Russ follows up on Coffee with the Consuls, sponsored by PKF Texas and hosted by the Greater Houston Partnership. Great Britain’s Consul General Andrew Millar talks energy, economy and the long-standing relationship between the U.S. and the U.K.
Russ: Hi I'm Russ Capper, this week's guest host, and PKF Texas entrepreneur's playbook. A follow up from this week's coffee with the consults with Great Britain, put together by PKF and the greater Houston Partnership, and I'm very pleased to have as my guest the British Council General for Houston, Andrew Millar. Andrew, welcome to the playbook.
Andrew: Russ it's good to see you again.
Russ: Let's start from the top. Share your perspective on the relationship, the commercial business relationship between Great Britain and the U.S., and then let's get down specifically to Texas and Houston.
Andrew: Okay Russ. The UK and the U.S. are incredibly close partners in a whole range of issues, but in the trade and investment site I don't think there is a closer relationship in the world. We are each other's number one investor, foreign investors in each other's country, and we're major, major trading partners with each other. If I drilled down to take this in particular, and then we're talking about the UK being Texas's largest international investor. Not just Texas, Louisiana as well. We're number one investor there, and in terms of employment, some 75,000 people every day go to work for British companies in this state. We have investments amounting to around about $20 billion dollars of foreign direct investment that's here helping Texans go to work, helping Texas to build its economy.
Russ: And we thank you for that. In fact it made me remember right there of all the consul of general officers that I've been to, which are quite a few, none of them have a U.S. trade and investment arm operating in the consul general.
Andrew: Right well the way that we're configured is to actually see trade and investment as absolutely integral into our foreign policy, and that's not to say that foreign policy drives trade and investment, but actually the economic prosperity from a British perspective has to be built on trade and investment. For centuries long past, we have been a small island trading nation, and where we've walked those paths, our businessmen, engineers, and companies have followed. So it's absolutely integral to what we do.
Russ: Now you do have a unique background for a consul general, which I plan to get into in a minute, but tell me a little bit more about the relationship with Houston. I'm sure somewhere along the line energy plays a role.
Andrew: Oh no absolutely and we are the number one destination, well Texas is the number one destination for UK exports to the USA far extending any of the other states in terms of export, and I think that is done entirely in gas. Similarly with the investment, much of that investment is going into oil and gas, and into the service companies that support the major companies in the production of oil and gas. We've a whole range of other interest as well across medical, across life sciences, across technological ICT up in Austin for example, and I'm sure as the commercial space and district takes off that in Texas then we will be part of that as well, but energy is the bedrock. Aberdeen is a sister city of Houston for a very good reason. We are each other's counterpart. I like to think of it as two hearts beating with one beat, because what happen in Aberdeen and vice versa just through the sheer flow of people.
Russ: Okay cool, very cool. So share your unique background. I also have not met a consul general that has this sort of technical energy background. I have to say there are a couple of us in the consul core with a background in energy, but I came into energy from school. I went to the nuclear industry. I didn't go to a university until I was 25 when I realized that actually having an education matters, which does help. So at the age of 25 did a degree and masters in economics, and then when I came out of that I went to work for a gas industry regulator doing gas transportation economics. I moved on from there to foreign to service, and then within the Foreign Service from an economics background, became head of energy security in the foreign office, and I took on the job in April 2005. It was a relatively quiet job. With my background in the regulator is said there has got to much more we can do within this role, and started putting down some pathways, some feelers about what we might do, and obviously in August we had Katrina and Rita that year, which through everything that was in turmoil I was already sitting on one of those committees at the international end. Energy agency that started to play an integral part of what we were doing in terms of trying to negotiate a stock release across the IEA members. It led us well to sitting within the GE techs for energy experts group for preparation for the St. Petersburg summit.
Andrew: So I've done a lot in energy, and far more than I think is normal for a consul general to have done, but I came to Houston. I saw if from a long way off. I traveled through here many times in the 2005 to 2008 period. There's something about Houston about the Global capital of energy, and coming from a geopolitics, and geo-economics background, sitting amongst the commercial sector here with a view in every part of the world it's fascinating, and if you're a political junkie and an energy junkie than you can have conversations here one day about Russia, one day about China, one day about Argentina, one day about Britain. You know there's a whole range of things you can do here in Houston that's just difficult to do anywhere else, because they don't have the concentration of energy companies.
Russ: That's so refreshing to hear that. I mean there are a lot of the consul generals that I've visited with that kind of talk about the importance of it, but you seem to have it in total perspective. In fact it leads me to another question. I content that much of the population here even in the U.S. doesn't quite grasp or understand the importance of energy in the overall economy, nor the magnitude of the shift that's taken place as a result of horizontal drilling and hydraulic factoring. I mean it's the engine that drives it, and the world has changed, and I don't understand why we're not having a national celebration. Do you?
Andrew: Well energy sits as one of these critical supplies into our everyday life, and water, food, and energy is three of the absolutely key components, and if one of those fails, we fail. We start to fail as a society. We have to have that energy flowing. It's typically electricity increasing the gas. If we don't have it we can't do normal things. Our society starts to break down, so it is incredibly important, but it's also global industry, and if you take to one side to oil and gas, and separate then slightly the oil market has been global market for many years. The gas market is increasingly becoming global. It's not there yet, but it's increasingly becoming global, and the role of the U.S. and the shift in the role of the U.S. has been incredibly important in that and within the due politics of energy as well. The U.S. has shifted from being predicted to be a major importer to being predicted to being a major exporter. That is a fundamental shift when you look at the energy consumption that goes on within the U.S., and this is all through hydraulic fracturing, horizontal drilling, and it's technology changing the game.
