{"id":108,"date":"2006-03-13T22:27:29","date_gmt":"2006-03-13T18:27:29","guid":{"rendered":"https:\/\/www.desertsun.co.uk\/blog\/?p=108"},"modified":"2006-03-14T08:40:03","modified_gmt":"2006-03-14T04:40:03","slug":"syriana","status":"publish","type":"post","link":"http:\/\/www.desertsun.co.uk\/blog\/108\/","title":{"rendered":"Syriana"},"content":{"rendered":"

Upon winning\u00a0a Best Supporting Actor\u00a0Oscar for\u00a0his role in Syriana<\/em>, George Clooney<\/a> said:<\/p>\n

“We are a little bit out-of-touch in Hollywood…I think that’s probably a good thing.”<\/p><\/blockquote>\n

Syriana<\/em> is a film largely about the workings of the oil and gas industry, in particular the Middle East oil and gas industry, and as I know a thing or two about this subject, I was interested in watching it.\u00a0 Having now done so, I think Clooney was understating the fact.<\/p>\n

The points of contention are as follows.<\/p>\n

1.\u00a0 The merger between Connex and Killen will\u00a0use economies of scale, and\u00a0result\u00a0in\u00a0cheaper products for consumers.<\/em><\/strong><\/p>\n

I think they’ve whipped this line from the automotive industry or somewhere, where buying raw materials in bulk and mass producing the same item on\u00a0identical production lines can result in a reduction in cost per unit built, and hence increase the margin per unit.\u00a0 Unfortunately, the oil and gas industry doesn’t work like this.\u00a0<\/p>\n

Firstly, the selling price of a barrel of oil is not set by the producer, but by the market.\u00a0 The market rate is largely determined by production (or production expectations) and consumption,\u00a0the former\u00a0of which is\u00a0heavily influenced by OPEC.\u00a0 Hence it is OPEC which plays the major role in determining the price of oil, although their control is limited to a reasonable\u00a0extent.\u00a0\u00a0And last time I looked, no large American oil company was a member of OPEC.\u00a0<\/p>\n

Secondly, producing a barrel of oil does not require materials to be bought in bulk (once the production equipment is in place that is), hence there is no saving to be made on the input side.\u00a0\u00a0And the cost of extracting a barrel of oil\u00a0is largely dependent on the location and characteristics of the reservoir, and is not\u00a0hugely affected by the size of the company doing the extraction.\u00a0 However, to the point that it is affected, the relationship is as follows.\u00a0 A larger company\u00a0will have greater overheads, usually through\u00a0having complex technology centres and management systems, so the larger companies tend to look for a greater margin per barrel, and hence favour the fields where\u00a0cheaper extraction\u00a0is possible.\u00a0 Witness the withdrawal of the supermajors from the declining North Sea fields, leaving the way open for the smaller companies to come in and make a greater margin per barrel than their larger competitors could.\u00a0 In the fields where extraction costs are low (West Africa, for example), the supermajors dominate and the smaller operators are almost non-existent.\u00a0 So were two oil companies to merge, there would not be any economy of scale which would result in reduced production costs, and in all likelihood the company would require greater margins per barrel of oil to keep the same financial performance.<\/p>\n

Therefore, the idea that a merged oil company would be able to provide cheaper products to its customers is nonsense, as they cannot influence the selling price of its products, and at best the production costs would stay the same.<\/p>\n

2.\u00a0 The merger of the two companies led to a low-paid immigrant worker being laid off.<\/strong><\/em><\/p>\n

Fortunately, knowing quite\u00a0a bit about employees on Middle East oil facilities (dammit, I’ve walked around enough of them!), I was able to determine what kind of employee the chap who got laid off was.\u00a0 Judging by the work he was doing before he got laid off, the clothes he was wearing, and the way his redundancy was dealt with, he was almost certainly a basic maintenance worker on a one or two year contract (we know he was from Pakistan).\u00a0 He was not a permanent employee, as nobody who does that kind of work in a subordinate position is:\u00a0 they are all contractors.\u00a0 If there is any oil company in the Middle East who takes on a vessel painter from Pakistan as staff, I have yet to know about it.<\/p>\n

Now, when two oil companies merge, there will inevitably be many overlapping positions in the resulting organisation, which will lead to redundancies.\u00a0 These are almost all at the admistrative or managerial level, not at the operational level, and certainly not at the site level.\u00a0 A company which has just taken on a smaller rival still needs to have its facilities maintained, and cannot simply lay off its maintenance crew as a result of the merger.\u00a0 For starters, the facility\u00a0looked pretty old,\u00a0probably between 15-20 years.\u00a0 If the maintenance crew were doing some painting work, chances are it was necessary.\u00a0 So\u00a0it\u00a0would not be in Connex’s interests to sack its maintenance\u00a0crew,\u00a0and\u00a0to do so\u00a0in the context of a merger\u00a0is laughable.\u00a0<\/p>\n

