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Big Oil Companies Struggle to Justify Soaring Project Costs

Big Oil Companies Struggle to Justify Soaring Project Costs thumbnail

A group that includes Exxon and Shell plans to spend $40 billion to pump oil from man-made islands in the Caspian Sea. The project’s budget has ballooned from $10 billion. NCOC/Associated Press

Chevron Corp. CVX -0.72% , Exxon Mobil Corp. XOM -0.56% and Royal Dutch Shell RDSB.LN +3.11% PLC spent more than $120 billion in 2013 to boost their oil and gas output—about the same cost in today’s dollars as putting a man on the moon.

But the three oil giants have little to show for all their big spending. Oil and gas production are down despite combined capital expenses of a half-trillion dollars in the past five years. Each company is expected to report later this week a profit decline for 2013 compared with 2012, even though oil prices are high.

One of the biggest problems: Costs are soaring for many of the new “megaprojects” to tap petroleum deposits needed to replenish depleting fields.

Plans under way to pump oil using man-made islands in the Caspian Sea could cost a consortium that includes Exxon and Shell $40 billion, up from the original budget of $10 billion. The price tag for a natural-gas project in Australia, called Gorgon and jointly owned by the three companies, has ballooned 45% to $54 billion. Shell is spending at least $10 billion on untested technology to build a natural-gas plant on a large boat so the company can tap a remote field, according to people who have worked on the project.

Finding the next gusher has always been a risky business, sending oil companies beneath the ocean floor and into unstable parts of Africa, Asia and the Middle East. Now the pursuit is trickier and more expensive than ever. The easiest-to-reach oil ran dry long ago, and the most prolific fields often are controlled by state-owned companies in places like Saudi Arabia and Venezuela.

As a result, Chevron, Exxon and Shell are digging even deeper into their pockets, putting their usually reliable profit margins in jeopardy. Exxon is borrowing more, dipping into its cash pile and buying back fewer shares to help the Irving, Texas, company cover capital costs.

Exxon has said such costs would hit about $41 billion last year, up 51% from $27.1 billion in 2009.

As they pursued the big-bet strategy, the three oil giants arrived late to the shale boom in North America, where they missed out on profits raked in by smaller, nimbler companies that pioneered how to extract oil and gas from the dense rock.

The news isn’t all bad. Combined profits at Chevron, Exxon and Shell totaled about $70 billion in 2013, according to analysts’ estimates. Exxon and Shell report fourth-quarter and full-year results Thursday, while Chevron announces its results Friday. In 2012, the three companies earned nearly $100 billion.

Exxon and Chevron are pressing ahead with their megaprojects, confident they will boost production within three years. “Before we make the first cut with a saw, we re-measure five times instead of one,” says Ken Cohen, Exxon’s vice president of public and government affairs.

By 2017, Exxon will pump a million new barrels of oil per day and the equivalent in natural gas, showing the company’s ability to deliver big projects on time, executives say. Exxon’s output started to rebound in late 2013 after a two-year decline, helped by new crude from a $13 billion oil-sands project in Canada. The project’s cost rose $2 billion since 2011 because of regulatory hurdles and permit delays.

In a sign of the growing pressure, Shell is reconsidering some investments in “elephant projects” that cost billions of dollars and were a key part of the company’s growth strategy. Earlier this month, Shell announced its first profit warning in 10 years and has vowed to focus more on profitability than increasing its oil and gas output.

Full-year earnings at Shell are expected to total about $16.8 billion, down from $27.2 billion in 2012. Net capital spending hit $44.3 billion in 2013, up nearly 50% from 2012.

Oil-industry experts say it will be difficult for the oil giants to spend less because they need to replenish the oil and gas they are pumping—and must keep up with rivals in the world-wide exploration race.

