She could never decide exactly how to dress around him. He only gave her genuine compliments when she was wearing something sexy or a skirt that was short by an extra inch or two. But dressing like a whore wasn’t ever going to get Hilton to take her seriously, and besides, Anita thought, there were too many whores to compete with anyway. She picked a sheer cream-colored shift from the rack and hung it over the shower curtain bar. For some reason when they built these apartments, they never installed real exhaust fans in the bathroom, just one of those cheap charcoal filters that supposedly recycled the air. She needed to keep the door closed or she would wake up her daughter, still sleeping quietly in the other bedroom down the hall. Now, after her hot shower, the big mirror over the vanity was still heavily fogged over and she took one of the fresh towels from below the sink and wiped off the mirror. After blow-drying her hair, she passed on the hair spray. Hilton had told her long ago she didn’t need to spray her hair for him, which was his way of saying he didn’t like it. She never got any exercise, but if she just didn’t eat, she looked damned good. She took the corset, hanging from the towel rack, and slipped it on, fastening it at the front, which pushed up her breasts nicely. She carefully removed the dress from the hanger and stepped into it, reaching behind her to zip up. Standing erect in front of the mirror she looked herself over. At first glance, she was very dressed up and looking formal enough for a very nice business lunch. While standing there, her thoughts turned to making love with Hilton, and then, surprisingly, with Martin, as well. It was possible that Hilton would not call her for lunch today as he said he would. Anita thought about it for a moment as she stood examining herself. If Hilton didn’t call today, it was definitely going to be his loss.
CHAPTER 33
Teamwork was integral in an oil and gas exploration company. During the exploration phase, management would meet with accountants and geophysicists and geologists for hours to define groups of investments they could make. Big companies would compare exploration opportunities on a global basis, and it wasn’t as simple as estimating how many barrels of oil were under the ground. Discussions would focus first on the oil, how much there was, how deep was it, where was it, was it light, heavy, sulphurous, acidic and so on. Next the discussion would turn to drilling. The first question was could they get a drilling rig to it, and if it was in the water, what type of drilling rig would they use? What had others used? Was a rig likely to be available, what would it cost, how long was it likely to take to drill? How rocky and gaseous, and salty and uneven was the subsurface? What were the environmental conditions like, both from a physical and regulatory basis, and how long would it take to get drilling rights and permits? What had been the record of others drilling anywhere in the area or in similar conditions around the world, and what were the contingency plans should difficulties arise?
The land department would report the status and end dates on all acreage the company owned around the area. In producing areas, the ownership was not just defined at ground level, but was likely to be defined in horizontal zones or completion zones where a company might own 50% of the mineral rights to 5,000 feet, 25% to 12,000 or 14,000 feet and still own 100% of the rights below. The landmen might explain that brokers and landowners and federal and state and county and Indian and school agencies might have an overriding royalty of one to twelve percent in each horizon. This meant that they would not share in the cost of drilling, but this would entitle them to get a piece of the production should oil or gas actually be found. A report would be made on who owned the surrounding acreage and how much the acreage cost. Title work would determine how long the owners had held it. An estimate would be made of what it would cost to get more acreage and who would likely be oil company partners. These partners would not only share in the revenues but also the cost of finding and producing the oil. Gone were the days of the 1800s where everyone drilled his own well on his own small patch of acreage. The land department, along with federal or state environmental agencies, would determine to what extent conditions would require combinations of acreage, a process called unitization, intended to enable efficient drilling, management and production of the oil and gas. This could result in the pooling of the interests of dozens, perhaps thousands of interests from generations of families, oil companies and regulatory agencies.
The oil or natural gas from a well would not flow out of the ground in a day and be sold. The production department would describe the number of years and flow rates of production. They would work with facilities to describe the structure and the cost of production and they would determine the transportation facilities required to get the oil out of the ground and transport it to market. These days, hard-to-find new production would be located in harsh conditions with arctic cold, or deep water or civil unrest and security issues. In deep-water production areas, like the North Sea, facilities would require billion-dollar production platforms that could house a small city of three hundred men around-the-clock. Much of the oil and gas would be mixed together and contain water, or metal, or even the poisonous gas, hydrogen sulfide. Complex processing and purification units might be needed at the site or in the area to remove impurities. Storage and treatment facilities might be needed to recycle and even re-inject the offending materials. Pipelines underwater or over mountains might be built to get the production either to a market, or to a final liquefaction and loading facility for movement to market. Drilling one well wouldn’t do it, either. A ten- or even twenty-year drilling program might be defined. As the wells aged, they would need to be refurbished, and injected with heat or pressure or acids to sustain or renew declining production levels.
