Bill Gammell, Chief Executive Officer, Cairn Energy plc
The Way Ahead Interview invites senior figures that shape our E&P industry to share their wisdom, experience, and deep knowledge with the young E&P professional community. Each interview is an open conversation that explores the careers, advice, and vision of these successful individuals. For this interview, we travel to the Cairn Energy headquarters in the historic Scottish capital city of Edinburgh. Please join us for an inspiring conversation with Bill Gammell, Cairn Energy’s Chairman and Chief Executive Officer, as he discusses his joint passion for business and sport. We explore Cairn’s origins and delve into the company successes in Asia. Gammell reveals that success lies in learning from, listening to, and respecting those around you—and taking the ball and running with it.
John Donachie, TWA Interview Editor
What was your first job in the oil field and your impression of the industry when you joined it?
My first job in the oil field was working as a roustabout on a rig in the Dutch sector in the early 1970s, at the start of North Sea business. I was impressed by its dynamic and exciting nature. Working in the North Sea in the early 1970s was a great leveler. It taught me very valuable lessons in life about having the right attitude and how relating to people with differing backgrounds was extremely important. I learned a lot about how to deal with people, to give respect and to earn respect. It was very educational.
You have been exposed to the E&P industry throughout your life. How do you think the oil industry stacks up against alternatives, and why should a young professional pursue it?
Because it is fantastically challenging. The three fundamental risks to the oil industry are political, commercial, and technical. If you can master an understanding of all three, then it opens many of the opportunities available in the industry.
The really cutting-edge thing about this industry is that you are continually challenged to assess risk against reward. This equips you for analyzing any problem. You are always learning and always looking for new opportunities and new solutions. I am always happiest when we are drilling because it is the unexpected that it is interesting. We are discovering the past to create the future. In discovering large amounts of oil in Rajasthan, we are creating the future for the people of Rajasthan. I don’t think any other industry is quite so diverse in opportunities.
What are the most memorable experiences in your career in E&P?
I suspect the 5 a.m. telephone call to tell me that we had discovered Mangala oil field, just because of the size of it. We truly found a major oil field. It is heading toward half a billion barrels of recoverable reserves, and this is a significant oil field onshore.
Who has helped you the most in your career, and what lessons did you learn from your mentors?
My father taught me to be bold and not to be afraid of failure. I try to pass this message on to people in my company. Failure is only a stop on the way to success. It is about how you learn from your mistakes.
In this industry, we are wrong more often than we are right. You have got to encourage your people to be comfortable, to be bold, and to learn from failure. If you look at the career of Cairn, it is built on what we learned from where others thought there was failure and we saw success. I think that the most important lesson for anybody is to believe in themselves and trust their gut instinct.
What advice can you offer young professionals on how they address future trends in their developing careers?
Drink lots of cups of tea. Increasingly, we must build relationships with and show respect to state oil companies and governments who now have a greater say in the control of the world reserves. We need to align our interests, and the interests of our shareholders, with the state or the government in the way we do business. “Drink lots of cups of tea” is a genuine point in India, or Bangladesh, or Nepal, or anywhere in Asia. You need to prove yourself as a partner and prove how you are going to add value and make a difference.
I have a personal motto: Can I add value and make a difference in any situation? As a recent Indian bid round illustrates, state oil companies are bidding aggressively for their own leases, making it more challenging for others to gain a footing. Each company must define its competitive edge, and there is a continuing opportunity for the independent entrepreneurial company.
Looking at Cairn as a group, we have a competitive edge because of our 10- to 15-year-long government and operational relationships in the Indian subcontinent. We drink lots of cups of tea at all levels. Engineers get to learn and respect the knowledge of their opposites in the government, or the state oil companies and all of our joint-venture partners. I emphasize respect again because the return is amazing if you show people respect.
A great thing about the oil industry is that we know so much about different places. If we are dealing in someone else’s country, they inevitably have more information about local reservoirs than you have. Through communication we can discover: “Well, actually there was a well drilled 20 years ago that I happened to sit on.”
What do you enjoy most about your job?
