When you arise in the morning, think of what a precious privilege it is to be alive—to breathe, to think, to enjoy, to love.
This is a particularly hard column to prepare. It is early October and I had hoped to tell you how being an SPE member and being an active part of SPE was part of your professional responsibilities/duty. It is, but we will save that discussion for later.
As I interact with our members-in-transition and young members I am struck by the profound reality that most don’t know what to do next. In addition, in North America, Europe, and elsewhere, the workforce continues to be reduced. Smaller companies struggle for access to capital and free cash flow (and many for their very existence). Despite this, I find that our members are uniquely devoted to our mission and to our industry—in particular to ensuring that we are able to contribute to the energy needs of a world in recovery.
Looking Behind/Thinking Ahead
Looking Behind. There are many old adages about not looking behind, the usual logic being that if you look back while running, you will not see the tree or hole ahead. However, we must look behind to understand how we got here and how we will get to where we need to be. Arguably the greatest period of technical and operational innovation in our industry occurred during the past 10 years during the so-called “shale revolution.” In that decade we have learned to access, evaluate, and produce reservoirs that have one-millionth of the reservoir permeability that was considered feasible just 40 years or so ago.
We have created and adapted technical innovations in drilling, completions, reservoir, and production that enabled us to develop and produce even the poorest-quality oil and gas reservoirs. Notice that I did not say “economically developed and produced.”
These technical and operational innovations came at an enormous cost. While our technical and operational success in unconventional reservoirs is unparalleled, the economics have been challenging, to say the least. It is important to mention that the development of unconventional reservoirs occurred at the right times (and, in general) in the right places for successful demonstration and for a reasonable return on investment. These plays are not economically viable at recent and current commodity prices, but they will become economically viable—most likely a lot sooner than most people think.
We live in a world where there are many so-called “low-cost producers.” The “shale revolution” will provide such producers with access to technologies and practices that further improve their abilities to produce, thereby achieving an even lower cost of production in many cases. This is the price of progress.
Technology is like the tide—it raises all boats, sometimes even the ones with holes. One can argue that the “hole” in unconventional resource development is a high economic threshold above current oil prices for almost all operators. It is worth noting that companies which are pure-play are faring well(ish), as are several (mostly independent) operators in the “best rock,” as well as a few supermajors who have been able to adapt to scale based on their financial capabilities.
Thinking Ahead. Rystad Energy (mid-September 2020) projects that global oil demand, relative to the average for the year of 2019, will remain lower by about 6–6.5 million B/D by January 2021 and that full recovery to 2019 levels will not occur until late 2021/early 2022 (base case) or 2023 (second COVID-19-wave case). This is sobering, but it allows us time to prepare for post-COVID-19 demand, which is likely to increase rapidly. Certain demand categories will likely remain lower (e.g., long-range travel), but demand for consumer goods, manufacturing, food, and health care will inevitably increase. Following World Wars I and II, demand rebounded and expanded quickly. Energy is the enabler; what we do serves a world in need of more energy. Yes, we are moving toward a more diverse energy mix, but greener sources will not be ready to respond to the surge in demand post-pandemic. Only oil and gas will be able to do that.
A Test of Faith
These recent months have been extraordinarily challenging. Even as many struggle to find work or stay employed, they still find the time to engage, mentor, and participate in SPE activities. I am extremely proud to serve with such people. They understand that who we are is not defined simply by what we do for a living, but rather, by our purpose, our character, and our devotion to serving others. I have witnessed a generosity of time, spirit, and resources like none other in my career.
As a career-long academic, I am accustomed to somewhat regular enquiries as to the relevance and viability of our industry (generally by students, of course). But what I see now is a genuine disorientation. Enquiries are more along the lines of “I want my old job back” to “when should I get out of oil and gas?” Hence the title of this month’s column: “Finding Your Compass.” With “compass” as a metaphor for “tell me which direction to go”, I have no crystal ball or magic Ouija board to give solutions. Personally, when I face such questions, I seek the counsel of those who know me at my core: my wife (who is an absolute angel), my kids (who, sadly have no inhibitions on telling my faults, and do so with regularity), and a scant few close friends who know my heart.
The title of this subsection is “A Test of Faith.” I do not necessarily mean a higher power ruling the universe (although that could certainly apply). The faith I am referring to is faith in yourself. Those reading this have chosen to work in a field where risk, uncertainty, and adversity are sewn into its DNA. Those of us who have chosen this industry must have the ability to accept those elements along with a single-minded purpose to achieve and exceed our expectations.
Every person has to find their compass, and to be sure, this is neither easy nor clearly reversible. Once a compass is found, one must commit to the process of measurement, direction, and motion/trajectory. Just look around, there are a number of startups that have embodied the innovation, independence, and personal commitment of individuals who see what could/should be. In the words of one of our more illustrious alumni, “There are many great achievements that never occurred because of a job that was just too good to leave.” Think about that for a moment. Are you working to make a paycheck, or are you working to make a difference? You can do both, but I really hope you are most heavily weighted on the latter.
Oil and gas will be around for a very long time. There will be jobs for petroleum engineers. These jobs may look different, require new skills, and be with companies different from today’s. You may have to live somewhere else. Everyone will have to learn new skills. The oil and gas industry will always be cyclical. But as I have told some of my students, if you want it badly enough and it aligns with your compass, then there’s a career in petroleum engineering for you.
To end this section on a philosophical note, Albert Einstein once stated, “An empty stomach is a poor political adviser.” I will paraphrase that into “unemployment is a poor career adviser.”
Be more focused on what you want to do with your life. Education gives you both options and capabilities—use them. An old girlfriend once told me, “All disappointment begins with unmet expectations;” there is no need to guess how that worked out. However, the message is valid. What are your career expectations? Why do you have them? What will you do if your expectations aren’t met?
As always, I sincerely welcome your feedback. Feel free to contact me at president@spe.org.
