“Not to worry! Knowing you were coming, Ben has been working overtime to not disappoint you. Ben, if you please?”
“Mrs. Roth,” said the young man, “I have prepared four questions that reflect our highest-priority concerns. First and foremost, we are concerned about becoming increasingly dependent on the seven major oil companies. Not only are we suspicious of some of their practices and motives, we are also reluctant to become more dependent on them in light of some of the national political interests they appear to represent.”
“Perhaps the best way for me to answer your concern,” said Claudine, “is to say that my friends and I are committed to the idea of encouraging the development of oil on an international basis, independent of any political and economic agendas, in whatever manner is necessary to satisfy emerging global needs with a reliable supply of affordable oil. We have every reason to believe that once the Oil Club’s economic barricade has been eliminated, consortiums of independent oil companies will come forward and provide competitive bidding on the development of new oil concessions.
“Once you have had the opportunity to examine the fine print of what unfortunately has become a very large document, you will discover that, beyond seeking the approval of the U.S. government to pass needed legislation, the administration of our plan will be provided by representatives of the investors.”
“I’ve been studying your prototype,” said Ben, “and I noticed the equity portion of the funding was provided by the Sentinels and your inner circle of investor friends. Are you expecting future applicants needing equity support to work with the same group of investors?”
“Good question!” said Claudine. “No, that was a special situation designed to facilitate the first deal. Unless our help becomes necessary, we prefer that applicants create their own equity sources. I hope that our investment won’t be misconstrued as anything other than a one-time measure born of expediency.”
“Very good! Does the fact that new Saudi reserves were used to organize the prototype indicate that future funds must be limited to Saudi or Persian Gulf reserves? Is there anything in the energy fund agreements preventing qualified French oil companies from bidding on proven reserves in our protectorates in North Africa? Properly developed, they could very well represent the solution to France’s growing appetite for oil and provide an important source of wealth we need to reconstruct our postwar economy.”
“Once again,” said Claudine, “we wanted to take advantage of our relationship with Prince Habib and the House of Saud. Because Saudi Arabia is the region’s leading oil producer, we believed its involvement would not only make it easier to complete our mission but also might provide us with the best possible endorsement for our bond fund. Beyond that, there is no significance to Saudi involvement. Quite the opposite. I remind you that our goal is to encourage the production, on a worldwide basis, of a reliable supply of least-cost oil.”
“Does your answer mean,” said Ben, “that subject to meeting the stated feasibility qualifications of the funds, there are no restrictions, political or otherwise, that will prevent us from using proceeds from the energy fund to finance the development of North African oil?”
“Subject only to satisfying the requirement for competitive, arm’s-length bidding procedures, that is exactly what it means.”
The chairman turned so he could watch Claudine’s reaction to the fourth and last question. “Once a new oil field becomes proven, how committed are you and your husband to assisting our French clients with their applications to the energy fund? And afterward, will you be available to assist them with post-approval problems, should they occur?”
“Ben, the real issue you are raising is one of our continued involvement and availability. No one understands the personalities, the terms and conditions, and the small print involved in this transaction better than we do. The moral bargain we are prepared to strike calls for us to remain personally involved until the fund is fully vested and distributed. The entire process could take as long as three to five years. Beyond that time, we believe the administration of the fund should shift to its managers and the management of the subject oil companies. All that notwithstanding, we hope that our decision to return to Europe will be regarded as part of our commitment to assist with the long-term interfacing between the United States and Europe on this and other situations that may arise.”
Chairman Arnof concluded the meeting by turning to Ben and saying, “Are you satisfied with Claudine’s answers?”
“Mrs. Roth’s answers have exceeded any expectations I may have had,” said Ben. “I am prepared to recommend her investment proposal.”
Cecil said, “Claudine, I congratulate you; it appears you have satisfied both our quantitative and qualitative requirements. That’s the good news. I am worried about what the size of our commitment may be. It will take some time for us to determine the extent of our discretionary funds and those of our cooperating fund managers. We will have to also resolve what percentage of those funds can be used to fund a single investment. Whatever that calculation turns out to be, I will recommend we make a maximum contribution.
“On a more personal note, Claudine, I would like to express my gratitude for what you are attempting to do. Let me reassure you there are those of us who understand and appreciate the strategic importance. I am certain that I speak for others when I say we will try to be as helpful as our circumstances allow. Please convey my best wishes to Jacques and assure him that until he can rejoin you, the presentation of your program is in good hands.”
Chapter 45
ASLEEP AT THE SWITCH
Sir David Marcus was only too familiar with the history of the oil industry in England, including its ties to the British government and its collective devotion to perpetuating the monopolistic practices of its established producers. Since 1905, this consortium of oil companies and the government had remained the center of Great Britain’s centuries-old policy of economic liberalism. During his tenure at English Oil, the company had demanded he support what he considered to be an outmoded system. The conflicts involved in enforcing economic liberalism and remaining empathetic to emerging conditions in the Middle Eastern oil market were the biggest factors in his resignation.
