TD Column: Lessons Learnt From 50 Years in the Oil and Gas Business

On the 14 September, I celebrated 50 years of active involvement in the exploration and production (E&P) sector and 45 years as an SPE member. How time flies when you are having fun.

I graduated as a mining engineer and learned my petroleum engineering on the job, initially as a Shell trainee and subsequently as a member of the SPE. Simultaneously, I learned the trade together with the soft and life skills that are critical to working with and trusting strangers.

I cannot remember my first week at Shell’s head-office in The Hague. But, by the weekend, I was in the small Dutch community of Zuidlaren with a rented bike checking out the best route from the hotel to my first land rig experience.

Much of my first 3 years was spent on offshore and land rig assignments in southeast Asia and the North Sea. My training followed the workflow from exploration, delineation and appraisal drilling, via development well completions and workovers, to production engineering. I doubt that I ever thanked those patient drilling and engineering supervisors enough, not only for what they taught us, but also how mentored we opinionated and slightly obnoxious young guns.

Looking back on my first 5 years, I learned that

1. Data matters. Someone or some process needs to spot-check the inputs and investigate meter inconsistencies. For example, the gauges may be out of range, need recalibrating, or fittings may be partially plugged. Therefore, automation requires data verification and gauge recalibration systems.
2. Experienced people make mistakes, especially when stressed or tired; so critical calculations need to be double checked, preferably using a different method or a rough estimate. The same applies to sophisticated software: there may be data entry or coding errors. If in doubt, ask someone else if the proposed decision appears sensible (a peer review).
3. Communications and problem solving can be greatly improved with an annotated sketch and by plotting the available data to look at trends and deviations (as in decline curve analysis).  
4. Good supervisors ask simple questions in addition to reviewing the data, charts, and reports. This requires a balance of soft and hard skills and flexible communication styles. They summarize a complex situation in a concise manner, leaving some details for the inevitable Q&A session for which they are well prepared.
5. If in doubt, stop the job. Act to make things as safe as possible. Discuss options and risks. Then try to improve the situation, while waiting for an engineered solution.
6. “Our young engineer can probably help you with that.”

In the next 5 years, I provided Shell a good return on their investment in me. I also started having an interest in “collecting, disseminating, and exchanging technical knowledge concerning the exploration, development, and production of oil and gas resources,” which is SPE’s mission.

Talking Shop

Most professionals and field staff love talking about their work experiences and are very happy to share knowledge … even managers and executives. I realized that one can learn a lot in an informal setting, what we would now call networking, and that you do not need to like someone to learn a lot from them.

Six such casual conversations from the early 1970s are etched in my memory and have guided my thinking for many years.

1. Oil is far too valuable as a petrochemical feedstock to be wasted fueling anything other than planes, so wherever possible, try to substitute low-value gas, natural gas liquids, or electricity from the grid.
2. Within your career, you will see natural gas, liquefied petroleum, compressed natural gas, and liquefied natural gas take over as the primary source of energy for the world. (Not quite yet, but heading that way … besides, my career isn’t over yet.)
3. The three most common mistakes that young engineers make are:
   
   • Failing to decide or recommend a decision after a modest amount of work is pointing toward a course of action. (The law of diminishing returns means that more calculations or simulation runs are unlikely to get any closer to the most likely case. However, with enough imagination, a totally new model might improve our understanding of the bounds of possible outcomes.)
   • Being afraid of being wrong or making a mistake. (The E&P business involves inherent risk, so the focus should be on mitigating the risks and consequences of being wrong.)
   • Not learning from one’s mistakes; or, worse still, repeating them.
4. Somewhat predictably, Laurence (Laurie) Dake, prominent reservoir engineer, asked me, “Why do you want to be a production engineer?” He added that reservoir engineers have the greatest impact on asset value. But, if you think that is your strength, get into field development planning, if you want to have a material impact.
5. Think in terms of minimizing the discounted, risk-adjusted energy supply costs to include the life-of-field OPEX, as well as the CAPEX.
6. You can belong to whichever  professional organization you like for peer recognition, but if you want to make a difference and add value as a production engineer, you must be an active member of the SPE.

Capitalizing on Good Luck; Being in the Right Place at the Right Time

The discovery of the Brent Field in the northern North Sea in 1971, OPEC, and the 1973 Arab-Israeli War, and the resulting oil crisis had a huge impact on my career. Nevertheless, I quickly realized that I needed to grab onto any good career-building opportunities that came my way, even if they threatened to be highly disruptive to my personal life and plans.

