Exploration

Most of you hardly need to be reminded that technology is the lifeblood of our industry. Without it the easy oil would still be there because we’d have no solid way to find or produce it. But ingenuity has consistently produced the tools and techniques to chase increasingly difficult-to-find targets.

There are plenty of rewards for a job well done, of course — service companies benefit from new technology through increased sales, and oil companies benefit by having a competitive edge. But wouldn’t it be nice to recognize the folks who actually had that bright idea?

Here at E&P, we do. For more than 35 years we have bestowed the Meritorious Awards for Engineering Innovation, more commonly called the Meritorious Engineering Awards or MEAs, to deserving companiees that have pushed the boundaries to produce truly innovative technology. Companies large and small are encouraged to enter their ground-breaking technology into one of several categories for consideration by an objective panel of judges (”Captains of industry,” you might call them!) The awards are given out at the Offshore Technology Conference in Houston every May.

Entering is simple (if a little time-consuming). Go to http://www.epmag.com/mea/mea.process.php and create an account. If you have an existing account, you can still use it. For each entry you’ll be asked to choose a category, submit an abstract, submit a case study, and upload up to three supporting files (these can be pictures, brochures, even movies). Once your entry is complete, you submit it. You can go back and edit it any time up until the deadline, which is Dec. 31, 2009.

I encourage everyone to enter — the more entries we have, the more meaningful the winning selections become. All we ask is that the technology be commercially available. The rest is up to you.

So get out there and get innovative!

If you have any questions at all, please call me at 713-260-6459 or e-mail me at rduey@hartenergy.com.

I’m sitting at the Galaxy Bar at Schiphol Airport in Amsterdam waiting to board a plane back to Houston. I’ve been here all week attending the European Association of Geoscientists and Engineers (EAGE) annual meeting, and the more people I talk to, the more I feel like whatever weird “doldrums” this industry has entered are soon to end.

Let’s face it — $40 oil is better than $10 oil, and $70 oil is better than $40 oil. And as John Gibson of Paradigm announced during a press conference Tuesday, oil has now pushed through that $70 barrier.

Other companies are similarly “cautiously optimistic.”  A contractor that supplies electromagnetic surveys suddenly has a huge backlog of work after going through a very rough patch earlier this year. The seismic industry could potentially be facing another overcapacity issue like it experienced in the late 1990s, but John Greenway from PGS said that the newbuilds coming on the market are so technically superior to older vessels that retiring those antiques will not be a tough decision for the major contractors.

Outgoing EAGE President Phil Christie, scientific advisor for Schlumberger Cambridge Research, said the show had attracted about 5,000 attendees, down about 800 from 2008. Considering that oil prices were probably $50/bbl higher last June than they are now, this does not seem like a significant drop. It could also partially be explained by the fact that the American Association of Petroleum Geologists had its annual meeting at the same time, forcing many of us to choose which show to attend. (If anyone managed to make it to both, I’d like to hear about it!)

Generally speaking, I’d say the mood at the show was quite upbeat. Booths were busy, and technical sessions were often standing room only. Yes, there were the usual murmurs and lousy booth locations, etc. But generally speaking the exhibitors’ take was that attendance may have been a bit lower than last year, but the quality of the visitors to their booths was high.

I would like to invite commentary about a couple of things:

1.      Why, when oil dropped to $40/bbl, did everyone act as if the sky was falling?

2.      Why, when oil dropped to $40/bbl, did oil companies completely pull back on their exploration spending?

3.      Why do the contractors blame the oil companies for not spending any money while the oil companies can’t understand why the contractors are so upset?

To me at least part of a recession is based on human perception and reaction. People get scared and stop spending money. This in turn causes the overall economy to tank. A few pundits out there have been preaching the gospel of going against the grain – spending more money in a lower-priced environment, firming up contracts when the contractors are desperate for business, etc. Overall, though, I think this kind of attitude is in the minority. I hope that shows like EAGE will get people talking to each other, thinking more positive thoughts – and spending more money.

And if you think the oil industry is hurting, look at the publishing industry. Maybe that will cheer you up.

As a journalist with no formal education in geoscience, I try to maintain a balance by understanding what I’m writing about without becoming “too curious for my own good.” I’m not always successful.

Yesterday, for instance, I was driving home thinking about reverse time migration (RTM) because the topic has, within the last couple of weeks, come up repeatedly. Being the naïf that I am, I got to wondering whether there might be a “reverse depth migration” on the horizon, much like prestack time migration gave way to prestack depth migration in the 1990s.

I contacted one of my geoscience friends, who told me that, “in a perverse naming plot,” RTM actually is a form of depth migration.

