Martin Houston has zero regrets about turning down the top job at BG Group.
When approached to be BG’s CEO in 2012, Shell’s landmark takeover was not on the horizon.
“I didn’t say no on the spot, but thought okay I’m going to have to have a conversation with myself about my life,” he said.
“I joined at the bottom as a junior ranked geologist, so it would have been a great story. But I was 55 and I knew if I signed-up for it I would have to commit to giving the board a minimum eight years and I started to do the numbers.
“It was hard, hard, hard work. You do London to Australia once a month and see what it does to your body. You become almost incapable of sleeping. I thought while I’m still young, have my health and have the passion to do this I have got to step back.”
He added: “I called time. I didn’t want to be CEO. I wanted to stop and go do something else.”
It was Mr Houston’s “deep frustrations” with how business was being done, often “cloaked in health and safety”, that ultimately led him to the decision to do business in big oil and gas on his terms.
Sitting down with Energy Voice, the former chief operation officer of BG said: “Big oil has a way of doing things. People are articulating collaboration but they’re not doing it, so there’s two universes out there. In BG – and it’s no different if you were in Shell, Total or Chevron because it’s all the same – the processes and systems and policies define how the company works.
“As COO and board member, I had a seat at both tables. I was not able to change engineering standards, or the way we did things.
“Now those are good things, because they provide checks and balances when you’re spending $20billion a year or whatever your capital spend is. You’ve got to have checks and balances.
“But my deep frustration was in Queensland, because I could see it when I was building my third LNG plant. I was deeply frustrated, because I wanted to change things but couldn’t. I said when I get out of this and retire I want to prove that we could do things differently. And we’re doing that. It’s a work in progress, but I think we’ll get to $500 a ton plus or minus and we will get to standardization.”
Mr Houston used his experience as the architect of BG’s LNG business to found Tellurian Investments alongside Charif Souki in February 2016. The company offers mid-scale natural gas liquefaction and export projects along the US Gulf Coast. In a whirl-wind 12 months, Tellurian has attracted $25million of investment from GE Oil & Gas and $207million from Total.
Mr Houston attributes his success to shedding the traditional Big Oil attributes.
“I telephoned a chief executive recently and said do you want to do this for us?” he said.
“There was no discussion of price, just come and do it and we’ll figure it out later. That’s the opposite way round. There’s this urge in companies to bid everything, like somehow magically the price of the water bottle is not going to be $1. It’s going to be 80 cents if you bid for it. Well it’s still $1. We know that.
“And there’s a huge raft of those frustrations for me. I could go on and on all day.
“In Tellurian we’ve done it differently. And we’ve proved it not only to ourselves, because Total bought a quarter of our company. We are able to move differently.
“It’s very important not to conflate that with cutting corners, or not doing it safely, or not following standards.
“Nothing I’m doing is changing the safety outcome. Nothing is more dangerous. I’m using standard parts. I’m not buying bespoke parts. I’m not allowing the industry to re-design something that they can lift off the shelf.
“Secondly, API has this set of standards that defines what you build in America and they spend a year making sure it’s in compliance with standards they have evolved for over 100 years. In BG, we would have said no, we’ve got different standards. Ours are higher than that.
“Now in many cases they didn’t need to be higher. Actually, I would argue in all cases they didn’t need to be.
“At Tellurian, we will adhere to the standards, but we’re not going to start saying we think it needs to be colored blue instead of red or made from a different material. And those things get currency in an organisation through middle management.
“Busy hands are happy hands. Middle management want to do that . Engineers want to engineer.”
Mr Houston criticized the over-engineering trend seen in the industry.
“So you would take a 25-year-old engineer and say you are in charge of the standard of door handles,” he said.
“My God he will make sure you have the best door handles. And if you want to build something with different door handles, no dice. Because he owns that standard. Aluminium? Forget it, only gold. Pure gold. 24K by the way. Not the cheap stuff.
“There was this notion of ‘I think I can do it better’.