It may have been slightly more believable had it been the Killen crew that were laid off, in order to make room for a maintenance contractor incumbent with Connex.\u00a0 But even then, it would take years following a merger to change the maintenance regime in an existing facility, yet we are expected to\u00a0believe this happened in the days\u00a0following the announcement to the stock market.\u00a0 Any maintenance contractor (who would certainly be a Middle Eastern company with powerful connections, and not likely to be pushed around by Americans) faced with losing the contract would simply see out the remainder of the\u00a0contract period and\u00a0move onto the\u00a0next job.<\/p>\n

And finally, it may have escaped the attention of the film makers, but the major problem facing every oil company in the Middle East is getting enough personnel into the country to\u00a0carry out the mind-boggling amount of work there is to be done.\u00a0 With most facilities getting towards the end of their design life, there\u00a0are dozens of enormous maintenance and upgrade projects underway, and there are dozens more billion-dollar plus\u00a0new facilities under\u00a0construction.\u00a0 There is more work in the Middle East for your average maintenance man than you could shake a stick\u00a0at, and there is not a chance in hell that a\u00a0maintenance contractor\u00a0would be\u00a0sending somebody home early for whom they paid a flight and immigration charges, especially if that chap was keen to stay and work.\u00a0 He’d be off one job and onto the next before you could relieve him of his Connex hard hat.<\/p>\n

And I’m not even going to bother addressing the film director’s attempt to make me believe that an immigrant worker on a one or two year contract would be so\u00a0angry about his\u00a0termination that he’d turn into a suicide bomber.\u00a0 If this were the case,\u00a0Kuwait would be a much more interesting place than it is.<\/p>\n

3.\u00a0 A\u00a0large US oil company operating in the Middle East has its logo plastered all over its facility.<\/strong><\/em><\/p>\n

The makers of this film have clearly not done much research into how things work out here.\u00a0 To my knowledge, no Western oil company owns or operates a facility in the\u00a0Gulf, especially not one the size of that portrayed in the film.\u00a0 All facilities in the Middle East are owned by national oil companies, and operated either by national oil companies or consortia in which a national oil company is the\u00a0major shareholder.\u00a0\u00a0Foreign oil companies at best have to make do with being the junior\u00a0half of a partnership, and it is most definitely the senior partner, i.e. the national oil company, which makes the rules and calls the shots.\u00a0 For this reason alone, the film doesn’t make a lot of sense, and the facility portrayed in the film is, literally,\u00a0the stuff of\u00a0Hollwood.\u00a0\u00a0\u00a0<\/p>\n

4.\u00a0 Executives of an oil company, presumably who are not on work experience from school,\u00a0make the shocking discovery that a large Kazakh oil deal may have involved somebody\u00a0being paid off and – shock! – an inside informer!<\/strong><\/em><\/p>\n

The footage of them making the further discovery that the sky is blue ended up on the cutting room floor.\u00a0<\/p>\n

5.\u00a0 A Chinese company outbid at least one giant American company in a competitive tender.<\/em><\/strong><\/p>\n

What?\u00a0 Eh?\u00a0\u00a0Are there two Chinas, or something?\u00a0 The chaps making this film have obviously never gone up against a Chinese company\u00a0in a competitive tender.\u00a0 Wait until they do, and see how much they praise Chinese business ethics.<\/p>\n

6.\u00a0 An American oil company is bullying the Emir of a Middle East nation into cancelling a contract with a Chinese company.<\/em><\/strong><\/p>\n

Recall what I said in No. 3: Foreign oil companies at best have to make do with being the junior\u00a0half of a partnership, and it is most definitely the senior partner, i.e. the national oil company, which makes the rules and calls the shots.\u00a0 The idea that a foreign oil company could bully a Middle East national oil company is pretty fanciful.\u00a0 The notion that a foreign oil company could bully an Emir is preposterous.\u00a0 I’m sure this view is fashionable amongst sections of the Western left, but to anyone who actually works within the Middle East oil industry, it is laughable.\u00a0 It simply is not true.\u00a0 American companies lose out in tenders\u00a0to Chinese, Japanese, and Korean companies all the time, and I have never, ever, heard of a contract being withdrawn after award because an American company exerted pressure on the client company.\u00a0<\/p>\n

7.\u00a0 An executive in an American oil company says he is proud to have restriced the amount of oil getting to China.<\/em><\/strong><\/p>\n