Who knew? (Other than geoscientists, of course!) It got me to thinking about all of the other jargon that I hear repeatedly that could, if anyone so chose, actually be sorta-kinda clear to the average listener/reader if it was just rendered into more common terminology. Another geoscientist friend once told me that geophysicists like to use big words because it makes them sound smarter than they really are. I’m not going to fully agree with this statement because I know an awful lot of really smart geophysicists. Still, I wonder how difficult this really needs to be.

So in my almost 14 years of covering the exploration side of the business, I’d like to offer up my personal definitions of some of these difficult terms. And I invite you, gentle readers, to take pot-shots at them and tell me why “azimuth,” for instance, is really the only word that fully explains the concept.

Anisotropy: variation based on direction

Azimuth: angle

Prestack: prior to averaging

Stacked: averaged

Stacked model: don’t make me go there

Migration: moving things to their correct position

Inversion: no clue

Reverse time migration: see above

Feathering: cables being moved by wind and currents away from their desired position

Bin: a cube in a 3-D survey

Velocity: speed

Velocity model: something you build before you really know what’s going on

Tomography: a cool term that we borrowed from medical imaging

And don’t even get me started on geology!

Special thanks to Schlumberger’s Oilfield Glossary for helping me ensure that my feeble assumptions were at least somewhat correct.

Despite the perks, being a CEO must be a pretty tough job.

It was at least a tough day for Chevron Chairman and CEO David O’Reilly Wednesday, when his company’s annual meeting was host to activists protesting pollution and human rights violations. The volume of protestors was such that at one point the entrance to the meeting was blocked.

Two key issues were the company’s involvement in the Amazonian rain forest in Ecuador and its human rights record, including a recently settled suit involving a hostage situation in Nigeria. Chevron is currently awaiting a verdict from a judge in Ecuador that could cost it $27 billion in fines due to alleged pollution by Texaco, which Chevron bought in 2001.

According to the San Francisco Chronicle, O’Reilly told protestors they were blaming the wrong company for the pollution. Texaco drilled for oil in Ecuador from 1964 to 1992, then turned over operations to Petroecuador. Chevron inherited the suit when it bought Texaco.

“These problems are not the problems of Texaco,” O’Reilly said. “They’re the problems of the government of Ecuador and Petroecuador.”

According to an article by the Associated Press, the company was able, more or less, to conduct the business at hand despite the protests. Three key shareholder proposals were considered: a more detailed human rights policy, a proposal for a report on Chevron’s criteria for investing or operating in countries with questionable human rights records, and the company’s approach to assessing environmental laws in other countries.

The human rights policy got 26% of the vote; previous proposals in the past have not received more than 10%, the article states.

A report titled “The True Cost of Chevron,” which accuses the company of destroying communities, causing environmental damage, and being politically oppressive, drew derision from O’Reilly, who called it “insulting to our employees, and I think it deserves the trash can.”

Another proposal seeking more clarity on Chevron’s plans to help curb climate change and lower its greenhouse gas emissions was withdrawn. The proposal was supported by Patricia Daly of Sisters of St. Dominic, a faith-based institutional investor.

Daly was attending the ExxonMobil shareholders meeting in Dallas but told the Associated Press that after meeting with Chevron’s management, she was satisfied that the company is taking the right steps in this direction.

ExxonMobil executives were less fortunate, although its meeting was apparently less raucous than the San Ramon, Calif., contretemps. “Exxon officials were also questioned about environmental issues and executive pay, but shareholders ultimately stood by management and voted down all 11 resolutions presented there,” the Associated Press article states.

A Reuters report added that ExxonMobil CEO Rex Tillerson told shareholders that his company would stick with investing to help meet global energy demand, a strategy he said had helped it weather the current downturn.

I recently had a talk with Frank Lloyd, associate dean of executive education at Southern Methodist University’s Cox School of Business. This school has worked with companies in the energy industry for several years helping them manage their talent and providing MBA and leadership programs for their star employees.

Lloyd said that his school is trying to address the changing demographic within the industry as more “millennials,” those born between 1979 and 1994, enter the workforce in droves. Millennials view the world, and their jobs, differently than their baby boomer parents, and companies hoping to cultivate the bright minds in this group will need to adopt some new tactics.

I must say I’m a bit concerned about the potential for these younger employees to realize the kind of “cultivation” they will need given the current business climate. I think back to when my mom first went to work. She started as a secretarial temp but quickly got a full-time job at a company that sells centrifugal pumps. Over the years her intelligence and abilities were recognized, and she ended up being an outside sales rep despite the fact that she did not have an engineering degree. But the company provided the training and continuing education she needed because they recognized her potential and were willing to invest in her career.

