Price Isn’t Driving Exploration
‘Unconventional’ Depends on View
Recent, somewhat dramatic price swings in oil and natural gas futures have done little to dampen the overall optimistic outlook pervading the industry.
Still, volatility historically has been an indigenous component of the business, and a tad of caution is a good thing.
In fact, you might say cautious optimism will be a central theme of the DPA luncheon talk, “Mapping the Global Route of the Energy Industry,” to be presented at the AAPG Annual Convention by Robert Ryan, vice president of global exploration at Chevron.
“We tend to hear that the easy oil and gas has been found,” Ryan said. “But that comment usually focuses on what is considered conventional oil and gas.
“When you consider the current list of unconventional hydrocarbons, heavy oil and oil sands, for example, there is a tremendous resource base in the world,” he noted. “In fact, a survey of government, academic and industry reports might lead you to the conclusion that trillions of barrels of oil have already been found and are just waiting to be developed.
“There are a lot of hydrocarbons -- they just tend to be a little different from what we typically thought of in the past.
“The sky is not falling,” Ryan added. “I believe the industry is fully prepared to meet the challenges of the world’s energy needs -- we just probably have to look at it through a different lens than in the past because of the unconventional component.”
The Price of Price-Watching
If the energy demand forecasts hold true, the industry will be successful in meeting those forecasts when the unconventional becomes conventional, according to Ryan.
He noted a time in the past when the deepwater was included on the unconventional list in some circles.
Ryan also emphasized that it’s naïve to think one energy source sets the course for the future, noting that oil and gas (both conventional and unconventional), coal, nuclear and renewable fuels all play a role.
Relative to oil and gas, access can be a big issue.
For instance, many prospective areas are off limits to drilling in the United States, making it difficult to increase the domestic supply and achieve the stated goal to reduce the volume of imports.
Access looms as a growing problem in far-flung parts of the world as well, where the challenges often extend beyond acquiring permission to stake a claim in a specific locale -- extremely high lease bids, low contractor takes and the potential for nationalization present their own kind of thorny access challenges.
Although commodity prices always impact projects, Ryan emphasized the industry isn’t letting high prices drive the exploration business.
“Oil price doesn’t change the rocks,” he said. “If a prospect is poor from a technical perspective, oil price doesn’t make a difference -- it doesn’t change the quality of the prospect.
“Years ago as an industry we reacted to high prices, and increased the number of high risk prospects drilled due to that price,” he said. “Then we wondered why there were so many dry holes.
“But the industry is smarter,” he noted. “When asked now if we can increase exploration drilling and investment above current levels, I answer ‘not necessarily, as exploration is a learning business and has its own pace.’
“You can’t make exploration decisions based on the ebb and flow of oil prices.”
NOT Your Father’s Career
Given the dearth of university students opting to concentrate in the earth sciences curricula, it comes as no surprise that this industry veteran expressed concern about the future of the industry.
Specifically, the question is begged: Who’s going to be around to make it happen?
“I asked a freshman engineering student what the talk was amongst the newly arriving engineering students in relation to the oil and gas industry,” Ryan said, “and she answered, ‘It’s what our fathers did.’
“We need to make sure the next generation of potential earth scientists and engineers understand this is an extremely high tech business that’s full of great professional challenges,” he said.
“We have an obligation to make sure the industry has the technical talent it needs going forward.”