Since the turn of the century, we have seen a boom and a two-step downturn that is reminiscent of the early 1980s.
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However, many now believe there has been a fundamental shift in the energy supply business resulting from
The rapid increase in marginal oil and LNG supply options.
A slackening in the rate of growth in the demand for coal and the heavier grades of fuel oil.
Changing expectations of many institutional investors and customers in terms of environmental stewardship, social interactions, and corporate governance (ESG).
Aggressive investments in renewables, distributed power generation, and peak-shaving systems.
Increased gas-on-gas and pipeline vs. LNG competition in the OECD countries.
Over the past 20 years, unconventional and deepwater developments have significantly increased the marginal sources of hydrocarbon supply. The ultratight resources come with high and increasing gas-oil ratios, which have resulted in increased gas-on-gas and gas-on-oil competition, as well as significant increases in LNG trade and competition. Australian LNG developments are challenging the Middle East and SE Asian producers in the lucrative Pacific market, and US LNG has emerged as the dominant challenger to Qatar and Russia in the Atlantic market. As electrification expands, there is increasing interest in smaller-scale gas-to-power projects, especially for peak shaving and as a backup power source. We should embrace the increased competition from renewables—rivalry spurs effort and innovation, and lower power cost will allow some of us to not only reduce lifting resources, but also to market more hydrocarbons.
While population and gross domestic product (GDP) growth continue to drive energy demand, improvements in energy efficiency and demandside controls, spurred on by the last oil-price shock, have slowed the rate of growth in energy demand. So, we may be moving into a more balanced supply and demand situation that may result in greater price stability, albeit with reduced long-term pricing expectations. In fact, reduced cycle times to add additional supply should act as a damper to major price fluctuations.
2015–2025, A Decade of Accelerating Disruption
Over the past 5 years, many of us have been struggling to adapt to a new business environment and changing stakeholder and investor expectations. Unfortunately, our once solid financial performance track record seems to have slipped in recent years and especially so in the face of this new, lower-for-longer oil- and gas-pricing scenarios. We are now challenged by an increasing competitive market for capital, human resources, and investor enthusiasm. So what? Most professions enjoy nothing better than an intellectually demanding challenge.
There remains a strong appetite for affordable energy from the developing nations with growing populations. However, in countries with higher GDPs and declining populations, the headlines are dominated by those who are prepared to pay a premium to incentivize the development of low-carbon sources of energy supply in order to mitigate the perceived risks from climate change. In reality, this should be seen as an invitation to deliver additional premium product lines, including hydrogen, natural gas and hydrogen blends, carbon-based products, or enhanced hydrocarbon recovery agents.
There is a parallel disruption to our business driven by improvements in the cost effectiveness of sensors, programmable operating devices, broadband communications, and data analysis capabilities—the digital revolution in oilfield operations. This exponential growth in automation has been gaining momentum over more than 50 years. The space exploration program had paved the way for greater usage of unmanned facilities and remotely operated vehicles for inspection, maintenance, and installation operations.
For many us, the revolutionary concept was to start thinking in terms of minimizing discounted technical costs of the commodities, rather than focussing so heavily on driving down CAPEX. As a result, we are seeing greater interest in
Sharing resources and the standardization of the components in new developments.
Allowing midstream companies or specialized service providers to expand into the fluid collection and processing business.
Upgrading or repurposing of existing facilities.
Having the equipment suppliers, engineering, procurement, and construction companies, and service sector manage innovation, technology development, and improve quality-management processes.
Having the facilities and construction professionals in the operating companies take a greater role in project management, requiring not only a reasonable understanding of a broader range of technologies, but also much stronger
Quality-management and risk-mitigation skills.
Data management and decision analysis capabilities.
- Health, safety, environment and sustainability (HSE&S) risk awareness.
What Will the Production and Facilities Function Look Like in 2025–2035?
In Winning the Next War (1991) Stephen Rosen argued that to avoid being doomed to "fight the last war," the military had to respond to shifts in the strategic environment. Rosen showed that in peacetime military innovation was the product of analysis and promotion. In wartime, by contrast, innovation is constrained by the fog of war and the urgency of combat needs.
By analogy, we will soon be expected to shift our attention from “damage control” to a new period of strategic analysis and innovation to face the challenges of the new business environment. Innovation will be heavily focussed on restoring the returns on investments in a business environment that assign less value to the raw products, but where low-carbon products and reduced emissions will help attract investments and premium prices.
As it is the production and facilities (P&F) community that must advance promising concepts through the feasibility, design optimization and/or pilot testing phases into the detailed design, execution, commercialization,and optimization phases, I have been spending a lot of time listening to the R&D gurus talk about
Carbon capture utilization and storage, especially CO2-based enhanced oil recovery (EOR).
Gas utilization, especially for EOR, fuel substitution, LNG, and hydrogen extraction.
Emissions monitoring and management, especially for methane.
Wastewater treatment and usage, as well as options for the disposal of highly saline or contaminated water.
Digital oilfield operations, automation, and unmanned systems.
I am also tracking technology-transfer opportunities. For example:
Thermal heavy-oil operations and facilities to enhanced geothermal systems.
Infield power generation and distribution to minigrids and fuel substitution.
Applying ultralow-pressure-gas-gathering systems used in the coalbed methane/coal seam gas operations for fuel supply or emissions management in conventional operations.
Wastewater disposal to beneficial usage of produced water for irrigation purposes.
It is also important to understand how our technical community can help improve corporate and industrywide environmental, social, and corporate governance (ESG) scores.
By structuring contracts and incentive schemes to discourage workers from driving when they are too tired or distracted to concentrate properly.
This should be some of the lowest-hanging fruit in our mission in the SPE Technical Report, “Getting to Zero and Beyond: The Path Forward.”
Making it is easier for stakeholders and regulators to accept cost-effective, fit-for-purpose technologies that offer HSE&S as well as operational advantages, for example by
Reducing trucking of fuel and water.
Extending the use of unmanned systems and normally unmanned facilities.
Leveraging the available remote sensing data and pinpointing emission problems with drones.
Shortening reaction time to system upsets or minor leakages using state-of-the-art emissions sensors at production facilities and tank farms.
Line-leakage monitoring and new rehabilitation options to reduce the risks from saltwater oil spills.
Assessing the Tactical Implications of These Changing Times
Over the past 2 years, the SPE Reservoir Advisory Group has been working on a Green Paper to update the Reservoir technical discipline for the challenges of the 21st century. In the process, they are trying to define what it will take to achieve significant improvements in estimating ultimate recoveries from conventional and unconventional reservoirs.
Logically, the P&F function will need to determine the technologies and cost savings required to support this effort. We also need to define how work processes within our own technical community are likely to change over the next 10–15 years.
Tertiary education and competency development programs must anticipate and prepare the P&F community for these rapidly evolving demands. We need to determine to what extent the SPE needs to refocus, modify, and expand their Knowledge Transfer and Training Services to address the needs of both the existing practitioners and the new entrants, including those Data Science and Engineering Analysis (DSEA) and HSE&S specialists who will be embedded within our community.
In Q4, the P&F Advisory Committee will be setting up a task force to prepare our own Green Paper envisioning what our technical function will look like in the decade from 2025–2035 and what skill and training gaps that the SPE will need to fill over the next 5 years.
Bob Pearson, Glynn Resources, is the SPE Technical Director for Production and Facilities.
