In an airport lounge we run into an asset manager from one of the majors, who is in charge of one of their most productive oil fields. She is a young woman on the fast track, and has an interesting story to tell.

Her performance contract with her employer requires her to increase production by 20% while reducing costs by 20%. If she meets both objectives, she will receive a substantial bonus. If she fails in both, she will lose her job. If she succeeds in only one, then the chief executive will decide her fate.

The company is in the grip of the chief executive’s personality cult, where the question is not whether you are good at your job, but rather whether you are a fully paid up member of the cult, or not.

Her problem is that the only way to reduce costs by 20% is to stop adding the corrosion inhibitors to the oil stream at the wellhead.

Some crudes are acidic and have all sorts of undesirable and even toxic components. To prevent corrosion of the production facilities and pipelines, inhibitors have to be added. Otherwise the pipelines will corrode and eventually fail, with dangerous and expensive consequences.

The asset manager knows that (as she puts it) the bang will not happen for two or three years, by which time she will be long gone. So she stopped the inhibitors and got her bonus and promotion.

Several years later there was a loud and very expensive bang, which destroyed the pump station and shut the field in for several months. The internal enquiry lowered the beam on the subsequent asset manager, who had inexplicably failed to add the corrosion inhibitors.



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Chris Thorpe

Chris Thorpe is a respected independent lawyer in the upstream oil and gas industry, and an established lecturer and author. Chris has a LLB in law from Magdalene College, Cambridge and trained as a barrister in London. He worked for eight years' as an in-house lawyer for BP and Marathon. Since 1991, Chris has run his own upstream legal practice, CPTL, which has acted for many upstream clients. He has extensive experience of international upstream transactions, principally in the North Sea, the FSU, Africa and the Middle East. Chris has spoken at many UK and International Conferences and Seminars, both public and in-house. His most popular current lecture is Fundamental of Upstream Petroleum Agreements, a two-day course with accompanying book.