Published on 1 July, 2007. By John Reynolds
Petrel Resources managing director David Horgan is no stranger to schmoozing with diplomats, government officials, investors and fund managers, so he should feel at home in the lavish comfort of the Merrion Hotel bar.
Currently valued at €76m, London-listed Petrel is potentially sitting on the next Saudi Arabia. It hopes to sign development rights to a potentially 5 billion barrel-rich oil field in Iraq’s Western Desert as soon as the country’s hydrocarbon law is passed. If all goes to plan, in 2010, the firm’s second Subba and Luhais oil field development – which will cost about $197m – will produce 200,000 barrels of oil a day and 120m cubic feet of gas. A third development is under discussion.
“We’re like the bird on top of the crocodile picking the meat from the croc’s teeth,” says Horgan, describing the company’s good relationships with oil giants such as BP and Total. He’s adamant that Petrel is doing them a favour by arguing the industry’s case for Iraq’s hydrocarbon law, something he can do thanks in part to being Irish and therefore seen as less politically aligned with US or British interests in the eyes of Iraqis.
“Eventually we’ll be bought by BP, Total or our sugar Daddy, Itochu (a Japanese joint venture partner in Iraq with Petrel),” he says. In Iran, Persian Gold and oil and gas firm Pan Andean Resources – two other companies chaired by Dr John Teeling – are hoping to start new explorations. Horgan has just returned from Colombia, where Pan Andean hopes to expand. Other ventures – or perhaps adventures – are in Botswana, with De Beers-partnered African Diamonds. Teeling is also looking at zinc mining opportunities through Connemara Mining, which is listing on London’s AIM next week. “It’s a bit of a gamble really,” Horgan admits.
Gambles occasionally pay off. “Ryanair stock has quadrupled in price since its IPO ten years ago, but some of our early investors have made 20 or 30 times their money. Our stock starts cheap, but most people only buy it when it’s recommended in the newspapers,” he says, glossing over a plunge in Pan Andean’s stock price some years ago.
“You have to be a bit mad to change the world. Just like Michael O’Leary, John Teeling isn’t a normal person. He’s more like a serial killer who kills more people in the hope that he’ll get caught; only he starts more and more companies in the hope that one of them will be a huge success. He’s an eccentric entrepreneur with an academic background and at times he can be a bit difficult to work with.”
As a globetrotting oilman, clearly Horgan gets through his fair share of the sticky black stuff. “I’m overseas about 40 per cent of the time,” he says. Most of his time is taken up with Petrel and Pan Andean. Earlier this month however, he found time to give evidence to new British Prime Minister Gordon Brown’s Iraq Commission. Horgan perhaps unknowingly echoed a phrase coined by Tony Blair. “What matters is what works,” he told civil servants, who seemed surprised to learn that it’s wise to get permission from the Iranian government before working in southern Iraq.
Horgan’s does his best to stay on the right side of governments and their spooks in the various countries where he does business. “I could write a book on this,” he boasts. “When I was at Cambridge University, a retired lecturer tried to recruit me for MI5, the British intelligence agency. So undoubtedly they have a file on me,” he says nonchalantly. “Another time I was at an Opec meeting where there was a very attractive blonde who was multilingual and claimed to work for the British Embassy, but I’m sure she was a spy. My Venezuelan director knew her and spoke to her, but I tried to avoid her, because I was conscious that the Opec ministers were watching me.
“I’ve also been stopped on a trip to Washington. I was put into a holding cell by US immigration in Dublin when they saw all my Middle Eastern passport stamps, but I calmly told them I’d been to Harvard and that the former ambassador was a friend of mine. I was later told they called Langley (home of the CIA) to check me out and then they let me go. In the Middle East, my hotel rooms have been raided from time to time or spooks have listened in. Sometimes I’ll speak in Irish to a colleague to get around it. It’s a fact of life and actually a good thing in some ways.”
Has the investment community ever been hostile to Petrel and its interests in Iraq? “Once a US bank wouldn’t process a bank transfer to a consultant who was working with Persian Gold in Iran. And a Gartmore fund manager was told to divest his investments in Iraq, but he ended up making money anyway from selling his Petrel stock. A lot of people would like to back us, but can’t do so. The Rothschilds haven’t backed us for political reasons. By and large, top City fund managers are very supportive and we’re both ultimately pragmatists, so it works well. We use the Irish flag and we aim to be part of the solution in Iraq, rather than part of the problem.”
Has Petrel ever used private security agencies in Iraq? “No, partly because it can be very expensive. For €1,000 a day, you can get someone with ten years’ experience who speaks Arabic, but for €1,000 a month, I can have the undying loyalty of a Shia militiaman.”
What about paying bribes? “We were sorely tempted to get involved in the UN oil for food programme, but we didn’t, whereas other larger oil firms did. Former Iraqi oil minister Ahmed Chalabi’s people in Ireland demanded $2 million from us, but we didn’t pay. We’ve contributed to Shia charities, but it’s relatively small money.” Horgan has also organised shipments of medicines for sick Iraqis in the past, perhaps as much to improve Petrel’s standing in the country as to help its people.
“Corruption is rife in countries like Angola and Mozambique, where you can practically buy the judge. But then again there are bad practices in the City. In 2001 I needed an armed guard in Colombia, but now it’s safer and the chicest place in town is an Irish pub. But we may have to cut a deal if we come up against South American companies bidding for the same contracts as us. I often argue with do-gooders and NGOs about corruption and I suppose we’ve suffered because of it more than it has helped us.” He likens foreign investment to a police car keeping an eye on criminality. “We were asked for money in Sudan, but it was more trouble than it’s worth,” he adds.
Does he ever pause to consider that the planet will choke even more when all that Iraqi oil is burned? “Environmental debates are more about politics and emotion than science. Human activity is energy intensive but people won’t give up growth or reduce their overall energy consumption. We’re emerging from an ice age so you’d expect long-term temperature increases. We can do little about nature. If you can halt emissions easily, it would be foolish not to: it’s like an insurance policy.” It’s a pretty fatalistic message.
Unsurprisingly, he doesn’t have much time for Green voters. “A lot of South Dublin housewives voted for Ciaran Cuffe. But when I’m getting the Dart or taking a taxi to work, they drive by in their SUVs, probably on their way to the airport to fly off to their second home in Provence.” Are biofuels the answer to our oil addiction? “No, they’re being heavily subsidised and there’s more carbon dioxide emitted in their production than that of petrol.” Probably the sort of reply you might expect from an oilman.
Will oil prices rise if the black stuff starts to run out, as RTE broadcaster George Lee warned in his recent doom-laden documentary in which Horgan featured? “If Bush launches another crazy escapade, anything is possible, but in the short term, oil is overvalued, so prices should come down. In the long run they’ll rise though, but it would take something big for us to see $100 – $200 a barrel.”