Before I arrived, I think a year before I arrived to this post they were talking about peek oil. It was a very hot debate. People were like well it's going to run out, and begin economist said memories of agricultural economics, and David Ricardo said just add technology, and nowhere have I seen a more accurately displayed than in horizontal drilling a fracturing.
Russ: Absolutely, I read intermittently that there's sort of a push in England to go and do a couple of plays that might benefit. Is it happening?
Andrew: It's starting to happen, and I have to say it's Britain rather than just England.
Russ: Okay but I though the place was -
Andrew: We have a number of Shell placed in the UK. The Lancashire is one of those. WE have some in the South. In Devin we have some up in Scotland, and a considerable reserves, absolutely considerable reserves.
Russ: Are they drilling today?
Andrew: They're starting to test the wells. We've had a couple of drills. I think what we'd say is we're at that pre-production stage where the regulatory frame work is being set, and we looked across the Texas, Arkansas, Oklahoma, Wyoming looking for the best possible regulatory environment for this. Getting regulatory environment set was needed to give companies certainty about what we were going to be doing. We said we're open for business. Companies are looking at it. We've had a number, I think six already, who have signed up for exploratory licenses, and are starting to think about production. The issues in the UK are quite different to the issues in Texas for example.
Russ: The geological issues?
Andrew: Well geological issues I think obviously, and less obviously social environments.
Russ: Well I was going to ask about that. How's the population handle it?
Andrew: To be honest, there's a lot of fear and anxiety, and I think that fear and anxiety is right to have, and the industry needs to think about how it communicates to particularly of these communities that need to get it. I took Governor Perry over to the UK last October, and one of the big points that he made to our energy sector in Devin was the biggest impact of hydraulic fracturing in Texas has not been the fiscal revenue. It's been unemployment, and what that employment has done for communities, because one of the biggest things we have in the UK is a real worry about what happens at community level, and because we don't have mineral rights invested with the surface rights holder, which is a fundamental difference. Where do you get the beneficiation for the community, and that's something the companies need to think about going into that environment. It's something the government needs to think about in terms of communicating and setting the rules in such a way that communities benefit for this. I grew up in a mining factor, so the energy background goes beyond my birth. Coal mining family, coal engineers, and I grew up in areas where there is coal production. It was extractive industry. It wasn't pretty, but it provided a lot of employment and a lot of economic growth, and I think as the community starts to see that, and as industry starts to connect with them on that basis then I think the communities will accept it.
Russ: You think that would happen if they saw the benefit, and they're not quite so worried about environmental issues, or earth quakes, or messing up the water system?
Andrew: I think they will be worried about that, but it's not for companies to actually mitigate those risks, and we work in a safety case environment in the UK, which essentially means that companies have to go out, and predict the sort of risks that are going to be generated by their activities, and alongside that prediction they have to set out a set of mitigations for those risks. So it's a goal oriented safety environment in the UK, and I think that'll be true on shore as well as off shore.
Russ: You mentioned Aberdeen a while ago, and you look at sort of the social structure in Great Britain as a whole, what's the deal with this Scotland thing right now trying to -
Andrew: Yes September the 19th could be the end of the United Kingdom, which is pretty fundamental if you think about what he United Kingdom has contributed to the world over the last few hundred years. The end of the name, the end of the flag, Scotland going its own way potentially and there's still a margin of opinion that sits on the union side, but there's quite a strong sense of the independence side saying no we want to be independent. September the 19th we will see. My government is for the union. It's better together is our slogan and campaign. I have to say with family living on both sides of the boarder, children are being brought up with a mixed identity. I enjoyed being Scottish. I'm passionately proud of being Scottish, but I'm also passionately proud of being British. So we will see September the 19th, the world could change for us all.
Russ: Well I had a daughter who went to school at the University of Ed Borough so I spent some time there too, and it's unique, and I like people speaking for themselves, but I think over here we want you guys to stick together so. If we have a vote, we'll vote for the union.
Andrew: Thank you for that, but ultimately though this is an important point. It's about self-determination, and one of the things that we've said about the Falklands we say about Scotland as well, which is the principle of self-determination is really important. The people that live in Scotland I have to say I don't get a vote. I don't live in Scotland. The people who live in Scotland get to vote on whether they want to stay a part of Britain or move away and that is there choice.
Russ: Right now you're saying it looks like they're going to stay?
Andrew: There's a margin on the side of union rather than independence, whether that will persist, we have commonwealth games over the summer in Glasgow, which is going to be a fantastic spectacle. We then have the 400th anniversary of Bannockburn, one of the Scotts greatest victories over the English in our history together. So by the time they get to September, you know you're passions will be running high, and people will be voting with their heart has well as their head, and I'm just hoping that the people who vote on the basis of rationality rather than pure emotion.
Russ: Well Andrew I really appreciate you sharing your perspective with us.
Andrew: Lovely to talk to you again.
Russ: Thank you.
Andrew: Thank you.
Russ: Right and that wraps up my discussion with Andrew Millar, the British consul general here in Houston, and wraps up this episode of the PKF Texas Entrepreneur's playbook.