Sharpen those axes

Norway’s Statoil isn’t fucking about in Houston:

Around 70 Statoil employees reportedly were stripped of their jobs with immediate effect at its Houston-area offices in the US after refusing to take voluntary redundancy as part of manpower cutbacks at the Norwegian state-run oil giant.
Ouch!  I don’t think we’re in Norway any more, Olaf!

Retrenched staff – largely drawn from the company’s IT, technical and communication departments within its upstream business – were offered voluntary redundancy packages or alternative positions within the Statoil organisation.

I don’t know what “technical” department means in the context of these redundancies, but I suspect – being lumped in with IT and communications – we’re not talking about engineers here.  I have no idea what a communications department does, and it sounds like one of those entities which you’d only find in a government organisation or an oil company.  At a guess, I’d say they handle press releases, advertising, PR, etc.

However, a company spokesman confirmed that not enough workers applied for voluntary redundancy, and therefore, those who had not found alternative jobs were informed in meetings last week that they had been sacked.

What’s the betting they didn’t take voluntary redundancy because the individuals concerned hadn’t a ghost of a chance of finding a job even half as good?

“Those who were not able to retain their employment then had to meet with career advisors in the human resources department. There they were asked to hand in their identity cards and computer, and were informed of the content of the redundancy package,” the spokesman was quoted as saying.

Ah, now I often wondered what career advisors did in an oil company.  They certainly don’t do much by way of offering careers advice in my experience.  They’re usually trying to persuade you to take a posting in Iraq or Somalia saying “it’s good for your career” without explaining why being kidnapped and beheaded would look good on the CV.  At least now I know that the role of these people is to inform people of the content of their redundancy packages as they walk through the front door on what they thought would be a normal day at the office.  It occurs to me that I may have spotted some additional candidates for redundancy.

“Afterwards they were taken to the elevator by human resources personnel and then led out by security guards.”

Made to dig their own graves, and dispatched with a twenty second burst of machine-gun fire.

Those who were told to leave have been given the same redundancy packages based on length of service as workers who left voluntarily, which the spokesman said “were very competitive in the context of US conditions”.

Redundancy packages can be competitive?  Who knew?  I think he means “generous”.

He also warned there would be a further round of US redundancies to meet the targeted tally of job cuts.

This is a topic I may return to in future: when a multinational company is looking to cut costs, does it make the tough decisions and fire unproductive people regardless of where they are based, or do they let the axe fall where it is easy to fire people (like the US) and overlook places (like Norway) with much stronger labour laws?

Statoil has so far cut 2335 personnel – including 1340 permanent staff and 995 consultants – out of its global workforce, representing a reduction of nearly 10%, since 2013.

That big viking axe has been swinging merrily.  Or has it?

It has largely carried out the redundancies through natural attrition, internal transfers of staff to new positions, cessation packages and early retirement under mostly voluntary arrangements.

The axe appears to be made of foam.  Except in the US.  It would be interesting to see what Statoil did with any staff in Norway who refused to take voluntary redundancy.

The manpower cuts are part of the company’s stated target to make annual savings of $1.7 billion from 2016 in an efficiency drive.

Hard though this is to take for the individuals concerned, the only way to do this is by reducing headcount.  And this, as anyone who’s worked in an oil company over the past 10 years could tell you, ought to be pretty easy to do.

Back in the good old days of a Ukrainian Crimea, a Dubya Bush presidency, a Libya led by Ghadaffi and $120 oil the number of personnel drafted into what laughably get called “support services” in oil companies rose exponentially.  A lot of this was driven by empire building – the more personnel a manager has under him, the higher he scores on the Hay system, or whatever equivalent his employer is using, and that is used to determine his salary.  A lot of it is simply crap management: new positions are created without really looking to see if the current crop of employees are utilised effectively, or even needed at all.  Poke your head into any of the support service departments in an oil company – finance, HR, procurement, communications, IT, travel, diversity, HSE – and you’ll see 20, 30, sometimes 40 people in each, outnumbering those in the drilling department.  The numbers are supposedly justified by the size of the operation and the overall employee headcount, but in my experience the larger the department the worse the service.

Back in the days when I wore short trousers and had bum fluff, I worked in an office of no more than 20 people.  We had an admin. girl working for us who was in charge of, well, all admin.  This included travel.  If one of us need to go somewhere we’d tell this girl – Sarah was her name – where and when we wanted to go, along with any preferences such as routes, etc. and she’d come back to us with a couple of options and prices, and we’d choose the best one.  Then the General Manager would sign off on it, once he was satisfied we weren’t going from Calgary to Houston via Bali with a stopover of 5 days.  The system worked very well.

Fast forward a few years and I was working in an organisation which employed almost a thousand people, and they had a dedicated travel girl.  Flights were booked by her using pretty much the same system as Sarah used in the aforementioned example.  She had email and a spreadsheet and by combining the two she managed to arrange everyone’s flights without too much difficulty.

Fast forward once again and I’m working in an oil company.  This outfit had a travel department, with at least a dozen people working in it, plus a manager or two.  I still have their travel procedure, and it reads as follows:

Step 1.  Traveller sends the (unauthorized) travel request form by e-mail to the Travel Agent directly according to the approved list.  The form must contain the following: name, last name, DOB,  passport number and expiry date, origination, destination, dates of travel, class of travel and purpose of travel.  Travel Agent books 1 or 2 options depending on the availability and according to the policy and sends them to the requester via e-mail with the costs and time limit for issuing tickets. The bookings are kept in the reservation system. However the tickets may be issued only after the authorized travel request is has been submitted.

