The Past and Future Decade: Industry Leaders Speak Their Minds
Question: What do you think was the major industry focus area over the last decade in terms of oil and gas resources: conventional, deepwater, heavy oil, shale? Could it shift in the next decade?
LR: I think the answer depends on the energy needs of the nations involved and the resources available to them. For instance, Brazil has developed impressive technology and capabilities in the last decade for deepwater resources extraction. The US has been successful with unconventionals (shales, tight hydrocarbons, etc.). I think the industry will continue to develop new technology and the next shift in focus will be towards developing resources that will become available due to implementing that new technology.
ES: “Shale” resources’ huge impact was the big surprise of the last decade. Shale resources have had a major economic and geopolitical impact and will continue to do so in the coming decade.
Question: What novel technology emerged in your area of expertise in the last decade? What was its impact?
LR: Hydraulic fracturing has been evolving for the last several decades, not just the last one. However, it has been in the last decade that all the variables required finally fell into place. A combination of new drilling technologies made horizontal wells economically viable—new developments in rock mechanics that improved the understanding of how fractures develop in the rock, new ideas in fluid mechanics that allowed us to improve fracturing fluids. All those technologies allowed for the shale “revolution” to occur and increase production from unconventional resources fourfold. In 2008, according to the EIA [US Energy Information Administration], unconventional production accounted for 12% of total US crude oil production. Today it accounts for more than 35%.
ES: The shale revolution has revealed how much we have yet to learn. Our understanding of hydrocarbon migration is very incomplete. To more efficiently find and produce hydrocarbons, we need to better understand natural hydrocarbon migration. Hydraulic fracturing is a “big hammer,” but we need to better understand the role of natural fractures on all scales over time to become more efficient. Remote sensing technologies may be an attractive way to identify areas of higher natural fracture density that are sweet spots in shale resources.
Question: How have job hiring trends for the industry changed over the last 10 years? How do you think these trends will change over the next decade and what advice can you give to young professionals planning to enter the industry in the coming years?
LR: During the last decade the industry faced a difficult situation, as its experts and technological leaders aged and began to retire. Young professionals’ entry into the energy sector has not been enough to replenish the retired force. Hiring trends today reflect that. A lot of engineers and experts all over the world are moving to the US to fill the gap.
My advice to new engineers is you need to find a focus area and select your future direction based on that. For instance, if you want to become a reservoir engineer leader, you may seek a position with an operator that has a lot of experience and/or leading-edge technology in old and new fields. If you want to become a drilling engineer leader, your first move may probably be with a service company that specializes in that area. Don’t let a company manage your career; rather, move to the company that you think will focus your skills better and allow yourself to be the manager of your career. In the end it all depends on what you want to do—as clichéd as it may sound.
ES: When the industry started hiring again about a decade ago, enrolments in university petroleum engineering programs were low, because of the low levels of hiring during the previous 2 decades. The pattern was very similar to what occurred in the 1970s when the petroleum industry re-staffed after a couple of decades of low petroleum prices and low hiring. Companies don’t hire because their workforce is aging, they hire because business is booming and operations are expanding.
Every industry has its booms and busts, so we all need to have strategies to survive both periods of frantic activity and times of layoffs. Being active in SPE is a good strategy and was a critical part of my toolbox. Building connections and a network beyond your own employer creates a safety net of people who know your capabilities and work ethics. In hard times, most good jobs are obtained through personal networks. Over a 30- or 40-year career, you can expect that you will encounter at least one major downturn when having a strong personal network helps you stay employed.
Question: What do you think about the quality of industry job candidates now versus the past decade?
LR: A lot of different opinions exist. The consensus is that the new candidates somehow lack the knowledge and preparation that previous generations had. I disagree. The new generations are better at using new tools and technology that just a few years ago were not available. This multiplies their performance in ways that are quite surprising. I only expect new candidates will become increasingly better. One issue remains constant though: Some skills are acquired only through experience.
ES: Higher enrolments of students in disciplines of interest to the petroleum industry mean that employers can be more selective. Also, with more students studying petroleum engineering, there are more high-quality candidates.
Question: With the increasingly higher (and arguably unsustainable) starting salaries for new graduate hires, how do you see recruiting strategies changing so companies can obtain the best talent?
LR: This is simply an asset allocation issue. If the energy industry provides better returns than, let’s say, the telecommunications industry, then it will offer better salaries to capture the best talent. This is happening now. However, the situation can change. If for some reason commodity prices plummet, it is very likely that recruiting strategies and new-hire salaries will adjust accordingly. Using the same logic, we can easily understand how Wall Street now offers higher bonuses than the oil industry—and how that situation was reversed during the 2008 economic crisis. Today our industry offers higher salaries simply because it can, and we want the candidates.
ES: Employers will try to leverage other factors to make themselves attractive. Training programs and certain early-career opportunities can be very enticing.
Question: What are the major workforce changes you have seen and what are companies doing to accommodate the changing workforce?
LR: By far, retirement. We are losing our best engineers and knowledge to the aging cycle and we have not been able to adapt quickly enough. According to the latest SPE survey, the average age of a US petroleum engineer is 46. Companies are bringing new engineers from overseas, increasing their investment in universities and colleges in order to capture the best candidates, creating in-house programs to train engineers in petroleum engineering areas, etc. Only time will tell if current efforts will help overcome the trend.
ES: The younger workforce is increasingly composed of people who are part of a dual-career couple. Previously, much of the workforce had a spouse who handled household logistics. Relocation of people in dual-career couples is more complicated and requires more support, because both partners’ careers must be considered and there is not a supporting spouse to manage the logistics. Dual-career couples also need more flexibility on a daily basis because no one is at home to manage all the unexpected events.
Question: What are the major disasters/accidents that have occurred in the industry in the past decade and what have we learned from them?
LR: I think that the Macondo disaster may be the consensus as the most significant. The Deepwater Horizon oil spill simply shook the industry to its core. In just a moment, the industry was reminded not only that they are responsible for human lives and of their environmental and safety responsibility, but that their companies—no matter how big—are not too big to fail. We are neither banks nor car manufacturers. A single event could destroy all the value added for decades, in an instant. The government will not—or cannot—come to our rescue; they simply lack the technical expertise to address a situation like this.
Perhaps one of the most important lessons learned is in the areas of deep-spill decontamination and the analysis of oil spills’ impact on the environment. For example, new and quicker methods to test for contamination in marine animals were developed and validated by the US Food and Drug Administration. The solution to the Macondo event was truly an example of cooperation between industry, government, and scientists.
ES: The Macondo blowout has had a tremendous impact in the industry. It has revealed many of the gaps in our safety culture. Employees must be better trained and feel empowered to insist that work be stopped when unsafe situations arise. