API metamorphosis

Red Cavaney, the new American Petroleum Institute president, plans to split the industry's largest trade group into three distinct functions.

He said the reorganization plans will be completed this summer, and API will shift to the new format next year (OGJ, Jan. 26, 1998, p. 38; May 11, 1998, Newsletter).

Only one firm decision has been made: API will offer early retirement to some employees in an effort to further thin its staff.

Cavaney said, "API is optimally configured to service large integrated companies under a one-stop shopping kind of arrangement. That has served the industry reasonably well for a long period of time."

But he said oil companies have decentralized, and API should do the same.

Cavaney observed that government regulates "not by association, but by industry," and API should provide leadership to pull together the broader parts of the industry.

Divisions

Under the plan, API will continue a basic management and administration function. The association also will continue to focus on "strategic issues"-such as global warming, taxes, and trade-that are important to the entire industry.

The "resources" third of API would offer services for hire in the areas of communications, government relations, legal, research, analysis, and statistics.

The final third of API would be six groups focused on industry segments: upstream, downstream, natural gas, pipeline, marine, and allied.

They would be directed by committees consisting of senior people from private companies. The committees could set their own budgets, based on dues proportionate to a company's market share of that segment of the industry.

The six groups would pick and purchase needed API services, such as legal and government relations. API would discontinue any staff functions not purchased.

Cavaney explained, "Member companies use this same shared-services concept to help them meet the marketplace test. Certain things can get in the budget one year and sort of develop a life of their own. But, if it isn't part of the core mission, it shouldn't be part of the core dues."

Cooperation

Cavaney is enthusiastic about the opportunity the reorganization offers for closer cooperation with other oil and gas associations.

He said oil groups often have worked together on specific issues in the past, but, "We've never looked at this thing more broadly than just issues."

API would invite other associations to assign people to the six industry groups-for instance, independent producers would be asked to delegate representatives to the upstream group-and the six groups would be free to set policies.

Cavaney said API would not "own" the industry working groups, and, in fact, other associations probably would dominate some of them.

He said, "API doesn't care who gets the credit so much as we care that there are results." He said other industry associations have been supportive of the proposal so far.

Referring to the general reorganization, Cavaney said, "If we are able to do this, we may be creating a model for other associations to follow."