“In Queensland we added $800million of self-imposed standards that did not change the price of the finished product. The other thing we did was we recruited an army of people.”
That level of recruitment created a culture of “man-to-man” marking, according to Mr Houston.
“If you’re a young engineer and you’re man for man marking on the project team what are you going to do?” he said.
“You’re going to find something to do. They’ll start saying things like ‘I’m not sure about the fire quality of that door. I think we’re going to need a slightly thicker door. I know that’s the standard design frame and off the shelf, but we’re going to need that an inch wider’.
“The whole thing becomes self-serving. Often it’s hidden and cloaked in safety as if you don’t adhere to this you’re somehow in breach of the safety mantra and ethos.”
But Mr Houston, who said his team would not exceed 20 people, pointed to a specific case in Queensland where over-engineering stopped a project in its tracks.
“There were these small gathering plants that push gas into the LNG plant. We were covering an area of 20,000 sq miles in Queensland with gas plants everywhere,” he said.
“These were small plants with small engines and we had 30 of them that we bought from Canada. There were 1,800 of them in service in America, so it was proven technology. We had these five engines lined-up in this gas plant. I was there for the start-up and all of sudden it sounded like it was grinding nuts and bolts. It sounded awful. The fan blades were catching and all of a sudden something else was going wrong.
“Clearly the plant wouldn’t work. These things were brand new and they were broken. They were shipped over from Canada. 1,800 of them in service in America. What could possibly be wrong with them?
“I kept asking questions and it took me about two weeks before I asked the right question of somebody before people would own up and tell me what the problem was in the first place.
“And the question I asked the engineer was, ‘Did you do anything to those machines after they left the manufacturers in Canada?’
“I couldn’t have possibly imagined that we would have taken a machine that is in service, brand new, industry standard and meets all the codes and done anything to it.
“The engineer looked at me and said, ‘Yes, we had to make some safety modifications’.
“’I said what safety modifications?’
“And then of course you get the sort of attack, which is ‘Well, you believe in safety. We had to do it.’
“But there are 1,800 of them operating in America. Why is this so different? And before you know it the bullshit comes out. Anyway they screwed around with these machines. And guess what? We had to send 30 of them back to Canada to undo what they had done.
“That is what we were dealing with. We don’t do any of that stuff in Tellurian.
“I’m buying a standard machine. I know what it is. I know what it will do. We have designed and engineered around it. We’re not going to do anything special around it.”
And now that simplicity is sacred in his business strategy, he now has his sights set on going public.
But his big worry is not how and when they’ll get there, but making sure the industry as whole doesn’t let a “golden” opportunity pass it by.
When asked what keeps him up at night, Mr Houston said: “It’s making sure that the golden age of gas doesn’t pass by and then becomes the golden age of coal. That worries me. We’re not driving policy makers towards the outcomes we need in the industry. Gas should be punching much further above its weight than it is. I worry about the industry’s ability to rally around the new order. The new order is cheap LNG from America. Not expensive LNG from projects in East Africa.”
LNG will play such an important role in the future energy mix and Mr Houston has no qualms about the competition.
“I don’t worry about the competition,” he said.
“We’ll survive on our own wits. We’re comfortable where we are. If one of our competitors nails it then bring it on. We need the LNG.”
So what does it feel like to leave a firm after 30 years and start anew?
“It’s terrifying when you start, because you’ve got no money other than the money you put in yourself and that usually diminishes quite quickly when you start employing people,” Mr Houston said.
The industry veteran and his business partner were able to rely on their strong reputations to fuel growth in a short period. That “counted for a lot when we were trying to do some simple things”, according to Mr Houston.
However, he added: “That’s the scary part of it, but there’s also that feeling of total liberation that you can do whatever you want. As long as you don’t start drinking your own Kool-aid and go too far, as long as you understand your own limitations. That takes a bit of learning.
“It is really is a different world. But it is refreshing and liberating. I saw my stress levels go from off the scale to, I wouldn’t say Zen like, but I’m definitely a better human being for it.”
Recommended for you
