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Ted Beaumont, AAPG ACE2013 Presidential Address

ACE2013 Pittsburgh, Pennsylvania

ACE2013 Pittsburgh, Pennsylvania


AAPG President Ted Beaumont addresses the 2013 ACE Opening Session in Pittsburgh, Pennsylvania, on May 19, 2013.

Full Transcript

Well, we really live in interesting times now. Who would've ever thought that we'd be producing more gas in the United States than we did back in 1970? And I think it gives us an opportunity to measure the impact that AAPG and its members have on society.

This man, Edwin Drake, was called crazy because he believed that he could drill for oil. And the people around Titusville, Pennsylvania, which is about 2 and 1/2 hours, or two hours, north of Pittsburgh, thought he was crazy when he said he could do it. And he did. And he discovered oil in August of 1859, and changed the world.

It's appropriate that we're meeting here in Pittsburgh, because it's the home of Bill Zagorski and the Marcellus play. And Bill is credited as being the father of the Marcellus play. And Bill is the 2013 Norman H. Foster Outstanding Explorer Award winner. And you'll hear a lot more about Bill in a minute.

But the cover of the May issue of the AAPG Explorer said, "In the beginning," and the subtitle was "the play that rejuvenated a region and an industry." And I don't know if you noticed when you came into Pittsburgh, when you flew in, if you flew in, like I did, but there was a sign put up by Range Resources that but said, "Economy, get ready to take off." And it's all about this Marcellus play, which is really exciting.

Well, ever since we found oil, it became very important, vital, to our economy. And we worried about running out of it, because we knew how important it was. And this is one of the more famous quotes from David White, who was an AAPG member. He was the chief geologist of the US Geological Survey. And in 1919, he said, "The peak of production will soon be past, possibly within three years." And everyone worried what would happen when we reached that peak. And off and on through time, people made similar statements.

And one of the most famous ones was made more recently by M. King Hubbard. And he was a member of a group called the technocrats who believe that we could control the world's natural resources better by understanding their statistical distribution. And in 1956, he predicted that the world will run out of oil in about the year 2000. And it was a highly controversial statement at the time. But around the year 2000, people began to notice that we weren't finding a lot more oil. And it looked like you could argue that we were in a decline.

And that spawned the publication of several books, this being one of them, that were very influential. Twilight in the Desert, by Matt Simmons. It's published in 2005. Not that long ago. And this book, and a bunch of other books like these, talked about Hubbard's curve, and how we are on the downside of production in the world. And we would soon be back in the Stone Age. Literally, some of them actually said that.

And what happened to me about a year ago, a year and a half ago, I heard a talk by Tom Ahlbrandt-- I think Tom's in the audience. And Tom was the former chief of the US Geological Oil and Gas Assessment Branch. And he said that actually, we're producing more oil than we've ever had produced in the US, which shocked me, because I thought we were on a bumpy plateau. And I didn't realize that we were at record highs.

And this slide shows Hubbard's smooth bell curve that he used to predict the peak of production for gas in the US in about the late '70s. And you can see the actual curve. He's not that far off. But what is really remarkable is that we're actually producing more gas than he said we'd produce. And I'm one of the people that didn't realize this had happened. And it's really remarkable.

Also, Hubbard predicted peak oil production in the US in about the year 1970. And today, we've turn that around. And the EIA said recently that the US will be the world's number one producer of crude oil by the year 2020. Which is just incredible, I think.


Well, I think you could argue that unconventional play, which is really becoming more conventional now, that shale gas and tight oil, is really a black swan event. And a black swan event is a term that was coined by Nassim Taleb in 2007 in a book that was called The Black Swan-- the Impact of the Highly Improbable. And the term, he said, came from an old expression used in Europe in the 1500s and 1600s that meant I'll believe that when I see a black swan. It's sort of like it's an impossible, something impossible. We say, in the US, we say, I'll believe that when I see pigs fly.

And he defined a black swan as something that's surprising. You can't see a black swan coming. It's a total surprise when it arrives. It has high to extreme impact. The world's never the same after a black swan event. We have psychological biases that keep us from seeing these black swans. And they have retrospective predictability. In other words, if you study them, you think you should have been able to see them coming. And the examples he used were the cell phone, personal computers, 2011, and a bunch of other ones.

And I think that the unconventional resource play could be called a black swan. First of all, it's surprising. It has high impact. The world's never going to be the same. We missed it, I think, for a cycle, because we have psychological biases that keep us from seeing things like black swans, and this one in particular. And I think Matt Simmons' study and prediction, and it looked like especially the US, his predictions for production in the US had almost followed exactly what he had predicted-- people gave a lot of credit to his prediction for the peak production in the world-- kept us from seeing these black swans.

And they have retrospective predictability. If you think about gas shale plays, we've actually had gas produced from shale since the 1820s, in Fredonia, New York, for example. So there was gas production out of shale for a long time. And also, coal bed methane and horizontal drilling were coming along. We just didn't realize how big of an impact it would have.

