BUSINESS BOTTOM LINE (Interview: Xu Wenrong, former president of BGP)

As the world’s largest on-land geophysical service company, BGP (Bureau of Geophysical Prospecting of the China National Petroleum Corporation) is a force to contend with when bidding for contracts in the international arena. BGP’s metamorphosis from a strictly government entity to one of the most competitive players in the international geophysical market has extended its field of operations beyond China and into oil prospects of Sudan, Nigeria, Pakistan, Kazakhstan, Libya, Yemen, Indonesia, Venezuela, Mexico, and Peru among others.

At the helm of BGP since 1999, President Xu Wenrong has been a strong advocate of not just expansion but globalization. A graduate of the Petroleum University of China in 1982, he was immediately enlisted by a western company, Geophysical Service Incorporated, for one year, supervising a geoscience project for CNPC, and again in 1988. This early and intensive association with western business is relatively rare among Chinese people of Xu’s generation at a time when China had just barely started the opening policy. He fells that his exposure to international service companies early on in his career has been instrumental in developing an understanding of the global market.

Since BGP set forth in the international geophysical market in 1990, Xu was one of the key people in marketing and project managing, spending over 70% of his time overseas. In November 1999 he was named president of BGP and his extraordinary performance has recently earned him a promotion to assistant general manager of China National Petroleum Corporation (CNPC) in Beijing.

During the 2003 SEG Annual International meeting in Dallas, Xu met with TLE’s associate editor, Dolores Proubasta, for the following interview.

Mr. Xu, please describe the background of BGP and its role in China’s modern oil industry.

BGP was formally founded in 1973. In fact, its embryonic form was started in 1961, shortly after discovery of the super giant—Daqing in China, as the Ministry of Petroleum of China wanted seismic mapping over the entire big basin. For that sake, 26 seismic crews (about 70 % of the China’s total at that time) using paper recording were gathered from several oil provinces. In 1963, on completing the mapping, the crews’ collective was moved to North China Basin around the Bohai Sea and quite a number of important oil fields were found during the first decade, the crew number expanded more than double. Then after “sending back” about half the crews to different oil field complexes, the remained was entitled BGP by the Ministry as a strategic prospecting force of petroleum geophysics.

The difference between BGP and other geophysical service companies was that we got the money from the government, not from clients, and BGP helped decide which area had more potential for oil. This function of BGP continued until 1993, when the Chinese government started its open door policy. Since then we have learned to operate like other geophysical service companies, but we still keep the function of being a strategic exploration tool during the past four decades in China. Majority of the major oil fields in China have been found by BGP.

Since 1999 we have been part of a market economy without receiving any money from the government to support the company. As soon as we are done with the discovery of a field, the crews are asked to stay in the area for additional detail studies and looking at finding new ones.

As president of BGP, what are your main functions? And what are the most challenging aspects?

It’s not easy to describe my function. But as manager of the company, I must be the leader of the group and make sure that it works cohesively like a team. [SEVERAL SENTENCES UNCLEAR]. (looks can be omitted) And as president of a geophysical company, I should make some contribution to this industry—the management style, the technology, the culture … There must be a change in culture in this industry as we go forth.

I also have to try my best to organize all possible resources and the available financing in the most effective way. And finally, a very important function is to define the corporate culture and ensure that all employees follow it. Especially for BGP, which changed from a state to a market driven enterprise, it’s important to keep the company learning and becoming ever more innovative. This has resulted in the transformation of BGP from a Chinese company into an international service company. Now BGP is the largest onshore service company in the world.

But the most challenging aspect of my job is human resources. Because we operate internationally, communication is extremely important. Obviously, the language is fundamental, but to reduce cultural differences is even more fundamental.

How do you go about training BGP employees to improve on these skills?

I recently read that there are more English speakers in China than there are in the United States. China has long realized the importance of language training. Most BGP employees have studied English from middle school through their university. Although they are qualified to read and write English, however, their speaking abilities are limited. While our employees speak highly of BGP’s technologies and original ideas, the clients sometimes have difficulty understanding us. That’s why our new employees are given financial support for a 3-12 month language course, usually English, and some take parallel instruction in Spanish, Russian, or Arabic. The heavy emphasis is on spoken English. If they pass a test, then they are allowed to take an international assignment, which helps their language skills. International assignments are prized opportunity among our employees, so they learn with a great deal of dedication.

BGP encourages the use of English in our home office’s day-to-day communication. As more international employees join our ranks and rise within the organization, we accommodate their presence by using English and they in turn make the effort to learn Chinese. This is part of our effort to build an English-language environment within BGP international headquarters.

Even when speech barriers are lifted, however, communication can be hindered by cultural differences. We know that those differences generally arise from country to country, enterprise to enterprise, and enterprise to individuals. To solve this problem, BGP has implemented cultural training. The first thing to understand is that no corporate culture can change a country’s culture. What BGP does is that, in compliance with international rules and remaining Chinese at the core, BGP follows the custom and respects the ways of the host country. Sometimes this can be quite a stretch, like in countries with tribal cultures. But then we work with local employees until a mutually acceptable culture—a blend of theirs and ours—can be established. This is definitely beneficial to our worldwide operations.