Presumably the film’s makers think that if a Chinese company wins an oil contract ahead of a US company, China gets oil that would otherwise have gone to the US.\u00a0\u00a0This view – popular amongst those who think Iraqi oil flows to the US now it is under US occupation – is wholly incorrect.\u00a0 There is one global oil market, into which all oil produced effectively flows.\u00a0 Customers then purchase oil from this market.\u00a0 The origin of the actual oil is not important to the end user, outside of commonsensical transportation arrangements.\u00a0 The amount of oil a customer gets from the market is dependent on how much the customer can afford to buy at the prevailing market rate.\u00a0 If one customer decides it wants much more, as is the case with China in today’s real world, then the market rate increases accordingly in reaction to the increased demand.\u00a0 The nationality of the foreign company being awarded Middle Eastern oil contracts has no bearing whatsoever on the final destination of a single drop of oil.<\/p>\n

8.\u00a0 The US government, presumably at the behest of a US oil company, assasinates\u00a0a Middle Eastern\u00a0royal because he wants to\u00a0modernise his country and open it up to market forces.<\/em><\/strong><\/p>\n

Presumably the film’s\u00a0makers think American oil companies prefer corrupt dictatorships to progressive countries which undergo radical reforms, ushering in free market enterprise.\u00a0 Which is odd, because Hollywood’s great and good – one of whom stars in this film – regularly lambasts\u00a0the US\u00a0for removing a corrupt dictator in order to reform a Middle East country and open it up to free market enterprise for the benefit of US oil companies.<\/p>\n

In short, the film is awful.\u00a0\u00a0Evil oilmen, CIA assasinations, corrupt Arabs, noble reformists,\u00a0desperate suicide bombers.\u00a0 They couldn’t have crammed\u00a0more ignorant stereotypes\u00a0into this film if they tried.<\/p>\n

There are some other minor errors in the film, which are neither here nor there, but I though I’d point them out just for fun.\u00a0<\/p>\n

1.\u00a0 An Arab listened to his guest’s business proposition whilst standing up in a corridor.<\/em><\/strong><\/p>\n

Not. A. Chance.<\/p>\n

2.\u00a0 Having been laid off, am immigrant maintenance worker is free to roam the country looking for work.\u00a0<\/em><\/strong><\/p>\n

Not likely.\u00a0 An employer sponsors\u00a0somebody to come to the Middle East from, say Pakistan.\u00a0 The employer pays the flight and immigration fees, and is responsible for that employee until his work permit is cancelled and he has left the country.\u00a0 It is illegal for that person to work for anyone else, and it is illegal to transfer a work permit on the fly, so the\u00a0unemployed chap would\u00a0not be able to search for another job on his own.\u00a0\u00a0What is almost certain is that he would be escorted to the airport with his passport, and plonked on an aeroplane as soon as his contract was terminated.\u00a0<\/em><\/strong><\/p>\n

3.<\/em><\/strong>\u00a0 An Arab, who\u00a0judging by his dress is clearly in a managerial position,\u00a0has had two of his wife’s kids deported from Dubai because of lack of work.<\/em><\/strong><\/p>\n

WTF??!!<\/p>\n

4.\u00a0 To get work in Dubai, you need to speak Arabic.<\/em><\/strong><\/p>\n

Erm, no you don’t.\u00a0 All the Arabs are well educated, and speak English pretty well.\u00a0 The only people who don’t speak good English are the cheap immigrant labour from the Indian subcontinent.\u00a0 In fact, our intrepid hero’s Urdu would enable him to get by on any oil facility in the Middle East.<\/p>\n

5.\u00a0 Matt Damon calls his wife from what looks like the Shangri-La Hotel in Dubai, and says all the women dress in black.<\/strong><\/em><\/p>\n

Except for the Westerners in jeans and strappy vests, the\u00a0Indians in saris, the Russians in white jeans and 80s style tops, the Chinese in all manner of clothing, and the\u00a0Filipinos in not much at all.<\/p>\n

6.\u00a0 A royal motorcade is stopped by a man herding goats.<\/em><\/strong><\/p>\n

When the royals travel in the Middle East, the roads get cleared, and closed.\u00a0 For hours.\u00a0 Police outriders travel\u00a0a mile or so\u00a0ahead, and get anyone – and any goats – well out of the way.<\/p>\n","protected":false},"excerpt":{"rendered":"

Upon winning\u00a0a Best Supporting Actor\u00a0Oscar for\u00a0his role in Syriana, George Clooney said: “We are a little bit out-of-touch in Hollywood…I think that’s probably a good thing.” Syriana is a film largely about the workings of the oil and gas industry, … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[6,9,7],"tags":[],"_links":{"self":[{"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/posts\/108"}],"collection":[{"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=108"}],"version-history":[{"count":0,"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/posts\/108\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=108"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.desertsun.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}