Step 2. Traveller adds the flight details and costs to the travel request and sends to the relevant managers for approvals [Ed. Line Manager and HR Manager mandatory, plus HSE and others if required for certain types of travel].  The e-mail from the agent must be attached for the manager’s consideration.  Traveller must collect all approvals prior to sending the travel form to Company Travel Department functional mail-box.

Step 3. Company Travel Department ensures that form is properly filled in, agent’s itinerary and all relevant approvals are attached and sends the form to travel agent for issuing tickets, booking hotel and transport with copy to traveller.

Step 4. Travel Agent issues tickets, books hotels and transport and confirms the arrangements to the traveller. Traveller contacts the agent directly if there are any questions regarding the travel. If the travel plan is revised a revised revised travel request must be submitted to Company Travel Department.

Step 5. Traveller collects tickets in person from Company Travel Department.

So the procedure requires that every highly-paid manager, engineer, technician, and specialist runs around emailing travel agents, getting quotes, filling out forms, getting managerial approvals, submitting forms, and collecting tickets.  Meanwhile, let me reiterate in its entirety what the dozen or so staff employed by the Company Travel Department contribute during this process:

Company Travel Department ensures that form is properly filled in, agent’s itinerary and all relevant approvals are attached and sends the form to travel agent for issuing tickets, booking hotel and transport with copy to traveller.

That’s right: they check the form is filled out properly and forward it to the Travel Agent.

Anyone who thinks oil companies should not be firing people by the thousand isn’t taking this downturn seriously.

“Next!”

Petrobrassneck

Well, fancy that:

The initial report of a Brazilian congressional investigation into corruption at state-run Petrobras concluded late Monday that the company and politicians did no wrong, and that suppliers and rogue employees were responsible for graft, according to a report.

Thank heavens for that!  When the CEO and senior executives of Petrobras resigned in February, I pessimistically thought Brazil had sunk into the mire of corruption and graft that seems to plague South American countries in perpetuity.

But it turns out everything was all right after all, it was just a handful of rogue employees who handled the $800m in bribes and illegal funds that the police had uncovered.  And I’m delighted that Brazil’s politicians have been shown to have done no wrong in this whole sordid affair, that would have done untold damage to the country’s image, especially as:

Brazil’s President Dilma Rousseff was chairwoman of the board of Petrobras during much of the time when the corruption scheme was operating.

Alas, it was the suppliers.  As is always the case when something goes terribly wrong for an oil company, the contractors are to blame.  I hope now that Petrobras will implement a robust pre-qualification procedure to weed out unscrupulous suppliers and provide online training to dissuade any more employees from going rogue.  It is important they put this behind them and move on, lessons having been learned.

“Nothing to see here…”

Get off your knees!

This is not good news for anyone who holds stock in the companies concerned:

The leaders of 10 of the world’s biggest oil companies have offered their qualified support for a new global treaty on climate change.

The producers of 20% of the world’s oil and gas say they share the ambition to limit warming to 2C.

They promise to work to reduce the greenhouse gas intensity of the global energy mix.

The Oil and Gas Climate Initiative represents major producers including BP, Shell, Saudi Aramco and Total among others.

The Oil and Gas Climate Initiative?  What the fuck is that?  From the link:

The Oil and Gas Climate Initiative (OGCI) enables the oil and gas industry to work together to deliver practical solutions to climate risks.

Practical solutions?  I’m all ears.

Member companies commit to:

– Share best practices to enhance overall standards and environmental performance

– Develop common methodologies to measure climate-related impacts and contributions to solutions

– Design a reporting process that enables the voluntary pooling of efforts and the communication of progress as a group to external stakeholders

– Facilitate and deepen engagement in international multi-stakeholder specific solutions and initiatives as well as the design of shared roadmaps

 – Engage with other industries to identify and build climate related synergies

These must be what pass for practical solutions in the world that CEOs of oil companies inhabit.  For those of us who are, ahem, a bit closer to the drill bit and the heavy-lift crane, these sound less like “practical solutions” and a lot more like “vague, woolly guff”.

Anyone who has been in the oil industry in the past 15 years will recognise all the buzzwords: “best practices”, “solutions”, “methodologies”, “stakeholders”, “roadmaps”, “synergies”.  This bullshit is pumped out at a rate which, if it could somehow be applied to their crude production, would allay the fears of investors for the next thirteen generations.  It is splurged all over the unfortunate industry employees and contractors in a manner which would make Exxon Valdez look like a carefully applied drop into the eye of a newborn babe.

Sifting through all this b0llocks I have managed to identify 3 tangible goals of this initiative:

1) Increasing the share of natural gas in the global energy mix.

2) Reducing methane emissions and “routine” flaring from operations.

3) Improving energy efficiency.

Regarding Nos. 2) and 3), this is stuff that should be being done anyway, and both have been stated goals of oil company operations for at least the past decade.  So why the need for this joint initiative?  As the website says:

Members work together, but each company defines the scope and parameters of their contribution to the initiative.

Which sounds pretty much like your average oil and gas project: everyone working together but doing whatever the fuck they want.

But it’s No. 1 which should worry investors, along with another stated aim of the group:

Developing projects to provide broader access to energy.

Which I take as an attempt to rectify the failings of various governments who, in 2015, have somehow still not managed to ensure their citizens can turn on a light after sunset.

Here’s my problem.  The role of an oil and gas company is to produce oil and gas and provide a return to their shareholders.  The role of an oil and gas company is not:

1) To determine what percentage natural gas should be in the overall global energy mix.  We have these things called “markets” to determine what form of energy the world wants.  This reeks of Soviet-style central planning whereby a handful of very clever bureaucrats decide what tens of millions of people ought to be buying.  The result is a complete mis-allocation of resources.

