OBG talks to Tony Hayward, CEO, Genel Energy

Interview: Tony Hayward

How much has security and stability contributed to the economic success of the Kurdistan region and to attracting investment?

TONY HAYWARD: I think you have to recognise the great success the Kurdistan region has had in creating a secure and stable operational environment. That is, of course, where we are focused and it is the bedrock of economic success. Without security and stability it is very difficult to have the amount of foreign investment required for the oil industry to grow as it has. I think the Kurdistan region is a wonderful example of how to create a secure, stable operational environment and how to embrace the private sector when it comes to encouraging investment in the country. This has taken place not only in the oil sector but also across all sectors of the economy in the last seven or eight years, and there is a sufficient interest now in maintaining this because private industry is booming.

There has been an enormous amount of direct investment made by Turkey in the Kurdistan region. If you look at the balance of trade between Turkey and Iran, $9bn a year flows from Turkey to Iran, while $7.5bn a year goes into Kurdistan.

Tremendous investment is being made in the Kurdistan region by Turkey and its businessmen and this is creating great commercial integration between the two countries, which is also helping to encourage a more secure business environment.

Some 500 incidents of illegal oil tapping occurred between 2003 and 2011. Is the Turkish government investing enough to ensure pipeline security?

HAYWARD: I think a lot has been done by the security operations of both the Kurdistan and the Turkish military, but I think it is also clear that the resolution of the Kurdistan Workers’ Party (PKK) issue will not be through military means. While further investment in this area may be necessary, it is not a permanent solution. A political resolution is needed and I understand that this is increasingly the approach being taken.

While it is important to have the military ability to contain the PKK, the real issue is to have the right dialogue to bring them into the political process. It seems to me that this is now under way and that this will lead to a more secure infrastructure.

More broadly, I cannot think of one example anywhere in the world where a conflict of that type has been resolved ultimately via the military. I can think of an example in my own country, Northern Ireland, where there was a very similar conflict for decades that was ultimately solved politically. There are examples in many parts of the world where the only resolution lies in bringing people into the tent.

Other than its strategic geography, which puts it close to hydrocarbons resources, what makes Turkey an important partner for international businesses?

HAYWARD: About 500,000 to 600,000 bpd of crude flows from Iraq into Turkey and down to Ceyhan, but this is not the only industry that is thriving.

I think Turkey has made extraordinary strides in the last 10 years, and you can see this everywhere you look, from the very proactive private sector approach to investment to the encouragement that the government gives to Turkish companies to go overseas.

This sort of free-market approach has been blazed by the Justice and Development Party (AKP).

Turkey has certainly become one of the most popular destinations for international companies looking to grow their businesses, which is really a reflection of the economic policies of the country, and of course, a reflection of demographics, since 65% of the population is under 30, which is a tremendous market opportunity for any company.

When you create an economic policy that is driving economic growth between 8% and 10%, I do not think you need to be doing any more. I am sure there are some areas that I am not aware of where some tuning can be done; however, on the whole, I think that the government in Turkey has got it just right.