“If you don’t spend, you’re going to shrink,” says Dan Pickering, co-president of Tudor, Pickering Holt & Co., an investment bank in Houston that specializes in the energy industry. Unfortunately for the oil giants, though, “I don’t think there’s any way these projects are more profitable than their legacy production,” he adds.

Chevron has been especially aggressive, promising a 25% increase in oil and gas output by 2017. Last year, the San Ramon, Calif., company poured $42 billion into oil and gas projects, more than double its 2010 total, even though Chevron is half as big as Exxon or Shell by annual revenue. Chevron plans to spend an additional $40 billion in 2014.

The spending surge has drawn attention from U.S. securities regulators, who have demanded more disclosure from Chevron about whether the jump will get even bigger and affect the company’s liquidity. Chevron told regulators it will provide more details.

Chevron’s most gargantuan projects, from Australia to the Gulf of Mexico, haven’t generated any cash flow yet—and might not until next year. The lag between the upfront investment in the projects and their output is pressuring Chevron’s bottom line. Analysts expect the company to report that profits fell about 20% to $21 billion in 2013 from $26.2 billion in 2012.

The Gorgon natural-gas project is one of the most extreme examples of the runaway costs that haunt Chevron, Exxon and Shell. The three companies teamed up in 2009 to build the plant on an island reserve 40 miles off Australia’s coast, aiming to tap a natural-gas trove estimated at 40 trillion cubic feet. Gorgon could be productive for decades and feed energy-hungry Japan, South Korea and China.

Chevron staked more than $18 billion of its own money on Gorgon, one of the company’s biggest projects ever, owns nearly half of the project and runs it. Exxon and Shell own a 25% stake each.

Gorgon, also the name of sisters in Greek mythology who had snakes in their hair and could turn beholders to stone, presents unusually tough challenges. The gas produced there must be piped 80 miles across a mountainous sea floor to Barrow Island, home to so many unusual species of plants and animals that locals call it “Australia’s Ark.”

Then the natural gas has to be purified and run through giant chillers that condense it into liquid form so it can be shipped on tankers.

Barrow Island’s sensitive ecology meant that much of Gorgon’s construction had to be done elsewhere, with hundreds of thousands of tons of buildings and equipment disinfected and shrink-wrapped to keep out invasive species.

Chevron executives brushed aside analysts’ worries about the project’s cost. “We see a window of opportunity to move forward with Gorgon, timing it to capture growing market demand while benefiting from a lowering cost environment,” George Kirkland, now Chevron’s vice chairman, said in March 2009.

Costs soon spiked higher. Labor costs rose because of fierce competition for skilled workers as other companies committed to spending more than $100 billion in similar gas projects across Australia. The strong Australian dollar inflated the cost of materials. Cyclones slowed work on Gorgon and forced Chevron, Exxon and Shell to build stormproof camps for workers.

Gorgon was about half-finished in December 2012 when Chevron estimated the project would cost a total of $52 billion—or 40% over budget. Last month, Chevron tacked an additional $2 billion to the price tag. The project now is 75% complete, according to the company.

“The economics of the Gorgon project are strong,” says Kurt Glaubitz, a Chevron spokesman. The company has struck deals to sell most of Gorgon’s output under contracts tied to oil prices that are up about 60% since Chevron committed itself to the project, he adds.

Chevron says it is working hard to keep costs in line. A civil-engineering unit dedicated to managing expenses and overseeing contractors has tripled to 120 employees since 2008. The company has about 62,000 employees.

Gary Fischer, who leads the unit and started at Chevron as an intern in 1979, said at an industry conference in November that the company has intensified its focus on completing megaprojects on time and on budget. Those projects “are very fragile,” he said, “and they’re totally unforgiving.”

WSJ



30 Comments on "Big Oil Companies Struggle to Justify Soaring Project Costs"

  1. Feemer on Thu, 30th Jan 2014 1:19 pm 

    This is ridiculous, fracking has temporarily pushed back peak oil, but the worlds oil wells are declining already, and fracking is going to end soon (before or by 2020). Expensive projects like this just to get a few billion barrels is not sustainable, and you cannot run an economy off of oil thats $120+ and this oil will be much more expensive than that.