2) To rectify the failings of corrupt, incompetent governments in providing their citizens with basic services (or an environment which would allow private actors to provide those services).  Most of these people without access to energy live in countries ruled by governments which are corrupt, brutal, incompetent, or any mixture of those three.  Any efforts to bring energy to these deprived populations will only take place with the permission of the host government, who will almost certainly use any scheme to enrich themselves and absolve themselves of the responsibility to sort out the mess they have created in their own countries.

In short, oil companies have no business being involved in what should either be left to markets or is the responsibility of governments.  I’m not even sure this is a sensible objective either:

Developing renewables

Developing renewable energy is undoubtedly a good idea, provided government subsidies don’t skew the results in favour of useless windmills and equally wrong-headed electric cars.  But who in their right mind thinks major oil companies are best placed to develop them?  Seriously, this OGCI group includes PEMEX, the Mexican state-owned oil company.  I’ve written about them before.  Does anybody think that the bowels of a useless, corrupt, state-run behemoth is the best environment in which to develop and roll-out the technologies on which, supposedly, the fate of the earth depends?  Anyone who has worked in a major oil company, even a private one, will know that projects move with the pace of a snail, people are appointed based on their personal connections and conformity rather than ability, and decisions get made only after everyone is absolutely sure that any potential fallout can be safely deflected away from them.  And they rely on having a handy slush fund of several billion dollars with which to hose at the project when the budget inevitably gets blown in week 12.  Hardly the environment in which to nurture risk-taking ventures to develop ground-breaking technologies, is it?  Sheesh, an oil company would take a year – and $100k in jollies for HR zombies – just to come up with an expense reimbursement procedure.  And it would take equally long under this procedure for an employ to get his or her money back.

The notion that oil companies, by virtue of their being involved in energy, ought to be in the business of developing renewable energy technologies is akin to saying horse breeders should have gotten themselves into motor car production, or Ford should have gone on to develop aeroplanes.  I repeat: oil and gas companies ought to concentrate on producing oil and gas and selling their products at a profit, not dabbling in alternative energy in an effort to look good.

And this is what this is all about: it’s PR.  Dim politicians and ignorant sections of the public believe oil companies should not be maximising their efforts in doing what they exist to do, but should instead divert a portion of their resources and cash into an area which they know little about and is, at the moment, a muddled mess full of distorting subsidies, government interference, and scaremongering masquerading as science.  Clearly the CEOs of the participating oil companies think the PR will bring about a net positive return for their shareholders, presumably by improving their companies’ image.  Let’s see how that’s going:

Environmental campaigners were quick to pour scorn on the oil and gas producers’ initiative, saying it would do little to aid the decarbonisation of the global economy.

“The oil companies behind this announcement have spent years lobbying to undermine effective climate action, each and every one of them has a business plan that would lead to dangerous global temperature rises, yet suddenly they expect us all to see them as the solution, not the problem,” said Charlie Kronick from Greenpeace.

“The world should thank them for their offer of advice but politely turn it down. Arsonists don’t make good firefighters.”

Oh dear.  All that arselicking, and the eco-loons still hate you.

The incumbent oil giants are in danger of disappearing up their own arses.  Several of the companies participating in OGCI face enormous challenges in dealing with an oil price hovering around $50 per barrel.  The strategy – and I use that term charitably – of certain players seems to be one of let’s wait for the price to go up instead of “how do we adapt to <$80 per barrel oil”.  The sanctions on Iran are due to be lifted early next year: what’s that going to do to the oil price, do you think?

These CEOs have a duty to their shareholders to make the necessary changes such that they can make money at today’s oil price, not some price of yesteryear which we’re not going to see again for another generation.  And that will involve restructuring the organisations to ensure they have the right people working under a system of management where decisions can get made and projects developed without the costs spiralling out of control and the schedule going in the bin before the first month is out.  This is where the CEOs of oil companies need to concentrate their efforts, not on arselicking PR stunts aimed at cosying up to governments while doing nothing to improve their image with those who despise them anyway.  The whole thing is nothing but a distraction.  They should proudly state that they are in the business of producing oil and gas, and dammit that is what we will do!

I would hope that an appreciation of this point is the reason why ExxonMobil and Chevron are not participating in this nonsense.  Companies whose CEOs take their eye off the ball and start wandering off into the long grass tend not to last very long.

“Oof…sorry, what’s my job again?”

Les Produits des Grandes Écoles

First this story:

Two Air France managers have had their shirts torn as they were forced to flee a meeting on job cuts by angry workers.

Human resources manager Xavier Broseta and senior official Pierre Plissonnier had to clamber over a fence, while several others were injured.

The men were taking part in talks about plans for 2,900 job losses when hundreds of workers stormed into Air France headquarters at Roissy.

This scene couldn’t be more French if it had a baguette, beret, and a mistress.  Indeed, it wouldn’t be a summer in France if petulant farmers weren’t burning lorry-loads of sheep on the motorway or flinging cowshit at government buildings, and SNCF, Air France, and the ferry operators not leaving thousands of people stranded because the staff have walked out over proposals to extend the retirement age beyond 47 years old.

For a long time I thought that the attitude of the French workers was one of fecklessness and ineptitude, and that the Unions were determined to feather their own nests at the expense of the next generation who simply cannot get a job.  And to be honest, there is probably a lot of truth in that: there is a lot of fecklessness and ineptitude among French workers (go and visit a Prefecture, for example), and without a doubt the Unions include in their leadership members of the militant, teenage Trot brigades who haven’t yet realised the Cold War is over and their side lost.  But that doesn’t tell the whole story, and neither does this BBC article which attempts to provide some background to the initial story.

