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IA Neftegaz.RU Interviewed Greg Stringham, Vice President of CAPP

Greg Stringham: Hello! It's as simple as that: Canadian Association of Producers Petroleum.

IA Neftegaz.RU: Good afternoon! We're glad to meet you. First of all we are very interested to know what does САРР mean? Greg Stringham: Hello! It's as simple as that: Canadian Association of Producers Petroleum.

IA Neftegaz.RU: As we have caught, CAPPis an independent organization. How does it interact with the officials? Greg Stringham: You mean the Goverment? Here in Canada we represent about 140 oil and gac companies, producing mostly the natural gas. So that goes up from exploration drilling, development but not pipe-lines, pipe-line is not part of Association and from that prospective we also have 110 associated members which are consulting firms, legal firms, service companies that are associated with oil and gas industry and so they are members of association as well. And we act on behalf on them, we represent the voice of the industry to governments, media and the publics. And comes to government we come together as all 140 companies and decide on what policy we would like to take to the government for either change or keep it the same and then we would go to government on their behalf and we would take messages to the government and say: Yes, this is what our position would be on climate change, this is what our position would be on open market and exports policy, this is what we would like government do both federally and provincially, areas where we are working and trying to put this policy on its place.
Do your members get any privileges comparing to other companies? Greg Stringham: So the privileges they've got they're going to be involved in decision making, coming to consensus what the industry wants to say as it's their policy and get a lot of information, what are the important data or what industry's doing all the environmental aspects of the industry and they also have to perform according our environmental storage program they have to meet minimum. Threshold being good performance in the environment before they become members. So there are privileges but there are also obligations for them. IA Neftegaz.RU: Do you interact with the same organizations?
Greg Stringham: In America for sure we interact closely with a number of similar organizations in Canada there's a mining association which does the mining for gold and metals and core, there's a forestry association. We interact with them in similar policy, but closest alignment with oil and natural gas associations in the US. And very much focus we represent to Canada as it is developing but since our major partner is the US. We're very close with oil and gas associations such as American Petroleum Institute and other oil and gas associations in the US. We do very little International work when we come to Europe or when we come to Russia or other areas like that because there's not a lot of interaction between Canadian producers and Russian producers but it's wrongly. We have noticed that investments of Canadian companies overseas has doubled last three years and that will be a growing proportion of what we do. We right now focus mainly on Canada we're working with the US because it's a large market. We were very close to government involving those countries right now as well and there has been some interesting small companies as you know some small Canadian companies that have moved into those areas trying either explore or partner with Russian companies to move forward. But at this point of time whether the association gets involved it will be core of the members. We have a board of governors that represents about 30 of those 140 companies who makes decisions on what areas we're going to, what areas we don't right now. There's not a big enough momentum to move on that area but I think if we grows we may.
IA Neftegaz.RU: In opinion of CAPP what special conditions exists within Canada for attraction investments of oil and gas industry and how do incorporate the investments? Greg Stringham: We promote investment in oil and gas industry setting first government policy sort of the business climate is attractive for business to grow it so this means highly-educated work-force, very favorable taxation regime so they couldn't be overtaxed and competitive worldwide, a big matter that we or themes that we use in association is to make sure that we're competitive globally. As oil and gas produces we're subject to competitive pressures, because global oil price goes up and down depending what happens around the world: production from Russia, quotes from OPEC, economy in Asia very, very global, so we're involved in trying to be competitive from Canadian perspective. About 600 of oil and gas companies and there's a dominant investor, there're some large companies, there're many large international companies here as the Imperial Oils, BPs, then there're Canadian companies like Canadian National Resources, one of the largest investors, then there're numbers of Petrol Canada, another big company, private company government started before. There isn't just one or two or three large oil companies, a very large range of oil companies. Our top about 26 oil companies make about 60-70% of production but there is no one company that makes a big dominant share so it really changes all the time. When you look at international investment they right now makes up 10% of total investments. We invest about C$25bln in oil and gas industry and about $3bln are invested overseas. Now it will be a number of different countries from Russia, Yemen, Eastern Europe, Nigeria, other areas around the world. And more and more there is interesting South America countries, Argentina, f.e.very similar conditions to Canada. It is all company's looking at and say: can I take a technology, the expertise that I've learned here and move it to those areas. It is still a small percentage 10% of our investment but it spread all over the world.
