Sir Frank Chapman is the Chief Executive of BG Group plc, a world leader in natural gas with a broad portfolio of exploration and production, Liquefied Natural Gas (LNG) and gas transmission and distribution interests across 25 countries on five continents. Listed on the London Stock Exchange and headquartered in the UK, BG Group is one of the largest companies in the FTSE share index with a market capitalisation of some $50 billion and a track record of sector-leading shareholder returns over the last decade. The company is driven by a unique business strategy that combines a deep understanding of global gas markets with a proven track record in finding and commercialising reserves.
Sir Chapman is an engineer who has worked in the oil and gas industry for more than 35 years. He joined BG Group in 1996 and was closely involved in the two demergers from the former British Gas, which led to the creation of BG Group plc, becoming the Group’s Chief Executive in October 2000. Under Sir Chapman’s leadership over the last decade, BG Group has been transformed from the old, state-owned utility to a global integrated gas major, widely viewed as one of the most exciting growth players in the energy industry. Having recently purchased a holiday residence in La Zagaleta, he reflects on his decision to invest in this natural enclave and how it complements his work and family life.
1. In what way did La Zagaleta appeal to you and your family and why did you finally decide to invest in a home here?
For us it started with a choice between the south coasts of Spain and France. Ultimately, the longer season and choice of property favoured Spain. But I think the deciding factor was the easy rapport we quickly developed with the people during our many early visits.
Once we had decided on Spain, from a rather wide range of possibilities in this region, La Zagaleta was a more obvious choice. Here we can enjoy being outside, the mountain and sea views, the nature, the peace and quiet but still have the club facilities and activities and importantly, a real sense of community. My wife Kari is Norwegian and here she can have the mountains and the sea, but she gets it with the sunshine and warmth, a rare commodity in Bergen. We thought we understood all of this perfectly from the outset – but there are always some surprises. I can remember our astonishment at seeing many wild deer, some stags with giant antlers in one of our first evening outings to a La Zagaleta cocktail party. So, you can have all of this at home, plus restaurants and entertainment just a short distance away, the wonderful fresh fruits – no need for sugar here – and the historic culture of Spain as you turn inland to the north and northeast.
2. Most people spend a total of three years in the process of building a dream home in Southern Spain. What role has La Zagaleta Company played in making your transition efficient and satisfactory?
Life is very busy and buying a property is quite a sizable task, particularly if you are clear about what you want and would like to play a role in shaping the outcome. Our lead time was actually very short – less than a year from the start of the Spanish search – and this was due to a stroke of luck plus some hard work.
The stroke of luck came as we were looking for a very contemporary design and La Zagaleta in their first such collaboration had engaged Marcos Sainz of MS Arquitectos, who had produced, in our view, a spectacular concept fashioned around a somewhat unique fusion of east and west architecture; an evolution of his other concepts of recent years. And we caught this at a point in the construction where we could still have a major influence on the services and finishes inside the house, and even the addition of an upstairs “wing.”
The hard work came with our question: “Can it be finished (progressed from a structural shell to a complete house) ready for holidays in 6 months?” Silence and a deep intake of breath!
So started some serious teamwork. La Zagaleta has a concept of delivering a complete product that needs only furnishing. So there was no need to arrange additional designs, for example for lighting or garden facilities – this was all-in. It was evident too, from the very start, that their aim “to deliver to the customer precisely what he or she really wants” was not just a marketing slogan, but a reality that they approached with a commitment that sets something of a ‘gold-standard’ in this business. Lots of communications and fast decision making in both directions really set the tone for the craftsmen on the ground – they built up an unstoppable momentum under the leadership of La Zagaleta’s project director Pedro Lizarza, ably supported by the sales manager Maika Díaz, and delivered the product on time with all our requirements incorporated. I don’t think past January anyone would have believed it possible.
3. Who else did you get involved in order to move in and have everything ready for the end of July?
We decided to use our own interior designers (Hill House Interiors) and audiovisual specialists (ATI Ltd) -- both of Weybridge -- that worked on our home at Wentworth just a few years ago. Those relationships meant they could mobilise fast, identify requirements and produce drawings and specifications to allow the interfaces with La Zagaleta’s contractors to be worked out. Here, too, we saw quite an exceptional collaboration notwithstanding the distances and language differences – it makes you acutely aware of the role the internet now plays in internationalising all of us, but this only can work if you have the right-minded people at each end. We are really pleased with the interior design outcome – it was a complete home from day one. We just walked in with our suitcases and unpacked some clothes.