Thanks to an accident of childhood that saw me grow up speaking French for a while, some years ago I found myself seconded into a French company, one of the giant corporations whose name most of you will know.  I spent over a year living in France on this assignment, and then not long afterwards was working in the offices of another large French corporation on a project, albeit not in France.  So I got a good look at how French companies are run and, asking around, I don’t think it’s much different in the other large French companies (or indeed the government, if we charitably assume they are different things).

For all what the history books show, the French never actually had a Revolution.  It is possible to go to Russia, and live there for years, and never see a trace of the old aristocracy in the state institutions or companies.  There is a definite hierarchy in place, but it is not one based on class.  In France, by contrast, it doesn’t take one long to figure out that the entire government and major corporations are dominated by an elite consisting of the old French aristocratic families (take a look at the names, and see how many have de in them) and the cream of the crop of the French grandes écoles:

The grandes écoles of France are higher education establishments outside the main framework of the French university system…They have historically produced many if not most of France’s high-ranking civil servants, politicians and executives, as well as many big businessmen, scientists, writers and philosophers.

Now you don’t need to be from an aristocratic family to enter one of the grandes écoles, but if you are from an aristocratic family then the chances of you being shepherded in are very high.  So far, so Oxbridge.

What then happens is those finishing top of the class in the grandes écoles are drafted into the major French corporations and civil service where, if they show they are sufficiently “on message”, they are put on a fast-track career path which sees them take very senior positions before they have had a chance to know what the fuck they’re doing.  Naturally, the ones doing the pushing of these protégés are those who also came from the grandes écoles and enjoyed the same privileged treatment themselves.  What matters here is the person’s background: the school they went to, the grades they got, and the family they are from.  Experience, competence, personability, and other skills don’t matter a jot.  In the eyes of the French elite, they are so very clever that they can solve any problem, handle any task, and manage any situation simply by virtue of having proven themselves in (usually maths-heavy) exams when they were in their 20s.

So confident are they of the abilities of themselves and their classmates that they think nothing of shuffling between various high-level positions in government and business, often arriving in an area in which they have almost no experience.  Take Total’s CEO Patrick Pouyanné, for example:

At 20, he entered the École Polytechnique where he graduated with an engineer degree, holding the 11th spot in the degree ranking.

Note it is mentioned where he came in the class rankings.  This is important in France.

Patrick Pouyanné started his career in 1989 at the French ministry of industry. In 1993, he became the technical advisor of Édouard Balladur, the French first minister at the time. In 1995, he became technical advisor for environment and industry, and chief of staff of François Fillon right after at the Information Technology and Space Minister from 1995 to 1996. In January 1997, he joined the petroleum company Elf as general secretary for the Angolan subsidiary.

So having been a political advisor all his post-graduate career, and knowing nothing outside of government, he lands a very senior position in what was probably Elf’s most important subsidiary at age 34.

Contrast this with the CV of ExxonMobil’s Rex Tillerson:

He received a Bachelor of Science in civil engineering from the University of Texas at Austin in 1975…Tillerson joined The Exxon Company, US, in 1975 as an engineer. He held various positions with Exxon, domestically and internationally. In 1995, he became president of Exxon Yemen Inc. and Esso Exploration and Production Khorat Inc.

It took Tillerson 20 years of working his way up from engineer before he took his first senior management position at age 43.

This parachuting of very bright but inexperienced young elites into senior positions is rife in France, and when I was there I saw plenty of examples of high-flyers arriving from wholly unrelated industries – or government – and being thrown into senior positions where they were completely out of their depth.  The assumption was always that they are clever enough to be able to understand everything and make all the right decisions.  Having been told from an early age that they are bright, brilliant, and the best and not knowing any better, the individuals tend to even believe it themselves.  Short on confidence they are not.

In effect, France’s major corporations often seem more like an employment vehicle for the graduates of their grandes écoles than commercial enterprises.  And as with the government and the electorate, stuffing the upper echelons full of well-connected elites results in a huge disconnect between the management and the workers.  For it is largely true that, no matter how hard one works and how brilliant one is, you will never surpass the chosen few from the grandes écoles in terms of promotion and prestige.  For sure, many try, and considerable efforts are made by the company management to convince the ordinary folk that if they show sufficient compliance, obedience, and work themselves to death they will be admitted to the hallowed ranks of the chosen few.  But in reality, they are being sold an absolute lie.

I likened the situation in the company I worked in to the British colonial powers in India.  The British were the rulers, and the Indians were the subjects.  No matter how good an Indian was at his job, and how much he had demonstrated his loyalty, he was never going to be given the job that was earmarked for the 25 year old son of a British MP.  And nor would a British administrator listen to an Indian if there was a British chap nearby saying something different.

Eventually the Indians got fed up with this and kicked the British out.  What we are seeing in France is the result of workers having realised that they are being treated like second-class citizens in the workplace by a small bunch of privileged elites who have been parachuted into management positions for which they are wholly unsuitable, and have decided that they need to get aggressive if they are to have any share of the spoils.  No wonder France has militant Unions that demand ever-increasing benefits for their members when the ruling elites treat them with such contempt.  They’d be pretty foolish to rely on the good nature of this bunch to take care of them: they’d end up with nothing.

Whereas I think this peculiar French system of corporate management might have worked for a while (the British approach to India brought undeniable benefits as well, for a time), my guess is the French elites are finding it harder and harder to compete in a globalised world where nobody cares which school you went to and everyone worth doing business with stubbornly insists that it takes place in English.  The grandes écoles system, while guaranteeing a job for life in France, probably does not prepare its graduates well for life outside of a French bubble.  This reality, coupled with the inevitable poor decisions of successive generations of managers who all came from the same system, has meant the French corporations are struggling.