IA Neftegaz.RU: Can we talk about technical innovation? What is percentage of foreign data which is used to implement those technologies? Let's take for example, the American-Russian joint venture Chernogorskoye. At present "Chernogorskoye" joint venture is a well developed oil-fields with 101 wells including modern equipment for oil development, using such modern technologies as polymer-clay drilling mud and its deep cleaning perforation on drawdown with deep-percolating charge,oil opening-up with separator-heater and others. What about Canada? Greg Stringham: The technology that is used here is, I don't know the exact percentage but it is a lot of Canadian developed because it is applied here and probably oilsand is the biggest example of technological innovation. You see the situation in Canada and Russia varies greatly, first of all in technologies. That technology of oilsand has brought world class scientists from around the world to work on the problem but it has been developed through the companies and through the universities, and through the government programs of research here in Canada. For example it was about 15 or 20 years ago, the oilsand was very expensive. It cost at list $25 if not $30 per barrel to be able to extract oil from oilsand because oil and sand were mixed together. Today they has moved down to the range of somewhere depending on operating of 4-cycle cost into 10 or 15 dollar range. So it's economic for oilsands and there's 175bln barrels of oil sands there, hundred years of that reserves, just sitting everyone knows where it is, no exploration, you have to go up find it, you it's there, it is really technology and now developing more and more technologies: how to make it less expensive and environmentally sensitive.
IA Neftegaz.RU: Do you control environmental policy? Greg Stringham: Absolutely, I mean the government itself sets the legislation. They set environmental standards, this is what you need to meet and there's both federal legislation from federal government, as well as in Canada, the resources, the oil and gas resources actually bed in provinces, so it's spread out across the country because when you go to provincial government to get approvals and they also have environmental regulations and we call them regulators, in Alberta it is Energy And Utility Board, at the government level it's the National Energy Board. And we also have departments of environment, that set the standards on air, water, land proclamation, here are the minimums that you must meet. And they set the regulations we as an association say: what can we do to meet best these regulations, what are so called "best practices" , what are the best companies doing on the environment and all companies should learn from that and do that. If it's technology that one learns they should spread it around extra over company, so flattering of natural gas, use of water or reclamation techniques for putting the land back the way before it was started, all of those things, all that company should learn from each other and do it most efficient it's also the best manner so we have very small environmental impacts in a larger term.
IA Neftegaz.RU: Why if one do the others follow? Greg Stringham: I think there are two reasons of it. The first one is the rule of law if they don't there is a penalty and they won't able to produce and the regulator will shut them down and they won't be able to produce. The more important than that, companies see it as competitive advantage. If they are environmentally sensitive, the land owners and the government will say: we want to come and develop it more rather than: oh, no. So there is seeing of very strong input to be able to continue the development through the years to come.
IA Neftegaz.RU: What about bribes? Greg Stringham: First of all, it's illegal. Secondly, if they even try to do that the words get community very quickly that's the case dealing with first nations people and also dealing with land owners and they won't be able to produce in other areas. And the reputation of the company will be very much damaged by that and from that side of thing people and government would find out it and they won't be able to produce any more. We have in Association both ways to do it: the best and they have rule of loose if they try to do another way.
IA Neftegaz.RU: Can you tell us about the situation with interacting of aboriginalы and oil and gas companies from CAPP? Are their any problems? Greg Stringham: We work very close, I mean aboriginal people do have rights on different areas of land in Canada , they have so called "Freeties", and we've found out that there is a confusion of aboriginal people in some areas. If we look at North-Eastern BC, which is an exiting area for oil and gas development right now, the aboriginal people will say: it's our land, and the government: oh, no, it's not your land, so there is conflict who has rights on that area. Our industry sometimes is between that, we just simply say we can come and develop oil and gas, how we could get government and aboriginal people to talk to each other, so we can go and develop this. So we make progress the government has recently announced a programm for dealing with aboriginal people, it's called "Memorandum of Guidance", this is how you should do the consultation with those people so if you are doing any development of oil and gas, pipeline or forestry, you must consult with these people as it may effect the life style, you must do that and also we as a government must do our part to consult with them to try resolve them. In provinces now, on the provincial level. Which is small level of the government they do also recognize the issue and say: this is something we need do and they started to put the framework of guidelines of how to make sure the consultation, discussion happens with aboriginal people in developing oil and gas. They can work on the oilsands or they can contract with the oilsands; right now, for example they have chosen to set up a business where they are making all the heavy-duty clothing, winter clothing for oilsands, they do that right the next door and aboriginal people are making good business, good money and children can get educated to be able to work in those areas, and so that has worked extremely well; the one thing the association has done itself which we call "First Nation Employment And Training Initiative" and so we look for opportunity for them to get jobs as well as get education, so get training in operating equipment or the training to become research scientist or get training in education to become someone in the industry which is coming to the industry that wasn't in that area before and that had provided great opportunity for aboriginal people and their children to get the kind of training. I think it's a good example when you go to the North of Canada, to the North-West, territory where people created several companies that were involved in production and exploration oil and gas, service companies:they own the companies, they run the companies, environmental companies that come and make environmental screening and make sure that the number of fish, number of birds have a sustainable environment, those companies are managed and run by aboriginal people.