Today I came across an article in “The Wall Street Journal” that said that, unlike past recessions where those 55 and older were most likely to be vulnerable to layoffs, today it’s younger workers who have the most to fear. “Employees in their 20s and 30s are finding themselves more at risk of a layoff, according to labor lawyers, as employers look to avoid age-discrimination lawsuits by adopting a ‘last one in, first one out’ policy,” the article states. “In some cases, young, childless professionals say they feel they’re being targeted in layoffs, while employees who have families to support are given special consideration.”

Two of my friends have college-age daughters who were offered paid internships this summer, only to be told at the last minute that, while they were still welcome to work, they would be doing so without pay, as if they’re volunteering at a soup kitchen rather than going to work for a responsible corporation. Yes, they will gain valuable experience and learn priceless lessons. Unfortunately, one of those lessons is that promises will continue to be broken long after they’ve heard their last commencement speech and collected their final diploma.

Is this going to get better? Not if “Time” Magazine is any indication. The cover of the May 25 issue says, ‘Throw away the briefcase; you’re not going to the office. You can kiss your benefits goodbye too. And your new boss won’t look much like your old one. There’s no longer a ladder, and you may never get to retire, but there’s a world of opportunity if you figure out a new path.”

Yikes. Can SMU help? Lloyd used the analogy of peanut butter to describe how some companies handle tough times. “Creamy” peanut butter is a company that smoothes over all employees equally, regardless of their future potential. “Chunky” peanut butter leaves a few folks “uncreamed,” even if the impact to the bottom line is smaller in the short term. It’s these “nuts” that may be the future of the company.

Given the present news, I’m not sure anyone will survive the food processor.

Kudos to Marc Lawrence of Fairfield Industries for sharing this tidbit! It seems that an expedition team that set out from Plymouth, England, on a 5,000-mile (8,000-km) “carbon emission-free” voyage to Greenland had to be rescued by none other than an oil tanker.

God this is choice.

The BBC reports that the crew of the Fleur was rescued by the Overseas Yellowstone in strong winds after the crew sent a mayday because they feared for their safety.

The team, according to the report, planned to use sail, solar, and man power to propel the vessel. The expedition was being followed by as many as 40 schools across the UK “to promote climate change awareness.”

The grandiose plan lost its footing after ferocious winds caused the boat to be temporarily capsized three times. At one point one of the crew hit his head, and the wind generator and solar panels were torn from the ship. Another crew member fell overboard during the rescue, while water was entering the boat due to breaking waves.

The mayday came as the crew were still 400 miles (644 km) off the west coast of Ireland.

Perhaps even more amusing than this ironic rescue is the flurry of comments that accompanied the BBC report. A few of the better ones:

“The irony here is making my week. First ‘clean energy’ is a flop, and then to add insult to injury, they have to be rescued by an OIL TANKER!”

“The only thing that would’ve made this story even funnier is if a whaling boat had to help.”

And my personal favorite: “If those three guys were truly dedicated, they would have refused to be rescued by that filthy tanker. Give their lives for their ‘noble’ cause.”
 
OK, so I’m glad they are safe and no lives were lost. Still, it makes you wonder how the eco movement can be so critical of the oil and gas industry’s “accidents” at sea when millions of barrels of black sticky stuff get moved around the world’s oceans on a regular basis without their crews requiring risky rescues. Yes, the boats are bigger. But the crews are also highly trained, and the vessels have redundant systems in place if something fails.

I’m not sure sail, solar, and man power quite meet the criterion of a “redundant system.”

OTC thrives despite challenges

This just in: “Attendance at the 2009 Offshore Technology Conference (OTC) reached 66,820 strong despite a global economic recession and initial concerns about swine flu,” according to a report from event planners. Had I written this missive I might have referred to “swarms” and “teeming masses,” but this pretty well covers it. It takes more than an economic meltdown and a pandemic to keep this industry away.

If I was writing copy for a radio ad, I would say, “The Offshore Technology Conference is just around the corner.” But I won’t say that, partly because it’s a horribly trite cliché and partly because it implies that something fun and delightful is about to happen.

No, I’d be more likely to characterize the imminent arrival of OTC as “looming ever larger” or “about to crush us all.”

It’s not that I don’t like OTC. It is arguably one of the most amazing trade expos one could hope to attend. Its sheer size exemplifies the concept that everything is bigger in Texas. And it is full of the aforementioned “big chunks of iron,” giant pieces of kit that showcase how truly innovative this industry is.