As with any elite in any country, accountability on their part has been non-existent and resignations rare.  Instead, we hear the refrain of embattled dictators everywhere: I’m still the man for the job!  Meanwhile, these same individuals are now telling the workforce that cutting thousands of jobs is necessary to bring the companies back to profitability.  Now whether or not job cuts are necessary, and I am sure that they are, who from the grandes écoles that have presided over this situation are going to take responsibility?

Nobody, it seems.  No wonder the workers are pissed off.  I don’t work in the airline industry so I don’t know if the Air France CEO has made the same knuckle-headed decisions his counterparts in the oil industry make with alarming regularity, but this is his CV:  graduated from a grande école in 1980, did a further 3 years in academia, worked in government until 1995 and then joined Air France as director of management control and audit at Air France Europe aged 39.  Nice!

France is not unique in having a cosy, well-connected, and interchangeable elite enjoying a merry-go-round of high-profile positions in government and business which come with generous packages but seemingly no accountability.  But the degree to which it is beholden to this system is sending the country and its industries down the pan, fast.  I suspect it is too entrenched, and too late, to do anything about it now.

“But I came top in calculus at  l’Ecole Nationale d’Administration!”

And everyone will have a pony

This, from the clot running Greenpeace, deserves a proper fisking:

The world can more than afford to switch to 100% renewable energy as the savings in fuel usage will outweigh the cost of switching from fossil fuels, a new Greenpeace-backed study has claimed.

Erm, if 100% renewable energy is cheaper than fossil fuels, then what is the “cost of switching from fossil fuels” he is talking about?  If it’s cheaper to switch to renewables, then there are no costs of switching.  Unless he is referring to the inevitable blackouts, brownouts, and energy rationing which will follow such a switch.  In other words, the energy will be cheap but unavailable.  Like toilet paper in Venezuela.

The environmental watchdog has also countered claims by the International Energy Agency (IEA) that job creation will fall once fossil fuel usage declines, claiming that the employment scenario will improve in a green future.

As Tim Worstall is fond of pointing out: jobs are a cost, not a benefit, of renewable energy schemes.

“The investment cost for the switch to 100% renewables by 2050 is about $1 trillion a year. But because renewable energies don’t need fuel, the average fuel cost savings are $1.07 trillion a year,” [the study] read.

What has fuel got to do with it? If the cost to produce 1MW of electricity is $X for renewables and $Y for fossil fuels, the only thing that matters  is the difference between the two figures: what they consist of is irrelevant.

“So the investment over the period is met in full by fuel cost savings, with the cross-over happening between 2025 and 2030.”

If the annual investment required to produce renewable electricity is roughly the same as the fuel cost alone(!) from conventional generation, why aren’t companies falling over themselves to do so right now?  Answer: the numbers are bullshit.

The study comes ahead of a crucial meeting on climate change between world powers in Paris at the end of the year.

Where said world powers will be encouraged to splurge yet more taxpayers’ money on demented studies carried out by the likes of Greenpeace.

“The ‘Energy [R]evolution’ proposes a phase-out of fossil fuels starting with lignite (the most carbon-intensive) by 2035, followed by coal (2045), then oil and then finally gas (2050),” it read.

If this all makes such perfect sense economically, why is a planned phase-out required?

“The rate of phase-out of oil and gas matches the rate of depletion of existing oil and gas fields. So exploration for new fields should be seen as high-risk investment as the ‘assets’ may be stranded.

Sorry, who is driving this phase-out?  If governments, having listened to the cretins in Greenpeace, are forcing companies to “phase-out” fossil fuel use then yes indeed, exploration would be high-risk.  And if government force is not applied, then why would assets become stranded?  I do believe Greenpeace is advocating a Soviet-style command economy.

The study claimed that, within 15 years, the share of renewable in the electricity mix could treble from today’s 21% to 64%. Greenpeace’s scenario sees natural gas as the last fossil fuel to be in place, but even that will be replaced renewable-generated hydrogen by 2050.

This sounds like one of those predictions from the 1950s about how we would be dressed in the future.  Like this apparently:

1950s

Whereas in reality:

Present Day

So much for predictions.

“Even with the rapid development of countries like Brazil, China and India, CO2 emissions could fall from the current 30 gigatonnes a year to 20 gigatonnes by 2030,” it said.

At the expense of the those countries run by people stupid enough to listen to Greenpeace, I suppose.

The switch to renewables would also not come at the cost of jobs, the report claimed.

Good!  I’ll inform my Porsche dealer.

“At every stage in the transition to 100% renewable energy, there are more energy sector jobs. The IEA predicts the number of jobs falling after 2020. The ‘Energy [R]evolution’ sees them increasing, by nearly 20 million between now and 2030, because of strong growth and investment in renewable.

So we need to employ more people to generate the same amount of electricity that we do now.  And this works out cheaper, somehow.  Uh-huh.

“Solar PV [photovoltaics] will provide 9.7 million jobs, equal to the number of people working in the coal industry today. Jobs in wind power will grow to over 7.8 million, which is twice as many as are employed in oil and gas today,” it added.

Twice as many as the global oil and gas industry?!  Who is gonna pay their salaries?  Or will we just pay ’em half as much?

The report’s lead author, Sven Teske of Greenpeace, commented: “The solar- and wind industries have come of age, and are cost-competitive with coal. It is very likely they will overtake the coal industry in terms of jobs and energy supplied within the next decade.

So no need for any more subsidies then, presumably?

“It’s the responsibility of the fossil fuel industry to prepare for these changes in the labour market and make provisions. Governments need to manage the dismantling of the fossil fuel industry which is moving rapidly into irrelevance.”

