11/07/11

In this article, we talk to Tom Faichnie at Campbell Dallas LLP and Duncan MacNiven at Warrego Energy about the many benefits of internationalisation.

“In a global economy, it is impossible to ignore the lucrative benefits of internationalisation. Yet making the first step can be daunting for many small and medium enterprises (SMEs). Without sufficient research and preparation, dreams of global success can quickly become an expensive nightmare says Tom Faichnie, Partner at Campbell Dallas LLP.

He continues to say that:

“With the right guidance, SMEs should not be afraid to look further afield than their European neighbours and transatlantic cousins. Markets which are featuring high on UK company’s agendas are Brazil and Australia. The Maxwell Drummond 2011 Annual Energy survey confirmed this trend: the majority of respondents believed that, within ten years, global exploration and production will be focused in Latin America and Australasia.

“Latin America has enjoyed significant economic growth in recent years. Goldman Sachs predict that the country’s energy demand will grow at an average of 2.1% per annum between 2004 and 2030. The multi-billion dollar LNG industry, coupled with a boom in Australia's mining industry, opens up serious opportunities for those with skills and technology in these sectors. The resource sector is expected spend a historic $76 billion on mining projects next financial year.

“Countries worldwide including Australia are actively seeking international experience and British skills fit their needs. Finding the right partner to facilitate internationalisation is the first critical step. It’s all about who you know. UHY, for example, is an incredible network that works hard to facilitate UK access to various markets. They have a presence in 78 countries worldwide, including nine offices in Australia through Haines Norton. But remember the locals have the power. You need to stand out. Showcase your skills and industry experience, understand their business culture and establish personal relationships. Adhere to corporate etiquette, too. Be there, make an effort. It’s essential to build a friendship. Visits may be time consuming, but costs will undoubtedly be outweighed by business benefits.

“But success depends on more than just an excellent partnership. A common barrier for SMEs is a lack of management resources and time. So, basic business sense is important too. Don’t forget your company at home. Immense overseas opportunities may not be immediately accessible. Time must be devoted to market research so a sound strategy can be created. Long term planning is vital.

“Aberdeen and Western Australian based Warrego Energy certainly accumulate business air miles with 10,000 miles separating their Aberdeen and Perth offices. They are well aware of the importance of a personal presence when doing international business.”

Duncan MacNiven:

“I co-founded Warrego Energy in 2007 to invest in onshore unconventional energy assets, unlocking stranded gas reserves by applying innovative techniques and technologies. Our first Warrego venture is in Western Australia’s (WA’s) North Perth Basin. While working with a previous business enterprise in Australia in the late nineties, my business partner and I foresaw a significant gap in the local market. We became aware of substantial tight gas reserves and predicted a looming domestic gas shortage in Western Australia. We already knew that the region was, and still is, the most gas dependent economy in Australia. Predictions for the domestic gas market shortage are as high as 35%. The mining companies are significant users of energy and in need of a economic and environmentally viable energy source. It was after the sale of our consultancy business that we decided to focus our initial attentions on Perth and the WA market.

“Although the UK and Australia share the same native language, UK SMEs shouldn’t be fooled into thinking there is no cultural difference. Australia is truly a vast country. It is larger than all of Europe and has three time zones. The diversity between states shouldn’t be underestimated. They each have their own unique aspects within the Australian federal systems. SMEs with international ambitions considering Australia should be aware of these.

“I believe there are three ‘golden rules’ that SMEs can bear in mind when considering Australia as an international office location. Firstly, always be prepared for meetings. This may seem obvious, but in a country the size of Australia, with over 2000 miles between Perth and Brisbane, your first meeting could be your last. Agree an agenda with common objectives of the meeting upfront and be prepared to close the deal at the initial meeting. Australians understand that distance is an issue and often will be ready to do the deal there and then. They are very straight talking. It is definitely best to be direct and cut the conceptual puff.

“A further point, given the distances, would be to establish and stick to an agreed communications plan. Decide when you are going to talk, what key reports have to be produced and what vital issues need to be addressed.