Planning people, accountants and economists would establish current and projected prices for an entire range of products around the world for the next twenty years in order to evaluate current and future production levels. Production levels by product would be multiplied by these prices to determine all of the future revenues that could reasonably be expected from a potential field. Assumptions regarding capital costs, and operating costs for material and labor would be estimated over a corresponding time frame. Assumptions regarding currencies, discount rates and interest rates would be applied in an attempt to determine the net present value today of dozens, or in a huge company, hundreds of investment opportunities. Political consultants and industry advisors would review current and likely political scenarios in target countries. This would provide a framework for assessing a range of factors in lesser developed countries related to stability of the current government, health of the economy, strength of opposition parties, existence of radical elements or terrorists in the region, and an entire range of additional factors. The risk profiles would be used at the front end of the process to define a number of regions as off-limits due to unacceptable corporate risk. Then the framework would be used again at the end of the evaluation process in an effort to set a value on an incredibly large and attractive pool of oil in a remote, unstable country in West Africa, for example. The framework would then compare the West Africa oil with a risk-adjusted value for a smaller reservoir of deep natural gas in the politically stable area of the North Sea, where the product would be easily marketable but technically very difficult and expensive to drill and produce.
All of this work and analysis would come together in a lengthy annual portfolio review process by the management team of the exploration company. There was tension in the internal company process—and competition, too. People had invested much of their last six months in preparation for the portfolio meetings and there would be winners and losers. Management tried to mitigate the problem by shuffling people across different teams so that everyone would be a winner. Hopefully, the losers would not be so obvious, but hurt feelings and egos were at stake. Paychecks weren’t as important as pride and credibility. It was very simple. If your projects and your proposals got approved and got funded, you were likely to manage them, and you would form the “A” teams to lead the company’s exploration and drilling activities o
ver the next year. If management didn’t “buy” your prospects, or the damn economists or accountants poked a lot of holes in them, you’d be assigned to support the “A” teams over the next year. You’d basically be a grunt for the guys who got their stuff approved. You’d get your chance to develop new prospects next year.
There were three classes of people in this process. The Management Committee was at the top. Some of them were former engineers themselves who knew good work when they saw it. For this meeting, they were joined at Basin Oil, by the top three exploration directors who had a record of getting their deals done. A third group was at the bottom of the pecking order, made up mostly of technicians. They were either younger graduates, still learning the ropes, or older gentlemen, who had always focused on the technical aspects of the business. Maybe in their younger days these older guys had cut a deal or two, but mostly they were extremely strong technical people not very interested in management. In the middle of these two groups was a mixed group of people trying to make it to the top. Some of them were fairly recent college grads who wanted to do everything immediately and did not want to wait their turn for promotion. The balance were some very good experienced engineers who just couldn’t seem to get traction with senior management. Even Martin knew it was this last group in which he found himself.
Martin had been quiet the first two days of the five-day meeting. He had presented several routine prospects with his various team members. Most of the plays were extensions on existing fields or enhancement programs on mature fields. The money wasn’t all that big, and the decision making was pretty straightforward.
On the afternoon of the third day of the five-day meeting, he was leading the presentation on the Kazakhstan field, in the Former Soviet Union. He had spent half of his time in the last year working on this prospect. The Tengiz field. It was natural gas and there was plenty of it. Europe needed the gas, too, so there was a market. There were two major issues. The gas was in relatively complex formations more than two miles below the surface. Secondly, either a pipeline would have to get the gas to market, or a gas liquification plant would have to be built on the shore of the Caspian Sea. The pipeline would be costly and risky, but the effort would have international backing and the cost would be shared with a number of other large oil and gas companies who had already announced major investments in the region. The investment was significant, but if Basin Oil wanted to be a respected player in the industry, Martin felt they had to show that they could do projects like these. His team wanted this project badly. The chance to work on such a large, international project that had such complex challenges was an engineer’s dream. The project would be a lot more interesting than recompleting some tired old wells in Louisiana or West Virginia. Such a project would also look good on everyone’s resume, enabling them to command more money at Basin Oil, or some future job.
Martin had let one of the best analytical young reservoir engineers describe the size and location of the gas and there had been little discussion. The President, the Chief Financial Officer and three Exploration Directors had listened intently. The gas was there. Martin’s boss was one of the three Directors, and he had been supportive of the effort over the last six months.
The conference room had been set up in a U shape with a large projector, large screen and various forms of technical computer hook-ups in place to access the data. The teams would come in and sit on both sides of the U, leaving the executive panel sitting in five big leather chairs at the back. They would act as a sort of tribunal during the presentations. Sometimes they were quiet until the end, asking a few questions and then quickly approving or rejecting a project. More often, they would get stuck on a thorny portion of a project and then test the work very hard before determining whether or not to move forward with it. Everyone had been on a break, and as they settled back in, Martin got up to discuss the pipeline aspects of the project. The room was very quiet. His credibility was on the line. His team was watching carefully, ready for him to bring this baby home.