Sorry, what?  Governments are being encouraged to dismantle the fossil fuel industry…but it remains the responsibility of the fossil fuel industry to make provisions for the millions who will be laid off as a result?  Jesus, even Thatcher didn’t tell the miners to write their own dole cheques!

Greenpeace executive director Kumi Naidoo added: “We must not let lobbying by vested interests in the fossil fuel industry stand in the way of a switch to renewable energy, the most effective and fairest way to deliver a clean and safe energy future, so more than meet the costs of the investment.”

And there was me thinking, at the start of the article, the switch to renewables was an economic no-brainer.  Now he’s throwing out woolly terms like “fairest” borrowed from a meeting of 6th form Trots.  Lobbying by vested interests, he says?  Motes and beams, thinks I.

Cavemen“I preferred it when we didn’t have all those windmills.”

Rood Boyz

There is an odd phenomenon in corporate environments whereby extreme rudeness and impolite behaviour is perfectly acceptable provided it is of a certain form, while others are very much frowned upon.  Here is an example.

A project I was managing required a specific type of insurance document to be drawn up on behalf of one of the contractors.  For this, I had to go to a chap who called himself Head of Legal Affairs.  I explained to him what was required, the importance of it to the contractor and hence the execution of our work, and he assured me that this would be done in good time.  Without this document, the contractor – who had acted thus far in completely good faith – could not mobilise.  A week passed and still no document.  I emailed the Head of Legal Affairs, who I’ll call Mr Weepy for reasons that will become apparent, to ask him when this document would be ready.  I never got a reply.  Meanwhile, my contractor was understandably getting agitated as their schedule was in danger of slipping.  I called Mr Weepy’s desk, but he was on holiday.  I eventually found his replacement and forwarded the earlier email to him, and asked him to issue the document.  No reply.  So I called him up, spoke to him, and he said he’d get on with it.  Another week or two went by, the insurance document was still not issued, and my contractor’s schedule was in tatters and his costs increasing.  I’d had nothing but silence from the Legal Affairs department.

I decided to wait until Mr Weepy was back from holiday, and then sent him another email.  No response.  I sent him several more emails.  No response.  In each case I copied in the chap who had replaced him when he was on holiday.  No response from him either.  This went on for about 2-3 months, and the noises from my contractor were getting more and more desperate.  I contacted Mr Weepy’s manager, to no avail.  Eventually I got Mr Weepy on the phone.  The conversation went like this:

Me: “Hello, it’s Jake Barnes.  Have you issued the insurance document yet?”

Him: “Sorry, what’s this about?”

Me: “The insurance document for the contractor.  I’ve sent you a dozen emails on the subject.  Is the document ready?”

Him: “Oh, you need to speak to Mr X (the chap who had replaced him on holiday and been in copy of all correspondence since).”

Me: “He’s been in the loop since the beginning, and hasn’t done anything: you’re his manager, so YOU go and tell him.”

Him: “I am sorry but…”

Me, in a ferocious growl concealing a murderous anger: “No, you listen here.  And you listen damn good.  You will go to your desk and you will prepare that damned document and you will send it to the contractor right now.  I am not interested in your “buts” you will do your damned job and issue that document.”

Him, in a voice revealing extreme shock “You will not speak…”

Me: “I’ll speak to you how I damned well like.  For three months I’ve been asking you to do this and not once have you bothered replying.  You have utterly failed to do a simple task and so I am taking it upon myself to make sure you do it.  So you will stop whining and go to your desk and prepare that document as soon as we are done talking.  And we are done talking.”

With that, I slammed the phone down.

A few minutes later my phone rang and his trembling voice demanded to know who my manager was.  He was actually crying.

Me: “You damn well find the organisation chart and look it up.  Now I instructed you to prepare that document and I expect you to do it, right now!”

And I slammed the phone down again.

Within a couple of hours I got a phone call from one of the senior managers who wanted to speak to me about “an incident”.  No prizes for guessing which one.  He admonished me for being rude, unprofessional and used phases such as “there is no need for that” and “there are ways of asking nicely”.  My response, delivered in monologue (my preferred method of communicating with managers) was roughly as follows:

“Oh, so I was being rude, was I?  And three months of having my emails ignored, phone calls ignored, and being fobbed off with excuses on what was obviously a seriously important and sensitive matter isn’t rude and unprofessional, I suppose?  And yes, there are ways of asking nicely and indeed I did just that for three months and found myself getting nowhere.  So I kicked his arse and made him cry, and do you know what?  The contractor got his document yesterday.  So if by asking nicely I get fobbed off and ignored, and if by bawling at him and making him cry he finally does the job he is paid to do, what do you think I’ll be doing in future?  What’s the lesson learned here?  The lesson he needs to learn, and others like him, is that if he does his job and is courteous then people won’t be rude to him; but if he is discourteous and unreliable in his dealings with others, he will be made to cry again.  And the lesson you need to learn is that rudeness and unprofessionalism comes in many forms and you seemed quite uninterested in them when I was on the receiving end for three months.  In fact, I came to see you about this very problem and you just shrugged and told me “I have to manage it” so you know what?  I did.  I dealt with it my way.  What was I supposed to do, keep asking nicely for another three months?”

To which the manager – having learned not a damned thing – just weakly repeated what he’d said about “there being ways of talking to people”.

But you know what?  The document was issued that very day.  The lesson I took away from this is not to refrain from being rude to somebody, but that if somebody doesn’t respond to being asked nicely more than three times then give him a kick up the arse that will make him think his sphincter has eloped with his tonsils.

“Allow me to be polite!”

