OTC 2011: GE’s comfortable with more energy regulation

The staff at a certain Houston hotel knows Claudi Santiago and his family very well.

The president and CEO of GE Oil & Gas has made nearly 100 visits to the Houston area in recent years as the company has grown its business here exponentially via a rapid string of acquisitions.

From just a handful of Houston employees a decade ago, GE Oil & Gas now has some 4,500 workers in Houston, due to its acquisitions of Hydril, Vetco Gray and, most recently, its $2.8 billion deal for the Wood Group’s well support division.

But Santiago’s frequent visits shouldn’t get Houston’s Chamber of Commerce types too excited about the chances of the industrial giant moving its energy headquarters from Florence, Italy, to the Energy Capital.

“To me, the notion of having one headquarters for a business like this is old news, old fashioned,” Santiago said in an interview today on the floor of the Offshore Technology Conference at Reliant Center.

GE Oil & Gas has three primary areas of expertise that are geographically headquartered in different locations.

The subsea equipment and services business is based in Aberdeen, Scotland; the rotary equipment and compressor business in Italy; and the surface drilling and enhanced oil recovery business (including the technology to tap into natural gas shales) in Houston.

“We have the right teams running these three very big businesses, so we think the formula is working,” Santiago said.

The Houston business still could be set to grow, however. The acquisition of Wood Group’s electric submersible pumps business, for example, will let GE help customers in enhanced oil recovery, improving the recovery rate of oil in previously tapped fields.

“On average customers only unlock about one-third of a total reservoir,” Santiago said. “If we can help them improve their reserves by even just 3 percent that would be like making available to them all the reserves currently available in Iraq.”

Offshore West Africa and Brazil are the places Santiago mentions most when talking about the expansion of the subsea business, and Brazil gets an extra nod as the home of a planned research center for GE Oil & Gas. But the company isn’t stingy about sharing its R&D with any of the business units, so the Houston-based operations will likely benefit, he said.

The surge of new regulations the U.S. is rolling out in the wake of the Deepwater Horizon accident isn’t a concern for Santiago, but rather a welcomed development. GE is already primarily working in heavily regulated industries, be it aviation or nuclear power, so the need for more stringent equipment oversight and better data is nothing unusual.

“All of this ties in well with our desire to bring this aviation mindset to all our oil and gas businesses,” Santiago said.

The company is getting a good deal of traffic at its OTC booth promoting new technology to monitor temperature, pressure and other metrics in blowout preventers and other sea floor drilling and production equipment. This includes systems that provide the data even after the equipment is disconnected from the surface, as occurred in the Deepwater Horizon accident.