A Busy Year Gives Way to New Possibilities

Welcome to 2014, where here at AAPG we look forward to a new year of advancing the world of petroleum geosciences.

As you can see from this issue of EXPLORER, focused on world developments, there is a lot happening in the oil and natural gas sectors. And that is notwithstanding the announcements by several companies late last year that they would be curtailing investment activity in 2014.

Global demand for oil remains strong.

The International Energy Agency, in fact, increased its demand forecasts for 2013 to 91.2 million barrels per day in its December monthly market report. And it forecast an additional increase in demand of 1.2 million barrels per day in 2014.

The new annual energy outlook published by ExxonMobil last month also projects significant demand growth in coming decades, driven by increased urbanization and a burgeoning middle class particularly in the developing world.

“By 2040, the proportion of people living in urban settings in non-OECD [i.e., less developed] countries is projected to rise to about 60 percent, up from 45 percent in 2010 and 30 percent in 1980,” according to the ExxonMobil report. “OECD [developed country] urbanization rates are likely to rise to 85 percent, from about 75 percent.”

The demand growth isn’t unchecked, though. In fact, ExxonMobil reports that while total demand is increasing, the growth in demand is actually slowing down. Energy efficiency is a key driver of this trend. And as societies develop and become richer, such as the OECD and now happening in China, the rate of demand growth flattens and stabilizes.

Developing and developed economies alike need energy from all different sources, but oil remains the backbone of transportation and natural gas demand for electricity generation continues to accelerate – it is expected to nearly double between 2010 and 2040, according to ExxonMobil’s report.


It’s not all smooth sailing, of course.

Industry leaders are concerned about accelerating costs, both offshore and onshore. I’ve recently been in conversation with several senior executives who are concerned with the industry’s return on equity – the amount of profit the industry is able to generate, in percentage terms, with the money invested by shareholders.

The oil and natural gas industry always has been capital-intensive, but pushing into ever-deeper waters and fully developing new unconventional plays requires a lot of investment. And delivering a return on that investment is essential to attracting additional capital.

Global geopolitics always plays a role in our industry. And developments – both positive and negative – can quickly affect oil markets and the operating environment:

  • The on-going civil war in Syria continues to destabilize the eastern Mediterranean.
  • Negotiations with Iran about its nuclear program could result in the lifting of some (or all) of the sanctions currently in place against this oil and gas producer, or …
  • The talks may collapse and raise tensions in oil markets.

There are other policy forces at work that could affect oil and natural gas prices. As a Washington Post article on the ExxonMobil forecast indicates:

“Exxon expects governments to impose costs on fossil fuel consumption and subsidize renewable energy in an effort to reduce emissions of gases that scientists say are causing climate change. Exxon expects those costs to be roughly $80 per ton of carbon dioxide – a price that may be explicit in the form of a carbon tax or baked in to the cost of new technology and equipment needed to meet stricter emissions limits.”

Such additional costs are not assured everywhere, but “in one way or another governments will put in place policy that will increase the cost of hydrocarbons, whether it’s on supply or consumption,” says Ken Cohen, ExxonMobil’s vice president of public and government affairs, in the Washington Post article.


These are just a few of the headwinds that our industry may experience in 2014. And without a doubt there will be other, unforeseen issues that emerge in the year ahead and challenge oil and gas operators around the globe – this is not a business for the timid.

But bear in mind this fundamental truth: The world needs the energy that we find and produce.

“Energy is a critical part of boosting prosperity and eradicating poverty,” says World Bank President Jim Yong Kim in the ExxonMobil forecast.

Billions of people around the world need this energy to raise their standard of living. And this demand for energy, particularly oil and natural gas, will be supplied – it will, by someone.

“Wow, it really snowed last night! Isn’t it wonderful?

Everything familiar has disappeared! The world looks brand-new!

A New Year…a fresh, clean start!
It’s like having a big white sheet of paper to draw on! A day full of possibilities!

It’s a magical world, Hobbes ol’ buddy … let’s go exploring!”
– Calvin and Hobbes (Dec. 31, 1995)

It’s time to pull out those maps, sharpen those colored pencils and let’s get busy supplying that demand.

Best wishes for happy and successful exploring in 2014!

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Director's Corner

Director's Corner - David Curtiss

David Curtiss is an AAPG member and was named AAPG Executive Director in August 2011. He was previously Director of the AAPG GEO-DC Office in Washington D.C.

The Director's Corner covers Association news and industry events from the worldview perspective of the AAPG Executive Director.

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