Too much information

A mate of mine from my university days works as one of the bosses in a company supplying specialist equipment to the oil and gas industry.  A few years ago, back in the days before the oil price collapsed and such jollies were kyboshed, I met him at his company’s stall at the ADIPEC exhibition in Abu Dhabi.  We started talking about his role in flogging equipment, and he told me over the course of the conversation that you can tell very quickly what kind of organisation you are dealing with, and whether it will be a waste your time, by observing their behaviour in the first month after initial contact.

He told me one of the biggest red flags was rapid and continuous demands for “more information”.  If the words “please provide” appear in any of the correspondence, you’re probably wasting your time.  His product range was substantial, but the example he gave me concerned fireproofing material which he’d attempted to pitch to a large oil company in Central Asia.  Naturally, he brought with him the full sales package, including all the technical information associated with the actual product.  Despite his potential client turning over billions per annum and running a gargantuan operation, he walked into the meeting room to be faced with half a dozen tired and elderly men and women who looked as though they were doing their graduate training when Nikita Khrushchev was building the Berlin Wall.  The technical leads were impressed with his product, and they were sorely in need of it, but once they’d established their interest in the actual valves they started looking shiftily at each other, as if unsure what to do next.  After some mumbling back and forth in their native tongue, one of them finally ventured:

“Are you registered to do business in our country?”

To which he replied “Of course.”

Another lengthy pause, then one of them suddenly brightened and asked “Ah, but is your product certified by the fire protection authority in our country?”  This made all the others nod vigorously and murmur in agreement.

“Yes,” said my friend “it is.”

Heads sunk.  More mumbling.  Then “Do you have a license to import this product?”

Things didn’t go any better after the meeting.  For the next three weeks he found himself in an iterative process whereby they would request documents and information (company registration certificate, power of attorney, tax records) which would he would provide, only for them to come back and ask for more information (import licenses, fireproofing certificates) which he would duly supply, at which point they’d ask for yet more information (“we need certified copies of everything”),

What was happening was obvious.  Although the technical people liked the product and needed it badly, nobody had the courage to commit to adopting it.  This would not only require somebody to make a decision for which they might later be held responsible, but they would have to deal with other departments (procurement, finance) who would make the task almost impossible and they would need to persuade senior management who owe their position less to their business acumen than their willingness to inform on their neighbours in the 1970s and then hire ex-weightlifters to smash in the heads of their business rivals in the 1990s.  Faced with internal obstacles of this nature, it’s much easier to say the new product cannot be accepted due to lack of documentation, and just keep on doing what they’ve been doing since Yuri Gagarin became a household name.

My friend quickly learned that a company which is serious will ask for a standard set of documentation once, and possibly some specialist technical information later with a clarification or two, and then quickly move on to commercial stuff: when can we get them, how many, how much, etc.  But if a company asks you for masses of information, especially in the form of “Please provide the following” at the head of a long list of generic documents, and repeatedly asks you to supply increasingly detailed and obscure information, then it is fair bet the people with whom you are dealing won’t have the authority or capability to ever place an order.

Most worryingly, my friend told me that whereas this is commonplace in state-owned companies, it is increasingly becoming the case in major western oil companies.  Not for the first time I get the feeling that the two are converging, and not in the way they are supposed to.

“You need to fill out these before we can do anything.”

In Reply to Young PETE

Commenter Young PETE has asked me a couple of questions in the comments under the previous post, and I have decided to answer them in a post of its own.  First, YP’s comment:

I stumbled upon your website and have been reading your posts for the past few hours, and agree with practically all of it. One of the common trends you discuss within majors is technical ineptitude and lack of integrity/character on a junior level, which evolves to middle management and then upper (assuming the stars are aligned, among other things).

To what extent have you observed this behavior in independent O&G companies? Also, do you have any advice on young staff improving their technical skills? I’m not advocating SPE papers (although that wouldn’t hurt…), but rather insight based on your experience in the industry, and arguably the best/worst aspects of it.

My answers, which ought to be afforded the weight due some random bloke on the internet giving his opinion but are absolutely representative of what I think, are as follows.

I haven’t had much exposure to independent O&G companies, but that which I have had (which might not be representative) has shown me two things:

1. They often start out as exploration companies and have considerable success, due to their core expertise being provided by good but frustrated people working in the geosciences in the majors. However, they then try to move into production and operations (usually with engineering and construction of a sizeable project too) and don’t do half as well at this as they did exploration.

2. As the independents don’t have the pedigree and history, they need to recruit externally into the production, engineering, and management positions – usually from the majors. This then leads to lead guys coming in and recruiting their mates and/or cliques forming between the ex-BP/ex-Shell/ex-Whatever lot. Neither is good for business.

Several independent companies have tried to recruit me over the years, and as I may have said before, you can tell an awful lot about an oil company by their recruitment process. Casting my mind back, four attempted recruitment experiences from independents have been:

1. Appallingly, mind-bogglingly bad. If this is how they run their operations.

2. Reasonably professional, but the location didn’t suit. A nice bunch, though.

3. Left me laughing out loud that this guy seriously expected me to come and work for him.

4. Rude in the sense that nobody bothered even telling me the outcome of the interview.

In summary, I’d hazard a guess that the independents avoid some of the issues major oil companies face, but at the price of inventing new ones unique to them. However, I suspect each one differs considerably and it all comes down to which individuals are in which positions at any given time.

