Turkish oil and gas-exploration company Genel Energy recently partnered with the British firm Vallares, and the two companies count several interesting names among their ranks. These include Nathaniel Rothschild, a financial investor from the prominent Rothschild family; former US ambassador to Turkey Mark Parris; former BP CEO Tony Hayward and Chairman of Turkish Cukurova Holding’s Mehmet Emin Karamehmet. These days, the biggest problem facing these individuals is the $1.9 billion in cash sitting in their safe.
Mehmet Sepil, the Chairman of the Board of Genel Energy — today the biggest oil company in Northern Iraq — and the CEO of the newly-formed partnership, Tony Hayward, can’t stop talking about the dollars filling their pockets.
Genel Energy wants to invest these idle dollars in new reserves and fields within the next 12-18 months, and has natural gas deposits in the Middle East, North Africa, West Africa, Mersin and Iskenderun (in Turkey) in its sights. In the short term, it will dig seven new wells in Northern Iraq this year through a process of aggressive exploration.
Why is Genel Energy so keen to invest its $1.9 billion? While $1.9 billion in the bank during a time when the sector is facing funding problems might appear to some as an important edge, these reserves might also well become a liability. By saying “We have plenty of money,” both Mehmet Sepil and Tony Hayward are sending messages to their rivals and potential investors while they look for the right places to invest.
‘’At the moment one side of us is a bank, the other side is an oil-exploration company. Those who invest in this sector don’t decide whether to invest or not based on cash on hand, but rather on expected exploration and production. You gain 1 percent in interest by having cash on hand, while returns from exploration and production are an expected 25 percent. This is why investors are expecting us to spend this money,” says Mehmet Sepil.
Genel Energy’s eagerness offers good opportunities for those looking for a partner, or to companies trying to sell out. Competition in Northern Iraq — from Exxon, Total and the Norwegian national oil company Statoil, to name a few — is getting tougher. Mehmet Sepil predicts that at least half of the 50 companies operating in the region will be eliminated, to be replaced by four or five big companies. “We shall be one of them,” he says.
CEO Tony Hayward, a man praised by Sepici as “our biggest advantage," says that Genel Energy will be worth $15-20 billion in the next three to five years.
When asked about oil prices, Hayward predicts that they won’t fall below $100 over the next three to five years.
Tony Hayward also has some interesting views about Northern Iraq. “I don’t think there will ever be an independent Kurdish state. Given that it would be landlocked, it would not want that. The goals of the Kurdish region are very different. They want to be a part of federal Iraq, and I think that Turkey, the US and Britain are basing their calculations on this desire,” he says.