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Interview

with Christian Flammier, Geopetrol

30.03.2011 / Energyboardroom

Geopetrol has been around since 1993. How did the company’s operations in India come about at that time?

Let me give you some interesting background about Geopetrol. The mother company was started in 1958, and through the years it became one of the world’s leading companies in geological services, Geo Services. It is a private family company. At some point in the early 1990s the owners had a vision to diversify into the E&P business. This is when Geopetrol was created, firstly in France, and then abroad, starting with India.

Geopetrol was the first foreign company to start work in the E&P business with Indian partners. We were awarded blocks in Arunachal Pradesh with Oil India and Enpro, which is now known as Jubilant. Geoenpro being the joint venture that was created to serve as operator. From the Kharsang field, we spread out and were very interested in other potential projects. Since the beginning, Geopetrol was of the opinion that India would be a very exciting place to be in the future, especially in the oil and gas industry. Before the 1990s, the only companies present in India were Oil India and ONGC, state owned companies with their own unique ways and means. For many years crucial sectors like oil and gas were restricted from private and foreign investment, but this changed in the 1990s with the introduction of the NELP bidding rounds, in which foreign companies were invited to participate, and private national companies for the first time were allowed to move into the oil and gas market.

Why was India the first market that Geopetrol chose to enter after France?

Even looking at the minimum of statistics and information about different economies around the world, it is clear that the countries with the most potential are China and India, and this has been the case for a number of years. We saw that India would become a booming economy, but a number of other factors influenced our final decision, including that India is a democracy with a respectable and transparent legal system in place, which was very important for us.

Finally, the factor that tipped Geopetrol in the direction of India came down to luck, in that we found out about the Kharsang field, and after studying the field and finding a partner and support from Oil India, we had made up our minds.

Has the country lived up to the company’s expectations so far?

Pretty much!

From that first venture into India with the Kharsang field, how did the company look to expand its operations in India?

One of the most interesting aspects of our work here in India so far has been the way in which we have helped our partners such as Jubilant to develop their knowledge of the oil and gas industry. Having such a grateful and faithful partner is a big bonus in any market.

In order to develop Geopetrol’s Indian business further, we started looking for additional opportunities. We have bid in most of the NELP rounds that have taken place so far, and through this and other opportunities we have grown the business. Today, as well as the Kharsang field, we also have four CBM blocks in partnership with Reliance Industries, plus another large exploration block in (please confirm). There are also new projects in the pipeline, which unfortunately I cannot comment on at this time, but we have great hopes for their development.

How did this partnership with Reliance come about? Does Geopetrol have previous experience in CBM?

We actually have very little experience in CBM, but we are very lucky to have a technical manager who is very familiar with CBM. One of our greatest advantages that we can offer to other partners is that we are an accredited E&P operator by the DGH. Reliance came to us after extensive talks and negotiations, because at that time they were not accredited as an operator and so were unable to bid for the blocks on their own.

This is a very interesting trend in India – as the oil price rises, more and more companies and private individuals with no experience in the oil and gas industry are looking to the sector with interest. This provides opportunities for Geopetrol, but challenges also. You have to catch, counsel and train your partner in a business that he does not know about. You have to mix two different business cultures together, which can be difficult in any country, let alone India. In essence it is a good system – at least it is rational. The government of India has been fairly wise in this regard.

What is your opinion on the move to open acreage that has been talked about for a long time?

Current available acreage in India is limited, good acreage. From a commercial standpoint rather than a development standpoint, the Government of India is trying to attract companies through different resources such as CBM and shale gas, which is fine, but in the next 10 to 20 years, I am sceptical about what CBM and shale will add in terms of commercial resources for India, and whether companies will be able to make money from it. The margins are very low, and it is technically a very difficult business, and on top of this the original geology it is questionable.

The bottom line is that there are many more profitable businesses to be developed in India, but this does not mean that Geopetrol will not interested in opportunities in the future, if the right one comes along.

