IPAA focuses on emerging technologies, IT innovations

Anne Rhodes
Associate Managing Editor-News

The U.S. oil and gas industry is near the beginning of "a real golden age," according to former U.S. Deputy Energy Sec. Bill White.

His optimism comes from strong fundamentals: sharply rising demand, growing supply, a broadening role for natural gas, and technological innovation.

White, chairman of Frontera Resources and the Wedge Group Inc., Houston, gave the keynote address at the Independent Petroleum Association of America annual meeting and emerging technologies conference last week.

White specifically expressed optimism about the role of U.S. independents in the global oil industry, citing recent and revolutionary technological advances.

Perhaps paramount among these technological advances has been the increasingly important role of information technology (IT), the subject of a special IPAA panel last week.

Meanwhile, IPAA selected a new president at the meeting: Gil Thurm, a veteran trade association executive and Washington attorney. The incoming IPAA chairman is George Yates, of Harvey E. Yates Co., Roswell, N.M.

Positive outlook

During a discussion of information technology and its effect on the oil and gas industry, White's fellow panelists expressed similar conviction about the industry's recovery.

Daniel Yergin, president of Cambridge Energy Research Associates, Cambridge, Mass., refuted claims that the oil industry is a "sunset" industry. "It's being rebuilt, reenergized," said Yergin.

Comparing today's industry with that before the 1986 oil price collapse, John Gibson, executive vice-president of Landmark Graphics, Houston, said, "We're finding more oil and gas today with half as many people."

Julian West, director of international oil strategy for Cambridge Energy Research Associates, London, added that, in constant dollars, "The price of oil is as low as it was before the first oil shock."

In addition to technological advances, White credits the skills of the industry's people for its turnaround. "The real resource in the oil and gas industry in the U.S. todayellipseis the know-how and skills of our people," he said. "Independents are risk-takers and decision-makers. With wit and knowledge, independents are going to be fine."

Information technology

Directional drilling and 3D seismic have revolutionized the oil industry. But because those and other technologies are now available to everyone, said West, it is how a company uses technology that can give it an advantage.

During the IT panel discussion on the evolution of information technology and its impact on the oil and gas industry, Gibson echoed West's assertion. "Competitive advantage is no longer access to the tools," said Gibson, "it's access to judgment."

Producers are looking to IT as an important means of enhancing that judgment by putting the right information in the hands of the right people. And Gibson thinks independents have an advantage when it comes to employing IT for competitive advantage.

Compared with major oil companies, independents are "unencumbered by legacy systems," said Gibson. He would like to see independents take advantage of this by investing more in people and leveraging technology.

Outlook

Edward McCracken, former chairman and chief executive officer of Silicon Graphics Computer Systems, Redwood City, Calif., told the audience that, despite recent advances in computer technology, the information age is a post-2000 phenomenon. "We're at this inflection point," said McCracken, "going from the industrial age to the information age."

Yergin said IT has shown a clear advantage when it comes to the bottom line. "It helps companies cope with lower prices and fluctuating prices," he explained. As a result, oil companies are more profitable now than they were 10 years ago, despite the fact that oil prices are lower, in inflation-adjusted terms, than what they were then.

Despite its obvious advantages, the rapid changes taking place in the IT arena can be difficult to cope with. "IT is hard to manage," said Yergin, "(because) it transforms as it enables." It changes not only how you work, but also what you do and even how you feel about your work, he said.

In addition to quantum changes in the amount of information that must be handled, rapid advances in IT have led to problems stemming from legacy systems. Yergin suggested that management needs to support the resulting "change fatigue."

"Companies that harness their IT effectivelyellipsewill outcompete those that fail to do so."