Buckee at home in oil 'minefield' - Politics and bullying nationalized firms
Financial Post, August 23
By Diane Francis
CALGARY - Jim Buckee is an Oxford-educated rocket scientist who went into the oil business in 1971, travelled the world and has led the transformation of a British branch plant operation into one of Canada's most prominent international independent oil companies.
In 1991, he was transferred to Canada as president of BP Canada Inc. One year later, it was re-dubbed Talisman Energy Inc., as part of an employee naming contest. It has been true to its name, which means good luck charm. The oil company has grown 10-fold , expanded internationally and is Canada's largest oil producer by volume.
"The team included a lot of people who were internationally minded and who felt Canada was mature in terms of exploration," he said in a recent interview in his Bankers' Hall office.
"The big driver at the time in 1992 was that natural gas was only 80¢ per thousand cubic feet so we decided to broaden our product base. We wanted to be more oily."
Jim and his team embarked on $4-billion worth of acquisitions and a merger with Bow Valley Energy which gave Talisman valuable stakes in the North Sea, Middle East and Indonesia. Drilling successes followed.
"We paid $70-million for the Indonesian part and it's now worth US$1.5-billion," he said.
"Along the way, the team has built up expertise in terms of international agreements, international negotiation skills and dealing with foreign governments."
The international oilpatch is not for the faint-hearted.
The days of sleazy intermediaries may be mostly over but business is still a minefield of bullying nationalized oil companies as well as political activism, as Talisman soon learned when it acquired assets in Sudan.
The company had only a minority interest in the Sudanese oil company in partnership with China's national oil giant, but was pelted in the press, courts and at annual meetings with criticism from aid workers, human-rights groups and churches concerned that Sudan's Muslim fundamentalist government was using oil revenues to fund genocide against Christians and animists in the southern part of the country. Last year, Talisman sold its stake to India's national oil company, netting an after-tax profit of $340-million.
"On balance, we're happy we're out of Sudan, but I don't think the Sudanese people will benefit. We simply had Sudan fatigue," he said.
Jim comes by his global outlook honestly. His father travelled the world in the British navy and he grew up in Britain, India and Australia. He obtained a PhD in astrophysics from Oxford, but after graduation in 1971 went into the oil business as an engineer because of a hiring freeze in the American space program. He joined BP, one of the world's largest multinationals, and spent years working all over the world before arriving in Canada.
BP had obtained an "outrageous price" from Ottawa's PetroCanada for its Canadian gasoline stations and refineries as a result of Ottawa's buying spree ,which ended in the mid-1980s. Jim inherited BP Canada's exploration side and set about finding shareholders to buy out BP, and then repositioning the company.
Now with its treasury full of cash, thanks to the Sudanese sale, Talisman is beating the bushes for new opportunities in an increasingly oil-short world. One of its biggest challenges is to compete against the phalanx of oil outfits owned by national governments, known in the oil patch as NOCs (national oil companies).
"The NOCs are aggressive and have no requirement to pay attention to international sensitivities. They are driven by national energy security issues and are oblivious about niceties like U.S. sanctions and human rights concerns. We are losing ground to these people," he said. "NOC partnerships are a possibility and they would like to work with us but it can be a nightmare."
World oil shortages are a distinct possibility, he believes, and says that coal and nuclear will overtake oil and natural gas down the road as China, India and other undeveloped nations become prosperous and voracious power consumers. Prices should remain in the US$25-a-barrel range in the future but by 2010 China and India and the rest of Asia will be gigantic importers.
"China and India already recognize this and are aggressively moving on acquiring reserves. The global supply/demand situation is tighter than people would like to think. The world is consuming 27 billion barrels of oil per year and companies are finding only eight or nine billion barrels a year," he said. "So the world is relying on the North Sea and Alaska and old discoveries in the Middle East. Russia is the wildcard."
Horror stories about criminals and political interference still leak out of Russia, which makes joint ventures for Talisman "still too uncertain." Besides, the country's NOCs want to keep out foreign oil companies.
Another problem, in terms of supply, is the fact that the world's second-biggest reserves are in war-torn Iraq, where oil production is frozen as a result of sabotage and anarchy, he said. A stable Iraqi government will take between two and five years to develop, he speculated.
"The security situation and economic situation will take a long time to fix and you need to fix these before you fix the political situation," he said. "We don't believe you can sign a contract with anything less than a fully recognized Iraqi government recognized by the Iraqi people."
This contributes to higher price pressures in North America and the necessity to build both the Mackenzie Valley pipeline to tap Canada's Arctic natural gas as well as the Alaska gas pipeline.
"The natural gas [from the Arctic and Alaska] will go exclusively to [power energy operations at] Alberta's oilsands," he said. This is because planned production increases of oil from the gooey oil sands will need massive amounts of energy.
"We're not interested in the oilsands. We're not a mining company," he said. "The economics work in the best bits but the best bits have somebody else's name on them. Like Exxon and Shell. There's also a danger of cost overruns and high-cost inputs. BP had oilsands experience in the past and didn't like it. The world doesn't need too much bitumin [the unrefined tar recovered from the oil sands] and refining is not our business."
But hunting for conventional reserves around the world is risky.
"The biggest risk is always geology. You can talk quite alot about political risk but if the rocks don't work then the revenue doesn't," he said.
If discoveries are made, oil wealth often means political instability.
"The problem [with oil wealth] is that the money comes in from the top. It's wealth but not widespread nor does it flow into general economic activity," he said. "Oil revenues are also prone to misuse unless you have a very careful or very wise government."
The Talisman team is evaluating a number of acquisitions, but finds prices too high. It has allocated, thanks to its Sudan windfall, 22% of its exploration budget to higher risk drilling, up from 14%, in Colombia, offshore Nova Scotia, Trinidad and Qatar.
Talisman's cash makes it a possible takeover target.
"That's for other people to answer other than me," he said sanguinely.
In the meantime, Jim heads a venture with tentacles around the world from Calgary. He keeps in touch and visits his four daughters in Europe and Asia where they pursue careers or educations.
"Calgary is a pleasant place," he said while posing for a photo, "but it could do with a shorter winter."
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