cap of around $380 billion is not much changed from a decade ago, and could soon be dwarfed by the state-owned Aramco, which analysts estimate could be worth up to $1 trillion if it goes ahead with an expected 2018 initial public offering.

Sure.  But Aramco is being forced into this IPO because despite sitting on top of the world’s largest oil reserves they are woefully short of working capital.  The privatised company might be larger than ExxonMobil, but we should remember that British Leyland was larger than Volkswagen.

Shell — now valued at more than $200 billion thanks to its 2015 acquisition of BG Group — may produce more barrels than Exxon by 2019.

Production is king?  What is this, 2012?  Perhaps the journos at the NYT have been left off the mailing list, but the majors stopped chasing production targets and switched to CAPEX reduction and profitability shortly after the oil price tanked in 2014.

Shell’s leader, Ben van Beurden, also wants to beat his larger rival in terms of total shareholder return.

Yes, we know Shell wants to “beat” ExxonMobil – that’s been their goal for years, although Lord knows why – but they’ve never been able to quite manage it.  What’s different now?

The good news for Mr. Woods is that Exxon still dominates in one key respect: return on average capital employed.

Over the last five years, Exxon’s return on that measure has bested Shell’s by nearly 7 percentage points on average. That is one imperial feature that will take time to erode.

Well yes, that is good news, isn’t it?  One is permitted to ask why the NYT is giving equal weight to the egotistical dreams of the Shell CEO versus ExxonMobil’s vastly superior financial performance.

Because those at the NYT are clueless and  don’t like ExxonMobil, that’s why.

Share

The Real Challenge Facing Rex Tillerson

There is much speculation as to whether Rex Tillerson will make a good Secretary of State in a Trump administration, much of it to do with his relationship with Russia.  Personally I think ExxonMobil’s dealings in Russia are of no concern, and if anything make him more suited to the job.  (For some good articles on this subject see this from Steve Coll, author of Private Empire: ExxonMobil and American Power; this post from Streetwise Professor; and these two posts from The Dilettante).

I think Tillerson will do very well on the world stage in front of what passes for global leaders these days, and will do a fine job of representing America’s interests abroad.  Where I think he might struggle is when he stops looking upwards and outwards and casts his eye downwards through the organisation he will inherit.

ExxonMobil is extremely well run by any standards, let alone those of the oil industry.  It is by far and away the standout supermajor, and the only one that appears to have considered the full business cycle in its long term plans.  They haven’t even had to shed many workers during the downturn because they weren’t overstaffed in the first place.  ExxonMobil has a reputation for efficiency which Tillerson inherited from Lee Raymond, his predecessor as CEO, and it is well deserved.

ExxonMobil has achieved this largely by putting in place a rigid corporate management system containing ultra-strict procedures which are adhered to universally by a workforce who is under no illusions as to what happens to those who breach them.  This can often border on paranoia: I once saw an ExxonMobil staffer go purple in the face and demand to know from where I obtained a certain document, which was actually one that was specifically written to inform outsiders of a particular ExxonMobil internal process.  Nevertheless he snatched it from me as if it were reservoir data, leading me to joke for several years afterwards that ExxonMobil employees don’t give out business cards because they consider them proprietary information.

Like those of all large organisations, ExxonMobil’s employees are expected to toe the corporate line at all times, and departure from the company way of doing things is not tolerated for long.  In return for their cooperation and loyalty, ExxonMobil staff enjoy generous salaries, perks, work conditions, and career opportunities.  It also helps greatly that the ExxonMobil way produces some quite outstanding results, which cannot be said for all corporations which insist on absolute obedience and compliance from its workforce.  I can think of some exceptions, but if you ever come into contact with ExxonMobil employees they nearly all fit the same mold: well presented, intelligent, and ready to explain things with a PowerPoint presentation.  They speak always with caution, and are extremely aware of the applicable corporate policies and they refer to them constantly.  The attraction of remaining an ExxonMobil employee is too great for anyone to deviate too far from the norm, and any revolutionaries won’t last long.  Naturally, and like all oil majors, ExxonMobil can afford to recruit the best graduates from the top technical, oil and gas, and mining schools in the country.

