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Q&A: A Big Future for Oil and Gas

19 March 2009

Claudi Santiago, chief executive of GE Oil & Gas, is an example of just how cross-pollinated the energy industry has become.

A Spaniard who studied in France, Santiago worked in Germany and the U.S. and now oversees energy employees in Houston from his headquarters in Italy. Globalization, indeed.

With the 2007 and 2008 acquisitions of local firms VetcoGray and Hydril Pressure Control, Fairfield, Conn.-based GE more famous for its light bulbs and NBC network now has 3,000 oil and gas employees based in Houston.

Santiago recently spoke with the Chronicle (article source) to discuss the recession's impact.

Q: I was surprised that GE Oil & Gas is still based in Florence. Why not Houston?

A: This notion of where the company is headquartered is very last century. I have 11 different nationalities in my leadership team. We operate in 100 different countries.

Q: Do you have an energy background?

A: I am a telecommunications engineer. In 1997 I joined this new acquisition that GE had made in Italy to develop the aftermarket services for oil and gas. The idea was that I had the GE DNA to help the transition.

We knew telecommunications would play a key role linking gas turbines and compressors with satellites so our engineers could assess their well-being. We use technology to gain efficiencies and avoid potential catastrophes that would cost a lot.

We've grown rapidly seven or eight times our size in 2000 not because we were geniuses but because this company had a huge amount of installed compressors and gas turbines around the world.

Q: How is this economy affecting you?

A: The oil and gas industry always cycles. When the cycle is going down, customers look at capital expenditures new projects and the scrutiny is higher. But when you already have installed assets, you want to make sure you monetize them and make them as efficient as possible, so our aftermarket activities are much more insulated from these economic cycles. If anything, in a down cycle you want to extend the life of the asset you've got, increase efficiency, upgrade existing platforms to make sure you continue to increase production in a cost-effective way.

Q: What did you gain from buying VetcoGray and Hydril?

A: At GE we like high-tech products, whether it's aircraft engines or health care equipment. We look for technology we can get faster than developing organically. Vetco fits that model well with its subsea applications. It's putting equipment in the waters of Angola and Brazil, which requires lots of engineering to maintain over the life cycle. In the case of Vetco it brought us closer to the reservoir. We went a little bit upstream from the rest of the portfolio, which is more downstream.

Q: GE is pushing a pro-environment image, but your division was the only bright spot financially in 2008. Is that a contradiction, and does that put pressure on you?

A: Remember we just got into this industry in 1995, so we're the youngest of GE's industrial side. And we're growing and gaining visibility in the company. Does this put pressure on us? Not necessarily.

We leverage a tremendous amount of technology from other "GE stores. I have the advantage to take an aircraft engine and use this technology that flies planes to drive our compressors to push gas through a pipeline. We can take a specialty gas turbine designed to generate electricity and use it to drive the compressor on a liquefied natural gas plant. It's a benefit for a business like ours to be part of GE.

We are convinced there's a big future for oil and for gas. If you assume just 1 percent of increased demand over next decade with existing depletion rates, in 10 years the world will need 48 million barrels of additional oil every day.

That's four times what Saudi Arabia produces. In addition to oil for transportation, the need for electricity will only grow. There will be renewables and there probably will be more nuclear, but the majority of new power will come from burning natural gas.

There's two ways to move that, pipelines or LNG (gas chilled to a liquid state so it can be transported on tankers). We can help with both.

Our mission is to make all our equipment environmentally friendly. This image of our industry that there's dirt under the fingernails of a lot of people, again it is a notion of the last century. These hydrocarbons can be and should be produced in a responsible way.

This is what we are trying to do. We are part of the solution, not part of the problem.