H. Daniel Hogan: «I’m proud to be an American working for LUKOIL» | 341 (December 2017)

General Director of LUKOIL International Upstream West – on LUKOIL’s recent acquisition in the Gulf of Mexico, American energy policy and his professional journey.

2017-12-29 16:09 Views 507

H. Daniel Hogan: «I’m proud to be an American working for LUKOIL»

General Director of LUKOIL International Upstream West – on LUKOIL’s recent acquisition in the Gulf of Mexico, American energy policy and his professional journey.

My first question is about market situation and its influence on the exploration projects. In production, we can postpone investments and maintain current output. What can we do in exploration to cope with the low oil prices?

Daniel Hogan: It has a significant impact on us as well. All our projects must generate a certain internal rate of return. When the oil prices go down, we reassess their economics, and if they fall below a certain threshold, we have to decide whether to remain in these projects.

OJ: Did you already reassess some projects?

Daniel Hogan: Yes, we’ve looked at our projects in Cameroon, Ghana and Nigeria. Actually, we continually assess those projects. We have significant investments in each of those three areas and while we are not the operator, we have significant influence on the timing of the projects. We may want to delay the projects to a future date hoping that commodity prices will increase. And in fact over the last 12 month prices have increased, which help us.

OJ: What do you think – is it better to be an operator in such complicated exploration projects or just an investor?

Daniel Hogan: My preference is to be an operator. As you know we recently acquired Block 12 – a fantastic acquisition for our company. I’m very proud of our efforts on Block 12. But the best is yet to come there as we will be the operator on the Block 12. The significance of being the operator is that you are in control of the execution of the project, of the expenses for the project, and I’d say you are in control of your own destiny. If you are not an operator, you can influence those decisions but you are not the decision maker.

OJ: You are an expert in the Gulf of Mexico. Would you say that this region is more promising than the other regions of LUKOIL presence from the point of view of offshore operations?

Daniel Hogan: It’s difficult for me to say which areas are the most promising because you have different expectations from each project. The fantastic thing about Block 12 is that there is significant upside on the exploration part of this project and we are the operator there. It’s also in the shallow water, so the cost of development should be less than in the deeper waters in the Gulf of Guinea in Africa where we are partners in Ghana and Nigeria. I believe that if the exploration is successful there, this project could be extremely economically prosperous for the company.

OJ: What in general do you think about southern part of Gulf of Mexico? Do you believe that it is similarly rich in hydrocarbons as the northern part?

Daniel Hogan: The Gulf of Mexico covers a large area, so just because you are successful in one part, doesn’t mean that you will be successful in another part. And also we need to keep in mind, just because you discover oil, it doesn’t lead to the economic success. If we find a cup of oil, we are not going to make money. The Company needs to find large quantities in order to be commercially successful. That’s true for Block 12 as well. We made a significant bid on that block which enable us to acquire it. We have to find sufficient volumes in order to be commercially successful.

OJ: Now let me ask couple of questions about American energy policy. A year ago Donald Tramp outlined his “America First Energy Plan”, pointed at better utilization of US energy potential. Do you already see some changes?

Daniel Hogan: Yes I do. Just since Mr. Trump took office, in the Gulf of Mexico we had a lease sale that under the new Secretary of Energy took a different approach. In the past we would have a lease sale that covers just the eastern Gulf of Mexico, or the western Gulf of Mexico, or specific parts. The most recent lease sale covered the entire Gulf of Mexico. I think this is a very positive sign. The President has also said that he will open up certain land blocks in the national parks for drilling, and I think it’s a good thing for our industry.

In the US we had generally been an importer of oil and I think that’s changing now with the shale oil business and fracking. Personally, I’m not certain that the shale oil and the fracking business will lead to the same economic success as conventional oil, which you have in Russia. I think it’s yet to be determined. The profit margins in the shale business are still very narrow. What we need to do in the US is to focus more on conventional oil and gas assets as opposed to unconventional.

OJ: What are the main factors that influence the global energy market?

Daniel Hogan: When you supply commodities to the markets, it’s a pure “supply versus demand” scenario. If supply goes up and demand goes down, the price will go down. The one thing that impacts our business as much as supply and demand, is geopolitical situations. Another important thing is technology.

We are always trying to do things better. I can remember very early in my career 500 feet was considered to be deep water. And now I personally have supervised the drilling of wells in 10,000 feet of water depth. It is amazing thing. Fracking is another thing. The shale is the source rock for conventional sands. In the past, earlier in my career, we would drill just for the conventional sands. Now we drill to the source rock and we frack it with extremely high pressures in order to release the oil. That technology we did not have as early as 10 years ago.

Technology will always change. It will usually get better. And it will usually mean that we can acquire resources that in the past we were unable to. As technology advances, it doesn’t just mean that we can capture more resources, it also means that resources that we have already proven may became commercial.

OJ: Now about your experience in LUKOIL. Previously you have been working for American companies…

Daniel Hogan: I will tell you little bit more about myself. I grew up in a very small town in South Texas, very close to Corpus Christi with population less than 10,000 people. My father died when I was 16 years old. He had been an automobile mechanic, and my mother was a bank teller so our family income was quite modest. I had to go to work to help my family, and the best paying job was in the oil field. I drove oilfield trucks, worked on drilling rigs. I did number of things during holidays, after school to help my family. Then I went to University to study engineering technology. After the University, I worked 16 years for Exxon, mainly in operations and engineering, then for ENI and Pan Atlantic Exploration (as a President and Chief Operations Officer).

I started out in a very low position in the oil field and I’m very thankful and grateful that I have a position now to work and influence the direction of such a great company as LUKOIL. I’m very proud to be an American citizen working for LUKOIL.

Are there cultural differences between Russian and American employees? Yes, of course. However, there are much more similarities in our cultures. Very recently, I was given the opportunity to be on the board of US-Russia Chamber of Commerce. I gratefully accepted that opportunity and I look forward to building a better business relationship between our countries.

OJ: What would you wish to your team and LUKOIL employees in general for the New Year?

Daniel Hogan: I wish everyone prosperity, I wish great things for our company. We are not just LUKOIL employees; we are all on the same team. I wish peace and happiness to everyone as we are going to the festive season and I wish that your families stay safe and have everything that God intends for you to have.

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