Seeing people achieve things they didn’t think were possible and going against the herd. I enjoy the constant creativity of what we are involved in and the sense of achievement we have all had over the years from creating something meaningful.
As a former Scottish international rugby player, what parallels can you draw between your experience on the sporting field and in the oil field?
Always remember it is a team game. I am privileged to lead a team. It is my job to turn vision into action. You need a strong vision of what you are trying to do, and you must recognize that the strength of the team is always more important than any individual. Sport teaches you that should you get negative energy, or the wrong individuals playing in the team, it doesn’t operate. You can have momentary success, but you won’t have long-term victory.
Cairn’s logo is a rugby ball, and our motto is, “Pick up the ball and run with it.” Most people in the company know that they can pick up the ball and run with it and pass it to someone else who is in a better position to carry it forward. You have to instill in people the confidence to know that they can go further and will not be criticized for trying. I am very passionate about sport and business. The Scottish Inst. of Sport Foundation, which I helped to set up, has a very simple motto: “Winning isn’t everything, but wanting to win is.”
The ability to pick good people is a secret of Cairn’s success. I am not afraid to hire people more able than I am. You only really grow an organization by hiring good people. Hiring good people allows you to develop and move forward. I suspect that I must have been quite good at hiring good people for the organization but, more importantly, at ensuring that they have confidence and space to build an organization.
If you want to grow a company, you need people who are capable and willing to take on positions of responsibility. There are many people who don’t want to take on positions of responsibility, and that is fine, but they shouldn’t be in leadership roles. The job of the management team as a whole is to always look to develop the opportunity. I personally enjoy seeing people develop within the company, progress, and take leadership roles within the team.
Cairn Energy discovered Mangala, said to be the world’s biggest oil discovery of 2004. What lessons can young professionals learn from your successful exploration in Rajasthan?
Be bold. Stand back and look at the fundamentals. I had a strong belief in Rajasthan for a long time based on a big-picture view of the risk vs. reward scenario. The lesson I take from Rajasthan is “Don’t give up.” Having been involved in west Texas in the 1980s and my father before me in the 1950s, I was excited at the thought of getting a basin that was approaching 10 000 km2. When you have an oil well producing 2,000 BOPD onshore, considering U.S. onshore is profitable down to 2 BOPD, you have to think it is intriguing; and we were looking for a large-acreage position in oil, so it was a good start.
If truth be told, we probably had invested about U.S. $100 million drilling 15 wells before we hit Mangala. The wells we drilled had a series of successes, but nothing major. About the third well, we identified the reservoir that was eventually found to be in Mangala. It was a jigsaw puzzle. All the pieces were coming together. You have to back your technical people and stick to the plan. We could have been wrong, but you have to keep going until you are proved to be wrong. There is no point in quitting too early in the game.
Cairn’s exploration successes have been against the herd where we didn’t quit too soon. We also had a big success in Bangladesh, and that was contrary to opinion at the time. I would say that you must very clearly understand the risk and the relative reward of any proposition you are making. I always knew that we were making relatively modest investments for the very large potential rewards. The $100 million we had invested had not all gone, as we had made some relatively modest successes. Then we made a very large success.
I have a rule of thumb that people will find surprising. I double the risk and halve the reward on first look at any prospect because people oversize a prospect in order to get me interested and always underestimate the risk. The philosophy of it is to focus on the success case. Everyone looks at the expected monetary value (EMV), and actually that is never the outcome. The bottom line is that the prospect is either there, or it is not there. A board will get presented with EMV cases the outcome of which you can never know. The person with the passion never gets the opportunity to tell you what it would mean if they actually found it. I try to get to the guts of a proposal to identify the success case based on how much acreage we have.
We have always been able to follow up with appropriate magnitude when Cairn has been successful, as seen in our major acreage in Rajasthan and Bangladesh. I am interested in getting the play. We happen to be in a period of strong oil prices, but if we hadn’t been, Cairn would still have been successful. If you look at our portfolio at the moment, we have a very big position in the Nepal Ganga Valley area that looks very interesting. We always look at the “what if you are successful?” rather than the EMV case. What do you do when it actually comes in? That puts you in a very different position where you must think about how to invest in the opportunity behind it.
