Drawing from the well

Ireland needs to lose its provincial mindset if the economy is to return to growth. So says, Aidan Heavey, who since founding Tullow Oil in 1985, has steered the company to international success.

AIDAN HEAVEY spends a lot of time “wandering around Africa” in his role as chief executive of Tullow Oil. So he is well acquainted with what people abroad think of this country right now. “There is no negative reaction against Tullow,” he says. “But what I do see is very negative reaction against Ireland. It is viewed as a basket case.”

Tullow is a multinational business. Its roots are in Ireland and it still has a large – and expanding – office in Sandyford, Co Dublin. But the company is listed and headquartered in the UK, where Heavey lives with his family, and its main sphere of operation is Africa, where it is operating in 22 countries and has big discoveries in Ghana and Uganda set to come on stream.

Heavey has a long list of gripes about the way Ireland is run and structured, but behind it all he is optimistic that the country can prosper again.

“When I come back here it seems to be getting worse,” he says. “The Irish problem really hasn’t been tackled yet. That’s what I find strange. There needs to be a complete re-look at the way we do business and I don’t think people are doing that.

“If you have an issue in a business, you restructure. It’s more difficult for the politicians to do it . . . that’s the problem. It’s easy for business people to say you have got to solve all these things, but there are a lot of social issues involved as well. But somebody has to make the tough decisions.”

All that said, Heavey says Irish people are great at going abroad and doing deals.

“We are great at getting out there, wandering around the world and getting on well with people. For a country of our size we punch way above our weight,” he says. “The problem that Ireland has is the people who stay at home. It’s parochial at home. We are in a goldfish bowl. They are not out in the real world. It’s a culture of ‘what’s he doing?’ We need to draw a line in the sand and get on with it.”

Given the state of the economy, and Heavey’s high standing globally, you might think that the Government would have tapped him for ideas. Not so, he says.

“No, and I don’t expect them to because anything I would say would be so radical,” he says. “The extremes that you would require to run an organisation in the world today would never be acceptable in this country because you have social issues.”

In a modest way, Heavey is lending a hand. He recently agreed to join the board of the Michael Smurfit Graduate Business School at University College Dublin in Blackrock, which is charged with producing a new generation of business leaders. Our interview took place in its Carysfort campus earlier this month after he had attended his first board meeting at the school.

“A school like this is critical to any country,” he says. “You need these kinds of people coming out of here with the right mindset and getting out there and taking on the world. Because Ireland needs business people.

“It doesn’t need developers. It doesn’t need speculators. We have had those and they have bankrupted the country. It needs people who will go out and create employment, create jobs and create wealth. This is where it all starts.”

Heavey, an accountant by profession, knows what he is talking about. He was a founder of Tullow in 1985. Over the past decade, he has transformed it from a resource minnow to a FTSE 100-listed company in London with a market value of £11.5 billion (€13.1 billion). That’s just shy of the combined worth of CRH, the building materials group, and Ryanair, the two largest stocks quoted on the Irish Stock Exchange.

He started out buying old oil and gas fields from BP in the North Sea off Britain, making them more efficient and extending their production lives. In 2005, he engineered the acquisition of Energy Africa, in a deal that doubled Tullow in size. Since then, Tullow has agreed to acquire Heritage Oil and has large discoveries in Ghana and Uganda set to come on tap that will transform its business. Tullow is now a big player in the oil industry, sitting in a group below the majors.

Heavey’s view is that oil will creep up over $100 a barrel. It’s a major player in Africa, both in the resource sector and in building infrastructure. Heavey argues that Irish construction companies, bombed out by the crash here, should be competing with the Chinese in Africa to build infrastructure.

“The Chinese are doing what I’ve been saying Irish companies should have been doing years ago. But Irish business has got fat and lazy during the years of the Celtic tiger,” he says.

BP’s oil spill in the Gulf of Mexico highlighted the dangers of the oil business, with chief executive Tony Hayward being vilified.

“The way that the US government treated him was appalling,” Heavey says. “The press coverage and the way he was attacked was pretty appalling.”

Heavey insists that such a disaster could never happen at Tullow. “The chances of something like that happening to us is very slim. We don’t get involved in projects that push the edge of technology. We tend to do the bog standard . . . because something like that could kill us.”

Tullow’s success has been built around driving performance consistently over a long period of time.

As Heavey sees it, this performance culture is lacking in Ireland. “I’ll probably be shot for saying this, but Ireland is too unionised,” he says. “It’s not a performance-related culture. And there’s too much criticism of performers who earn and that has to change.”

This leads us on to executive pay, which is in focus as talk of austerity grips the nation.

“My reaction is that you get the best and the brightest and they will create employment and they will create wealth. If you have a load of idiots, all they will do is bankrupt the place. So you have to have proper performance-related pay that goes right down through the organisation.

“I’m a great believer in paying fantastic salaries. Pay the best. I am 100 per cent certain that’s what you should do – and pay big bonuses.”

Heavey’s own remuneration has been in the media spotlight. Last year his salary was £666,104, up just 2 per cent on the previous year. With bonuses and other benefits, this rose to just under £1.7 million. It’s far from making him a fat-cat executive but Heavey has share options granted to him for free that are currently worth about £8.7 million.

He makes no apologies for his remuneration.

“If I’m not performing I would expect the board to throw me out and they are quite entitled to,” he says.

Really? Surely, as a founder, chief executive, and a large shareholder – he owns six million shares in Tullow – Heavey is immune to rebuke from his board. He is, after all, Mr Tullow.

“This is not about a job for life,” he adds. “Okay, I set the business up and I am a shareholder, but that’s not the point. We have shareholders and employees and we have a responsibility to them. Everybody has to be performing to their best. If you are not, you should be thrown out. That applies to the chief executive.”

Tullow’s success has led to speculation that it might become a target for one of the majors. Heavey dismisses this suggestion.

“We’ve got too big,” he says, chomping on a chocolate biscuit. “Nobody can afford us anymore. We move too fast. We are too aggressive as a business. A lot of companies would like to buy us and a lot of majors would like our assets.But if one of them made a bid, there would be a bidding war, so I think we’re pretty safe.”

At 57, does he have one eye on retirement? “I’m still only a kid,” he says. “The company has grown so vast now that there’s a big management team in place, with people much smarter than me. If I got run down by a bus in the morning, it wouldn’t affect Tullow.”