  2. meld on Thu, 30th Jan 2014 2:00 pm 

    I love watching this. You see it from the simplest allotment holder using more and more chemicals and digging to tread water to the multi billion pound companies expending more and more energy to get less and less.

    They are Us, they are everywhere, see if you can recognise it in yourself and all about you. Humans fighting the laws of nature rather than adapting to them.

    And remember evolution is survival of those that adapt best, not the fittest as is so often misunderstood

  3. robertinget on Thu, 30th Jan 2014 2:41 pm 

    First of all, get facts correct. Drillers have been ‘fracing’ oil and gas since
    day one. Some wise ass put diamite down hole around 1912 from then on technology improved. Blaming supercomputers for increased oil production would be far more accurate.

    Old critics, before we realized climate change is a bigger ‘game’ changer than
    fracking, always pointed to Canada’s oil sands as too expensive, not worth using a barrel of gas to get three barrels of oil. Even with not a barrel spilled, can ultra deep water recovery compete with ‘last ditch stand’ oil sands in cost alone?

  4. J-Gav on Thu, 30th Jan 2014 2:47 pm 

    Whatever one thinks of the article as a whole, it seems evident that some formerly very deep pockets are beginning to get a bit shallower.

  5. Makati1 on Thu, 30th Jan 2014 3:19 pm 

    Seems the financing will dry up before the oil. ^_^

  6. Kenz300 on Thu, 30th Jan 2014 3:46 pm 

    They will soon realize that there are safer, cleaner and cheaper ways to produce energy.

    Second generation biofuels made from algae, cellulose and waste are the future.

    Biofuels can now be made from waste or trash. Every landfill can now be converted to produce biofuels, energy and recycled raw materials for new products.

    Big oil is looking for big bets……… slow and steady will win the race.

  7. meld on Thu, 30th Jan 2014 4:01 pm 

    @Kenz300 – Start up a company then Kenz, seems like an easy way to become a millionaire if you believe what you say.

  8. Northwest Resident on Thu, 30th Jan 2014 4:23 pm 

    As Gail Tverberg writes in her newest blog entry on “Our Finite World” entitled “A Forecast Of Our Energy Future: Why Common Solutions Don’t Work”:

    Our number one energy problem is a rapidly rising need for investment capital, just to maintain a fixed level of resource extraction. This investment capital is physical “stuff” like oil, coal, and metals.

    Or, as another writer put it, today we have rapidly increasing amounts of investment needed to chase rapidly decreasing amounts of oil extraction.

    Our civilization has hit a brick wall. We are too stunned perhaps right now to recognize that game-changing fact, but as civilization peels its face away from the wall and the little stars swirling around inside the head begin to dissipate, we will open our eyes to take our bearing and find ourselves facing a very different future than the one we had imagined.

  9. rockman on Thu, 30th Jan 2014 4:55 pm 

    And not that we are the sharpest pencil in the box (although we old farts still have some sharp enough tips) but for some capital isn’t a problem. If a deal walked through the door this afternoon that my owner liked and it took $100 million we could wire the monies in the morning. No borrowing required…would come straight out of the family’s account. We did such on two outside operated joints ventures a year ago. Tomorrow I’ll drive to N. Texas to log the first well in one of those programs.

    The situation for us is that we’re not a pubco and thus don’t have the pressure they do to add reserves to the books to keep Wall Street happy. As silly as it sounds the only pressure me and my cohorts face is making the rate of return my owner demands. And we can’t get that from the shales. So yes: I have hundreds of $millions of capex at my disposal and not enough places to spend it. So we’re not in the “Oh my Dog…we don’t have enough money to drill” situation but in the “Oh my Dog…we don’t have enough places to drill” situation. Different causes but same result: not enough drilling gets done.

