April 25, 2011
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№ 3 (March 2011)

Editor's Letter

Modernization? Empower Kids to Think Small (Business) and Big Things Will Happen

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Pat Davis Szymczak

   In the oil and gas industry, safety is a life and death matter: fire, explosion, industrial machinery with moving parts that can easily take off an arm or leg.
In 1988, fire and explosion at the Piper Alpha drilling site in the North Sea killed 167 men and resulted in $3.4 billion in economic losses. While last year’s BP Macondo well explosion in the Gulf of Mexico pales in comparison with 11 dead, it is impossible to put a price on the cost of even one human life (especially if it’s your life.)

   Every country has its body of regulations to control risks, and civil and criminal penalties to punish negligence. Some of these controls are based on domestic laws while others engage with international standards because of the global nature of the oil and gas business.

   This month’s cover story in Oil&Gas Eurasia looks at an important aspect of the Kremlin’s drive to create a modern Russia: redrafting of safety regulations so as to make the oil and gas processing industry efficient at home and competitive abroad, without compromising safety.

   Russian President Dmitry Medvedev ordered the reform a year ago and in April, draft legislation is expected to emerge from a Duma committee and go to both houses of parliament, the government and industry for final discussion.
Oil&Gas Eurasia is proud to have been asked by Gazpromneft to carry articles detailing this process and this is the first of a series of articles we will be featuring on the modernization issue.

   But since this is my editor’s letter, I’d like to inject a little of my own thinking about modernization. It doesn’t have much to do with safety but it has a lot to do with innovation and the creation of new businesses, which is needed to keep any country in a constant state of modernization – once the initial modernization takes place. And while it might not be a macro-economic concern of the Russian government right now – at some point in the future it will be important.
In fact, innovation is being talked about and it is being addressed in large government projects like Skolkovo which are drawing world attention. But in all this “bigness” there is something that is not being addressed. Let me explain by one simple example:

   I was a moderator recently at a conference in Moscow to mark the signing of an agreement for Moscow to host the World Petroleum Congress in 2014. The conference was attended by a large number of students from Gubkin Oil and Gas University and several speakers – some from industry, some Gubkin professors – kept asking, “what the Russian government is going to do about innovation!” In other words, “who is going to save us?” Sorry, but it brought to my mind the satirical American comic strip from the 1960s, Pogo. As the central character, Pogo, grappled with life’s concerned, the answer he got was usually: “We have met the enemy and he is us.”

   The government and big international industry can cooperate on things like Skolkovo. But, true innovation by its nature depends on the freedom of the individual to think and act creatively. I believe I reminded my Russian readers back in July that Hewlett-Packard, one of the international companies interested in Skolkovo, was started by one man who labored on his invention alone in his garage. The garage, in fact, is a tourist attraction in Silicon Valley these days.
What I’m talking about isn’t about American mentality or Russian mentality or German mentality or Chinese mentality, although we all do have our own national character. What I’m talking about is human nature. True, some governments are more involved in supporting innovation in the private sector but that is another topic for another time.

   The government’s job is to give that individual a structure that keeps him safe while he pursues his entrepreneurial dreams.  That’s why, I’m sure, President Medvedev – a lawyer – speaks from the heart when he often talks about how important rule of law is in creating the right environment for innovation to flourish. I’m not talking about the lawlessness of 1990s Russia. I’m talking about freedom to start a business, grow a business and not have to worry about someone bigger who envies you and is well connected, closing you down or pushing you out in a hostile take-over.

   So back to that conference I mentioned earlier; I decided to conduct an experiment. During the question and answer period, I asked the audience a question: “I see a lot of young people in the audience,” I said. “Raise your hand if in 15 or 20 years from now, you can visualize yourself owning your own business. Maybe a small engineering company, maybe a small oilfield services company or high tech equipment producer, or anything else for that matter; just a small business and you own it.”

Out of more than 100 students, only three raised their hands. Think about that!

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