GAITHER OF SPE: DEMAND FOR PETROLEUM ENGINEERS TO REBOUND

A.D. Koen
Gulf Coast News Editor

Demand for U.S. petroleum engineers will rebound in the 1990s.

Most of that revival in demand will come from other nations as more U.S. companies' exploration and development dollars chase international prospects.

Further, as oil and gas fields in other nations mature, there will be greater demand for areas of expertise in which U.S. petroleum engineers specialize, such as enhanced oil recovery.

Curiosity, technical proficiency, and computer literacy are the key attributes a petroleum engineer will need in the 1990s, says Orville D. Gaither, 1990 president of the Society of Petroleum Engineers.

During the 1990s, says Gaither, SPE will continue to evolve into an international association, press its efforts to recruit-even at the youngest levels-students into petroleum engineering, and educate the public on the discipline's role in society.

Gaither, president of Amoco Production Co.'s Africa-Middle East region since 1979, has directed international oil and gas operations the past 23 years.

NO ALTERNATIVE

Gaither's enthusiasm for the future of petroleum engineering is based on the simple premise that there will be no alternative for petroleum for many years to come.

"By the end of the century, oil still will provide about 50% of the world's energy supply," he says.

But finding oil and gas supplies adequate to satisfy future demand will challenge the ingenuity and imagination of industry professionals, he says.

Above all, Gaither advises, petroleum engineering graduates must leave school with the curiosity to want to know how things work and why, enough technical knowledge to systematically analyze problems, and the ability to use all tools available to find solutions.

When a new engineer recognizes his formal education hasn't prepared him to deal with a problem, he seeks out sources of technology transfer.

"SPE will give him the information he wants," Gaither says. "That might satisfy his curiosity, but it also might cause him to want to broaden his knowledge even more."

Although Gaither says computer literacy is essential for today's petroleum engineers, he emphasizes it only should be considered a tool, "not a substitute for thinking."

ON THE FIRING LINE

Gaither says colleges and universities do a good job of preparing engineering students to analyze problems and instilling technical knowledge needed to find solutions to problems.

Similarly, he believes professional societies are fulfilling the role of helping individuals expand capabilities.

"But when engineers get out there on the firing line, and new technology comes along, it's up to employers to get the most out of their talents. In my region, Amoco has found more oil during the past 5 years with an interdisciplinary approach we call exploitation teams than we have with all our explorationists put together.

Amoco exploitation teams typically entail a petroleum engineer, geologist, and geophysicist working together on field problems rather than each working on solutions individually.

Through cooperation, Gaither explains, exploitation teams find clues otherwise missed to create a more complete, more accurate picture of reservoir structure. An example is detecting pressure differentials, which could help the team find small faults not evident on the first pass of a reservoir.

That has yielded new pay zones adjacent to and within existing fields.

"We're finding that 3-D geophysical programs are much more helpful in finding new reservoirs within old fields than in finding new reservoirs by themselves," he says. "By carefully examining changes in 3-D images of characteristics within a reservoir, we've been able to place new wells at the optimum location for maximum porosity and permeability."

MORE GLOBAL OUTLOOK

Gaither's international background is an important reason why he was asked to serve as president of SPE.

In addition to his current job, Gaither was Amoco International's chief petroleum engineer and vice-president of worldwide production, president of Amoco Trinidad, and production manager of Amoco U.K.

Gaither notes that an increasingly global petroleum industry will be called upon to tap higher cost reserves in more mature fields. As U.S. petroleum engineers pursue job opportunities in other countries, SPE's evolution to a more international organization will continue.

To provide technological information on a want to know basis to an increasingly diverse international membership, Gaither says, SPE must continue to refine its services.

But the society will limit itself to transferring technical information and leave to employers the task of preparing overseas workers for such traumas as terrorist attacks or Iraq's invasion of Kuwait, he says.

Not only has SPE's major membership growth in recent years occurred in non-U.S. sections, many U.S. members work on international projects, Gaither notes.

For example, Amoco spends about 60% of its budget to pay salaries and operate projects in other countries.