  10. Northwest Resident on Thu, 30th Jan 2014 5:24 pm 

    rockman — I think that you hit the nail on the head with “pressure … to add reserves to the books to keep Wall Street happy.” Isn’t that what a lot of the shale and deep water jobs are all about — not profitability so much as putting enough “oil on the books” to keep not just Wall Street happy but the illusion of plentiful oil viable (so the masses and the markets won’t panic)?

  11. ghung on Thu, 30th Jan 2014 6:53 pm 

    @NR – I gave up the ‘brick wall’ analogy some time back. It’s more like doing battle with the Tar Baby; the harder we fight to extract something more, the more stuck we get. Or maybe a quagmire.

    What is it they say you should do when you find yourself getting stuck in quicksand? Relax and float. That’s my strategy, though it’s frustrating to watch most of humanity continue to struggle while only sinking deeper into this mess.

    I’m done throwing ropes to anyone that doesn’t get it.

  12. Northwest Resident on Thu, 30th Jan 2014 7:08 pm 

    ghung — Your “Tar Baby” analogy is better than my “brick wall” analogy, with one exception — my analogy has more dramatic effect!! But you’re right, we are stuck in a slow sinking quagmire for now and like a frog getting boiled in water, we (“we” being civilization in general) just don’t feel the temperature rising — yet. Eventually, we’ll feel that temperature right before the boiling point is hit, and that’s when I’ll whip out my “hit the brick wall” analogy again (maybe…). — Once I get all my raised planter beds (about 1200 square feet worth) finished, leveled off with topsoil, and get my three chicken coups built — THEN I’ll be ready to relax and float right along with you. Till then, it is “work, work, work”. 🙂

  13. rockman on Thu, 30th Jan 2014 7:11 pm 

    NR – It isn’t so much that “profitability” isn’t important to Wall Street. It’s just that it’s nearly impossible for them to gauge. When an oil pubco said the made $X profit last year that has nothing to do with whether they drilled profitable wells last year or not. It’s based upon income vs. expenditures adjusted by all those various tax accounting tricks. ExxonMobil produced $X billions from their wells last year. No one knows what XOM spent drilling those wells so how can they know what the profit margin might be.

    And the wells they drilled in 2013? Heck…even XOM can’t tell you what the profit will be from those wells because they don’t know exactly how much they’ll produce over what length of time. But more importantly, they don’t know what future oil/NG prices will be so they can’t know what the revenue stream will be over time. And if you can’t do that you can’t calculate rate of return for those wells you drilled last year.

    But there is a hard black and white number Wall Street has easy access: the reserves a pubco, following those SEC regs, can post as new additions to their reserve base. So the metric is butt simple: did XOM add more reserves to the books last year then they removed by producing them? And WS just loves it when a pubco has a net gain in booked reserves. Even if those new reserves were developed at a cost greater then they’ll eventually produce. When XOM bought XTO a few years ago that one acquisition represented 88% of the “new” reserves XOM added to their books. And how many $billions did XOM pay? And how many billions in debt did they assume? Who knows…who cares…they added a sh*t load of reserves.

    Such is life for pubcos on Wall Street. Once I helped a small pubco increase their share price about 400%by increasing company production of NG five-fold. Unfortunately the monies spent drilling those horizontal holes wouldn’t create a profit: the NG the Hz wells were going to produce was still going to be produced by the straight holes already completed in those reservoirs. My wells were “accelerators”. So we didn’t even add booked reserves because they were already booked because of the straight hole. But all the asses on Wall Street hyped the fact that we increased company production so much. And we never lied. All the facts were clearly explained in the annual report. In very fine print, of course. But it was here.

    Dumb ass investors. LOL.