In an exploration company, you must invest very heavily in your exploration/technical people, but they must make sure the commercial/financial people understand the terms you are getting involved in. You can find wonderful things, but if you don’t have good commercial terms, then there is no point. It’s hugely important to get your exploration and commercial people understanding each other.
You have a very busy professional life, so what is your ideal escape?
The Scottish highlands. What I love most about Scotland is the wide open spaces and the scenery. That’s why the company is called Cairn. The other reason is the image of climbing to the top and placing a stone at the top of a mountain. I also enjoy all forms of sport. Squash, rugby, skiing. I play squash two or three times a week and coach rugby occasionally. I ski and I run. I stay pretty fit.
How does your company maintain a competitive position in today’s market?
It’s between the ears. It’s completely in attitude. Getting individuals to believe in themselves and believe that they can go anywhere they want. I have a belief that any individual can go anywhere they want. The barriers are entirely set by them; it’s up to them; be prepared to learn, to listen, take responsibility, and learn humility along the way. You get through that phase of being young and brash, but humility is important as well. With the right mentoring, I believe that there is a lot of benefit of really helping your good people develop their careers; and if you have been lucky enough to work for a small company, and I call Cairn a small company despite the fact we are now an FTSE 100 company, the experience that the management team has had is a real fast-track learning experience.
I used to think, “Wow, those guys really have a breadth of experience.” I now know that they don’t have anywhere near the experience of some of our individuals because we have had to learn, from the tea caddy up, because we have been in so many decision-making situations from a young age all the way through. It has honed our negotiation and our decision-making skills. It has allowed us to really develop young people very quickly as they have taken on a relatively large amount of responsibility at a relatively young age where they can compete with excellent people from large companies. We have a lot of people come here from large companies, so we have that benefit, but when you give them the benefit of becoming decision makers without necessarily large layers of consensus management put on top of them, where they are actually accountable, then you get a great opportunity to develop people quickly. It is a huge opportunity for on-the-job training.
Why should a young professional choose a career in a smaller specialized E&P company rather than a large one?
A young professional will be given much more responsibility in a specialized E&P company. For example, 10 years ago, we bought Command Petroleum in an Australian takeover, now effectively the Indian business, and its main field was the Ravva oil field. Our technical due diligence was done by a 26-year-old engineer and a 25-year-old geologist. They had been with the company a couple of years and I trusted them. They were very smart, and they were absolutely spot on.
As a generality, young people have been the lifeblood of Cairn and always will be. We give young people opportunities because our concern is that you get more risk-averse as you get older. The balance of judgment and wisdom is good, but you also have to be bold and brave. It is a combination, and I think we can get too conservative.
At the Australian Inst. of Sport they have a sculpture outside, of a pole-vaulter at the top his pole but he has no bar in front of him. There is no bar and the sky is the limit. It’s like Mangala field.
For the right person, an independent is a brilliant place. For the wrong person, it would be miserable because you would get found out very fast. We have a different type of attitude here, a “get after it” mentality.
I am hugely focused on value. Spending big budgets on many diverse special projects can be a complete waste of time if you are running a company; it is all about a value and value for the shareholders. We are pretty disciplined and put our time on projects that really matter and will have an impact. We are floating part of the business in India because ultimately that’s where we will show our added value.
What would you do to change the way the industry tries to attract young professionals?
This is an ideal career for people who are interested in seeing the world and traveling internationally, and I believe we should spread that message to young people as broadly as possible. It’s a multidisciplinary environment, and that offers a great opportunity for young people to develop. It is important to get this message across at a young age so they can make their decisions early.
What lessons can you share about leadership?
You have to inspire people into leadership. You can’t bully and cajole. Generally, it’s not about money but about being valued.