For example, I had only been going out with a young woman for about 6 weeks when I was transferred from London to Lowestoft to be the production engineer for the southern North Sea. She was not keen on having a long-distance relationship. So, Dee and I got married in the following week. We have had a great 46 years together and with our two sons (both of whom are now members of the SPE), their wives, and our grandchildren.

The last sentence above should have read: Nevertheless, we realized that they proved highly disruptive to our personal lives and plans.

We have yet to visit Portugal after cancelling a holiday because of an unexpected move to Aberdeen in 1977.

Over the next 7 years, we lived in nine houses/apartments in seven towns/cities and five countries and learnt a great deal about making friends, finding new babysitters and having fun together. Many of our close friends were itinerant oil and gas professionals that we met along the way.

To quantify my good luck, I asked my friends at Sproule to zoom-in on the inflation-adjusted oil-price plot from my last article. Clearly, I have been lucky enough to have seen three real and two mini-booms with respect to the average real (2020$) oil price of $58.45/bbl over my career. I was surprised to discover that the average real price in the first half of my career was lower than that in the second half and not far from the WTI prices that are being predicted for 2021.

There are several learnings from this analysis.

There is massive uncertainty over the medium to long-term oil price predictions and stability. Booms come and go and can create exciting career opportunities. It is relatively easy to get good projects through final investment decision and to materially reduce unit costs by accelerating production, reducing downtime, and slowing the decline rates.

Funds are generally available to leverage your good luck by demonstrating competency in the second half of the year, just prior to the annual performance review.

However, rapidly rising oil prices encourage a tendency toward magical thinking about the wealth-generation potential of high-risk, high-reward prospects.

Downturns always seem to catch us by surprise. They may disrupt our lives and erode our savings, but they also create new opportunities. From time to time, I have opted to take on projects for which I thought I was overqualified and/or underpaid; or which required me to be away from my family for longer than I had hoped. But I learnt a lot along the way; and had some incredible experiences that I would not otherwise have been lucky enough to have found.

Once the new reality is acknowledged, the semi-stable, lower-for-longer pricing assumptions eventually provide rewarding work for the service providers, operating company staff, consultants, and newly minted independents. The operators refocus on opportunities for adding reserves, organically or with merger and acquisition activities, and implementing new initiatives to reduce systemic costs.

Tougher Lessons To Learn

For me, some of the hardest lessons were:

• Doing just enough concept and feasibility engineering on alternate options to support a decision recommendation.
• Not by-passing project management phase (PMP) #3 (base case optimization) to focus on design engineering and execution planning (PMP #4).
  
  • Understanding that modern decision analysis (DA) is driven by commercial considerations, HSSE, technical and commercial risk analysis and mitigation, and probability theory. SPE identifies this as the Management discipline. In retrospect, my career might have taken a different course had I accepted an assignment that might have strengthened those skills at an earlier stage of my career.
• While keeping my eyes on the road ahead with “go-forward economics” (ignoring the sunk costs) for opportunity identification, to occasionally take a glance in the rear-view mirror to look at things from the investors’ viewpoint over the full cycle from the point of lease acquisition.

• Discovering that my ambitions to get onto the corporate management ladder in my mid-30s by shortening some legs of the “leadership pipeline” were not well-matched to my innate abilities, personality, or interests.

Rethinking My Career Path

As things went from bad to worse in the early 1980s, I was very unhappy about being asked to lay-off some of the staff that I had been recently asked to recruit. Dee said, “Get out of there and try something else.” So, I tried my hand at being a consultant, even though that meant spending 10 out of 14 days away from home for the first few months.

I hated it to begin with, because I was working outside my comfort zone as a junior reservoir evaluations engineer. But then, that assignment led to a job where I could really add significant value and got a trip to Indonesia as a side benefit.

At the next low point, I developed some training materials and that became an important business and new business development vehicle for our company. I found training and mentoring to be enormously rewarding and a great way to keep up to date with operational issues and design challenges.

Along the way, it slowly dawned on me that I had the opportunity to get one foot back onto the managerial ladder (albeit a small one) by building an employee-owned petroleum engineering consultancy. That proved to be a lot of fun and was extremely rewarding.

After more than 20 years of consulting, I got tired of having so much responsibility for the well-being of my friends and colleagues. Besides, we jointly realized that we did not have the financial or managerial strength to meet both our ambitions and the more complex needs of those clients getting involved in unconventional developments. During the next boom, we sold out to a consolidator that was already able to offer environmental and land-use planning advice on the international stage.

Dee and I went back into the international arena, in southeast Asia and then on to Australia, until the 2015 downturn. At that point, the desire to see more of our grandchildren brought us back home to Calgary. My involvement in the Calgary Section and Canadian Region of the SPE led to my being given the opportunity to apply to be the technical director for SPE’s Production and Facilities discipline.