It is one thing managing a giant corporation full of ultra-obedient high-flyers whose loyalty is beyond question and who can be fired immediately for the slightest breach of a corporate policy or directive, but quite another to manage public sector workers who are heavily unionised and many of whom shunned the private sector because it looked too much like hard work.  I don’t know what public bodies fall under the Secretary of State, or what the equivalent is of the British Civil Service is in the United States, but you can be sure that whatever there is will be chock-full of vested interests, entrenched archaic work practices, troublemaking employees, appalling inefficiencies, treachery, disloyalty, back-stabbing, dishonesty, and laziness.  These will be organisations of a type that Rex Tillerson will have no experience being in charge of: when he says “jump” as ExxonMobil CEO his entire workforce leaps into the air in unison; in his new job, be probably has to go around waking people up first only to hear them telling him that Kerry let them sleep until lunchtime before they go home crying about racism.

Rex Tillerson looks like a good fit for Secretary of State, but his greatest challenges might not be Russia, Iran, and China.

Share

Another Nutjob in the Pipeline

Whenever the US gets involved in a conflict somewhere in the world there is always, always somebody on the American Right who will come out with some bizarre conspiracy theory involving a pipeline.  It’s always a pipeline.

Before 9/11 when the Taliban were running Afghanistan and blowing up statues of Buddha, the lunatics on the extremes of both Left and Right were saying that the US was supporting the Taliban because they wanted to build a pipeline through the country between Pakistan and, erm, somewhere.  They cited a report showing that Unocal, an American oil company now owned by Chevron, did once consider building a pipeline through Afghanistan but the project got nowhere near even the engineering phase.  They accepted without question, as these people often do, that US foreign policy is determined in part by medium-sized oil companies best known for gasoline retail.  Or at least it is when the Jews go for their lunch break.

Immediately following the American assault on the Taliban which removed them from power, the conspiracy theorists simply switched to claiming the reason for the attack was in order to build – you guessed it – this Unocal pipeline.  Oliver Kamm wrote a decent post covering this switch and the absurdity of it on his blog at the time, and it is worth reading.

I was reminded of this today when I was directed via another blog to this Twitter post:

It’s always about pipelines with these people.  They have this daft idea that pipelines are so valuable it is worth going to war just to build one.  How the US government is supposed to benefit from a pipeline, presumably carrying gas, from Qatar to Bulgaria(!) I don’t know.  Obviously whoever dreamed up this particular theory hasn’t heard much about LNG and the growing spot market, nor US shale gas.

You don’t need to be a fan of Obama or Clinton to find this level of political analysis from the American Right to be as stupid as anything the American Left can come up with.

Share

Should have seen it coming…

When he’s not abusing Sydney’s nouvelles riches ladies of leisure and snapping photos of Sydney’s sartorial disasters, The New Australian is fond of pointing out two things:

1. Like Brits, Australians have bought into the idea that property is a guaranteed, one-way bet to wealth; and

2. Australia has not experienced a recession in the last two generations, and is therefore going to get a colossal shock when the reality of the current downturn starts to bite.

In support of these positions is a telling article from the BBC:

After 23 years of growth, including one of the biggest mining booms in the nation’s history, tumbling iron ore and coal prices have put a brake on Australia’s economy – and mining towns are paying the price.

Peter Windle is a casualty of the mining slowdown. The New South Wales mining employee has lost a well-paid job, a company car and an annual bonus that in some years was as high as A$60,000 ($48,800; £31,300).

A termination package from the mining company he used to work for has helped soften the blow. But Mr Windle still had to sell his investment property to keep his head above water.

It’s not difficult to see what’s happened here.  Mr Windle failed to recognise that the recent period of high salaries and plenty of work was an anomaly and would not last forever, and so leveraged himself to the hilt buying a property which, in ordinary times, he couldn’t afford.  You can, well, put your house on the “investment property” that he bought was wildly overpriced and unlikely to break even unless the resource boom continued for another decade.  A quote from the article hints at this:

“It’s the worst I’ve seen it in 28 years in the mining industry,” says Mr Windle. “Everyone is getting out. Three hundred houses are for sale in my town, three in my street, and rental prices have collapsed on older weatherboard houses from A$1,000 a week to A$200,” he says.

Ah.  So what’s the betting Mr Windle has bought an “older weatherboard house” for a staggering sum of money and was relying on A$1,000 per week in rent for the next 10 years in order to pay if off?