4. Would you agree in saying that the Spanish “way of doing” in combination with La Zagaleta has actually surprised you (against all odds) and seen from a “product-service-delivery” point of view?
You can hear a lot of horror stories. Lateness and poor product quality are commonplace in many countries in this industry. Coming to Spain we were somewhat concerned about this but found reassurance in the fact that La Zagaleta had done it all before many times. We were most impressed with the quality of all of the contractors used – both from a workmanship point of view, their commitment and customer orientation – nothing seemed too much; all were focussed on the task. Of course at the end there will always be a long ‘Snagging List’ of minor deficiencies – but it’s the attitude to fixing it that matters. This is the stage we are now in and all so far looks to be going very well.
5. How did you find settling in for your first holiday?
Getting a new house up and running and learning how it all works is quite an activity. So our first stay was quite busy. But we still found time to get good use out of the Club de Campo facilities, especially the children, with riding at Hípico (the horse stables) and playing at the tennis courts. Our start-up was also greatly supported by Monica Manser over at La Zagaleta Service Management who seems to be able to organise anything and everything at the drop of a hat. The La Zagaleta directors also understood the importance of putting us in touch with the Club management as well as other fellow residents of the estate.
THE BG GROUP
6. The BG Group operates in more than 25 countries. In what sectors of the energy industry would you say BG Group is leader, and why?
I believe we have over the last decade demonstrated world-class skills at all points of the natural gas value chain, from exploration, development and production through to transmission, distribution and supply to the customer. Although we also have some very significant oil interests, most notably in the deepwater Santos Basin offshore Brazil, our portfolio is weighted towards gas, both offshore and onshore. Upstream activities are at the heart of our company. We’re experts in finding, developing and commercialising the kind of natural gas reserves and resources that underpin economic activity around the world. Our track record in exploration is very strong: we’ve been involved in some of the biggest finds in the industry in recent years. Also, our people have earned a reputation for their drive and commitment to project delivery, so we have a history of bringing new energy sources on-stream quickly and effectively. I think there are two key points that differentiate us from our peers. First, our business model is market-focused not resources-focused. In other words, we begin with an analysis of the opportunities for growth within key high-value markets, then – once the best opportunities have been identified - we seek the most effective options to connect competitively priced resources to those markets. I think that gives us a resilience and depth of customer relationships that would not exist if we simply focused on finding resources with little sense of market needs. This approach contrasts with what I refer to as the ‘oil man’s exploration mindset’ which is driven primarily by access to hydrocarbon prospective acreage. Second, we have what I think is a uniquely dynamic, creative and entrepreneurial working culture within BG Group which enables us to move swiftly to capture opportunities to create value. I think the Group is defined not so much by what we are and the assets we own, but rather by who we are and how we do our work. Much of our success is derived from the fact that we invest heavily in putting the right-minded people with the right skills into the right places.
7. With more than 35 years of background in the energy business, you are inevitably an expert in the field. How do you position the BG Group brand today on one side and, in a nutshell, what are the company’s perspectives on a medium to long term?
We’re proud of what BG Group has become over the last 10 years and we’re excited about the growth prospects for our company over the next 10 years. We have a very strong and well-balanced portfolio, and our business plans include anticipated average year-on-year increases in the volume of gas and oil we’ll be producing which significantly outrun the plans of our peers. While it is true that global economic conditions remain uncertain at present, we believe there are reasons to be optimistic about gas markets in the future. For example, natural gas is the least carbon-intensive and most energy-efficient of the fossil fuels, offering abundant and accessible resources within reach of key markets. Gas, therefore, has an important role to play in governments’ climate change policies by displacing the higher-carbon fuels, particularly coal, which still dominates energy supply in some of the world’s largest energy markets.
8. Talking consumer end: What are the main evolutions in terms of customer expectations, pricing and service? As more and more countries like for example Spain are liberalizing the selling and distribution of household-gas business, do you think that this will lead to a better service and pricing or is it just a publicity stunt by competing groups?