Leadership is the catalyst that turns vision into action. We have a strong vision, and the challenge to our leadership team is transforming that vision into action. My strength to the organization has been being clear on a few things. As leader, the buck stops with me. If I make the wrong call, as all people do, my team is there to support me, but you have got to be brave enough to take all of the criticism. Fortunately, I have made a few right calls, and that is why I am still here. It is amazing how brave people are in the criticism stage but won’t make a call. You have to be comfortable that you can make that call and you will make it again. I can go through in my career the number of times where I have made tough calls, but I would make them again.
The key thing about leadership is that you have to listen, and you have to respect, but ultimately you have to decide. If you lose the respect and the support of your colleagues, then you are in trouble (or they are in trouble). The chairman’s job is to hire or fire the chief executive. The chief executive’s job is to lead the organization. If there have to be changes made, they will be made, and if I have a fault, it’s loyalty, as I am hugely loyal to my colleagues, as they are to me. The leader has got to be strong and supported by his colleagues, but if you start to waver on the big calls, you are in trouble. I have been leader for 18 years where a good proportion of FTSE companies have a leader for 3 years before they change out. You never get any continuity, and our strategy has always been long-term. I don’t know if Nepal Ganga Valley will come through, but the seeds were set 5 years ago.
Finally, how can a young professional achieve and maintain a successful career?
It is critical for an individual to recognize he has capabilities far beyond his discipline; individuals set their own barriers to their potential. This industry prepares you to use your skill set in a whole variety of areas.
This is a hugely professional industry. Attitude, common sense, and judgment are the three defining factors that lead to individual success. I believe that in the oil industry, if you are prepared to be adaptable and back your own judgment, and with the extraordinary range of skill sets you get through your career, you can master a broad variety of jobs.
I think from a mentoring point of view, I would encourage anyone from any sort of technical background to seek a basic financial understanding of the reason why they are doing anything. If you are going to go anywhere in management, rather than being purely technical, you need to have a commercial awareness of the technical aspects of what you are doing. And never believe that because someone is older than you or more senior than you that they are smarter than you. It is completely mistaken and a dangerous fallacy to believe that someone in a more senior job than you is better than you. The critically important thing is to go throughout your career, giving and earning respect, figuring out who you really can learn from. If you find yourself in a situation where you are going nowhere, because of the group you are in, get out of the group. Don’t stay because you think your career is going to be in a particular organization for a period of time; the limits are set by individuals and not companies.
There is a smart individual here who asked, “Where is my opportunity in the company? Where am I going?” And I said, “Come back and see me tomorrow and tell me where you want to go and we can have the conversation.” The point is that you have to be responsible for your future. You can’t give someone responsibility; they have got to take it, and that is a very important lesson. I love to give people responsibility, but actually it’s finding the people who will take it. So the individual is responsible for his/her own success. It comes from within. I say to the kids, “If it’s to be, it’s up to me.” Absolutely fundamental.
Do you want to know more about this topic or comment on this article? Visit the Young Professionals Network at www.spe.org.
Bill Gammell was born the son of a successful businessman, Jimmy Gammell, who was Chairman of Ivory and Sime. His father was a huge influence on him and his future career. Bill was a keen sportsman, heavily involved in football, squash, and then rugby. His rugby success saw him capped for both Scotland and the Barbarians.
Cairn Energy was listed on the London Stock Exchange in 1988. Managing a portfolio of oil and gas assets in the U.S., Cairn began to invest heavily, working by two golden rules. First, double the risk and halve the reward of whatever your technical advisers tell you. Second, get as much equity and acreage exposure to an asset as possible. In 2004, Gammell was named the U.K. Entrepreneur of the Year.
Cairn Energy is now one of Europe’s leading independent exploration and production companies and is listed on the FTSE 100. The company employs more than 650 full-time staff worldwide. They are based at the head office in Edinburgh and in south Asia where the company’s operations and interests are focused on India, Bangladesh, and Nepal.
Outside work, Gammell is still heavily involved in rugby and other sports. As a director of the Scottish Inst. of Sport, he is involved in the “Culture of Winning” program and recently founded the Scottish Inst. of Sport Foundation with the aim of promoting excellence in sporting performance. In the recent New Year Honours List, he was knighted for services to industry in Scotland.
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23 April 2018