If he’s been 28 years in the mining industry, he should have known better.  I am incredibly fortunate to have hit mid-career in the oil and gas industry in a period of unprecedented oil prices and salaries.  Several of the industry’s old hands have told me of the lean periods in the 1990s when there was no work, and one of them told me he worked a job for a year which paid less than he was spending: but at least it slowed the debt accumulation.  I remember in Sakhalin some of these same old hands telling us young pups that we should count our lucky stars and invest the money wisely, and know that this might not continue forever.  Few of my generation (and younger) missed this lesson.

Most of us knew that the good times would come to an end, which they did in 2008-9 but thankfully picked up again fairly quickly.  Everyone used the cash to buy property, which makes a sound investment if geographically diverse, a future permanent home, and/or is part of a portfolio of other investments.  But other than perhaps a few weeks after the initial purchase, few were daft enough to mortgage themselves to the point they’d be forced to sell if the prevailing boom came to an end.  For a short time I was a day-rate contractor, and the lesson dinned into me then was always have 6-12 months of salary stashed away in cash.  So if you lose your job, you have a cushion.  It’s a habit I still haven’t gotten out of even as a staff employee, keeping at least one, preferably two, year’s mortgage payments and living expenses in cash should the worst happen.

Obviously this isn’t feasible for most people working PAYE in civilisation in normal jobs, but for those of us who rode the oil and gas wave over the last 5 years or so, we were making hay while the sun shone.  I considered myself (and still do) extraordinarily lucky and privileged to have been able to benefit from it, but not a day goes by without having an eye on the oil price and the appreciation that in 3 months time I could be out of a job with a mortgage to pay, a wife to feed, and no home back in the UK.  I am grateful to those old hands I met in Sakhalin and Nigeria who told me not to squander the money made in the good times and be very aware that someday it will end: I learned to treat it as a bonus, not business as usual.

It appears there were not so many wise heads in the Australian mining sector:

It is poor consolation for Mr Windle, who is now contemplating looking for a job in another state.

“I’m 54 now, and I’ve had a hip replacement. I might get a job at an outback mine in the far north of Queensland but I’d hate to spend another year working away from home. And suppose they lay off workers too?” he asks.

It’s a shame for Mr Windle and others like him, but he should have factored all of this in when he bought his “investment property” and worked out his monthly cashflow.  Tough times, and it’s going to get worse.

Share

Beware of a Man in Search of a Legacy

Historical legacies are interesting things, offering as they do a chicken and egg situation.  Was Napoleon motivated foremost to secure his name in history and his deeds merely the methods he used to do it?  Or did he simply fancy taking charge of France and conquer large swathes of Europe by deploying astonishing military skill, and the legacy simply resulted from his actions?  I’m more inclined to believe the latter.  Not that great historical figures don’t have enormous egos and are unaware of the significance of their actions, but I don’t believe Peter the Great thought “if I want to be remembered in history I’ll have to do something big” and then after weighing up various options decided upon building a new capital and developing a Russian navy as the way to go about it.  No, I think he decided on building a new capital and turning Russia into a European-facing naval power and his legacy resulted from this decision.

Of course, the only people who succeeded in creating a legacy were those whose actions were both successful and significant.  History is littered with those who had grand ideas that never came off, and others whose actions changed little in the grand scheme of things.  What we hear even less of, thankfully, are those who, longing for a place in the history books, decided to create a legacy and then based their actions around this goal.  How do we know such people existed?  Because they’re still with us.

I remember during the New Labour years in the UK, people were always on about Blair’s legacy.  I think that’s the first time I was politically aware enough to see that somebody’s policies are being driven by what he wants people to say about him in the future, rather than what he actually believes.  Education Education Education was one mantra, that came to nothing.  Whatever the state of British education now, Tony Blair isn’t going to be remembered for playing any significant part in it.  Insofar as he has a legacy, it is one of a disastrous war in Iraq.  Those who supported the war don’t think he has a legacy at all.

Barack Obama is another modern politician in desperate search of a legacy, hoping to go down in history for something other than his skin colour.  He may well achieve it with Obamacare when the bills finally start coming in, although not for the reasons he thinks.  But that’s not enough: ill-advised peace talks with Iran and muddled overtures towards Cuba have followed, as Obama seeks a geopolitical issue on which to hang his hat in the history books.  Both are bound to fail.

