International Assignment Challenges for Energy Companies

Energy companies need a local presence in key locations around the world in order to be competitive. As resources are discovered, due to newly developed technologies in finding and extracting oil, many players want to get set up in new locations as quickly as possible.

With new resource discoveries each day, there’s not much lead time. Some interests will target specific locales, while others prepare to leap on new opportunities as they present themselves. As a result, Human Resources often does not receive advance warning and risks becoming reactionary.

We know energy companies need to be in markets that are problematic and, at the same time, enter those new markets without ample amounts of advance planning. Our focus is on the main themes of assignment management, overlaid by the particular challenges special to the world regions that are key to the energy sector.

The main challenges that are faced by energy companies fall under the following categories:

1. CULTURE AND POLITICS

“The existence of bureaucratic systems and cultures is central in making the decision to invest globally. The nature of corruption, local values and assumptions that are built into concern is the extent to which there is a culture of law or a culture of personal patronage, where negotiations are done on a personal rather than a legal basis. The impact of international lending agencies such as the International Monetary Fund or the World Bank is also important in creating a legal culture that a business will have to take seriously.”1

As evidenced by the number of lobbyists at work worldwide (an estimated 15,000 actively lobbying the European Union alone2), politics plays a lead role in business in every market. This is even truer for the energy sector working in the top oil-producing countries. Money brought in by a booming oil business has, all too often, led to the prolongation of state rule by tyrants. Dealing with such individuals is like reasoning with a spoiled child used to getting his way, and their tantrums often result in business deals falling through, broken promises, ventures ceased, and, at the end of the day, lots of money left on the table.

Any company working in this environment faces unpredictability. Countries once considered relatively safe (e.g., Tunisia and Egypt) have caught corporations by surprise with recent events3. And though there are many countries involved, for the purposes of this White Paper we will take a closer look at:

  • Russia, number one producer of oil in the world and stingy with their trust of the U.S., UK, and Europe. Russian leaders are frequently in the news promoting their open disappointment with U.S. and its allies’ policies worldwide.
  • Saudi Arabia, a patriarchal society that may have written checks into the future that it can’t cash. A friend to both those allied with the U.S. and not, it walks strategically in the minefield of its region, carefully calculating every move.
  • Venezuela, a democracy since 1959, has, in the last 20 years, transformed into a test subject for a new type of socialist movement created by Hugo Chàvez, complete with an openly aggressive stance against the U.S. and its allies.

For more information, please contact msi’s Human Capital and/or our Professional Services & Resource Management Company.

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