The oil and gas industry has undergone dramatic change in recent times. On one hand, technology has driven an increase in availability of supply, primarily from unconventional sources. Concurrently, global economic and political influences have resulted in sustained oversupply of oil and gas, despite declining demand. The effect on the industry has been to return to operating conditions not seen for decades, with sustained low prices and sluggish demand forecast to continue at least in the near to medium term.
The solution space for oil and gas companies to stay viable during this difficult period is challenging and cannot be reliant on external factors of rapid price increase, uplift in demand, or reduction in supply. Instead, companies need to find efficiencies within their capital- and operating-cost base and to examine closely and make optimal use of their assets. “Business as usual” no longer exists, and companies must challenge every aspect of their business—at strategic, tactical, and operational levels, underpinned at all times by sound and unbiased technical and commercial work.
The suite of papers in this feature addresses various aspects of these critical business requirements. At the strategic level, the importance of using a robust framework for ranking exploration, appraisal, and development projects in order of commercialization maturity, as embodied by the Petroleum Resources Management System promulgated by SPE, is discussed in paper SPE 170747. At the tactical and operational level, the importance of systematic application of standards and guidelines for technical work and of maximizing the benefit by a truly multidisciplinary approach to decision making and development of a road map to show the way forward to optimize recovery and maximum value is described in paper SPE 175004. Furthermore, the value of look-backs and calibrating performance, to extract value from lessons learned to be used in development of realistic learning curves, is assessed in paper SPE 172973.
The need for cost and capital efficiency calls for careful integration of technical and commercial elements. Many companies will be able to cite examples of disconnect between these elements, with resultant destruction of value and loss of opportunity. Recognition of uncertainty and sound technical input into commercial and financial models are critical and, when done correctly, allow effective portfolio analysis to be conducted. Paper OTC 26061 provides an excellent overview of the elements of such an analysis.
These papers highlight the critical importance of application of overarching strategic frameworks within operating and service companies as key enablers to realizing required efficiency improvements. These frameworks must include mechanisms to consistently and objectively assess portfolios of assets, to identify their strengths and weaknesses, to provide confidence levels that reflect the inherent risk and uncertainty that exist within oil and gas projects, and, above all, to ensure best use of human capital and incorporate lessons learned from past experience.
Recommended Additional Reading
SPE 175527 Validating Analog Production Type Curves for Resource Plays by Mark McLane, Rose & Associates, et al.
IPTC 18063 Is Your Trap Filled To Spill? by Douglas Peacock, Gaffney, Cline & Associates
IPTC 18128 The Art of Balancing the Cost and Value for Field Development by Keng Seng Chan, Petronas, et al.
Greg Horton, SPE, is retired from Santos after 33 years of reservoir-management responsibilities and maintains an active role in improving the SPE Petroleum Resources Management System (PRMS). He holds an honors degree in civil engineering from Adelaide University. Horton joined Santos as a field petroleum engineer in 1982. Since then, he has worked in many petroleum, reservoir, and planning engineering roles and in financial roles. Horton has managed extensive external audits of Santos’ reserves and contingent resources. He was a member of the SPE Oil and Gas Reserves Committee from 2011 to 2014, is a member of the PRMS Improvements Subcommittee, and serves on the JPT Editorial Committee.
Barbara Pribyl, SPE, is reserves and resources manager at Santos. She has more than 20 years of experience as a geologist and in reserves and resources management based in the Australian oil and gas, coal exploration, and coal-seam gas industry. Pribyl holds an honors degree in geology from the University of Wollongong. Her focus in recent years has been on Australian and international oil and gas reserves and resources assurance and reporting. Pribyl has been a member of the SPE Oil and Gas Reserves Committee since 2014.
Greg Horton, SPE, Retired, and Barbara Pribyl, SPE, Reserves and Resources Manager, Santos
25 November 2015
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Linn Energy recently sold its Williston Basin properties for $285 million. This deal brings Linn’s year-to-date total sales agreements to more than $1.5 billion as it financially restructures after bankruptcy.
Jones Energy CEO Tells of Company’s Transformation
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Angola: Does Recent Change Mean Economic Development?
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