Those who actively seek a legacy, rather than simply let it follow their actions, are doomed to fail largely because they lack the conviction to see their decisions through.  Historical legacies are not the results of popularity contests, in fact usually they’re the complete opposite.  Just ask Genghis Khan.  Those who succeed in pulling off great historical feats (both good and bad) do so from a position of absolute determination and self-belief in their actions, and will see them through regardless of the setbacks, or die in the attempt.  And the actions themselves are normally bold, brutal, and unprecedented.  This is in contrast to the modern politician seeking a legacy, who will be uncertain even on which path to take to achieve it, let alone the required actions.  At the first sign of trouble – an unkind editorial, an unfavourable opinion poll – most of them will backtrack and seek another way.  Abraham Lincoln didn’t suffer from this.  They also don’t think big enough: legacies are made by actions which affect millions for generations, permanently changing a country or continent, not tinkering with health policies or lobbing a few Tomahawks.

It is probably a good thing that today’s world doesn’t readily allow the actions that bring about the sort of legacies historical figures have left, given that most of them involved death and destruction on an industrial scale.  But the problem of those seeking a legacy, rather than simply doing their job, remains.  This brings me onto the current state of Russia under Vladimir Putin.

There is no doubt that Putin was very good for Russia in the early years: young, fit, and sober he was probably the best leader Russia has ever seen, although I should add that the bar is set extraordinarily low.  Russia in the ’90s was a terrible place, and Putin provided much needed stability and a reining-in of the oligarchs and gangsterism that plagued the country.  How much of this was down to him personally is debatable, but under his reign the currency stabilised, the economy grew, violence declined, and living standards rose as a new middle class of moderately wealthy Russians appeared.  The decade between 2000 and 2010 probably represented the best period Russia has ever seen (although again, the bar is set astonishingly low) and Putin deserves considerable credit for presiding over it.  Given what Russians lived through in the USSR and its aftermath it is not difficult to see why Putin was, and remains, so popular with his people.

Now we can argue that Putin should have done more, but I don’t take that view.  What he had achieved up until around 2006-7 had surpassed all expectations, and I don’t think anything more should have been asked or expected of the man.  That’s not to say there was not an awful lot left to do in Russia: there was.  It is to say that Putin was not the man to do it.

There are limits to what people can do in office, and that is often driven by time.  A two-term president in the US is usually in charge of a very tired administration in the final couple of years, regardless of how good they’ve been beforehand.  Even New Labour’s supporters were glad to see the back of Tony Blair after 10 years as Prime Minister; Margaret Thatcher left Downing Street a tired shadow of the vibrant woman who had entered almost 12 years previously; and despite the economic boom and rise in living standards Australia enjoyed under 11 years of John Howard, the population felt they were in need of a change when they kicked him out.  The optimum period in office for a leader in a modern democracy is approximately 7-8 years, after which their administration is plagued by various scandals, stumbling policies, tired rhetoric, and a population that has gotten tired of seeing the same damned face on the TV every night and could use a change.  Even the Soviet leaders eventually departed, unable to fulfill any more promises or bring about change in the way they could when they first took over.  With the exception of Stalin, few missed them.

By this measure, Putin’s time was up around 2007.  Having taken over as President in 2000, he was required to step down in 2008 when his two-term limit had expired.  This would have been a good time to usher in a protégé and retire from politics, having achieved so much and leaving the country in far better shape than he found it.  He would have been universally admired both at home and abroad, and gone down in history as a truly good, if not great, Russian leader.

But unfortunately, he was having none of it.  With the idea of amending the constitution to allow him to remain President floating around in the final years of his second term, he sidestepped the issue by installing a puppet President in Dmitry Medvedev, and slotted effortlessly into the Prime Minister’s role transferring his previous authority to his new office until it was time to return to his old job four years later.  Starting around 2006, buoyed by high oil prices that had brought enormous wealth to him and his friends and unprecedented wealth to many ordinary Russians, Putin started to strut his stuff at home and abroad.  A new wave of Russian nationalism took hold, taking the form of increased anti-western rhetoric, a re-positioning of Russia as the victim of foreign exploitation, and a desire to get more involved in global affairs in order to protect Russia’s perceived interests.  It was during this era that the Russian government intervened in several major oil and gas projects operated by western oil companies, citing legal or environmental irregularities as justification for bringing them back under state control.  At the same time, Russia decided the operatorship of the giant Shtokman project in the Barents Sea would remain with Gazprom, the state-owned energy giant.  In September 2007 I wrote that the policy of resource nationalism that Russia had pursued the previous summer could one day be seen as a turning point in the country’s development, the time at which the Russian leadership decided that the production of oil and gas by state-owned behemoths in an otherwise unreformed economy was the route to future prosperity.