“Secondly, hire a local tax advisor with experience working with international companies. I can’t emphasise enough how important this is. As a result of the differences in each state’s federal government, there can be slight variations in tax systems. From day one, think about your business exit from Australia. This might sound unusual, but from experience, shortcuts you might choose to make at the onset of your international business, can be very difficult to undo at the end.

“Finally, understand Australians have a huge respect for their indigenous people and local environment. This is a matter of course when in Australia and it should be admired. Brits doing business in Australia should have respect for the local culture. It’s something you can’t avoid. In Warrego’s case, this respect for the natural environment was a legal requirement. As we were developing the land, there was an obligation to recruit a botanist to conduct a flora and vegetation survey during a specific growing season in 2008. We also spent two years negotiating with the Amangu people who have native land rights to the West Erregulla Field. This was actually in record time; many larger organisations spend much longer. I believe this came down to the personal approach I took to the negotiations. We consider all those we work with in Australia as partners in Warrego; the Amangu people, the local consultants and contractors. We believe by tapping into the excellent local knowledge and skills and applying proven technologies and techniques, we will be successful.

“Warrego appreciate that Australia has an innate ‘can do’ culture and we are keen for others to realise the potential of this diverse country. We have found our Australian partners to be extremely loyal and supportive. They have a heightened sense of justice and are always rooting for the underdog. It is certainly somewhere that we have experienced great success and we look forward to continuing our business ‘down under’ for the foreseeable future.

“Many British industries have regained their innate optimism in the last year and are looking to grow worldwide. Lessons in internationalisation should be shared amongst the business community to generate a truly international presence for our nation.

“Partnership is vital; both with the business community in your chosen country of internationalisation, but also back in Britain. To foster global ingenuity, there should be no geographic barriers.”


More information about Tom Faichnie

Tom Faichnie has more than fifteen years of experience in the finance industry. He joined Campbell Dallas LLP in September 2010 as corporate finance partner in Aberdeen. Tom specialises in financing, advisory and transaction support services across the energy sector. Prior to this he was business development director in the oil and gas team at Barclays Corporate and director at Deloitte.

Last year Campbell Dallas’ corporate finance department was awarded Dealmaking Team of the Year at the Scottish Business Insider Deals:Dealmakers Awards.

More information about Campbell Dallas LLP

Campbell Dallas is an award-winning firm of independent chartered accountants with cross-cultural oil industry expertise and unrivalled clout in the renewable industry. Campbell Dallas is one of Scotland’s leading independent chartered accountants and is the Aberdeen member of UHY, an international association of independent accounting and consulting firms with offices in 78 countries worldwide. The Scottish company is also part of Aberdeen Renewable Energy Group, a group of local companies that are active in renewable energy across the supply chain.

More information about Duncan MacNiven

Duncan MacNiven, a founder and director of Warrego Energy, began his career as a corporate oil and gas lawyer with Aberdeen firm Peterkins. Between 1990 and 2002, Duncan worked as outsourced oil and gas counsel for Pentex Energy and Sibir Energy. He then ‘retired’ from the legal world to pursue interest in the oil sector.

More information about Warrego Energy

Warrego Energy was established in 2007 to invest in and exploit onshore tight gas assets through the application of innovative drilling and production techniques and technologies. Warrego’s first major venture is the West Erregulla tight gas field, situated in Western Australia’s North Perth Basin. In 2008, the company won the tender for Exploration Permit EP469, of which they are currently sole holder. In the future, this licence may allow exploration to extend beyond West Erregulla. Western Australia (WA) is the most gas dependent economy on the continent and Warrego’s potential customer base includes a variety of industrial users such as electricity, mining, manufacturing and processing companies. A reliable energy source is essential to continue economic growth yet the DomGas Alliance report illustrates a critical energy gap between 2014-2020. Warrego directors believe they have the right technology, the right connections, in the right place, at the right time to deliver gas to market in 2014.