'Flat out' industry faces enormous challenges, SEG told

Nov. 8, 2005
Operators and service companies face shortages of manpower, equipment, and services as they try to keep up with rising world oil and gas demand the next few decades, speakers told the Society of Exploration Geophysicists annual meeting in Houston Nov. 7.

G. Alan Petzet
Chief Editor-Exploration

HOUSTON, Nov. 8 -- Operators and service companies face shortages of manpower, equipment, and services as they try to keep up with rising world oil and gas demand the next few decades, speakers told the Society of Exploration Geophysicists annual meeting in Houston Nov. 7.

Supplying enough energy to the world's growing population is an immense challenge and an awesome responsibility, said Tim Cejka, president, ExxonMobil Exploration Co.

With world energy demand projected to vault to 335 million b/d of oil equivalent in 2030 from today's 230 million boe/d, industry must continue to improve operating efficiency, find new energy sources, and conduct operations safely, affordably, and without environmental harm, Cejka told SEG's opening session.

An oil field service sector constrained by capacity and people shortages is responding with innovative training efforts and by inventing workflow methods that allow a limited number of people to spread expertise to more projects, said Andrew Gould, chairman and chief executive officer, Schlumberger Ltd.

Gasoline prices the equivalent of $250/bbl in Europe with demand still rising raise the question whether oil may be even more valuable than current prices reflect, said Mike Bahorich, executive vice-president, exploration and production technology, Apache Corp.

All three agreed that industry will lean heavily on technology advances to meet demand in future decades, and Cejka said proprietary technology is vital.

Oil supply
Oil and service companies face supply challenges of geography, access, political risk, oil quality, and the expertise to deal with them, the speakers said.

The world, Bahorich said, appears to have produced 1 trillion bbl of the estimated 6-8 billion bbl of conventional oil in place and may have 1 trillion bbl of proved reserves, 1 trillion bbl of probable and possible reserves plus enhanced oil recovery volumes. Behind that lies another 7 trillion bbl of unconventional oil.

Industry must also deal with a crude slate that is becoming heavier and higher in sulfur, he noted.

Allegations of a peak in world oil production don't hold water, Gould and Cejka said. "The trouble with peak oil theories is that geologists know nothing of economics and economists know little about geology," Gould said. Neither do investment bankers, said Cejka. "The Saudi fields are world scale fields.

The world is not running out of oil, but access to acreage is becoming more difficult, Bahorich said.

Access to new basins and new ideas in old basins lead to better prospect availability, but some of the world remains inaccessible to western oil and gas companies, Cejka said.

"Where we do operate, we often face political and economic risks. The current price environment is encouraging many governments to seek a greater share of economic rent from existing oil and gas fields beyond the provisions in the production contracts.

"This threat to contract sanctity increases the risk to investors just at a time when the world needs more oil."

Gould noted that some of the most prospective areas for new exploration and development appear too risky for traditional sources of capital. Such areas are either not open for private investment or are in jurisdictions that make the risk too high, he said.

Operational efficiency
Despite technical and economic challenges, operators and service companies are improving field methods on many fronts, the speakers said.

"In many basins exploration efforts are moving into the subsalt section, in which the imaging of exploration targets is particularly difficult," Cejka said. "Our research company is working on proprietary techniques that selectively combine different segments of a set of reflections from subsurface horizons to counter the noise and boost the signal.

"This technique, combined with anisotropic wave equation migration, has led to significant improvements in our ability to image beneath salt canopies."

Other research looks back hundreds of millions of years.
"With a team at our lab studying the fundamental controls on heat flow in extensional terranes, critical to this is an accurate understanding of the timing of continental breakup. We have developed proprietary plate tectonics software to achieve this."

Every ExxonMobil office uses the same geoscience software.

For the last 3 years, every new service that Schlumberger has produced has been digitally enabled, Gould said. This means it was designed and built to communicate digitally, whether or not that capability was required immediately.

Gould said investments in 4D time-lapse seismic surveys for reservoir monitoring and a thorough rethink of the workflow have reduced time between surveys and shortened data delivery time to days from months.

"This has led in several cases to operators taking drilling decisions that have saved several million dollars and a lot of time."

Use of 4D technology will double in the next few years, he predicted.

Remote monitoring centers that link up with real-time drilling and production operations in the field help reduce "the call on a diminishing number of experts," Gould said.

ExxonMobil is using a proprietary technique in the Piceance basin that "allows us to simultaneously perforate and pump frac jobs in dozens of reservoir zones in one continuous operation, reducing completion costs and increasing production rates from these gas wells."

ExxonMobil is licensing the technology to three companies, he added.

Addressing shortages
Gould and Cejka said Schlumberger and ExxonMobil have taken actions to see that expertise is transferred from an aging work force to newer employees.

Cejka said, "A large number of our most experienced staff will retire in the next few years. We have taken steps to maximize the efficient transfer of learning to the next generation of geoscientists, pairing mentors with new employees. Our recruitment has remained constant over time and has not been dependent on oil prices.

"For the last 10 years we have successfully managed a new-hire development program that puts graduates through an initial 2-year program with three real work assignments in very different parts of our business."

More than 1,200 geoscientists took more than 8,300 workdays of training at an ExxonMobil Houston facility in 2004, he said.

ExxonMobil spends $200 million/year supporting graduate and undergraduate work in university earth science programs.

The lack of exploration and production professionals is as acute on the service side as it is in the operators, Gould said. "The service industry is not particularly ready to meet the needs of a rapid ramp-up in activity."

Cejka said every able US drilling rig is working, the world deepwater rig market has never been tighter, and the number of full service geophysical vendors has declined 70% in the last 10 years.

"The industry's about flat out," he said.

Contact G. Alan Petzet at [email protected].