Sir Desmond Muirhead, chairman of the London Bank of Commerce, out of respect for his long-standing friendship with David, had agreed to his request for a meeting. The discussion proceeded smoothly until Sir Desmond said, “Beyond our bank and the Roths’, I think you are wasting your time calling on any established banks in London. You might, however, want to talk to the Bank of Scotland and the Commonwealth banks of Canada and Australia. They have two things in common: they have vast energy deposits in one form or another, and they have their own problems with the British oil industry and with Britain’s political system.
“Before you talk to them, however, you might want to determine whether the proceeds from your bond fund can be used for the development of alternate forms of energy. In addition to oil, these countries possess enormous deposits of coal, natural gas, and hydroelectric power. Rather than refer to your program as an oil development fund, you might want to call it the ‘energy development’ fund. From a bankers’ point of view, assuming that all critical credit criteria can be satisfied, I don’t see why oil reserves need to be the only thing underwriting the fund. Why can’t any proven form of energy be used for collateral purposes?”
“Sir Desmond,” said David, “if we were to pursue your line of thought and broaden our definition of developable energy, what effect might it have on our fund?”
“Knowing you might ask the question, I made a little chart.” Sir Desmond pushed an open notebook toward David. “The inclusion of Scottish coal could make a big difference. The same might be true for eastern Canada’s hydroelectric power industry. The coal deposits and oil sands in Alberta are some of the biggest in the world. Finally, the coal mining industry, in addition to being one of Australia’s largest industries, represents one of the world’s larg
est and most accessible sources of high-energy coal. When you add all that potential together, you could be talking about a substantial amount of developable energy. The added interest could very well make the difference in funding your fourteen-billion-dollar goal.”
After pouring them both another cup of tea, Sir Desmond continued. “Ever since you called, I’ve been thinking about your plan. How do we know that if the big oil companies succeed in their quest to control so much of the world’s supply of oil, they won’t use their collective power in much the same way the German industrialists planned to when they brought Hitler and his National Socialist party to power? We could once again find ourselves asleep at the switch, with a well-organized group executing the early stages of a plan which, left unopposed, could result in their virtually controlling the world’s oil supply. That is a risk we don’t want to take. Even now, when you consider how much financial capital, management expertise, technology, transportation, processing capacity, and retail distribution these seven companies already control, it might be too late. If you and your friends don’t organize the capital you need within the next ninety days, you could jeopardize the momentum you need to make this deal happen.”
Two days later, sitting in the privacy of their special compartment on the train as they were returning from Glasgow to London, David and Natalie were excited. “Natalie, do you realize what we have accomplished? If the chairman of the Scottish banks is able to persuade Sir Desmond to join him, we could have our first commitment. Two hundred million dollars would represent one hell of an endorsement from war-weary British banks. Not a bad way to start before we leave for Canada!”
The change in the sound of the engines told David and Natalie their plane was leveling off for their long flight over the Atlantic to Montreal. David wanted to take advantage of the uninterrupted time to review with Natalie the energy issues they’d be asked to discuss in their upcoming meetings in Montreal, Toronto, Calgary, and Vancouver.
“Natalie, Let’s go over that one more time. I want to be certain I understand the key issues concerning the energy business in Quebec.”
When they got to Montreal, they found the bankers there had also done their homework. Their friends in Scotland, Europe, and the Middle East had carefully briefed them on David’s background and experience in the oil industry, and on the growing trust and respect he appeared to be earning with sovereign political leaders in the Middle East.
From Scotland came one report urging the Montreal bankers not to be fooled by Miss Natalie Cummins. She was indeed the same woman who had starred in many a London musical, but she was all business during the meetings. She took careful notes, answered questions about details and background, and was not shy about asking her own questions.
Natalie, very conscious of her new role, had paid detailed attention to how she dressed for the meetings. The cut of her suit was conservative, the collar of her blouse high, and she wore very little makeup and jewelry. Although it was unintended, her conventional garb made her appear even more mysterious and intriguingly attractive.
The curious bankers were determined to learn whether she was a legitimate student of the energy industry. Although polite, their first questions were always directed to her. Initially, the answers required only a general knowledge of the business. Gradually, the complexity of the questions grew, and the answers, correspondingly, became more detailed.
David was amused by the process. It was apparent that most of them had never been face-to-face with a woman as beautiful and charming as the celebrated Natalie, much less one so intelligent and well-informed. Once the bankers had been convinced that she knew what she was talking about, they directed the more strategic questions toward David.
As they proceeded from meeting to meeting, it became apparent to David and Natalie that the jungle drums had been beating. Each group of bankers looked forward to meeting the smart and irrepressible Natalie. Not ready to believe what they had been told, they still insisted upon directing their first questions toward her.