  14. DC on Thu, 30th Jan 2014 7:31 pm 

    Now you see why the US of War and Coal wont let up on Russia or Iran, and why it keeps actively destabilizing Iraq, even after all this time? None of the those nations have to poke 100 billion dollar holes in the ground to get oil or gas. I wonder though, are ‘our’ western oil corporations now including Iraqs oil as part of their ‘reserves’, in the same manner that the US considers Mexican and Canadian oil as ‘amerikan’?

    So, in order to make all these mega-exenpsive holes in the ground look viable, what options does a struggling US corporation have? Beg for even more subsidies, or ask the US military to help set them up in places where the cost of extraction is still dirt cheap by comparison?

    Now remember, of the two options, only one will really ‘work’. The USgov could in theory crank the subsidy tap even more, but that wont work. Subsidies can only paper over the problem this article talks about-it cant make ‘new’ energy, or make the ‘old’ energy cheaper.

    The US does have a plan in place to deal with expensive and or depleting oil, its called the uS military and the CIA.

  15. Northwest Resident on Thu, 30th Jan 2014 7:39 pm 

    rockman — I love the detail that you crank out. I’ve learned so much about the oil business just by reading your posts. What a business!! And I think you just explained what I really was meaning to say — when I said “profitability isn’t important to Wall Street” — what I meant to say is that the “illusion” of profitability in the oil business is extremely important to Wall Street, but they can “fake profitability” so easily in the oil business, using the exact tricks-of-the-trade that you explained. From my point of view, what is most important to Wall Street these days regarding oil/energy is to keep up the “illusion of oil profitability” (not that they wouldn’t like to actually make a few bucks while they’re at it). If that illusion gets shattered, then the investors head for the hills, and that’s when real trouble starts for Wall Street, and all the rest of us.

  16. J-Gav on Thu, 30th Jan 2014 8:03 pm 

    NW – Yeah, Gail’s latest is pretty sobering isn’t it? Not that we didn’t know …

    Meld – The ‘fittest’ can also be understood as the most adaptable, in fact in Darwinian terms, that’s exactly what it means – not necessarily the one with the most impressive rippling torso …

  17. ghung on Thu, 30th Jan 2014 8:16 pm 

    Gail’s 2015 prediction (with caveats) and her sharkfin graph got a lot of attention. Too bad she doesn’t get the alternative energy thing. We off-grid folks have known all along that alternatives wouldn’t save the world. That’s why we’re off-grid folks.

  18. rockman on Thu, 30th Jan 2014 8:30 pm 

    NR – Speaking of illusions I failed to add the end to that story. A billionaire Wall Street raider was so impressed by my Hz wells he launched a successful hostile takeover of my company. We were the second of small cap pubcos he started collecting. And how did that work out for him? Me and my engineer left…we were the only one there who knew how to drill those Hz wells. This was 20 years ago so there weren’t many of us in the oil patch in the first place. And in a few years the stock went from over $5/share to less than $0.10/share, he lost tens of millions, the company filed bankruptcy, was liquidated and disappeared forever.

    Dumb ass raider. LOL.

    Also remember a good Wall Street trader can make as much money by trashing a company as hyping it. All they need do is short the stock, wait for the collapse and then cash out. Which is exactly what me and a few others did who knew that dumb ass raider didn’t know crap about running an oil company.

  19. Northwest Resident on Thu, 30th Jan 2014 8:31 pm 

    J-Gav — I found Gail’s blog from clicking a link on the old Oil Drum. I thought then that I had found the mother lode of rationality and straight-shooting facts, and I still do. She tells it like it is, and does so in a very understandable way. From her site, I clicked a link that brought me here, and this has become my main “hangout” during the day which I visit in between spurts of mental activity working on websites — every once in a while, I need a BREAK!

    ghung — I think Gail’s previous article is in total agreement with you when you write “alternatives wouldn’t save the world.” She describes very well I think just why that is true. I’m not sure what 2015 prediction you’re talking about though, so maybe I’m completely missing your point…??