IA Neftegaz.RU: Can we speak about competition between oil and gas sector in Canada? Greg Stringham: If it could be done it would be just extension of what we see the global market. Right now in Canada the natural gas market is different than oil, oil is very global: Russian production, OPEC, prices are set very globally, oil travels by tankers all over the world, pipeline or tanker it doesn't matter, it's the same oil, it's just another way to send it to the exact market. Natural gas is a little bit different, natural gas is very continental, you don't put much gas on ships and move it over the world like pipeline much more. From that prospective we have a North American market right now because pipeline infrastructure is there. But if you add another piece of that just Alaska to the North America market or if you add Russia it would be just the same part of the market and you can trans gas to the certain distance, but it costs money to be able to do that. One thinks our companies has come to recognize very clearly and we are helping our government to get it is Canada fairly small country as far as population and economy compare to the world, very large geographically but fairly small economically so we need to be globally competitive, we need to be part of the market, part of the global market, part of the world economy in order to prospect because we are country of traders and we need to trade, to have our economy prospect and so if we would add Russia to this trading it would be just another part of global economy.
IA Neftegaz.RU: Speaking about global world economy, what is approximate percentage of Internet Technologies which are used now to ride the world economy regarding on gas industry? Greg Stringham: It's very high, we are very high technologically driven effect there is in Canada for example it's not solely Internet. We have the use of high power computer in Alberta, we have several of the largest computers in North America, that drive that three or four dimension size look at underground:up on the screen and decide where to able to drill and that requires high power computing and that is driven whole high industry. The Internet has become part of that, a lot of dialogical data that get trans back and forward to say here is oil and gas and here there's not, so it's doing through Internet now. People can go on-line and see: that well opened North territory produces this much and here is how produced during last several month, that is all available on Internet now. So Internet has been a very strong enabler of that dissemination of information to those companies, they use Internet for trading oil and gas, on pricing, they use it for dialogical data, they use it for communication. E-business is becoming more and more ramped in oil and gas industry because we use technology so much to find extra drop of oil or extra thousand cubic of gas that is spread and industry is very earlier adopter of high technology because new technology can reduce their costs in a long-term. So Internet is just a Part of that.
IA Neftegaz.RU: Could we speak about further development of e-busines in Canada? Greg Stringham: Calgary is a very good example of that we were not just an Internet city, we was just high technology, wasn't a Silicon Valley, it was oil and gas, but because it drove the technology we need to have this communication technology, Internet technology. Those companies came here because of the oil and gas industry at the same time why not for newspaper data, or forestry data:and been able to spread out. The base is oil and gas because it's a main business, so to spread the technology industry in Calgary we had suffered of downterm because it's based on oil and gas industry and they have this spin-off of the economy. The one exception of this problem is probably Nortel who came here, Nortel had some troubles globally and they were based here in Calgary, based on the oil and gas industry.
IA Neftegaz.RU: Speaking about Russia. In Russia there are different situations, Internet is concentrated in Moscow and St.Petersburg and these are not oil and gas territories and other companies from central region try to improve e-business. Do you think it would be better if for example KhMAO which is oil and gas territory in Russia, if they would use Internet technologies and e-business because it would be best fit between oil and gas industry and e-business? Greg Stringham: I can't speak for the businesses, but what we see is very successful here in Canada, e-business is just a part of business rather than being a business by itself, put on the top of core business, being that forestry or mining or oil and gas or have them pushing the technology then they construct branches out of the areas, those of the companies have been very successful because it's not just let create the new market for something, let's base on what it is there and push it a little bit further. Whether it becomes that area Russia, whether that becomes central or other areas as long as they have a core fundamental businesses they try to push technology and need the new technology to be able to exist in a global market than that will be probably more successful and just saying I'm an e-business company I may sell you something, if you don't need it my company doesn't have any assets. That's the tough part that we see in the downterm right now.
