Why we suck at PR

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The natural gas producers industry is not great at PR because it has never had to be before.

First we are not a consumer business and we don’t meet our customers. I don’t get on a plane to come to Montreal and explain why my natural gas is bluer or burns hotter than my competitors. Just like other commodities, financial intermediaries match buyers with sellers of natural gas. The system has worked allowing us to focus on geology, geophysics and engineering to deliver affordable energy with an ever-reducing environmental footprint but it also means we are disconnected from our consumers.

The upstream sector is a risk management business. We manage the risk of investing enormous capital in to assets deep underground that can’t be seen. To manage our risks, just like hedge fund we have to consider economics and political factors. We also have to manage incredibly high tech processes to put a four inch drill bit within a few meters of the exact spot several kilometers underground.

One advantage we have had in managing risks is mobility of capital. Conventional oil and gas wells have short lives and pay back their investment quickly. Like New York hedge funds, if a jurisdiction changes and becomes uncompetitive, we move our capital somewhere more economic. As a result, jurisdictions around the world have had to explain why they are good places to invest; not the other way around.

This is all changing as conventional oil and gas reserves run out especially in those jurisdictions where “Big Oil” can still operate. Today unconventional projects like the oil sands and shale gas take much more capital, have much longer lives and take longer for the capital to be paid back.

It was not just an eye opener for the Government of Alberta and the public when it attempted to change the royalty system. The industry was so bad at PR many of its own employees agreed Alberta was not getting its fair share.

In a matter of months, capital flowed out of Alberta and in to Saskatchewan, British Columbia and America. Only the loss of jobs in small town Alberta reminded Albertans how important the industry was to rural Alberta and the overall economy.

However, it was an eye opener for the oil sands companies as well. After their capital was invested, the Government increased the royalties under public pressure. They found their multi-billion dollar investments were still many years from paying back. They were stuck and even their own employees benefiting from 10 % and 20 % higher salaries (or perhaps that’s why) were not supporting them.

Suddenly we are like the mining industry. The mining industry has long investment timelines and has always understood the importance of politics (and social acceptability). Coal companies in particular with their hundred year plus reserves have one of the most powerful political lobbies in America.

No wonder the natural gas lobby didn’t know what hit them at the beginning of the shale gas debate. Industry is just realizing the importance of politics and public opinion just as social media is making it more important for everyone. We are good at managing change and in time we will get better at PR.