This is Wallace Pratt, who's most famous for the statement "Oil is found in the mind," which is from a paper that was published in the AAPG Bulletin in 1952 called "Toward a Philosophy of Oil Finding." And in that paper, he described two blinders to oil finding. One is the conservatism of the trained scientific mind. As we're taught to be scientists and engineers, we become more conservative, just by the training that we receive. And we tend to ignore the significance of what remains unknown to us. In other words, we tend to think too much of what we know, and not enough of what we don't know. And if you read Taleb's book and you read this paper, you'd swear that Taleb must have gotten some of his ideas from Pratt. This is one of Pratt's quotes. "However small our knowledge may be, it tends often not only to color, but to actually obscure, what remains unknown to us."

John Masters was an AAPG member. He's credited for being on a team that found the Elmworth Field in the Alberta Basin. And John was really good at articulating concepts of geology and exploration. And one of them I like that I think applies here is this one-- "Part of the definition of a new idea is that it will be rejected at first. Evolution teaches us that most new ideas don't work, so we learn to be against them. Big ideas do not come from groups or committees. Throughout history, they have come from individuals. And normal people almost never recognize the importance of the idea until much later on." So I have to ask myself, I think in the way he meant that, I wonder sometimes if I'm too normal. And I think we should all ask ourselves when we're being too normal.

Well, in the same paper, Pratt talked about Saudi Arabia. And believe it or not, there was a time when people thought that there was no oil in Arabia. it was because of the work of a well-respected Swiss geologist named Albert Heim who studied the petroleum geology of Iraq and Iran and compared it to the Arabian Peninsula. And he said, it's so different. I don't see how Saudi Arabia-- or the Arabian Peninsula-- will ever amount to very much. And people adopted this phrase. There's no oil in Arabia.

Then, largely due to the work of Max Steineke, who was an AAPG member-- he was the creator of the Ghawar Prospect-- Saudi Arabia and the Arabian Peninsula have the world's largest oil reserves. So total surprise. And it does have retrospective predictability. If you look at the area, there was oil and gas seeps known for hundreds of years all around the Arabian Peninsula.

And you just think back to 2004, which really isn't that long ago, we were thinking about importing LNG into the US because we thought that we would not have enough natural gas to supply the demand for the US. And as a result of the shale gas play, we've completely turned that around. And we're looking at exporting natural gas now. Exporting LNG, that is.

So one of the things that I always wanted to do is be able to quantify how important petroleum geologists are of the world. And I think that the tight oil play afforded us an opportunity. And it started from work by people like AAPG member Mike Johnson, who was a former recipient of the AAPG Outstanding Explorer Award. And Mike was credited for putting the prospect together that led to the discovery of Parshall Field, which is a Bakken oil field in North Dakota. It's a giant field.

So what I thought about was five years ago, the US imported 65% of its oil. And we import 45% of our oil today. So just doing back-of-the-envelope calculations, I came up with that's obviously 20% percent less. That's about $125 billion dollars per year that stays in the US economy as a result of the tight oil play.

And there are people that are saying today they think that it will go down to 25% of imported oil by 2020. And there are even some people that say zero. I think that'll be tough. But it's going to decrease. We know that for sure. And that's the result of work by people like Mike Johnson and other AAPG members, some of them who are probably in this room.

Also, there have been a lot of recent publications-- and I've found some on the internet-- about the impact of shale gas on the economy of the US. And depending on what you read, the US has had 1.7 to 2.8 million new jobs created, which is about $380 billion dollars per year to the US economy. And industries that left the US are returning because energy is so much cheaper today.

And Dan Stewart, who also was a recipient of the AAPG Outstanding Explorer Award, is credited, really, with being the father of the unconventional play, or the shale gas play, from his work in the Barnett shale.

So the question is, where does this play go around the world? And I think it's starting in other places. It hasn't taken off like it has in the US. There are a lot of things, a lot of reasons for that. I think what's exciting, though, is places that didn't really have much hydrocarbon production look like they could have significant shale gas. One of them would be South Africa.

But the main impediment right now is politics. And there are places in the world like Europe, where countries have banned the development of shale gas because of concerns about the environment. And hopefully that changes, and politics will clear up, and we'll get these things spread around the world.

Parke Dickey was a geologist from this part of the world. His first job was with the Pennsylvania State Geological Survey. And he left there and went down to South America, where he found a lot of oil and gas. And he contracted malaria. And he had moved back to the US. And he's famous for this one statement, which I think is a great statement. He said, "We usually find oil in a new place with an old idea. Sometimes we find oil in an old place with a new idea. But we seldom find much oil in an old place with an old idea. Several times in the past, we thought we were running out of oil, where actually, we were only running out of ideas."

There's a plaque that hangs up at the AAPG headquarters. It commemorates the founding of AAPG in 1917. And on that plaque is a list of all the founders, including Walter Small, who Mike [INAUDIBLE] talked about, and Wallace Pratt, who I mentioned earlier. And they founded AAPG to have a place where they could share their information and ideas with one another. And I wonder if they could've imagined the impact that members of AAPG would have on the world eventually.

Thank you. It's been an honor and a privilege.

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