Regarding the technical skills of a young engineer, my advice would be to first decide are you going to be a discipline engineer or not early on. A graduate should be able to figure this out fairly early on, and decide whether they’ll take a technical path (discipline engineer) or general path (project engineer, project controls, etc.) If the former, they are best off joining a large engineering company and learning the basics of the discipline for the first 5 years or so (Aberdeen is a great location for this; working in places like the Middle East not so) such that they have an extremely solid foundation which they can either build on or from which they can branch out to further specialities. The value of a properly trained and experienced Western discipline engineer cannot be understated: the idea that this value can be brought onto a project by importing cheap “engineers” from the developing world should have been abandoned years ago. It is not a matter of technical skill or intelligence, it is a matter of culture: it is imperative that discipline engineers have the courage to come forward and speak their minds, and not ignore problems through fear of being the bearer of bad news. But whatever the background of a young engineer, he or she will not go far wrong by applying the very basics of their discipline in a project environment over and over again until it is second nature. But this can only be done in an engineering company, a modern oil company is useless for this outside the of the geosciences.

I hope this answers your questions, and thanks for commenting!

Who judges the judges?

An employee in a major oil company finds themselves bombarded on a daily basis with advice, most of it unsolicited, uninformed, patronising, self-serving, and muddle-headed.  This is especially true if you are under 30, after which it tends to die down a bit as men who are not afforded respect at home quit trying to be your dad.

That said, occasionally one stumbles across a gem.  One of the best pieces of advice I was ever given came from an unlikely source, and went as follows:

“If you want to know if somebody is any good, don’t bother asking their manager: a manager is never going to tell you their subordinate is crap.  Instead ask one of their colleagues, particularly someone who was relying on them to deliver something.  They’ll tell you the truth.”

It’s hard to fault that.  Unfortunately, the course of action for most people wanting to get the background on somebody is to call their previous manager.  But as the advice says, he won’t tell you if he’s crap.  Why?  Because half the time the manager won’t know if he’s crap: most managers think somebody is good if they are sufficiently compliant, don’t ask awkward questions, and otherwise get with the program.  Being able to deliver doesn’t even come into it.  And half the time the manager will know his subordinate is useless but lacks the balls to do anything about it, and so to save him having to explain why the hell a crap worker is still on the payroll he’d rather say the employee is good.  This is particularly true if said manager is wanting rid of said employee.

The above is probably the theory behind what are called “360 degree appraisals”, which my company is experimenting with.  The idea is a manager, colleague, and subordinate each appraises an individual and so you get a good all-round assessment of the person’s qualities (or lack of).  Only my employer has no intention of giving any old oik the opportunity to pan one of their Golden Boys and so has given each manager the opportunity to select which subordinate will carry out their appraisal.  Naturally, they have picked those which are most compliant and whom they feel will judge them the most kindly.

In a wholly unsurprising development, I haven’t been asked to participate.  Fancy that.

Sunset: more of a surprise than Jake being snubbed.

 

Is Total feeling a Russian chill?

Following the tragic death of Total’s CEO Christophe de Margerie in a plane crash last October, I said:

[T]he Big Moustache’s enormous character made him genuinely popular among the Russian leadership and it is no certainty that his successor will make the same impact in a country where personal relations count for so much.  It could well turn out that much of Total’s commitment to Russia was down to de Margerie personally.  Having not been involved in E&P in Russia, the new CEO might find it a cold and difficult place to do business.

This thought came to mind last week when I read of the rumours that Total was looking to sell out of the Kharyaga development in Russia:

The French supermajor has held preliminary talks with state player and minority stakeholder Zarubezhneft about offloading its holding, Russian business newspaper Vedomosti reported.
The newspaper, which cited an unidentified federal official and source close to Zarubezhneft, said talks are at a preliminary stage.
Upstream awaits comment on the issue from Total.
Earlier this year reports suggested that Russian authorities were looking to remove Total’s operatorship from the project, something Energy Minister Aleksandr Novak later denied.
In January, reports emerged that authorities were unhappy with Total’s failure to achieve 95% utilisation of associated gas, and thus increase oil production as promised.However, Novak revealed that authorities only asked Total to consider taking representatives of Zarubezhneft on board to assist in the task of building processing facilities to bring associated gas to market specifications.

Kharyaga is Total’s only operating development in Russia.  To surrender all operatorship in a country as strategically important and with as much potential as Russia would be a huge decision, and one which would require a clear and detailed statement as to how this fits in with the strategy of a global oil company that is already absent (in terms of operated assets) in Canada, the USA, Brazil, and Australia – all areas of key growth opportunities, not to mention established producing assets, for their supermajor peers.

But so far they are just rumours.  Nevertheless, the article raises a few questions (emphasis mine):

In February 2011, Total said that it signed a $400 million engineering, procurement and construction contract with Russia’s Globalstroi engineering to update its central oil processing centre under the third phase of the production expansion project.

The contract included facilities to stop flaring associated gas by the end of the third phase.

However, the contractor has failed to perform

With the obvious one being “Why?”  While being quite ready to believe that Total had imposed upon them an incompetent but politically connected contractor that couldn’t manage to pour a simple slab of concrete if it had twenty goes at it, my experience with major oil companies would not have me betting against weak, inexperienced, arrogant, and incompetent Company personnel being a major factor in this $400m failure.  This is certainly one of the complaints Russians level at Total for the $1bn Shtokman debacle, although in that case the sovok mentality prevalent in Gazprom likely doomed the project from the start.

Whatever the reasons, Total appears to be struggling in Russia (although they’re not alone in that regard).  They are probably cheered by the progress of the giant Yamal LNG project which appears to be unaffected by the sanctions on its major shareholder and operator Novatek.  But I am of the opinion that Total’s position in Russia ought to be based on something a little more solid than an 18% stake in a company owned by somebody who probably owes his position to having once been Putin’s judo buddy.

This story is worth keeping an eye on.

“Alors, c’est difficile!”