For a while it was looking good for Russia.  The country was rocked by, but ultimately survived, the global financial crisis thanks to an oil price that quickly rebounded after an initial tumble.  But crucially, once he’d decided to remain in power, Putin failed to reform the economy beyond the Soviet-era export of natural resources, primarily oil and gas.  As I said earlier, given everything Putin had done to stabilise Russia I don’t think the onus was on him personally to reform the economy: such a daunting task would have had to fall to somebody else.  But by staying on, unless he was willing to double-down on his efforts and likely expend whatever energy and political capital he had, such a reform was postponed indefinitely.

It is not just the case that Russia is too dependent on oil and gas exports, it is that it is almost impossible for individuals to develop and grow a profitable business unless they are well connected to a rich and powerful entity in the locality.  For all practical purposes, this means being pals with the mayor or FSB of the local town, or the bigger politicians in the larger cities.  Otherwise, your business simply won’t be allowed to develop.  It is no surprise that most Russian towns feature one giant shopping mall owned by a local bigwig who also owns a nightclub and a few restaurants, with another one or possibly two smaller “empires” making up the bulk of the remaining local business portfolio.  If an enterprising but unconnected person decided to develop a small patch of land beside the river and turn it into a waterside restaurant, and by some miracle obtained the permits to get it up and running, within days of turning a profit (or even before) he would lose his business.  He would be forced out: either by a never-ending stream of regulatory authorities ranging from fire safety to health inspectors, all of whom would demand a cut of the proceeds to “allow” him to stay open; or simply by a gang of thugs working on behalf of a local bigwig who fancies co-opting the business (now that somebody else has done all the hard work) into his own empire.  In my discussions with Russians, this is something which is absolutely beyond dispute: the number of parasites that descend on private, independent businesses makes running a successful enterprise near-impossible.  In Russia, you may run a business only with the approval of the local power chiefs, and tribute must be paid.

This situation is a product of the enormous bureaucracies that govern Russian business life, coupled with the corruption that infests almost every corner of them.  Overhauling this is a mammoth task, and in all likelihood impossible.  But that doesn’t mean it shouldn’t be tried, and the starting point would be to strengthen the country’s institutions – particularly the courts and justice system, and insisting that governmental authorities everywhere follow the rule of law.  However, that would require giving them independence and devolving centralised state power over a much wider area, and neither the Kremlin nor the regional powers were prepared to do this.  Like a lot of leaders who have enjoyed unopposed power a while, Putin began to see himself as indispensable.  Far from state institutions being granted more devolved authority and independence, Putin centralised Russia’s powers further, notably around himself.

Further convinced of his own indispensability, in no small part due to genuine feelings of support for the idea from the Russian population backed by crushing election victories, Putin became yet more assertive in his dealings with the rest of the world, determined to restore what Russians consider to be their rightful place in global affairs, with himself in the role of saviour of the nation.  Somewhere along the way, Putin seems to have sniffed an opportunity of one day being held in the same esteem as Peter the Great, Katherine the Great, and maybe even old Joe Stalin.  Sometime after 2012, the ageing Putin perhaps thought time was running out for him to establish such a legacy, and so stepped up his efforts.  Confused mumbo-jumbo regarding Imperialist Russia and Soviet history underpinned much of his foreign policy, with vague ideas about manifest destiny thrown in for good measure.  Having trampled all potential domestic opposition and removed any dissenting voices from within his own circle, Putin fell into the trap of all long-serving authoritarians: he started believing his own bullshit, hearing nothing but rapturous applause every time he spoke.  So when the opportunity to reclaim Crimea for Russia presented itself, Putin moved quickly to take it.