No, my main trepidation is more the logistics – getting there, walking from the parking lot to the exhibit halls, attempting to take in even a fraction of the show floor, trying to be in too many places at once to cover everything that’s happening, navigating rush hour traffic to make it to the evening receptions, etc. There is LOTS of walking at OTC. LOTS. It makes my feet hurt to even think about it.

But in addition to trepidation, I will admit to a certain degree of curiosity. There are at least two elements at play this year that weren’t in evidence last year. First of all, of course, is the economic downturn. So far I haven’t been to a show that has seemed vastly affected by this crisis – the North American Prospect Expo actually seemed busier than last year – but as it wears on, we’re likely to see companies scaling back on their trade show participation to save some money.

Secondly is the swine flu epidemic, which has already made its way to Houston. OTC issued a press release this morning saying that the show will not be closed because of this problem. “The US Centers for Disease Control and Prevention has not limited travel to the US with the flu outbreak and recommends sensible health precautions to those who will be traveling to the US,” the release states. Precautions at the show will include hand-sanitizer stations and encouragement to attendees to wash their hands frequently. Other than that, event organizers promise to “closely monitor the situation.”

Will people stay away from OTC this year? It remains to be seen. Rest assured that your hardy E&P editors will be there in force, bringing you almost live coverage of press conferences and other events taking place during the show. And washing our hands frequently.

It’s not been that long ago that the initials WD (while-drilling) first found their way into common usage in the oil and gas industry. It had long been hoped that some of the measurements taken downhole after a well was drilled could instead be taken while the well was being drilled, saving time and money and providing subsurface information more quickly .

In recent years while-drilling and other formation evaluation services have consistently outperformed other services in customer satisfaction, according to EnergyPoint Research. EnergyPoint provides independent research regarding the oil and gas industry’s satisfaction with the products and services it purchases and uses.

In a recent report, the company indicated that formation and well evaluation (FWE) services are not ranking as well as they have in the past. EnergyPoint breaks its FWE coverage into four sectors: wireline logging, logging-while drilling (LWD), core and fluid analysis, and well testing.

“FWE’s forerunner status does appear to be lessening somewhat,” the report states. It lists core fluids analysis services as receiving the highest customer satisfaction ratings, while LWD services are getting the worst rap, “in part due to frustration with inexperienced crews and faulty equipment.” Well testing and wireline logging fared better than LWD, but “these segments also seem to be undergoing ratings erosion as of late.”

In a chart outlining service offerings from several of the major companies in this space, only one company received a “very high” rating (for core and fluid analysis), and very few were indicating an upward customer satisfaction trend.

This couldn’t come at a worse time. In today’s low-priced environment, customer service is one of the few things a company can offer to differentiate itself from its competitors. Companies would be well-advised to do their own customer surveys and strive for improvement.

The report is based on more than 1,000 evaluations in the FWE category. Respondents receive survey results from EnergyPoint in return for participating. To view past reports, visit www.energypointresearch.com.

Raise your hand if you live in a country in which the press, or even the general public, understands anything at all about supply and demand as it relates to the oil industry.

If your hand is in the air, you are in the tiny minority, gentle reader.

We’re certainly not blessed with an overabundance of intelligence or understanding here in the US. A recent headline from CBS News pretty much sums it up: “Why aren’t oil companies drilling?” The subhead reads, “CBS Evening News: Oil companies are only exploring one-third of US land they have rights to.”

Wow, where to begin? OK, item 1. Oil prices are in the toilet, relatively speaking. A recent speaker put it succinctly when he said, “We’re not going to produce any oil if we have to give it away.” This is why rigs are being stacked in some of the country’s hottest plays – there is a cost to finding and developing oil and gas, and most businesses prefer to make a profit, not operate at a loss.

Item 2: The places oil companies actually WANT to drill are, by and large, still off-limits. In the news this week was much talk about Energy Secretary Ken Salazar making the rounds on the West Coast, listening to concerned Californians who, despite the fact that their gasoline prices are always higher than the rest of the country and their state is monumentally huge, still don’t want to sully that Pacific Coast view with offshore infrastructure. Meanwhile, Alaskans have been meeting this week, also with Salazar, to square off against one another to discuss the future of their state’s oil and natural gas development. According to the Anchorage Daily News, vast amounts of hydrocarbons could be opened up to leasing if the oil industry holds sway.

“The [Interior] department’s Minerals Management Service handles oil and gas leasing in federal waters off Alaska’s coast,” the article states. “The MMS estimates Alaska’s offshore energy basins might hold 27 Bbo and 132 Tcf, much more fossil fuel than has ever been produced from land on the North Slope. But many tribal governments oppose drilling because they fear potential damage to lucrative commercial fisheries in the Bristol Bay region and subsistence hunts in Arctic waters.”

