How treehuggers can help hard-nosed businessmen

Having spent the last 10 days in Libya, I’ve been searching, as I always seem to end up doing on field trips, for arguments to support the idea of publish and be damned. That governments should just let it all hang out, publish contracts, seismic data, the transactions of state-owned bank accounts, why not, as something which is logistically easy, would revolutionise the way business is done and which would, in both the long and short run, be in the national commercial and political interest.

This usually involves noble arguments, grand philosophy or at best scrabbling around for precedent, often from arcane literature about far flung places that our local partners in any case feel no connection to. Often its too boring and pedagogical, gets in the way of building real trust.

But this visit my friend, a Turkish businessman who works in construction across the Middle East, handed me a case on a platter. Mehmet, or at least that’s what we’ll call him, is a veteran of Middle East business. I often think I detect a note of wry amusement when we exchange stories about who we’ve been meeting and what we’re about. When I introduced the word “treehugger” to him, he repeated it several times, with relish, rolling it around his mouth as it if were a fine Burgundy. Treehuggers, treehuggers. Tree. Huggers. You’re treehuggers?

But he wondered idly last week whether in all our rooting around for data on the Libyan oil industry, we could get well data for him. How many wells there are, what their ages are, how deep they are, how much drilling there’s been recently. This is all information which, if you wanted to know it about the North Sea, is available on a UK government website.

Why do you want to know? I ask. Long story. But basically, his friends are making money out of a current project in Libya in the construction sector, projects which long predate the revolution and which have picked up again now. If they repatriate this money, they’d have to pay a lot of tax. But now there’s been a revolution, everything should be wide open – why not try and reinvest it in another Libyan project?

 

“There are some tenders out to rework some of the oil wells. I was thinking about whether those profits could be spent on bringing in a rig”, he said.

But Mehmet, your guys don’t do oil, do they? Not as such, he says, but if it’s civil engineering around wells, casements, workovers and so on, we could think about getting into it. So how about it? Do you know anyone who can get me the data?

It’s not really the kind of stuff we’ve been looking for, I explain, though at the same time as I say this I think, why not? Why not see how much of this technical data are publicly available and on what conditions. And, we then agree, it’s quite likely these data are considered secret. If they’re not considered secret in theory, some official will have his paws on them in practice, and keep them close. You’ll only get it if you’re a special friend.

But here’s the use case. Because he doesn’t have the data, Mehmet is far less likely to advise his friends to invest the million, or several, to bring a rig in that could work on oil well workovers. He might be prepared to take a risk to do that without having locked in a contract, but only if he can see that the coming volume of business adds up to enough to be worth taking the risk for. And yet the National Oil Corporation, for whatever reason, is only issuing workover tenders single well by single well, so he, like most other potential bidders, is blind to the sector as a whole. At the same time as they do this, the NOC have set terms for pre-qualification which include the requirement that a company must already have a drilling rig in-country. Whatever the intention of that rule, it has the sure effect of restricting bids to incumbents – companies who have already done this, presumably through the same tendering process with many of the same officials.

There are thousands of wells all over Libya, many of them with ageing infrastructure likely to need maintenance and workovers. And that’s before you get to possible expansion plans.

But oil companies are slow to get back into Libya. Six months after Tripoli fell and more than a year since the east was liberated, many IOCs are still sending executives in on short trips. A couple have appointed Libyan general managers, suggesting they have made a decision to stay light on the ground for the forseeable future. There aren’t that many rigs in country.

Too bad for Mehmet and his friends that they can’t assess the potential size of the market because the well data aren’t available. As he says, if they can see enough volume, they can hedge their risk with a back up plan – if they can’t win enough business themselves, they can hire out the rig they brought in to others.

But too bad for Libya too. Fewer bidders means less competition, and, other things being equal, higher prices for worse delivery. Competition can only be good for Libya. It’s easy to see which kind of private interest could gain out of keeping this and a whole range of other data secret. Much harder to see how the public interest is served.

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