Technological development, personnel shortage remain critical points, says panel

Although advances in technology for drilling and other energy-related areas, and how that technology is applied, remain critical, the shortage of qualified personnel still holds back industry growth, said participants in an industry panel at the 12th Oilfield Breakfast Forum held Friday in Houston.

Oct 27th, 2000

Karen Broyles
OGJ Online

Although advances in technology for drilling and other energy-related areas, and how that technology is applied, remain critical, the shortage of qualified personnel still holds back industry growth, said participants of an industry panel at the 12th Oilfield Breakfast Forum Friday in Houston. The biannual event is underwritten by Resource Marketing International Inc. and Randall Morton International Inc.

The lack of experienced personnel remains a problem, especially for bringing shallow drilling projects online quickly, said Jim Wicklund, oil field services analyst for Dain Rauscher Inc. Wicklund quoted a Landmark Graphics survey that concluded only 111 petroleum engineers graduated from American universities and colleges last year and that only 300 college students are currently enrolled in petroleum engineering programs. The Landmark survey also reported that the average age of technical personnel is 47 years.

"Parents aren't steering their kids towards the oil business," Wicklund said.

He noted that much of the top talent coming out of universities has gone into the service companies but that much of the money needed to fund large exploration and production projects still remains with the major oil companies. Wicklund predicted that the lines between E&P companies and service companies would blur within the next 15 years as E&P and service companies expand their businesses into each other's territories.

Wicklund and other speakers also discussed solutions to increasing share value and return on capital as well as production. Wicklund said oil service companies should value their technology more to get a better return on capital. The fact that many exploration and production companies have shut down their technology research and development centers should make the technology of service companies more valuable.

But now, most of the newly developed technology becomes rapidly available on the market, allowing competitors copy it quickly. "You can't [gain] market share by reducing price," Wicklund said, but added that many service companies are attempting that. "When things start going bad, they take the attitude that 'If I just get this contract, I win.' They should be thinking, 'Can I generate revenue?'"

Information and knowledge management systems, which can allow energy companies to decide where and in what ways drilling and other technology should be applied, will likely play a more integral role in decisions regarding technology.

To boost share prices and return on capital, companies such as Kinder Morgan are finding ways to produce more oil and gas from mature fields, such as carbon dioxide flooding, said Tim Bradley, president of Kinder Morgan CO2 Co. Bradley said the process, in which CO2 is injected into mature oil fields to increase production, can be profitable with the right equipment, even if oil prices fall to $20/bbl.

That technology could become essential to exploration and production in the maturing US market in the coming years. Bradley said Kinder Morgan plans to expand its existing CO2 flooding operations in the Permian basin and could start 20 projects there if oil prices stay up.

Many large E&P and drilling service companies still have their sights trained on deep water, mostly on the drilling hotspots of the US Gulf of Mexico, off Brazil, and off West Africa.

But surging US demand for natural gas also has raised the number of shallow water rigs currently drilling, said Paul Lloyd, chairman and CEO of Houston-based R&B Falcon Corp. Other deepwater areas are West of Shetlands in the UK, the eastern Mediterranean, eastern Canada, and southeastern Asia. Lloyd noted that several companies have planned to spend substantial amounts on deepwater drilling projects during 2001 and 2002.

Lloyd said drilling companies will have to find "innovative ways" to keep down costs on building new rigs and upgrading existing ones. R&B Falcon has found ways to keep down capital costs for rig newbuilds and upgrades, he said, such as closely collaborating with E&P companies on wanted rig specifications.

Texaco Inc. has actually scaled back the number of countries in which it had drilling operations to 15 from 127 during the last few years, said Susan Cunningham, vice-president of worldwide exploration. Instead, it's focusing on more accessible oil reserves. "Our portfolio consisted of mostly low-impact, small projects," said Cunningham.

Texaco now focuses on a smaller number of projects that are likely to have a more significant impact. Cunningham said Texaco would start one drilling project in Brazil during 2001, and in Nigeria, Venezuela, the Philippines, and Kazakhstan in 2004.

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