For those who were panicked by the oil price shock on 20 April, an incremental temporary decline in oil prices was inevitable heading into the seasonal refinery turnarounds with storage almost full. So, I do not think that we should read too much into these unprecedented lows.
My curiosity is primarily focused on what is likely to be just over the horizon with respect to oil and gas consumption and price trends … a lifelong obsession for most SPE members.
It seems probable that we are involved in yet another structural shift as a result of changes in consumption and behavioral patterns that have been exacerbated and accelerated by the wider COVID-19 shutdowns.
If peak oil consumption has been reached, a battle for market share is inevitable and will be with us for a while. As with other industries. the future of E&P will be brighter in the exporting and developing countries than in many of the OECD countries.
A convergence of oil, gas, and renewable energy pricing will be self correcting, benefiting those who still do not have adequate access to affordable, clean, safe, and reliable sources of energy supply in the 21st century.
Advances in technology and automation should allow us to deliver more at asymptotically declining prices. I vaguely recall from Economics 101 this is the very nature of a commodity market. However, in an exploitive industry, the asymptote is defined by technical supply costs that have a nonlinear relation to market demand.
The evolving policy initiatives to decarbonize the energy supply over the next 33–50 years will inevitably continue unabated well into the next decade.
I suspect that most people’s vision of the oil and gas markets and exploration and production activities in 2022–2030 strategic planning windows have shifted over the past 4 months. Operational and tactical plans and strategies will need to be based on a widely divergent set of planning assumptions and scenarios in some sort of skewed [log-normal (?)] distribution between the perceptions of the pessimists and optimists.
Recommended Resources
- The 2010 SPE textbook, "Making Good Decisions,” by Reidar Bratvold and Steve Begg. Bratvold's 2016–2017 Distinguished Lecturer (DL) talk, "Creating Value From Uncertainty and Flexibility," and the series of articles he wrote for SPE’s Young Professionals in The Way Ahead are also recommended. Decision analysis and uncertainty management planning are a weak pillar in my skill set that needs reinforcing, especially in a time of great uncertainty.
- Another article has been added to OGF’s Savvy Separator Series. Seth M. Nelson, Southwest Research Institute, authored the 16th article in this technical series, “A Century of Carry-Over—0.1 gal/MMscf.”
Webinars, SPE LinkedIn Live Events, and SPE e-Training
- Live webcasts of DL talks. These are free to SPE members. I was totally absorbed by “Practical and Value-Driven Management of Non-Technical Risks” by Christiaan Luca, available as an on demand webinar. I also recommend “Enhanced Oil Recovery (EOR) for Unconventional Reservoirs: The Next Big Thing?” by B. Todd Hoffman and Harvey Yarranton’s “What Happens When Heavy Oil and Solvents Mix?
- SPE has kicked off a new series of SPE LinkedIn Live events. Visit LinkedIn and search “#spelive” to view the series, set notifications for upcoming events, and check out the archived on-demand events. Several are posted at JPT’s Tech Talks and all are available on SPE’s YouTube channel.
- SPE Stay Strong Vignettes are available in the Resources Section of the SPE International App, available for download at the AppStore or GooglePlay. These are short videos featuring technical and nontechnical content for our members. My own contribution deals with marketing your services as a sole practitioner or newly minted consultant. Over my career, I have started four small consulting companies on my own or with a friend or relative, all of them during downturns to capitalize on the upswing.
SPE Volunteer Opportunities. Check your local section’s website to learn how you can become involved and engaged with your colleagues. Visit SPE Volunteers to see other opportunities.
Members-in-Transition. Those who have recently become and/or who have been underemployed or unemployed for a while may have a pressing need for a sounding board and/or mentor—someone who has “been there, done that,” or re-invented themselves. The Members-in Transition Toolkit provides information, resources, and programs to assist you during the downturn.
In closing, I encourage you to
- Stay safe. It may be difficult, but more important than ever as the restrictions are slowly lifted.
- Stay connected. Take care not to overwhelm people who are overloaded right now.
- Stay positive. Enthusiasm and optimism are infectious.
- Stay creative. Most really creative innovations emerge during downturns when we have time to think and/or creatively champion an idea for value creation or preservation to colleagues and potential investors who now have the time to listen and think it over.
Bob Pearson, Glynn Resources, is the SPE Technical Director for Production and Facilities.
