Editor’s Remarks
2011 – A Year of Discontent
During the two days of our World Assembly on November 16-17 at Chelsea Football Club, I pulled aside dozens of our speakers and Partners for sixty-second interviews. You can
read some of the transcriptions in these pages.
I asked roughly the same question to everyone, namely, what was the biggest lesson you learned in 2011 that will be carried into your business planning in 2012, and what concerns you and what excites you about the upcoming year for you as a business and for the oil and gas industry as a whole.
In every answer, the same word came up: volatility; volatility in the financial markets, in the global economy, and in the sense of political instability. After 2011, what other answer could one give? And if volatility is the new stability and can be depended on as a factor in business planning – does that mitigate the pernicious effects of it, once the unpredictable becomes predictable?
From a socio-political perspective, there may never have been a year with as much aggregate dissatisfaction manifesting itself in so many parts of the world than 2011. It will enter history along with 1968, 1917, and 1848 as a year of widespread protest.
Consider: A fruit seller in Tunisia with nothing more to lose sets himself on fire as a protest against a Government who had made his life unbearable to his own self. Like the assassin’s bullet that killed Archduke Ferdinand, it was a small, solitary act that was the beginning of a truly world- changing year of rage. From Tunisia, the uprising spread across North Africa and into the Gulf States, the rumblings of which are still being felt as Egypt, Syria, and Yemen continue to fight for control of their futures.
Meanwhile, a different storm was brewing in the Eurozone and US – a painful relapse of a hangover of the 2008 financial crisis reasserting itself in the form of fears over sovereign debt. The prescribed cure – austerity – has triggered violent clashes and rioting in Rome, Madrid, Athens, and elsewhere.
On the softer side of the spectrum, the Occupy movement, which started in Wall Street and was itself inspired by pictures from Tahir Square, has metastasized to over 82 countries – in as unlikely candidates as Japan, Norway, Hong Kong and Mongolia. The Occupy movement has mercifully less violence in it than their Middle Eastern counterparts, but it too is characterized by deep dissatisfaction and discontent with the status quo.
There were even times in 2011 when violent civil disobedience seemed to have little aim whatsoever. In July, gangs of Londoners took to the street to burn
buildings, vandalize businesses, and injure policemen for reasons that were as pointless and superficial as the act itself.
The global O&G industry often operates at the sharp end of geopolitical and economic risk, not to mention operational and environmental risk; E&P takes companies to some of the most unstable and difficult parts of the world, and when the markets pull back credit, E&P stocks are punished disproportionally.
Yet, as Lord Browne reminded in his speech at our Awards of Excellence Dinner, the O&G industry produces a product that is indispensable to the functioning of the modern world. It does this by going into some of the most technically, logistically, and politically challenging parts of the world and uses NASA-level technology to extract its product from underneath the earth’s surface in a safe and environmentally acceptable way. It does this all for a product that is sold at $100 a barrel – far cheaper than the cost of a gallon of nearly any other product, whether that’s Coca Cola, milk, or bottled water.
While doing that, it is important to remember to be good guests when operating in a foreign country, said Lord Browne. At a time when global levels of discontent are at an historic high, the O&G industry should not be satisfied with merely acceptable levels of environmental and social compliance – it should over-deliver in these areas and build for itself a reputation as a ‘good guest’ wherever it operates, bringing benefits to local economies and communities.
Even when companies achieve this, too often, the media has put industry on the back foot, forcing it to issue reactive statements about its activities (‘fraccing’ was one of the Oxford English Dictionary’s Words of the Year, its context almost unfailingly negative). Taking the lead in environmental, economic, and social initiatives is one way to reclaim control of the message the industry sends to the market and the media.
In an alternative world, for example, why couldn’t fraccing be associated not with poisoning water wells and causing earthquakes, but with an incredible feat of human ingenuity aimed at solving the problem of providing cheaper, cleaner, and geopolitically more secure supplies of energy that benefit the local economy. Out of interest, who wouldn’t want that?
By Drake Lawhead, Editor
p.s. I look forward to meeting some of our readers at our Latin American Assembly in Bogotá early next year (Jan 25-26th).
Drillers and Dealers :::
::: December 2011 Edition
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