People First

Abdul-Jaleel Al-Khalifa, 2007 SPE President • president@spe.org

There is a mounting global perception that the petroleum industry is nearing a peak and that its sunset is inevitable within the foreseeable future. New discoveries fell short of total global production in the past two decades, while demand continues to climb. The lack of full transparency in reporting reserves and field-by-field performance has added to the perception of our industry’s decline. Anti-industry sentiments have recently proliferated in the media and political arenas, further impairing the industry’s image and leading to a new round of restrictive legislations. Policy makers seriously debate the sustainability of petroleum resources and the urgent need for alternative energy sources. This situation calls for immediate action at both the personal and corporate levels. A collaborative industry-wide effort is urgently needed to develop a Year 2020 vision that truly reflects the growth, reliability, and sustainability of the petroleum industry. SPE plans to facilitate a workshop in early 2007 for senior industry leaders to articulate this vision, with strong emphasis on people and technology. The SPE Board has recently approved a new magazine, titled Talent & Technology, to be published quarterly commencing March 2007. All SPE members will receive this publication with their JPT.

Clearly, the challenge is to extend the life of the industry through improving the success of finding new discoveries in frontier and remote basins as well as increasing the ultimate recovery from existing fields. However, this is only the tip of the iceberg. This tip is underlain by the unseen parts—technology in the middle and people as the foundation. People strive hard to fire innovation and develop new technologies, which in turn help to discover new reserves and improve ultimate recoveries. Therefore, people are the first and the most important element of the Petroleum Industry 2020 vision, where 10- to 15-year staffing plans have to be considered. Short-term human-resources plans that span 1 to 2 years can be very detrimental to the long-term objectives of the petroleum industry. Long-term plans would ensure that the industry retains a critical mass of talent, irrespective of cyclic market conditions. This will maintain expertise, reaffirm the positive image of the industry, and honor the loyalty of the people. This will also ensure a balance between the short-term financial and operational pressures and the long-term strategic objective of extending the life of the industry.

People: The Critical Mass

People are the most important asset in all organizations. People, too, are the highest cost in the operating budget. When the oil price dips or mergers take place, most corporations attempt to contain cost through doing more with fewer people. When the oil price picks up, industry starts calling for more human resources. As this cycle repeats itself, industry loses thousands of experts, going below the critical mass of skilled resources and causing irreversible damage across the entire spectrum of the industry.

In exploration, the current success ratio of one discovery in five wildcats drilled needs to be significantly improved by assessing the exploration process and embracing new technologies. Furthermore, finding mega-size discoveries is increasingly challenging, especially in mature basins where advanced technologies and highly talented people are critically needed to identify unconventional and more complicated traps. The exploration process is time-consuming and cost-intensive but very rewarding. However, when a low-price cycle hits the oil market, exploration programs may undergo major cuts. As the cycle reverses, companies activate their exploration programs and start hiring to augment their pool of explorationists. Hiring and acquainting new explorationists to new and more complicated basins is not an overnight process. This normally results in “rigs chasing prospects” instead of “prospects chasing rigs.” Cutting corners in generating prospects can overlook very important data, which can only lead to lower success and higher risk. It can also mean many missed opportunities, such as deeper targets or shallower formations that can be hydrocarbon-bearing.
In field development, the ultimate recovery of mature fields ranges between 10% and 80%, depending on production strategies, reservoir heterogeneities, and fluid properties, amongst many other factors. The global average ultimate recovery is only 35%, which falls short of the possible maximum recovery factor of 60% to 80%. Reservoir management experts attempt to leverage state-of-the art technologies such as intelligent fields, multi--lateral drilling, and complex reservoir modeling to maximize ultimate hydrocarbon recovery. They identify and map unswept hydrocarbons, design and implement new production strategies to produce the remaining hydrocarbons, and continue to monitor and analyze the field performance to revise production strategies. At cycles of high demand, professionals are swamped with short-term production-gain activities such as well remedy operations, rather than long-term recovery efforts such as data integration, water encroachment studies, and detailed reservoir modeling. These long-term studies are time-intensive and involve integration of vast amounts of data, including production and saturation logs, well performance, and seismic and geological information, to accurately map and model remaining hydrocarbon pockets. The balance between the very urgent short-term daily production activities and the most important but less urgent long-term recovery studies is very delicate, especially at times of strained staffing levels. This competition always favors production and drilling activities at the expense of recovery studies, which end up waiting for months or years. This leads to 80% focus on the urgent functions, leaving the remaining 20% to the important recovery studies. As fields mature, efforts to sustain production and extend production plateau consume more time, resulting in less and less focus on ultimate recovery studies. This can escalate to crisis management rather than well-balanced strategic management.

Similarly, in drilling and other service sectors, people are very critical to meet escalating demand while maintaining a high standard of excellence. In cyclic markets, neither drilling contractors nor service providers are geared to meet the spikes of operations. As a result, new crews are trained and dispatched to the field on urgent basis. While e-technology, such as real-time remote geo-steering, provides a quick means of sharing limited technical resources, the shortage of adequate human resources can result in extreme inefficiency and expensive setbacks. This cannot be tolerated in more complex operations, especially in deep drilling and unconventional well geometries.

Formulating and implementing a comprehensive 10- to 15-year staffing plan is essential to achieving a Year 2020 sustainable industry vision. Short of these long-term plans and in reaction to the spiking need for additional staff, most companies started to revisit their human resources policies and salary structures in order to successfully recruit and retain skilled manpower. As a result, over the last few years many professionals changed jobs within the industry.. At the same time, there was a minimal influx of people from other industries (a zero-sum game). On the positive side, an increasing number of students enrolled in geoscience and petroleum engineering over the past few years. This new crew will need a few years to develop good hands-on experience.

In this environment of scarce talent, the industry needs to critically zoom in within its borders and attempt to maximize the utilization of the entire current workforce. Are companies utilizing the full potential of their employees? Why or why not? Next month I will answer this in detail and present the results of a December 2005 SPE survey to assess employees’ engagement and job satisfaction.