Now regardless whether you believe the Russian claims that the annexation of Crimea was necessary to prevent the Americans establishing a base there, the fact is that in 2006-7 and again in 2010-12 Putin faced the choice of either reforming the economy by overhauling the state institutions and rooting out corruption, or improving Russia’s position with regards global affairs and its near-abroad with himself as the figurehead of Russia’s resurgence.  It is almost beyond question that doing both was impossible, and completely beyond dispute that he chose the latter.  In my view, he did so for two reasons: it was much easier for him, coming more naturally; and he thought this was the best route to establish himself in the history books alongside other great Russian leaders.

With that choice, any hope that the Russian economy could free itself from local strongmen and the national giants was lost.  The government remained dependent on a high oil price to balance its budget, while the rest of the economy remained unreformed, unreconstructed, and hopelessly inefficient.  As a result, Russia in 2014 found itself still heavily dependent on imports and produced little of value domestically: even the foreign car assembly plants set up in western Russia are dependent on imported parts, for which they must pay in Euros.

So long as the oil price remained high, none of this really mattered.  But with its collapse, and the western-imposed sanctions, the Russian economy has nosedived.  This article by Tim Worstall explains just how grim things are looking for Russia, but does not tell the whole story.  The middle-class consumer boom which took place in Russia over the last decade was driven mainly by personal debt: people borrowing from banks or credit card companies.  With the real prospect of incomes drying up and jobs being lost, a lot of households are going to struggle.  But what makes it worse is that credit in Roubles was being offered at interest rates of around 15-20% but consumers had the option of taking loans in Euros or USD which only attracted interest rates of 5-10%.  Many Russians took the latter option, and now face paying household debts in Euros or USD at a time when their Rouble salaries are worth half what they were.  Even those who borrowed in Roubles haven’t escaped: according to my Russian friends, banks are “renegotiating” the interest rates with their customers, which means higher monthly repayments.  Coupled with the rapidly increasing price of food (not helped one jot by Putin’s ban on imported products), we could see many households going into bankruptcy for the first time since 1998.  And this is before one considers the effect of the Rouble’s decline on the country’s main employers.  The head of Renault-Nissan in Russia recently came out and said manufacturing in the country is facing a bloodbath.

What will happen next is anyone’s guess, but a return to the grinding poverty and economic instability of the 1990s is looking increasingly likely.  Putin remains as popular as ever, having successfully dumped the nation’s economic woes squarely at the feet of the United States and European Union.  But as the economic reality starts to sink in, and increasing numbers of people with no jobs go hungry, issues such as political leadership and the inequality between the elites and the rest are going to become more pronounced.  Even if the Kremlin successfully manages to deflect the questions by piling on the anti-western rhetoric, this will not solve the underlying economic problems.

The trouble now is that it is too late.  The economy cannot be reformed with the sanctions still in place and the Rouble so weak, and so they have no choice but to ride it out until the oil price rises again, which on current forecasts could be a while.  Russians are facing the very realistic possibility of returning to the 1990s: empty shelves already line supermarkets, companies running package holidays abroad are going bankrupt by the dozen leaving local vacations as the only affordable option, and photos on Facebook show mass crowds buying TVs, video cameras, Ikea furniture, and other household items they don’t need in an effort to swap Roubles for something with a chance of retaining some value.  If this keeps up, it may be fair to ask exactly what progress has been made in Russia in the past 20 years.

Putin had the option of stepping down in 2008, his job well done, and handing over to a successor.  He chose not to, and instead opted to pursue what he hoped would become his legacy, which would be underpinned by the self-development of Russia’s vast hydrocarbon reserves.

The worst part is they didn’t even get that right.  The last major oil and gas development in Russia was the Shell-built Sakhalin II LNG project, which started up in 2008.  The Gazprom-led Shtokman development ground to a halt amid spiralling costs and disagreements between the partners.  Rosneft has been in the news mainly for its deals with BP, its appropriation of Yukos and Bashneft, and its staggering corporate debt rather than concrete development plans bearing fruit.  Umpteen grand announcements ranging from Nigerian gas deals and far-east LNG plants to Arctic developments and Chinese pipelines have come to nothing (or remain stuck on such details as pricing).  As of 2014, Russia remains as unpredictable, risky, and dangerous for an oil company – even a Russian one – to do business as it was in the 1990s.  For a country that picked hydrocarbon development as the sole political-economic strategy in lieu of reforming the economy and engaging with the west, this is a shockingly poor performance.