Item 3: Oil companies are actively drilling, even in this country. At last week’s Developing Unconventional Gas conference, several speakers commented on their continued development plans, despite low commodity prices. Which leads to item 4: If some of the leased land is not being drilled, um, er, well, maybe that darned geology is to blame.

In the CBS report, John Felmi, chief economist with the American Petroleum Institute, said, “The leases aren’t being drilled because there’s probably no oil there.” One wonders how hard Felmi had to work not to snort while he made the statement.

And this is a choice comment from the reporter covering this story: “A recent US Government Accountability Office report suggests otherwise. Bottom line: oil companies only ‘develop leases when it is most profitable to do so.’”

No. REALLY? Does this scream “conspiracy” or what?? Seriously, since when was the oil industry a not-for-profit organization? Of course oil companies are going to develop the most profitable areas first. Then they’ll go back to the less profitable areas and work them over as well. It is this business approach, I believe, that has staved off Peak Oil for so many years.

But don’t try telling that to the US media. It just doesn’t make for very good news.

It’s interesting to be a part of this weird e-revolution in the publishing industry. While pundits have predicted the demise of print media for years, only now are we seeing that dire threat move closer to reality. Vaunted titles are closing right and left – the Rocky Mountain News, my hometown newspaper, recently shut its doors after 150 years of reporting Denver-area news. Those of us who are left with jobs are having to learn how to do them all over again.

One of the stranger aspects of our “new” jobs is the fact that we actually have a pretty good idea of who is reading what we write, or at least how many mouse clicks we’ve managed to lure with a given topic. In the past we had to rely on reader feedback, which wasn’t always positive but at least meant that we weren’t writing in a vacuum. Now we’re actually expected to entice readers to read what we write. It’s all about the headline, folks.

Internally we joke about “doom and gloom” headlines – rather like a bloody roadside accident, people just can’t help but gawk at unpleasant things. And there’s certainly plenty of gloom and doom to go around these days. One need look no farther than unemployment statistics, commodity prices, foreclosures, etc., to see that these probably are the times that try men’s souls. So it’s nice to escape once in awhile.

I’ve escaped twice in the past two weeks, once to Golden, Colo., for a meeting with a consortium at the Colorado School of Mines, then to Fort Worth, Texas, for Hart Energy Publishing’s annual Developing Unconventional Gas (DUG) conference. And guess what? Nobody’s really focusing on doom and gloom. They’re too darned busy.

The Mines consortium is known as the Reservoir Characterization Project, RCP for those of us who have trouble with large words. The project has been around for more than 20 years attempting to solve the riddles of the subsurface through data integration, multicomponent seismic, and time-lapse studies.

I serve on the advisory board of this project. While I leave you to ponder the absurdity of that situation (after three years I still don’t get it), I will say that the “guts” of the consortium is the application of cutting-edge technology, along with the over-bright minds of a few graduate students, to solve thorny reservoir characterization projects. Every 18 months or so a bunch of new proposals goes before the board and the general assemblage, and the project that seems as if it will offer the most useful lessons is chosen for the next phase.

So if everything is in the doldrums, why is RCP more flush with cash than it has been in years? Why did six companies approach the group with what are effectively science projects, hoping to better understand their fields? Shouldn’t everyone be retooling, regrouping, cutting costs, and generally gnashing their teeth?

And if US gas prices are in the toilet, why would an entire DUG session be devoted to “screamer” gas plays in the Continental United States? You would not believe some of the fields and plays discussed during this session. One company has coalbed methane acreage in Kansas that has low-cost, shallow wells and fee acreage as low as $10/acre. And it has an estimated 6 Tcf of gas.

In the Uinta Basin in Utah and Colorado, a play called the Mancos Shale runs 60-80 miles east-west and at least 30 miles north-south, comprising 1.5 million acres. In addition to the Mancos, producing horizons include the Wastach, Mesa Verde, Dakota, and Morrison. They’re all high-pressure reservoirs. And they contain huge reserves.

In fact, when the presenter mentioned that his company was looking for partners, I considered dragging out my checkbook.

Yes, low wellhead prices mean that now might not be the best time to milk every hydrocarbon out of these fields. But it’s hard to feel too pessimistic when this country alone continues to offer up world-class reserves (and one commenter at DUG said the Eastern Hemisphere is considered to have more untapped gas reserves than the Western Hemisphere). I guess it kind of puts that whole scary “peak oil” thing off a few more decades.

Oh, and another thing I’ve learned about online journalism – word count doesn’t matter! Let the games begin.