"But that doesn't tell the whole story," Gaither says. "About one third of our people in Houston are working solely on international projects."

The reason, Gaither points out, is that the U.S. holds only about 2.9% of the world's remaining oil reserves, and as the most heavily drilled petroleum province, offers relatively small remaining potential for further economic discoveries.

"Clearly, the U.S. is no longer a superpower in world oil markets," he says. "it makes me so mad when I hear politicians say we could be energy self-sufficient. Well, we can't-it's just a plain lie."

Five countries in the Organization of Petroleum Exporting Countries-Saudi Arabia, United Arab Emirates, Kuwait, Iraq, and Iran-control 64% of the world's oil reserves, he points out.

In Gaither's view, events in the world oil industry will be totally dependent on actions of those countries for the next three decades.

OPEC CONTROL

However, OPEC hasn't always acted in its own best interests, Gaither says.

After forcing new competition on world oil markets in the early 1970s by nationalizing oil companies, members of OPEC became greedy, allowing price hawks within its ranks to drive up oil prices, he contends.

"That gave us all the incentive we needed to compete. Suddenly, it became economic to explore for high cost oil and gas in new areas all over the globe-in the North Sea, Alaska, and deepwater Gulf of Mexico."

High product prices also encouraged consumers to conserve. As a result, OPEC's share of the oil market fell to 16 million b/d from 31 million b/d-the brunt of which was felt by swing producer Saudi Arabia.

During 1979-85, Saudi Arabia's oil production fell to 3 million b/d from 9.8 million b/d and oil revenues dropped to $25 billion/year from a peak of $138 billion. Saudi spending in 1985 alone exceeded oil revenues by $27 billion.

While the recent era of low oil prices apparently clouded memories of the energy crises of the 1970s in many countries-notably the U.S.-Gaither is certain members of OPEC will remember the costly lesson.

In his view, the cartel will allow oil prices to increase enough to enable OPEC members to satisfy current revenue needs, but not to a level that will discourage consumption or encourage competition from other oil producers or alternative sources of energy.

Further discord among OPEC members, such as Iraq's invasion and takeover of Kuwait, can be expected, he believes. But Gaither predicts OPEC eventually will stick together and regain control of international oil markets.

INVESTMENT STRATEGIES

Another lesson OPEC learned as it tried to regain market share in the 1980s was that low oil prices significantly increase downstream profits, Gaither says.

So led by Kuwait and Saudi Arabia, OPEC countries have invested into downstream refining and marketing organizations, Gaither notes.

"In doing so, they positioned themselves to capture downstream profits during periods when oil prices are soft. "

Kuwait recognized that if oil income was all it had, it would be "held captive by the vagaries of the oil markets," Gaither says.

So Kuwait mapped out a strategy of nonoil investment that to date has totaled more than $100 billion.

By Gaither's estimate, Kuwait earns $6-7 billion/year on investments outside the oil and gas industry and is significantly less dependent on oil prices than other OPEC countries.

In the early 1980s, when SPE programs were generating more income than the group needed to operate, Gaither says, SPE made a similar decision.

"We put our money into things that aren't cyclical, like the industry," he says. "Those investments have helped us keep dues low during this period of low income.

"That's one of the reasons SPE membership is a great deal. For annual dues of $40, we return about $280 in member services."

FLEXIBLE GOALS

To serve an increasingly diverse membership in the 1990s, SPE goals have to be flexible enough to encompass a wider range of needs, Gaither contends.

That will mean tailoring SPE programs to help members at opposite extremes of the technology spectrum.

Engineers in some countries "are just breaking the sound barrier of petroleum technology," he says. They are hungry for basic information about topics such as gas lift, reservoir simulation, EOR, and horizontal drilling.

Society members in countries with little access to technological information are eager for visits from SPE distinguished lecturers, a program that helps those members set their domestic oil agendas.

In some countries at the high end of the technology spectrum, such as Saudi Arabia, engineers are reversing the usual flow of technological information by transferring knowledge to the U.S.