So what of Putin’s legacy?  If Russia hangs onto Crimea, which it probably will, it might warrant a note in a history book somewhere (offered as much prominence as Khrushchev’s transfer of the peninsula in 1954, which few knew about until recently).  But it’s hardly the stuff to warrant a mention alongside Katherine the Great or Ivan the Terrible.  As I said at the beginning of this post, the modern-day politician (of which Putin is one, no matter how much he wishes he belonged to another era) just doesn’t think big enough to create a proper legacy.  In the grand scheme of things, the annexation of Crimea is mere fiddling, and expensively at that.

The irony is that if he had stood down in 2008, he would have left a legacy of quite some merit.  Had he decided to stay and expended his considerable political capital in ramming through the economic and institutional reforms Russia so desperately needs, he would have created a legacy even greater (albeit one that carried a lot more risk of failure).  Instead it is looking increasingly likely that his early work will be completely undone, and his legacy will be one of having progressed Russia precisely nowhere since he took over, having gone the full circle from crisis-ridden poverty to stable wealth and back to crisis-ridden poverty in just 15 years.  Putin’s is a story more suited to Africa than Russia, with a legacy more akin to Robert Mugabe than Peter the Great.  What a terrible waste.  What a terrible shame.

Share

The BBC: Inventing new oil companies since 2014.

I knew that this BBC article would be bollocks as soon as I saw the headline: Halliburton reports $622m profits. The first thing you see is this picture:

_74356694_74356692

With the caption: Halliburton was one of the contractors involved in the BP Gulf of Mexico oil spill in 2010″

And you know immediately that the point of this article is to say “evil, polluting American company makes enormous profits” and allow all the assorted lefties who think the BBC is a national treasure to nod smugly at this further proof that capitalists are raping the planet.

Naturally there is no mention in the article that the US Department of Justice closed its investigation into Halliburton’s role in the Macondo blowout over 18 months ago, imposing a fine of $200k for no more than the unauthorised deletion of a computer record.  Now personally I think this was a complete whitewash on the part of the US government protecting one of its own and dumping as much blame as possible on BP, but the BBC doesn’t say that either.  It just doesn’t mention anything, possibly in the hope that its readers will assume Halliburton continues to shoulder responsibility of some sort.

But the article doesn’t even get the basic facts straight:

US oil exploration firm Halliburton has reported better-than-expected first quarter profits, helped by robust drilling activity in Russia, Saudi Arabia and Angola.

Oil exploration firm?  Halliburton is an oilfield services provider, it does not carry out any exploration of its own, as a brief glance at its corporate website would tell you.  Secondly:

The world’s second-largest oil company said net income for the three months to the end of March was $622m (£370m).

God only knows where they got this from.  Aside from Halliburton not being an oil company, even if it were, with a market capitalisation of about $53bn it is an order of magnitude smaller than ExxonMobil ($436bn) or Chevron ($237bn). I’m not even sure it’s the world’s second largest anything, being as far as I know the world’s largest oilfield services provider.  But then this is the BBC, so who knows what they’re waffling on about?  Still, the narrative fits: polluting American oil company makes giant profits.

People are threatened with jail to pay for this shite.

Share

Women in the Oil and Gas Industry

There’s an article over in Upstream Online which I feel misses the point, that point being the one which Tim Worstall bangs on about with regularity: gender inequality in the workplace is actually a motherhood issue.

A new survey claims the majority of women feel welcome in the oil and gas industry but nearly half believe the do not get the same recognition as their male counterparts.

The survey by NES Global Talent examined the gender talent gap in the oil and gas industry and ways of attracting and retaining women in the industry.

The survey claimed that 75% of women who participated felt welcome in the industry and 89% would encourage other females to join, however 45% said they believed men get more recognition in the industry.

While the survey found that some respondents found oil and gas a welcoming industry with equal opportunity policies in place, others said women were restricted to supporting roles and did not enjoy the same salaries and career opportunities as men.