Consumers are invariably much better served in markets that are fully and properly liberalised. The UK retail market – in which we are one of around 40 wholesale suppliers – is a good example of this. Liberalisation is also good for companies: fair and effective competition compels businesses to become as creative, efficient and focused as possible, which in turn greatly benefits their shareholders.
9. China’s booming economy is driving a surge for demand in energy, now becoming the second-largest oil consumer after the United States. BG has recently signed with China state officials to provide natural gas to this country via coal-seam deposits in Australia. What is the extent of the energy demand in China, and how is BG aiding the need for “cleaner fuels” in a more environmentally responsible field?
The rapid development of our Australian business is a good example of the point I made earlier about the climate change agenda. The gas we supply to the Chinese market will be used to meet domestic energy demands, which would otherwise be met by burning more coal in Chinese power stations. Carbon dioxide emissions from gas usage for power generation are 40-50% lower than emissions from burning coal – a very significant difference which is also coupled with improvements in air quality as gas replaces coal in the fuel mix. We’re proud to be in the vanguard of a new Australian coal seam gas industry that will make an important contribution to reducing overall carbon emissions.
10. When did your passion for sailing start and what does it represent in your life?
I started to sail when I lived in Sarawak (East Malaysian state of Borneo) in the early 1980s. There, over the years, I must have raced many thousands of miles in Olympic Class 470 dinghies. Huge fun and huge sunburn as I remember! Later I progressed to cruising on bigger yachts, before venturing into ocean passages and ocean racing. I have made a number of crossings of the northern North Sea from the UK to Norway; the Bay of Biscay, raced across the Atlantic and rounded the Fastnet Rock. I have my Yacht Master’s Certificate and own a 56’ Oyster sloop. It is a passion somewhat unfulfilled because of the demands of other parts of my life – but a passion it remains nonetheless. It is still a source of great happiness when I see land disappear over the horizon and am truly out at sea with my crew, my yacht and myself. Then you live in the present, and deal with whatever comes, using the skills and experience to hand. It’s a stark contrast with the 10-year plans we work with at BG Group.
11. When did you decide to buy a house in Wentworth, Surrey and why this particular location?
We were planning on building a larger house elsewhere in Surrey. One day, I had a meeting at the Wentworth Golf and Country Club. It was 6th June 2006 and a beautiful peaceful sunny day. In one of the recesses, my Chief Financial Officer and I went outside on a balcony overlooking the famous first tee on the West Course. It was idyllic – sunshine, birds singing, disturbed only now and then by the crack of someone driving-off the first. The CFO, a Wentworth resident himself, said “Why aren’t you living here? You’re mad not to.” I had no answer. On October 6 we moved into a beautiful new home on the East Course of Wentworth. It was a great decision.
12. You travel around the world to an extent that you almost live on a plane! What could you say about developing countries and the emerging economies? In recent statements some world leaders are convinced that multinational groups could help reduce poverty by investing in other ventures to create wealth. Do you think such an idea is realistic and how would you actually go about it?
One of our commitments at BG Group is to seek to ensure that our activities yield enduring benefits for our host nations. We are very focused on finding ways to align our long-term objectives with those of the governments and communities in the countries where we operate. There are many examples of how we put these principles into practice, particularly around sharing our skills to support the development of local businesses and industries, our investment in local infrastructure and our involvement in education and training. It’s also important to remember that all forms of society depend on cost-effective and reliable sources of energy to function. So our core business purpose – connecting markets to resources – in itself has an important role to play in helping emerging nations stabilize and grow their economies. We like to think and behave in terms of BG Group bringing our skills, finances and ability to access markets to a host nation, rather than BG Group carrying away a country’s natural resources. This is a state of mind that finds expression in many of the things we do – and how we do them – in the countries where we operate. I’d also underline our passion for safety. We have a relentless focus on ensuring that everyone who works for us – employees and contractors alike – goes home safely to their families at the end of their shift or working day. This is the absolute priority for everyone at BG Group, me included. Our belief that every accident is preventable shapes every aspect of our operations, from our drilling rigs to our corporate offices around the world. We work very hard to encourage our many stakeholders to join us on our journey to a goal of zero injuries at all of our work sites. In fact, I’d suggest that our efforts to embed a genuine safety culture wherever we work amounts to one of the most important long-term contributions we try to make to our host communities and countries.