"Not many young engineers in the U.S. have access to the kind of equipment available in Saudi Arabia, where young engineers run reservoir simulations and various other programs on Cray 1 and Cray 2 computers, and the biggest of the IBM machines," he says. "At the SPE petroleum conference in Bahrain, I heard some very good papers by some young Saudi engineers who have access to that type of equipment."

ENHANCED RECOVERY

Compared with their non-U.S. counterparts, U.S. petroleum engineers in the 1990s will work more with secondary, tertiary, and quaternary recovery and enhancing project economics, Gaither says.

But as fields around the world mature, conventional engineering skills developed in U.S. oil basins will have increasing applications in other countries, he contends. More recent technological advances, such as those in horizontal drilling also will find more non-U.S. applications.

"When the price and paucity of oil creates a need for incremental production achievable by advanced drilling and production techniques, there will be many opportunities to initiate those projects overseas," Gaither predicts.

The timing for EOR's proliferation in other countries will be largely a function of oil prices. Gaither says a price of $20-23/bbl is adequate to make most such projects economically viable.

He says tertiary recovery will be very important in the U.S.S.R., where many oil fields are under secondary recovery. The oil fields of Saudi Arabia could be candidates for EOR in 20-30 years.

"In other countries, Egypt for example, practically every field we operate is set up initially with the recognition that waterflooding eventually might be required," he says.

EDUCATIONAL IMPERATIVE

Perhaps the most serious challenge facing future U.S. oil and gas development is the lack of understanding among individuals outside the industry of the extent to which petroleum improves quality of life, Gaither says.

Gaither says SPE can ensure an adequate supply of engineering manpower by encouraging youngsters to become engineers and scientists.

A recent survey by the National Energy Education Development Project of 25,000 U.S. fourth grade through high school students found that only one in five knew petroleum is the country's top energy source.

That lack of knowledge is compounded, Gaither claims, by teachers without scientific or technological backgrounds who dissuade students from taking elective science courses.

"In many cases, by the time a youngster graduates from high school, he has failed to take prerequisite courses that would prepare him for a regime of scientific study at the collegiate level," he adds.

As a result, Gaither says that fewer young people are considering careers in scientific fields like engineering, physics, chemistry, or applied mathematics.

"In the U.S., four times as many students are studying law as are enrolled in engineering disciplines," he says.

The dearth of interest in engineering and other sciences is most advanced in the West, but Gaither sees evidence in every country.

To stimulate interest among young people in careers in science and technology, Gaither has been encouraging members in SPE's 109 sections worldwide to present programs at school assemblies.

"We don't necessarily want to encourage kids to become petroleum engineers," he says. "We're just trying to interest them in the world around them, in what makes it tick, and how exciting the fields of science and engineering really are."

SHOW AND TELL KIT

To that end, Gaither resorts to using his suitcase as a "show and tell kit" when he addresses school assemblies.

During those addresses, Gaither takes the suitcase onstage, tallies all the personal items, and calls attention to everything composed wholly or partially of petroleum derivatives.

"Ninety percent of the stuff that we wear or use is made at least partially from petroleum," he says.

Similarly, Gaither says, most kids know their cars need oil and gas, but they don't know that many parts of the car are petroleum-based. Even a kid with a bicycle doesn't know how totally dependent on petroleum that bicycle is. Tires, paint, seat covers-everything on it is made from petroleum."

If Gaither doesn't have his suitcase along, he invites his young audience to play a game of imaginary strip poker, in which they mentally remove all items derived from petroleum.

"Every time I call out something made of petroleum, they mentally discard it," he explains, citing rubber tennis shoe soles, nylon strands in shoestrings, elastic lycra in socks and underwear, nylon thread in cotton jeans, et al.

Then Gaither points out that air conditioning, heating, and lighting are generated by petroleum or natural gas, and a school official cuts the lights and cooling or heating.

"Finally, I get to a point where I light one candle," Gaither says. "Then I tell them that candles used to be made out of tallow, but today they are made out of petroleum, and I snuff the candle, too. "

That gets Gaither to his point:

"We need to protect the environment to the maximum amount we can, without being crazy about it. But we have to recognize that we don't have an alternative to fossil fuels."

Copyright 1990 Oil & Gas Journal. All Rights Reserved.