Industry connections

Aug. 1, 2005
In a horizontal magazine, categorization can be a challenge-but a welcome one.

In a horizontal magazine, categorization can be a challenge-but a welcome one.

Oil & Gas Journal is horizontal in the sense that it covers upstream operations, downstream operations, and everything in between, including markets and economics. Not many industry magazines do that. Most of them focus on specific operating segments.

OGJ takes a broader view, even as it covers the operating segments in great detail. Its organization reflects the approach. The magazine unfolds like the industry it covers: General Interest, Exploration & Development, Drilling & Production, Processing, and Transportation.

Blurry lines

But the lines between those categories can be blurry.

It isn’t always easy to tell where Exploration & Development ends and Drilling & Production begins. A company developing an oil discovery also is drilling, after all, and the aim of the undertaking is production. Similarly, gas plants usually belong to Processing in the OGJ scheme if they produce liquids, but they’re often part of larger production projects, which of course include substantial development and require transportation.

It’s easier to obsess over categorization than it sometimes is to categorize.

Occasionally, when a borderline story ends up in one category on a particular week, someone on the staff will recall with irritation that a similar item several weeks earlier showed up somewhere else. Editors love consistency.

This editor, however, loves consistency a whole lot less than he does getting good stories between OGJ’s covers. And it happens that some of the most important stories OGJ publishes are also the hardest to categorize.

Oil and gas is an amalgamation of specialties, but it’s still a single business. The pieces have to fit together.

Several years ago, this editor mentioned refining developments in a speech on industry trends to a group of producers. Afterward, a member of the audience sought out the speaker to express, courteously but emphatically, how little he cared about the affairs of refiners.

At the time, responding with a question wouldn’t have suited the occasion, but it’s still worth wondering how, with an crimped view like that, the gentleman managed ever to understand anything about his business.

The oil and gas industry is, in fact, a value chain. The links are as essential to the business as the bonds between carbon and hydrogen atoms. So it’s often in the connections between the industry’s operating segments, rather than specifically within the segments, that the most important things occur.

The opening of a pipeline triggers an exploration play.A refinery’s new coker improves development economics for nearby deposits of low-quality crude. Production, processing, and transportation infrastructure installed for A-grade reserves makes possible the later development of B and C-grade accumulations, which will mean more seismic surveys, more drilling, more wellheads, more feedstock for nearby refineries and gas plants. Unscheduled refinery maintenance in a tight market lifts gasoline and diesel prices, which strengthens the crude market, which influences a drilling decision. The list is endless.

OGJ’s horizontal perspective brings into view all the connections between the industry’s operations and yields the whole oil and gas story. That’s more important than whether a piece of it appears under one category one week while a similar piece appears in a different category in a different issue.

This week’s special report-Global Energy Transportation-is about connections, trading connections and what current changes imply for future industry operations.

LNG trade grows in response to rising demand for natural gas and requires construction of liquefaction and regasification plants and cryogenic vessels. Rising demand for oil in developing countries exerts a growing claim on exports from Persian Gulf producers and encourages refinery construction in new areas. Europe, for reasons of taxation and environmental regulation, uses more diesel and less gasoline as a vehicle fuel and therefore has increasing amounts of gasoline for export. The US, ever in need of gasoline, stands ready to absorb the excess.

Stretching connections

But stretch the connection. The US needs diesel in rising amounts, too. For requirements beyond what US refiners can produce, the Atlantic Basin, because of those rising European needs, can’t be the supplemental supplier that it is for gasoline. Might the need for Western Hemisphere refining capacity able to meet US diesel specifications be greater than generally believed?

That’s another story (refining? general interest?). The point here is that examining the industry’s connections helps bring the future into focus-which is why OGJ writes about them.