“Okay,” Martin started in, “we’ve seen that the gas is there, and the drilling is very doable. In the next twenty minutes I want to tell you what the market looks like and how we’re going to get in this pipeline.”
“First let’s talk about the market.” He quickly went through ten slides. The current sources and use of natural gas in Europe. The growth of the Green movement in Europe was generating a huge demand for clean-burning gas, instead of heavier, dirtier oil or coal. The outlook for the European economies was reasonably good. When you put them together, the market looked very favorable. Basin Oil would have no problem finding big, long-term buyers for the gas, even before they began the drilling. That was why so many of the other major players were going forward in other areas of the country. Once Martin had reviewed the market demand, he turned to the pipeline. The pipeline could go north through Ukraine, or south through Turkey. Martin began with a favorable discussion of the political climate of Turkey.
“I think your risk factor of Turkey is low.” said the President. “Those bastards got all nervous and mushy just letting Western planes fly over their territory during the war with Iraq, saying they were afraid they would piss off the Muslim fundamentalists in their parliament or whatever they call it.”
“It’s not a parliament,” Martin corrected, “it’s a National Assembly in Turkey, pretty much the same as our House of Representatives.”
“Whatever, I saw President Kozlov whining in the newspapers that the United States was putting him in a difficult position, and he wasn’t going to tolerate our bombers flying over his airspace.”
“That was just political rhetoric,” said Martin. “He publicly says that to keep his people quiet, but you can bet at the same time he’s making plans with the State Department for a whole new round of foreign aid and capital investment.”
“I still think your political risk indicator is too low.”
“Okay, well let’s come back to that, and let me tell you about building the pipeline.”
Martin’s boss stayed quiet. From Martin’s perspective, his boss would suck up to management on every single issue. To Martin, it was a question of integrity. You stood up for the people who worked for you and you did the right thing based on what the engineering and the facts told you. To Martin’s boss, it was more a question of making sure you ended up on the same side as management.
About ten minutes into the pipeline discussion, the Chief Financial Officer asked a question about material costs. Since it was going to take two years to build the pipeline, why wasn’t the cost of purchasing the pipe indexed to go up over the two-year period? It was a good question, but they had a good answer. The team had arranged to get a fixed-fee bid for the pipe that would rule out the risk of price increases during the construction period. It was an equally good answer, but the financial officer went on to ask a few questions about product pricing. One of the team members had gone pricing during the initial part of the session. Now Martin was flipping back to much earlier slides, explaining where they got those numbers, what the assumptions were and why. Finally, when he got back to the pipeline facility, his patience was wearing thin. After a few minutes, his boss joined in with the questioning.
“I can’t believe you don’t need redundant compressors along the pipeline,” said his boss. His tone was caustic; his boss already knew the logic behind the compressor plan.
“Compressor technology has come a long way in just the last three years, basically eliminating the need for redundant compressors,” said Martin.
“Well what do you do when one breaks down and you’ve got thirty big wells on-line?” asked his boss.
“Generally, you don’t wait for the compressors to break down. I know in your position it is difficult to keep up with new technology,” Martin’s comment was squarely intended to belittle his boss, “but unlike years ago, today the compressors have dozens of microprocessors that monitor operation of the unit. Using satellite dishes,
we transmit the compressor operating data back to the operations center continuously so that we can predict failures and service compressors before they fail.”
“Yeah, I know about predictive maintenance, I’m just saying, what do you do if they fail?” he asked again. “I think you need back up compressors.”
“What I’m telling you is we don’t wait for them to fail and that’s why we don’t need back-up compressors. Nobody uses redundant compressors on pipelines like these anymore.” Martin was getting steamed. There were forty compressors along the line and he knew exactly what they cost. If the political risk was assessed higher, and they had to add the capital cost of forty more compressors, the deal wasn’t going to get approved. Plus, the Chief Financial Officer was expressing doubt over the pricing assumptions which the CFOs own damn people had helped prepare.
It was Martin’s boss. “Well Jim and I were talking in the bathroom over break about whether we really want to sink this much money into Russia right now. If we’re talking about adding even more to the cost, I don’t know…” his voice trailed off.
“We’re not sinking money into it, we’re investing money in it—by the way, this isn’t Russia, its Kazakhstan.” Martin was losing it.
“Russia, whatever,” continued his boss, “I think Jim and I were just wondering if we want to put this much money into it or not.”
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