What is BGP’s approach to corporate culture differences?

A service company like BGP has to put clients first. Therefore, by all means possible, BGP has to immerse itself into the client’s culture. For instance, we have come to fully accept the health/safety/environment principles, which are so fundamental in the cultures of ExxoMobil, BP, Total, and others.

The corporate culture must also be mindful of the individuals it employs. Many non-Chinese employees have joined BGP. The company respects their points of view and their cultural backgrounds, and we encourage them to learn from each other. BGP, in turn, expects international employees to abide by our corporate culture.

We have also started cross-cultural training. Employees returning from overseas assignments are a rich source of cultural knowledge that is passed along to our home office and regional offices. In short, BGP strives for an open, respectful, and culturally aware working environment at home and abroad. Achieving this is my greatest challenge as BGP president.

What are the key components of successful geophysical contractors such as BGP and other international players?

So many factors affect the success of a company in the world today. For example the technology, the management … But I would say that to keep the company learning is the main contributing factor. An individual company cannot develop the whole technology that the oil industry requires from geophysical services, therefore we have to constantly acquire new knowledge to become a whole management system innovation, which is also one of my responsibilities.

BGP now operates nearly 100 seismic crews, many of them outside China. To what do you attribute BGP’s rapid growth in recent years and its success abroad?

I’d like to think that it is due to our ability to change people; their ability to communicate in other languages, to adapt to new management systems, and to embrace new ideas.

In venturing abroad, BGP had to bridge three gaps I described before concerning the common culture of the country of our clients, the gap between the cultures of BGP and corporate entities of host countries, and corporate versus individual needs. BGP spends a lot of effort training people, not only in languages but also in reducing these differences.

First of all we must inform our employees of the specific cultural differences that will concern them and keep them in mind in every stage of the process—from bid to completion. This has been a key issue with BGP, and I believe, the key to its rapid growth overseas.

How does BGP’s business model differ from that of its Western counterparts?

I don’t see fundamental differences between a western contractor and our business model; only common culture differences. For example, a Chinese employee usually works for the same company all his life; that being so, the welfare of the company is high priority for the employee. Likewise, the company takes care of the employee beyond his job—family, housing, health, and so on.

Since 1993-94 we’ve had many people involved in overseas operations; right now we have about 900 employees working outside China. And yet in the same period of time, only three employees have left BGP; and one of them has since come back. So that’s a turnover of 2 in 10 years. This aspect of human resources makes, of course, a difference between BGP and western contractors.

Our management is also very stable. For example, I’ve been in this position for four years. Normally I would continue for another 4-5-year term. This means that a president normally has to have the vision of how the company will grow during the next 8-10 years and beyond. So the stability of the workforce and of management is the main difference.

What are your goals for BGP five years from now?

We are now in a preparatory period developing technology, equipment, and a market to provide offshore services. That is one of our immediate goals. Also BGP wants to establish itself as one of the top three geophysical contractors in the world, and do so in the next five years, but first we must make a technological contribution. And let’s face it, whoever develops the technology necessary to solve the China’s complex geological problems, can solve equivalent problems anywhere in the world.

Also BGP will try to reduce the size and number of domestic crews, which are too many as a result of over-demand during the past years, and elevate slightly and maintain the number of BGP crews worldwide.

What are the applications of petroleum geophysics in China and what trends and developments do you foresee.

Almost all the petroleum discoveries and development in China have been made possible by geophysical technology. But we are confronted with severe challenges in China’s West, particularly the huge Tarim Basin covered with thick dune sands over majority part of its half million km square area, and the complex faulted area along foothills of several big ranges, not to mention the highly dissected loess plateau. High resolution and correct imaging in such difficult areas is what our industry is striving to obtain. In fact, the theme of CPS/SEG Beijing 2004 is “Geophysics Goes West,” because in the western part of China more technology is needed to unlock its petroleum potential.

The development of technology to meet these challenges is one of the trends. And also, like the geophysical industry everywhere, we are also aiming to develop technology for reservoir characterization.

Over the last 20 years, SPG and SEG have forged an excellent working relationship. Do you have any recommendations for an even more productive association?

Twenty five years ago, China began opening to the West and the first SPG delegation flied across the Pacific Ocean join the SEG Annual Meeting in 1978. The opening was certainly beneficial to Chinese geophysicists due to the exchange of technology. I can’t imagine the situation if we were still isolated from the outside world until now.

My Chinese colleagues and I have had increased interaction with SEG since 2000, and

I’ve come to believe that SEG could be more globalized by providing more opportunities to collaborate in joint meetings, technological exchanges, continuing education, etc. Another possible basis for closer cooperation is having more face-to-face interaction—not just through the Internet. For example, the SEG Beijing Section is fully managed by Chinese people, but having only one person in charge of daily routine affairs. More business needs more persons. Any additional payroll expenses for the Section could be shared by us.

At this time we have in China approximately 200 active geophysical crews under different entities; this is more than 25% of the total crew count in the world. It would be important for SEG to have more influences over them.

SEG Beijing Section

09/2003