Houston Energy Program Is Oilfield-101 to US Officials Abroad

HOUSTON (Dow Jones Newswires), August 8, 2008

For the energy industry, time is money. A lot of money.

When problems, such as the breakdown of a drilling rig worth $650,000 a day, crop up far afield, it isn't just the engineers who get calls from U.S. companies. So do U.S. foreign-service officers.

To assist the industry with problems that invariably surface far afield, the U.S. government each summer sends about two dozen U.S. foreign-service officers from key oil-producing countries to Houston for a week-long crash course on the basics of oil and oil services.

The little-known training program - which is jointly funded by the U.S. government and an oil-services trade group - provides a window into how rank-and-file U.S. officials interface with one of the most strategic sectors at a time when U.S. companies face challenges from resource-holding nations amid booming energy demand. One impetus is the belief that both sides benefit from better communications between the oil industry and government.

This year's mid-July sessions included a primer at Schlumberger Ltd. (SLB) on where oil and natural gas comes from, a demonstration of Halliburton Co.'s (HAL) real-time drilling simulation, meetings with executives at ConocoPhillips (COP) global headquarters and sessions on energy geopolitics at Rice University. Participants were shuttled across the city in a white school bus.

In recent years, producing countries such as Russia and Venezuela have adopted a more muscular approach towards foreign oil producers, in some cases nationalizing projects or pressuring companies to accept less generous fiscal terms. While oil-services companies don't encounter these precise challenges because they don't seek direct control over a host nation's resources, they face other hurdles abroad.

When they negotiate with private oil giants about projects, oil-services companies generally wouldn't think to engage U.S. government officials. But the landscape is very different abroad, where local-content requirements and tariffs can place foreign companies at a disadvantage. Oil-service companies spent much of last week demonstrating the benefits of U.S. oilfield technology, with the goal that more-learned foreign-service officers could tout the gadgetry if opportunities arise.

In approaching the foreign-service officers, oil-services companies are "trying to create an opportunity for U.S. companies to compete," said Robert Workman, president of distribution services for National Oilwell Varco Inc. (NOV). "In a lot of countries, there is not a level playing-field."

From Another Era  

The program, managed by the Houston-based Petroleum Equipment Suppliers Association, began in the early 1990s, not long after the 1980s oil-bust left a morass of idled rigs and oilfield equipment. Many American oilfield service-and-supply companies found themselves needing to expand their international business in order to survive.

The program was especially helpful to "smaller companies that didn't have a Washington office," said Matt McManus, division chief for the U.S. State Department's division of energy producer country affairs, who helped start the program. Besides the State Department, the Commerce and Energy Departments send international staff to Houston each summer.

As part of their official duties, foreign-service officers - agency generalists who typically are assigned to a country for two-year stints - are supposed to promote U.S. companies abroad. That means that foreign-service officers should "keep the interests of U.S. companies at the forefront of foreign procurement and help promote American procurement over that of a competing nation," McManus said.

Some government agencies even have official awards for employees who do the most to advocate for U.S. businesses abroad.

This year's attendees, who weren't granted agency clearance to be identified for this story, said the proceedings gave them a better comprehension of the industrial scale of energy.

U.S. officials also said they benefit from additional on-the-ground intelligence from industry sources. This insight can help government officials better predict the implications of local events, as well as provide information on key geopolitical developments.

Peter Secor, who heads up a key energy office at the State Department, urged industry officials to network with FSOs.

"The most senior levels of government are tremendously interested in every new piece of information about Chinese investment in Iran," Secor told a dinner gathering.

Houston-based PESA currently lists about 200 member companies ranging in size from oilfield giants such as Baker Hughes Inc. (BHI), to tiny valve and drilling fluid companies. The organization's Web site lets companies search for the program graduates of the PESA program by venue, currently listing about 50 sites from Angola to Yemen.

"As these people move to different spots around the world, we have more than 300 people who know about PESA and know what we do," said Sherry Stephens, president of the group.

Galen Cobb, a Halliburton vice president for industrial relations, said it is "unknowable" how much business has been generated by the program, but that strong relations with consular staff are essential.

"They are our ambassadors and they can be a more intelligent ambassador," Cobb said.

National Oilwell Varco typically is less engaged with consular officials in countries such as Scotland, which aren't known as politically challenging venues. But the company has learned to expect surprises in countries such as Venezuela and Nigeria, where new regulations and duties can surface suddenly. For more difficult countries, National Oilwell Varco officials are in talks with U.S. officials in such venues on "probably a monthly basis," said Workman.

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