Oilman blazes a trail in Iraq

The Sunday Times
May 3, 2009

Steve Remp runs the tiny Ramco but his big ambitions include UK wind farms
Danny Fortson

As second acts go, Steve Remp’s has followed an extraordinary script. Not long ago the Texan oilman faced the possibility that the company he founded three decades ago, Ramco Energy, would cease to exist.
The London-listed oil group had huge debts after a gas project collapsed. A $7m court judgment in America threatened to drain what little cash Ramco had left. But assets were sold, and the court judgement was overturned. Remp even injected some £50,000 from his pension fund to keep the company afloat.
Those dark days, he said, are now behind the company. “We survived by sheer perseverance,” he said. “This is a rebirthing story.”
This year Ramco became the first western company to sign a joint venture with the Iraqi government, beating the likes of BP and Exxon Mobil. EDP, the Portuguese energy group, has meanwhile agreed to partner Ramco to build some of the largest wind farms in the world off Britain’s coast.
The deals are part of a vision that Remp said will complete the rebirth. “Over the next 20 years, Iraq and offshore wind will be the two biggest energy stories in the world,” he said. “We wanted to take a meaningful position in both.”
Even so, it is hard to see why EDP, one of the largest renewable-energy producers, or Iraq, owner of the world’s third-largest oil reserves, would even go near Ramco.
To call it lean would be charitable. It has a staff of six who operate out of a modest office in Aberdeen. It used to own its headquarters but had to sell it to avoid going into administration. Ramco is still making losses and, after a fundraising last week, has about £2m in cash to keep it afloat.
Nonetheless, the Iraq oil minister chose these “six old dudes in Aberdeen”, as one source describes Ramco, as its first western partner when he signed a $400m joint venture in February. Under the deal, the Ramco subsidiary Mesopotamia Petroleum will buy 12 drilling rigs and begin boring wells around Basra by the end of the year. The agreement is part of Iraq’s ambition to increase daily production from 2.3m barrels to 4m by the end of next year.
The company set up to do the work is 51%-owned by the Iraq Drilling Company (IDC), while Mesopotomia owns the rest. Idriss Al-Yassiri, head of the IDC, said he chose Ramco because it was “the most persistent. And they were the most courageous, willing to come to Iraq while others are still hesitating”.
It is unclear whether either side will be able to keep its side of the bargain. Iraq’s oil policy is incredibly politicised and slow-moving; there have been several false starts before. For its part, Mesopotamia has virtually no resources of its own. It has hired JP Morgan Cazenove to raise the $200m it will need to fund its side of the deal.
“To partner with the big boys, you need something they want,” said the Ramco boss. So what do they want? Experience for one. Remp has done this before.
When the Soviet Union started to disintegrate in 1989, Remp had already spent several years travelling round the region. He had got to know many of the local politicians and a friendship with the head of Azerbaijan’s state oil company resulted in him gaining a small equity stake in a Caspian oilfield.
Ramco netted $150m when it sold the stake to a group led by Amerada Hess in 2000. Feeling plucky from that deal, Remp decided to transform Ramco into an oil producer in its own right by developing a promising gas field in the Celtic Sea.
The $150m, and more, quickly disappeared. The field was a failure and Ramco, which had recently scaled great heights, fell into life-support mode. Remp said: “We went from being a group of dealmakers to an exploration and production company. It was a disaster.”
In the meantime, an American court awarded a $7m judgment against the company after an investor sued over a failed oil project in Kazakhstan. Ramco warned investors it would go into administration if it had to pay. The decision was finally overturned in 2007.
That allowed Remp, for the first time in years, to look forward. The attractions of Iraq’s underdeveloped reserves were obvious. Remp created Mesopotamia with Peter Redman, an oil engineer who had helped to develop Iraq’s fields in the 1950s on secondment from BP.
“We are good at going in early, when you still need to wear a flak jacket,” said Remp. The deal took many in the industry by surprise.
Closer to home, the opportunity for offshore wind became apparent. The government envisions 25GW of offshore wind power by 2020, up from 0.5 GW today. To reach that will require at least £100 billion of investment and the government has introduced generous subsidies to help cover the building costs.
Offshore wind is still in its early days, though, and the number of experts in large offshore installations is small. So Remp poached the team that built the Beatrice deep-water farm off the Scottish coast for Talisman and Scottish and Southern Energy (SSE) and created Sea Energy Renewables as another Ramco subsidiary. It is the only group, he says, to have successfully designed and built a deep-water farm.
That expertise seems to have some value to industry. Sea Energy is a junior partner in two 900MW offshore farms proposed in Scotland by Npower and Airtricity, SSE’s wind arm. Each would cost about £2.7 billion. And EDP has chosen it as a bidding partner in a government auction for even bigger farms to be built further out at sea.
All these projects depend on years of environmental and planning approval. Their outcome will determine whether Remp’s second act will be a tragedy or a triumph.