  20. Northwest Resident on Thu, 30th Jan 2014 8:35 pm 

    Damn, rockman, you ought to write a book about your experiences in the oil business. I wish I could sit around and drink a couple of beers with you — the stories I would hear! You don’t have to tell me how deeply satisfied you were watching that raider’s stock drop into the sewer — I can imagine the smile on your face!

  21. Meld on Thu, 30th Jan 2014 9:19 pm 

    Rockman you are a massive asset to this site. I agree with NWR, you should write a memoir.

  22. ghung on Thu, 30th Jan 2014 9:51 pm 

    NR – See Figure 9: ” Estimate of future energy production by author”, which indicates a severe falloff in energy production @2015. Gets more discussion in the comments.

  23. ghung on Thu, 30th Jan 2014 10:08 pm 

    ….as for renewables, Gail has been dismissing them as essentially useless (or worse) for years, despite the fact that some of us have had great success with them. I guess if renewables can’t save suburbia, they aren’t worth considering. Luckily, I used different criteria when I started this journey. Point being, they weren’t the darling of mainstream corporate greed, and are only dependent on global supply chains for their initial production. Besides, I couldn’t afford my own oil well, refinery, nuclear power plant, etc. Darn it.
    We’ve produced over 34 kWH today, and still counting, just sitting here.

  24. Northwest Resident on Thu, 30th Jan 2014 10:25 pm 

    ghung — I thought long and hard about solar panels, and did some price shopping. But the problem here where I live is that about 3/4 of the year (or more) we have full overcast skies. Winters bring very short days with little to no light — kind of dreary actually, but not if you’re a DUCK! Down where you are, I’m sure you get a lot more sun and therefore a lot more bang for your buck when it comes to solar. But what we DO have up here is lots and lots of trees, and water. I’m thinking a good old fashioned wood-fueled steam generator is what I need — and they sell them too — just gotta come up with about $20 – $30K and oh yeah, get that permit from the city to operate it in my back yard. On second thought, I might have to do without electricity — and hot showers — and video games. Collapse is really going to suck…

  25. DC on Fri, 31st Jan 2014 12:20 am 

    ghung, I have been saying for sometime, Gail, for all the sustainable cred shes tries so hard to build, is a cheerleader for the suburban status-quo. Her main, no, I would say the only thing that bothers her, is what impact ‘high cost oil’ will have on her cherished shop-drive-consume-plastic-trash paradigm. How did I figure that out? All you have to do is read her work!

    Yes, she does bad-mouth ‘green power’, a lot. Perhaps there is somewhere buried in her reasoning some thin justification, here and there, but overall, her main concern is what the cost of oil will do to BAU. Put another way, shes hardly onboard with the transition away from the mass- consumption thing, not even a little bit.

  26. rockman on Fri, 31st Jan 2014 12:58 am 

    NR – Couldn’t really muster much smiling. He was a shark but a smart shark. The asses running the company took out a $100 million bond in an effort to degrade the value of the company in hopes of fending off the raider. They just wanted to keep their big salaries. So we were a company run by a couple of selfish asses fighting off an ignorant ass. But the ignorant raider ass still took over the country, the company went into the toilet, the bond value sunk and the raider bought the $100 million bond (11% interest) for $0.48 on the $dollar. And all the company revenue went to paying him $11 million per year for 5 years…got $55 million back on his $48 million purchase. No money to pay even a single $ on the bond so he then takes a $100 million write off against his huge taxable income. He didn’t know crap about finding oil/NG but he knew how to work Wall Street.

    And the bonus: 30 people lost their jobs and a company that my engineer and I took from nothing to a couple of hundred $million disappeared. I ran down the details not looking for sympathy. I’ve been doing this for so long the games don’t really bother me that much any more.

    But so many folks see the oil patch as some simple monolithic organism. Just like I was tying to explain elsewhere that when folks can’t get their NG or propane during this freeze it isn’t a problem with oil/NG production companies but the distribution system. A system the oil patch has no influence over. But folks have difficulty distinguishing the difference components. And the MSM often does nothing to clear it up and at times confuse them even more.