It’s almost like a game, David thought as he watched the process. Is it possible that they are more interested in trying to trip up Natalie than they are in completing their due diligence with me?
Convinced that Natalie was as reported, the bankers would then focus their questions on David. Typically, they wanted to be heard: “Sir David, it’s important that you understand our position.” Their projections for the growth of energy needs in eastern Canada and the northeast part of the United States assured them that demand would dramatically increase. The good news was that they have abundant sources of energy. The bad news was that they lacked the capital to develop them. And as one banker put it, “Big Oil and the British and American governments understand our predicament and are waiting like vultures to be asked to enter our market. For a lot of reasons, that is something we would like to avoid.”
On the second leg of their flight to Calgary, Natalie and David were on a plane enjoying a surprisingly good lunch and an even better bottle of wine, when Natalie said, “I wasn’t expecting the airplane fare to be so good. A girl could get used to this kind of travel. Don’t you think that second glass of wine tasted better than the first?”
David responded, “That will be enough of that—we only have so much time to prepare for our next set of meetings. If the Calgary bankers are a reflection of all I have heard about the pioneering spirit of the Alberta frontier, we could be in for quite a night.”
The Calgary bankers, having heard from their Montreal banking cousins, were looking forward to meeting David and his attractive assistant. Waiting for their guests to arrive, Calgary’s four principal bankers were seated in the lobby of the Calgary Hotel. Dressed in pressed gabardine slacks, highly polished cowboy boots, and Western shirts with the little pearl buttons, the banking executives made quite a contrast to their formally dressed counterparts in Montreal.
The plane carrying Natalie and David was delayed by weather. By the time they arrived at the hotel, the bankers had consumed more than their accustomed share of drinks. The trouble started almost as soon as the introductions were being made. The youngest of the four bankers said, “Ma’am, how is it that a beautiful woman such as yourself comes all this way to talk to a bunch of stuffy old bankers?”
Before she could respond, David interceded. “Natalie has worked very hard studying your local energy industry and she arrives well prepared to ask and answer questions. I hope you’re prepared to respect her professional skills, because she’s ready for you.”
Fortunately, one of the older gentlemen interrupted. “Miss Cummins, you are in the heart of cattle country. From what I understand, the restaurant in this hotel serves a very fine steak. How would you like to join us for dinner?”
Over dinner, the mood of the conversation quickly changed. It wasn’t until coffee was served that the congenial conversation switched to business. Natalie could tell by the growing complexity of their questions that she was being tested. Taking her time to answer each one in a thoughtful manner, it didn’t take long before she could sense they were impressed by her answers. She was beginning to win the respect of all the bankers, except the younger man who had made the impertinent comment. At just the wrong moment he said, “Ma’am, would you mind telling us how a woman of your beauty and stage experience can expect to be regarded as a credible expert on the oil industry?”
Thoroughly irritated, Natalie thought, Oh, what the hell, we will only come this way once.
“Young man, if you don’t mind, perhaps you wouldn’t mind if I asked you a couple of questions of my own?”
The three other bankers, embarrassed by their colleague’s behavior, remained silent.
David sat back in his chair, smiling. This is going to be interesting!
Still focused on being called a young man, the subject of Natalie’s ire was distracted and failed to hear the first part of her question. “Excuse me, ma’am, do you mind repeating the question?” he said.
“If everything
I have read about the unusual abundance of natural resources in Alberta is true, how are you planning to fund the costs of all this anticipated development?”
Neither Natalie nor anyone else sitting at the table felt sorry for the man as he struggled to answer her question.
“Well, young man,” said Natalie, relieving him after he’d stuttered out an unconvincing answer, “perhaps you can answer my second question. How high does the price of oil have to rise before the production of bitumen becomes a commercially viable enterprise and satisfies collateral requirements for lending purposes?”
Attempting to answer her question, he said, “I was reading a report the other day on this particular subject. If I correctly recall, I think they felt that the price of oil would have to approach fourteen dollars a barrel.”
“You think, they felt? Is that the kind of preparation you do before attempting to determine the feasibility of the amount and timing of financing required by your customers who want to participate in the growing demand for energy production?”
The next morning, there were only three bankers sitting in the large boardroom waiting to meet their guests from England.
David and Natalie ended their Canadian tour in British Columbia, where the situation was entirely different from what they’d observed in Alberta. The future of this western province was bright and immediate. It had been blessed with large reservoirs of easily extractable oil. To make things even more exciting, pipelines had been built during World War II to transport the oil from British Columbia to the United States.
David and Natalie found the local bankers to be a sophisticated, cosmopolitan, and highly informed audience. Like their counterparts in the rest of Canada, they were faced with an abundance of opportunity and a scarcity of capital. As a result, they listened eagerly and politely to the promise offered by the International Energy Development Fund.
Crude Deception Page 21