IA Neftegaz.RU: What are the perspectives of cooperation between Russian and foreign oil and gas companies? Greg Stringham: I think there are two ends. I was recently in Detroit at the GATT's ministry meeting and several presidents of Russian oil companies were there and presenting and Canada, France and other GATT's countries were there as well. That was an opportunity to raise awareness. We had in Canada several companies that 10 years ago went out to work in Russia and they had troubles in business, to have money back out or the country. So they say, I've got other opportunities, I can go to Nigeria, I can go to different countries. So if I'm going to have that difficulty in doing why I will continue making the investment. So I think we need the kind of continue education of information coming out, say this is now a possibility and GATT's companies is a great example of that the president of Lukoil of there saying: yes, this is how it works now, how it's going and it's very good ambassador for developing oil and gas industry in Russia. The next thing I think you need to do is a technological level, you can share research information that is easy to do on Internet, Web-sites, e-mail, Universities involved, Russian scientists, Canadian scientists that are already involved. Moving on to the next level of how to make business connections between the two really require the fact that Canadian companies and Russian companies understand each others business, see the opportunity and then believe there is efficient a framework because many companies come and see difficulties and say I'm going to try someone else now, it maybe right now the changes may happen efficiently as I've heard in Russia to be promoted again and start out. The best vehicle for reinitiate it is through governments. Our companies locked to our government, saying you have an office in Russia, you have an office in that area, tell us what is working - what's not, who should we do business with, who should we avoid. They become the first entry providing that kind of advice. There are always a few entrepreneurial companies who are ready to go right now over there and they are doing it. They need then to come back and have good experience and say: yes, they are great partners, they've changed. They are not of the way before and that information I don't think has made as strongly to Canada yet as it possibly could. It would be probably my recommendation is to try that information out to our companies through web-site, through Internet and provide opportunities and say: yes
IA Neftegaz.RU: What about financial situation? Greg Stringham: For both countries it's very important y but right now I would say they suffer from difficulties that happened previously. Please look at the investment: in geological prospects, in financial prospect or the best around the world. Even it's still small portfolio of our expenditure (about 10%) that money can go into any kind of areas. They have certainty of the government backing and the legal framework. The Russian geological prospects are very good, very similar to what's here, cold weather technologies that have been developed in the North of Canada. I mean the synergies are there and they are very ally. And I think there is an opportunity to re- and vegetate the momentum that was there I mean our companies did go over I think 10 or 12 years ago quite strongly. American companies went as well. But then they had difficulties in trying to extract the value of that business. Again great experience but it was just difficulty in legal framework that wasn't enough established at that time. As I understand it now that has changed. If the geological and financial prospects were big enough that wouldn't be a big barrier the companies would see the opportunities and find the way to do it themselves. But given the history that we had here I think one's do happen can push that information back in easily consumable form so the companies can say: oh, didn't know that perspective I think you are right and that would help in getting things over. What we really need to try to get that some companies are gone and understood that they come back and say: it's different and it works, and I'm over there and I've done it. You need some examples of success in order to ignite that enthusiasm in Canada and US I mean once you ignite it, it won't be just Canada it would be the world the once to move that area because I mean Russia is really increasing demand of production the oil side of thing because they are major world player bigger than OPEC countries right now so has a great opportunity to bring international presence there, it's desire there's some hesitation to weather it's really desired right now even if it desired the framework strong enough for it's a vast enough to be able to support from international perspective. And so people value that risk all the time, risks are being in Africa, South America they are risks, they are not risks free. But one thing is the oil and gas industry are very much a risk-taker, they go to explore oil and some times they drill well that has nothing in it. So they know how to take those risks but they want to be able to manage those risks and say: ok, I understand there's a risk but how can I manage that and what kind of information will certainly help.
IA Neftegaz.RU: And the last question is about the thing that impressed us most of all here. We mean Stampede. Greg Stringham: It's a remarkable thing here in Calgary. I only moved to Calgary 6 years ago. Before that I saw stampede but it wasn't so big. For about 10 days the whole city of Calgary turns into cowboys. They wear western clothing, the rodeo, the Stampede. There is an activity, bands, the whole city doesn't shut down but really transforms. Every business puts on western cloth: blue jeans and shirts and it's a really thing that I've never seen in other cities, other cities where I lived in have the similar kinds of summer activity, week of festival. People come here from all places to be part of it. There's a lot of activity, a lot of dancing, all kinds of things are go on, it wouldn't be acceptable in other time of the year but during the Stampede week the whole community really gets involved in, showing the western routes where the city came from.

Source : Neftegaz.RU