Negotiating Tips Learned from The Oil Middle Men

Updated: Apr 10, 2020

Here are some tips learned from oil negotiations in history...


Negotiating Tips Learned from the Oil Wheeler Dealers


1.) It's all about who you know
2.) Take advantage of timing
3.) Make sure you're getting the best deal possible

Working for a Caspian country like Kazakhstan or Azerbaijan, it is the consultant’s job to ensure that the host country and the oil company come to an agreement on the oil concession at stake. In LeVine’s writing, the importance of the consultant - or “middle-man” - is clearly evident. Like John Deuss and Jim Giffen, these middle-men work to ensure the best possible deal for the parties involved - and of course, get a stake in the profits as well. However, in successful deal-making, there is a delicate balancing act that requires planning and skill to reach a suitable agreement. In the following paragraphs, I will outline 3 main strategies that I think are good deal-making tactics and how they should be implemented to achieve success.


1) It’s all about who you know. If you don’t even have a “seat at the table” then there is no way to work a deal, and of course there has to be an incentive for doing so - a stake in the agreement. In the case of Azerbaijain, “Remp was after something more…he had hoped of negotiating ‘a seat at the table’ - a modest stake in the Baku oil fields.”[1] John Deuss earned his “seat at the table” through his connections with the royal family of Oman, because “he had earned the Omanis a premium on their oil by smuggling it to South Africa, leading to a relationship of trust.”[2] Due to the host country’s lack of experience in oil extraction, it is especially important to earn their trust. Remp’s “sincere manner earned him the trust of the Azeris, who were well aware of their inexperience with western oil companies and were grateful to have such a knowledgeable friend.”[3] It is necessary to relate with those you are dealing with and utilize those that speak the native language. In Azerbaijain, Leonard used a visitor who spoke the native language, and “government officials, delighted at having another foreign visitor who spoke their language, arranged a one-on-one meeting for him with the Azerbaijani president.”[4] It is important to deal directly with the president and those in power, and John Deuss “demanded that he deal only with those empowered to make a decision.”[5] While it is nice to have personal connections, it might also be necessary to hire people with expertise and additional connections. Deuss “scouted Harvard University’s business school for young talent [and] recruited former senior Arab officials and others who knew everyone in the Middle East, ensuring that [he] would be well connected there.” Having these connections and a “seat at the table” is the first step to successful deal-making.


2) Take advantage of timing. It is essential to know when to be patient, and when to pull the trigger on a deal. It would be prudent to seek out deals during a time of demand, because “buyers [are] willing to pay almost anything to satisfy their desperate need for crude.”[6] However, deal-making is not always that simple. Sometimes it is necessary to be a risk taker and know when to pull the trigger and where. “Leonard was regarded as a risk-taker with a nose for being in the right place at the right time, particularly good at tracking new frontier stuff in places like Baku.”[7] Other consultants, like Fehlberg, were not as lucky and lost deals because they didn’t act quickly or assumed they were the only deal-makers in the area. “Fehlberg noticed the letterhead of an unfamiliar company, an outfit named Ramco…Fehlberg examined the summarized oil field data. Interesting, he thought - this guy Remp had gotten access to the well logs before he, Fehlberg, had; Fehlberg had thought he was the only western prospector in town.”[8]


3) Make sure you’re getting the best deal possible. This means making sure all your bases are covered in negotiating, from having a trusted translator to ensuring sound financial calculations in order to squeeze out the most profit possible. In Kazakhstan, the “Kazakh negotiator Abdullayev discovered to [his] horror that there was not a single lawyer in the Soviet delegation negotiating with Chevron…let alone a single qualified translator. Instead Chevron’s lawyer drew up all the documents and did all the financial calculations.”[9] Negotiations should be made in a favorable and comfortable setting. John Deuss used a tactic that resembled “a luxurious version of shuttle diplomacy, hauling everyone off to Jackson Hole, West Palm Beach, Connecticut, London, or Paris for a time-out to cool tempers.”[10] If this type of “shuttle diplomacy” does not work to your advantage in the deal, it may be necessary to use a “take-it-or-leave it” approach. Deuss advised Nazarbayev that “if [Chevron] did not take [the offer], we would assist the Kazakhs in finding a new partner.”[11] Kazakhstan put its final offer on the table, and Chevron accepted a 20% stake in the deal. One important factor commonly left out of negotiations, is the development of a pipeline. Transportation of oil to market is a necessary means of making and controlling profit. However, if transportation is not secured, it could mean losing a chance at pipeline royalties, or could have further implications on pipeline politics. Chevron had “managed to link the payment of a deal-closing bonus for the Kazakhs to resolution of the stickiest remaining issue: the development of a dedicated pipeline from Tengiz to a seaport oil terminal.”[12] Without a way to get oil to market, Tengiz would be hardly worth owning. These strategies are all worthwhile, but when all else fails, use women. “No matter where the talks were, Deuss flew in beauties from the London, Paris, and New York offices of a modeling agency he owned…When negotiations broke for the evening, the tall, elegant models joined the men. They engaged in relaxed conversation with the Kazakhs and Americans and danced with any who were in the mood.”[13]

If these tactics are followed, a successful deal can’t go wrong. However, implementation of these tactics is key - which requires a certain amount of talent, but also practice and patience. John Deuss and Jim Giffen were successful deal-makers because they had connections with the right people, knew the places to go to at the right time, had practice - as well as much patience.


In summary:

1) It’s all about who you know

· First, make sure you get a “seat at the table”

· Be sure to earn the trust of the host country

· Hire expertise & people with connections

· Utilize foreigners that speak the native language

· Relate to those you are dealing with

· Deal directly with the decision-makers

2) Take advantage of timing

· Act quickly during a time of demand

· Know when/where to pull the trigger

· Take risks, even if it means earning or losing big

· Don’t assume you’re the only prospector in town

3) Make sure you’re getting the best profit possible

· Make sure negotiations are in your favor

· If necessary, use a “take-it-or-leave-it” approach

· Get control of, or implement a solid oil transportation plan

· When all else fails, use seduction

[1] LeVine, Steve, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea. New York: Random House, 2007, p. 148.

[2] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 129.

[3] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 148.

[4] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 153.

[5] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 129.

[6] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 132.

[7] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 152.

[8] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 151.

[9] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 137.

[10] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 138.

[11] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 139.

[12] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 141.

[13] LeVine, The Oil and the Glory, The Pursuit of Empire and Fortune on the Caspian Sea, p. 138.

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