A drilling rig working for Houston-based Vaalco Energy approaches the Ebouri platform, offshore Gabon. (Vaalco Energy)
Large, expensive and risky: That’s how Michael Yeager, who will retire this week as chief executive of BHP Billiton Petroleum, describes the projects in which his company and others are engaged around the world.
So nothing less than the top talent will do.
“It takes experts to get this stuff done,” Yeager said. “And no company can have enough experts to have them in four or five locations at once.”
Whether it’s a multinational oil and gas company running projects around the globe, or a company operating refineries just down the coast or oil platforms out in the Gulf of Mexico, keeping track of operations from the home office requires a mix of technologies – from the old-fashioned conference call to the latest 3D seismic data – good communication skills, attention to detail and the willingness to drop everything and jump on a plane if things start to unravel.
“We probably have somebody from Houston in Gabon every week, whether it’s finance, operations, management, geology,” said Robert Gerry, CEO of Houston-based Vaalco Energy, an independent drilling company with operations in West Africa. “They tell the employees there what’s going on here, what we expect of them.”
They talk by satellite phone at least once a day.
“Modern communication, it’s terrific,” Gerry said.
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William Arnold, professor in the practice of energy management at Rice University, said the communication revolution has changed the way energy companies do business, as has the staggering cost and size of today’s projects.
Maintaining control without stifling creativity is a balancing act.
Arnold recalled that a few years ago, Royal Dutch Shell and Exxon Mobil Corp. both were building natural gas export projects in Qatar, involving more than 100,000 workers between them.
“Think of the effort to coordinate that, finding people to do that, meals, air conditioning, budgets,” he said.
And while technology has the power to upend old ways of doing things – allowing production companies to shut down offshore production platforms remotely, for example – it also has raised new questions.
Right people in place
There is no one-size-fits all answer. What works for a small company like Vaalco might not work for a 3,250-employee company like BHP Billiton Petroleum, or international oil companies like Shell or Exxon Mobil, which have almost 100,000 employees. But the goals are the same – cut costs, reduce risks, start production more quickly.
“Technology helps, because we can use video conferencing, email, text messaging,” said Bill Day, spokesman for San Antonio-based Valero Energy, the nation’s largest refiner. “The fact that we get real-time production data via technology certainly helps. But a lot of it is just old-fashioned interpersonal interaction. Putting the right people in the right places and making sure the right systems are followed.”
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Valero has 16 refineries, most of them in the United States and Canada, along with one in Wales.
Day said a linchpin of Valero’s strategy is the daily conference call involving refinery leadership and the San Antonio headquarters. “That’s backed up with a lot of data reporting that comes in via dashboards and very complicated technology, but at the heart of it, it’s a conference phone call,” he said.
Payroll, engineering and human resources all are handled out of San Antonio, although each of the refineries has its own human resources office, as well.
That’s common for companies that operate overseas.
Gregory Hullinger, chief financial officer for Vaalco, said a local human resources manager handles hiring in Gabon because labor laws are different in West Africa, although the company does most of its training in Houston. Vaalco has smaller operations in Angola and Equatorial Guinea.
Stringent demands
Different countries have their own requirements about using local workers and materials, making on-the-ground human resources personnel helpful to interpret local laws.
“These demands are very stringent,” said Arnold, a former international executive with Royal Dutch Shell, as countries try to build a modern energy industry for the future.
But Gerry said that in many ways, working in West Africa is similar to operating in the Gulf of Mexico.
“The depth of the water may change, but a jack-up rig in the Gulf of Mexico can work in the waters of West Africa,” he said. “I wouldn’t over-worry the idea that it’s so far away. Fed Ex is pretty good.”
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Things get more complicated as a company tackles more projects in a wider variety of places.
BHP Billiton Petroleum, a division of the Australian resources and mining giant BHP Billiton, has production in the Eagle Ford Shale and Permian Basin, as well as the Gulf of Mexico, Pakistan, South Africa, the Philippines and Australia.
Everything – two major projects now under way include the Macedon gas project off the western coast of Australia and the Angostura gas project in Trinidad and Tobago – is designed and run from Houston.
“It’s not like it’s us and them,” Yeager said. “It’s all us. We decide everything in Houston, and we build it on location around the world.”
While Arnold said companies have experimented with 24/7 research and other projects, handing off work between teams in various parts of the world, Yeager concentrated intellectual efforts in Houston after he was hired as chief executive in 2006, including geology, reservoir engineering, drilling and project development, down to setting the schedule and deciding what contractors to use.
“What’s the geological picture? What’s the plan, what’s the timing, what’s the money? Then, on the ground around the world, they build it,” he said. “If we do this right, it’s all one team.”
Same language
But team members can miscommunicate, even when they’re speaking the same language.
That can cost time or money. Or both.
Yeager said the unexpected always happens in a big project, but a common vocabulary can help.
That and thoughtful planning also can help companies address some of the questions raised by technology, including when and how to reach beyond corporate walls.
Technology can make research partnerships easier if companies are willing to put aside old rivalries, Arnold said.
“You don’t want to have things so tight you are missing out on new thinking,” he said. “One way to get new thinking is to have people who have not been part of your corporate culture.”
And while Yeager’s worry about the top technical and scientific talent reflects a common concern in the industry, Arnold said that may be less of a problem as companies gain access to talent internationally.
Regardless, he said, communication will remain a crucial skill.
“It’s a question of how you organize that talent,” he said. “For some companies, the best model may be a single concentrated facility. For others, they may go on a global basis. But you have to sing from the same hymn book.”
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