From what I’ve seen, there are several women with high-flying careers who occupy senior and (presumably) well-paid roles in the oil business.  But in most cases they are childless, and often unmarried.  The problem is that to grow in the international oil business you have to have expatriate experience, and for a fast-tracked career you need to have done your expatriations in a hardship location.  For single women this isn’t much of a problem, but for those with young children it is extremely difficult to dovetail the requirement to live in a hardship location with the responsibilities a woman has towards her family.  This is pretty much admitted:

The percentage of women in the market has increased. Unfortunately, the number of women in technical roles and field positions are still scarce. The general mentality that this is not a female oriented environment still exists.

And the answer is right there: the reason there are few women in field positions is because field positions are the absolute worst positions for anyone to also manage a family life.  Unless a woman is childless or has a stay-at-home husband, it is going to be exceptionally difficult to hold down a field position, especially as more and more facilities are to be found in hardship locations or the deep offshore.

When asked how their company could be more welcoming and encouraging to female employees, respondents gave a variety of answers including  providing equal opportunities, female role models, flexible working hours and more support to women with children.

Which is great, but how can somebody in a field position be offered flexible working hours?  Most people are offshore on a 28/28 rotation or in the middle of nowhere on an 8/2 or 6/3.

A majority of respondents said they planned to remain in the industry for the next two-to-five years, but 18% said they intended to leave the industry.

When questioned for the reasoning behind their decision a range of answers were given, with family commitments, a better work / life balance and a lack of equality being among the main reasons.

Well, yes.  My advice to anyone who wants to put family before work and have a good work/life balance is to give the oil industry a wide berth.  I’ve quite deliberately remained childless partly for this reason, and I’ve not seen my wife since 2nd December and not lived with her since August 2009.  Such is the price you pay when you want to command a decent salary in an industry which unfortunately has most of its opportunities in places nobody wants to live.

What women are up against is people like me, who have forgone the family life in order to get the better positions.  The industry is full of men like me, and full of others who do the same but fail to keep the marriage or family together.  If women want to compete with this, they need to make much the same sacrifices, and the successful women you see in the industry have done this, at least for a period.

It is my firm belief that women are offered exactly the same opportunities as the men, but are also expected to make the same sacrifices with regards their family and personal life.  Unfortunately, in general, this hits women much harder than it does men.  I think oil companies have done a great deal to make it easier for women to occupy senior positions whilst minimizing the impact on their family life, but it’s hard to see what else they can do.

One thing I’ve noticed is that there is no shortage of female engineers in the oil industry, but they do tend to cluster around certain disciplines.  Far more women do chemical engineering at university than the other disciplines, which means that a lot of process engineers in the oil industry are female (and damned good, most of them).  The trouble is the natural career path for a process engineer is into operations, which means at some point you need to spend time on site.  To reach the upper echelons of management you will have to become an Offshore Installation Manager (OIM), which will be offered to you when you have about 15-20 years of experience (i.e. aged between 35 and 40).  Most women of this age will have kids and a husband who cannot manage if the mother just disappears for 28 days at a time, which is what an OIM’s job entails.  I have seen women offered this role but have turned it down for precisely these reasons.  The women who take these roles generally don’t have kids.  It’s really hard to know what to do about this.

One thing I am glad about was that the survey said most women felt welcome in the oil industry.  I have felt, in the oil companies at least, that woman enjoy far more equality and acceptance than they would perhaps find in other industries (law, for example).  I have yet to think of a time when my thoughts or attitude have changed in the slightest on discovering a particular engineer is a woman, and nor have I heard even the slightest suggestion from anyone – in over 12 years – that a woman doing a certain job is for whatever reason a bad thing.  The current head of my department is a woman, and I discovered this when I interviewed for the position: it didn’t make a blind bit of difference to me, never even occurred to me that it should.  The department itself is full of female engineers, most of them married with kids, and I probably interface more with women than men: again, it makes no difference to me.  At the risk of making a crude stereotype, I actually find female engineers to be pretty good as they pay considerable attention to detail.  And one of the most impressive engineers I have encountered in the industry, and by far and away the best risk and safety engineer I ever met, was an Australian girl.

I have seen the huge efforts oil companies have gone to in trying to accommodate more women in their career programmes, and the complete ease with which female engineers are accepted into what was once a male-dominated environment.  But for the reasons I have outlined I don’t think things are going to improve much from here, at least for those women who want a family life and a career in the oil industry.

Share