    Sometimes it seems as though the relationship between the oil patch and the public is becoming as dysfunctional as the two parties in Congress. And neither situation will prepare us for the truly bad times ahead IMHO.

  27. Mr.Big Sinep on Fri, 31st Jan 2014 1:30 am 

    Fools, rockman When it comes to I.Q. points, you lose them every time you go to the bathroom.

  28. Northwest Resident on Fri, 31st Jan 2014 3:50 am 

    rockman — Another amazing story of how slick individuals get rich while leaving a smoking trail of destruction wherever they go. In the end, guys like that get what’s coming to them — I really believe that.

    The Russian mafia wrecked a deal that I thought was going to make me rich — but that’s a whole different story.

    Dysfunctionality is everywhere. Maybe civilization is due for a big purge — kind of looks that way.

  29. rockman on Fri, 31st Jan 2014 7:28 pm 

    NR – Off topic but the thread is about dead so I’ll toss out another story. And this time not about me. You mention the Russian mob: I met a guy in Houston years ago that hooked up with a crooked Russian bureaucrat that ran a Portland cement plant. Like many Russian ops they keep working the people and running the plant when there was little demand. Many millions of pounds of inventory going nowhere. Cut a deal with the Russkie: pay him $200k and he would load a ship with millions of pounds of bagged cmt. The market prices at that time was around $2.5 million. But it had to be cash up front. So this guy is running all around Houston trying to rise the feed money for this 10 to 1 deal. Not easy since he had no cred (an exotic car salesman) and no one trusted the Russians on an under the table cash deal. He finally tracked down a commodity broker in Zürich. Got him on the phone and started his pitch. The broker told him to shut up…he knew about the deal and the Russian. He then explained that if he ever got the deal funded he and the Russian wouldn’t live to see a penny of profit. The folks that controlled the global Portland cement market would make sure of it.

  30. Northwest Resident on Fri, 31st Jan 2014 8:09 pm 

    rockman — That sounds about like what I would expect. Truth is, I travelled to Russia eight times over a seven year stretch. Three of those times, I rented my own apartment (two apartments one time — one in Moscow and one in St. Petersburg), and I stayed there for 3 months, 8 months and 4 months. I learned to read and write Russian. I lived like a Russian, my only friends and associates were Russian, I drank vodka like a Russian. During all that time, I was working the American consulate and American Business Center in St. Petersburg, developing contacts with Russian businessmen who were looking for opportunities to make business with American companies. I found opportunities in Russia, then pounded the pavement (and phone) to find American companies that might be interested. The story of how the mafia screwed my gig up is a long and detailed one, but to make the story short, I had some Russian associates with close contacts in the OIL business in St. Petersburg who claimed to have vast amounts of urea to sell. My American company was an international shipper. They put up a letter of credit for x number of metric tons — a whole ship’s worth — of urea to be delivered to one of their clients in India. The ship set sail with the goods. I was the designated “middle man” — they guy who would stay in Russia and pound the vodka and make love to the Russian women and shake the hands (and be the hostage) to keep the Russians honest. My “cut” was going to be a fraction of a penny per metric ton, but still, with all those metric tons my first “cut” was going to be about $100K, and the intention was to do monthly shipments. About half way across the ocean, the American company gets a fax from Russia — the Russian “owner” of the urea demanded a half cent increase per metric ton. Short story, the deal fell through, the guy in India who brokered the deal was executed, I had to crawl back to computer programming, the guy at the American company who convinced his bosses (descendants of the Shah of Iran) to put up the letter of credit fired him and last I heard he had turned into an alcoholic. I had numerous other encounters with Russian mafia too — none good. I went from being intrigued by Russia and loving Russia to wanting to get as far away from Russia and Russians as possible. Lessons learned…

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