Deloitte Middle East rides
energy boom

Deloitte’s global oil and gas business is focused around centres
of excellence. London and Houston were the traditional hubs, but in
recent years the Moscow centre has expanded and there is now a
focus on the Middle East. Paul Navratil tells Carolyn
Canham
about the opportunities on offer.

Paul Navratil is one of two new partners to join the Deloitte
Middle East oil and gas practice. He previously led Deloitte’s
energy practice in Central and Eastern Europe and, with David
Traylor from Deloitte US, joined the Middle Eastern business to
help spearhead its growth.

Navratil has a commercial oil background. “I was in energy trading
environments – both trading and in strategy – for a number of years
before coming into consulting and now my role here is to accelerate
the growth of the energy consulting practice,” he explains.
Navratil’s background in the oil and gas industry predates his
working life – he was born and raised in Saudi Arabia and his
father worked for Saudi Aramco.

He tells IAB that Deloitte’s energy practice is global in
nature, with a network of centres of excellence around the world.
“We’ve got our traditional centres of excellence… that were built
around the traditional hubs of oil – London and Houston. We have
extended that to Moscow over the last five years and what we’re
doing now is really to provide a lot more emphasis on the Middle
Eastern centre of excellence,” he says.

The strategy in the Middle East is to build a strong centre that
will be capable of delivering and anchoring all the service lines.
Navratil explains that Deloitte already has a “tremendous
footprint” in the region, with decades of experience of auditing
national oil companies (NOCs), plus a traditional focus on
international oil companies (IOCs) such as BP and Shell.

Localised work for the Middle Eastern NOCs was previously limited
to audit and audit support. Consulting and financial advisory work
was delivered by staff in London and Houston. “That was largely
because there hasn’t been much of a demand or a pull from the
national oil companies here,” Navratil explains, adding that this
is changing due to “a need to naturally evolve and optimise,
coupled with the spotlight which has been put on Middle Eastern
NOCs by the global press and the price of oil”.

Navratil says he characterises the growing demands of oil and gas
companies as “a function of helping to build the dialogue between
the IOCs and NOCs”. He explains there are two challenges driving
the NOCs to start looking for more advisory services: human
resources (HR) strains and the need to be perceived as capital
efficient firms.

“We do a lot of enterprise risk management work and… invariably,
it’s almost a 100 percent hit ratio that HR comes up as the number
one risk,” he explains. He adds that, in terms of capital
efficiency, “in certain areas the Middle Eastern NOCs are absolute
leaders in the field – exploration and production. [However] competency models-wise, they may be lagging a little behind.”

Navratil suggests that the NOCs admire the “perception of
efficiency” at the IOCs. On the other hand, he says, the IOCs
admire the NOCs’ access to resources and ability to extract those
resources profitably.

“From our position, we feel that we can play a role in facilitating
the dialogue between the IOCs and the NOCs. And that’s really the
role that we want to play,” Navratil says.

“We know that the IOCs are extremely interested in getting into
partnerships with the NOCs because everyone’s concerned about
resource nationalism. We feel that there certainly is a role for a
company like Deloitte to play in helping that dialogue and in
bringing all those sides together and bringing all the industry
best practice together.”

Navratil says Deloitte also has a role to play in terms of
corporate governance. “Decision making, accountability,
responsibility, those themes are going to be part of the
cornerstone of our offering,” he says.

Another offering is advisory on fiscal responsibility: “If you’re
Saudi Aramco and you’re sitting on $80 billion of investment, how
do you prioritise that? It’s a good problem to have but it’s a huge
problem because they know that they need to diversify.”

Navratil says another area for consultation work is on demand
security. “There’s a fine line between how much higher oil can go
before people really start considering some alternative sources of
energy,” he says. He adds that Deloitte is studying ways to assist
the oil companies in this regard, while also looking at work
related to climate change.

“The mood for professional services in the Middle East is vibrant;
vibrant is actually too watered-down a word to describe it, it’s
absolutely phenomenal, the amount of need that is required from all
sides, not only the national oil companies, but the related
industries, the petro-chemical industry, the electricity industry,
the gas industry, the aluminium industry… the key message is the
demand for professional services is mushrooming,” Navratil
says.

“As long as these two main issues exist – one, the talent and
resource crunch, and two, the requirement to be methodical and
responsible in investment decision-making and allocation – there is
a definite role for advisory firms like Deloitte to play.”