How do you see Geopetrol’s role in India today? Is it as an international company, bringing in new competencies and helping Indian companies to achieve their goals in the oil and gas industry?

We have definitely played this role in the past. It is not transfer of technology as such, but rather a transfer of intellectual technology. We are very happy to do that. I think that it is one of the best approaches that we can have in developing countries. Technology transfer does not really apply, but knowledge certainly applies. We are happy to do that with public companies as well like we did with Oil India. We are very good friends with Oil India, despite initial difficulties, and today we are very happy with our working relationship together on the Kharsang field.

Was Geopetrol’s move to India originally a profitable one?

No, it was not profitable, but we quickly made it so, through rapidly improving production levels. The revenue then arrived. Unfortunately we did that when the oil price was at the lowest it had been for the past 30 years or so, but now it is a very nice field, very profitable, it has got upsides as well, which we are going to develop this coming year.

How have you found running the business in India as an expatriate?

I was the first expatriate in India to start working in exploration and production. Generally speaking, there are not many expat managers in India, because they are simply not needed. Indian managers are very bright people. However, the oil and gas business remains highly technical. The people we initially employed were lacking some knowledge. This is why expats came, and this is valid for the whole world. The perfect example of this is Petronas in Malaysia, who started their business only with expats, and gradually trained Malaysians. Today, the company is almost entirely run by Malaysians.

How do you see your role today? What do you bring to Geopetrol today?

Every company has its own culture, its own way of doing things, its own vision. Geopetrol being a strictly private company, family owned. The owners feel that they get more comfort, better feedback, from an expat than from a national. They also had a bad experience in the past, which had a significant impact. I really hope that I will have the opportunity to train another Indian to replace me.

Why do you think that so few foreign companies are present in the E&P space in India today?

The government is clearly trying to make India an attractive place to international players, and managing to attract Exxon Mobil or Shell has value from a political standpoint. Realistically though, the field size in India is not ideal for the world’s larger oil and gas players.

India is however, a very attractive place for companies that are around the size of Geopetrol. There is room to develop and eventually diversify. We are mostly in the E&P business, but we also have real estate businesses and agro businesses in France, so we want to look at India in the same terms. Not meaning that we will build any of these businesses here in India in the same broad terms.

What are your long-term goals for Geopetrol now? If we were to come back in five years, what would you like to have achieved with the company?

We want to expand, but in a professional manner – not overbid in NELP rounds, not pretend to show an interest in things that are not interesting. I cannot disclose the real targets, but we are focusing on India in a very specific line of development, which is certainly not exploration.

In my personal view, exploration remains attractive in frontier areas, but it is difficult due to the nature and realities of these states, where there is very limited infrastructure. These are tribal states, which actually are very fun to work in – the people have excellent mindsets, there are beautiful landscapes, but there is no infrastructure, no refineries, and no pipelines. You need to know a lot about the culture and the politics there. It is not a simple job; it is a very big job whereby the technical aspect may be much less important than the political and public relation aspects.

This requires a very special and high cost approach, because infrastructure needs to be developed. Such projects are high-cost and high-risk, but geologically interesting.

How do you attract staff to Geopetrol? What is it that brings people in India to the company?

There are several factors, with one part being a money issue. Others include our sense of professionalism, creating a sense of belonging in our workforce, and building personal relationships. It works very well. We treat people as well as we can, paying a lot of attention to our staff and developing them, having the best possible interpersonal relationship, and building a team. That is how we attract people.

It is not our wish to attract people with high salaries only, but of course our salary structure is in line with the industry. There is no way in the world that I am going to pay double or triple or ten times what the industry is paying in order to attract people. That is not the way to do it.

Geopetrol has a very good reservoir of friends. Through Geoservices we have a huge pool of talented technical people. At some point, all companies start with nothing – they have no culture, no knowledge, nobody in the E&P business, and they have to find a way. One of the ways is to offer a high salary. The other way is the Geopetrol way.

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