COVER STORY
‘Most Irish companies work in the OECD countries. They compete and beat each other over the head for margins and contracts and jobs, when there’s a whole world of opportunity out there in Africa where there’s no competition’
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INCE founding Tullow Oil in 1985, Aidan Heavey has developed it into Europe’s leading independ- ent oil and gas exploration company. In August, FTSE-100-listed Tullow Oil announced an increase in pre-tax profits of 152pc to US$131m in the first six months of 2010, and an 11pc jump in
revenue to US$486m over the same period. What is more, the first oil from Ghana is expected before the end of 2010, which the company expects will result in significant production growth in 2011. Indeed, Africa represents a core part of the company’s success,
says Heavey, who spotted an opportunity to mop up small oil wells left behind by the oil giants back in the Eighties. With little or no experience in the industry, Heavey’s Tullow Oil acquired its first oil prospects in Africa in 1986. Today, the company operates in 27 countries and employs over 500 people. A native of Castlerea, Heavey attended Clongowes Wood College before completing his BComm at UCD, and qualifying as a chartered accountant. There followed stints at an Aer Lingus subsidiary, Blue Skies, and then at Tullow Engineering in Carlow, before he left to set up Tullow Oil in 1985. So with no background in energy exploration, what made
Heavey tackle this industry? “Well, if you look at the last few years you know, Ireland was all about property, around 2000 it was all dotcoms,” he says. “Back in the Eighties, it was all about oil. “You had the Celtic Sea, and you had Atlantic Resources, Arran
Energy, a whole load of oil companies – every taxi man in the country was talking about oil finds in the Celtic Sea, so there was a big buzz and when people were discussing and looking at opportunities at that stage, it was all about oil.” It was at that time that Heavey was discussing that whole oil mania with some bankers, when the spark was ignited that led to Tullow Oil’s subsequent success. “They were talking about small oil fields left behind by major oil companies, fields that were just too small for those companies to develop, and they were saying that nobody wanted to invest in Africa, and they were just left lying there. “That’s where the idea came from. We found out about some licences in Senegal, West Africa, and just went down to see,” he recounts. “I suppose the first trip down was a bit of a holiday, but when you arrived there and you saw such a beautiful country, such lovely people, suddenly it was obvious to us that this was a great opportunity and we were determined to get it. That’s where it all started. Senegal was our first project.”
Starting out Getting financial backing for such an ambitious project, run by a team of inexperienced ‘oilmen’, was a challenge, admits Heavey. “A Tullow had never been done before, it had never happened before that an oil company started from scratch and grew to a £12bn operation, which is what it is today. We knew nothing about oil, we had no backers, so it was a real challenge.” Initial funding came from personal bank loans, as well as
investment from family and friends. “So it was a gradual process of trying to get funds from any source until we started to prove that the project was worth something, and it took us about a year to do that.” As well as the struggle of learning about a whole new industry in the first few years, the other pressure came from a sense of responsibility vis-à-vis the Senagalese. “We were very apprecia- tive of the Senegalese because they gave us a break, they put a lot of trust in us and we were determined not to let them down. “A lot of the culture and a lot of the strengths of the business really started off in those days because we wanted to do it right. We didn’t want to let them down, or let our own shareholders down. They had all put a lot of trust in us.
“So we hired the best people in the business, we decided we’d
do everything properly from day one,” he continues. “We worked very closely with the community, we worked very closely with the government and we made everybody a team. It developed a very strong culture in the business, and we used the Senegalese expe- rience to expand into other areas. We built the business up into quite a sizeable one by the end of the Nineties, around those same sort of projects. The company was worth about £180m by the end of the Eighties, and we were a big, successful company by Irish standards.
“But what we found as we moved more around the world was that, by international standards, we were very much Mickey Mouse, and we were not in any way able to compete with our international peers.” Heavey and his team decided that if they were to become a “proper international company”, it was time to move to the next stage, and that a step change was needed. “That step change came in 1999. We started looking at the
North Sea, and we hired a bank to look at some opportunities there – we were thinking of maybe spending some £50m in the North Sea in buying some assets.” When the bankers came to Dublin to discuss their findings
they mentioned over lunch that they had a big project that had fallen through, where they had been contracted by an American
UCD BUSINESS CONNECTIONS 19
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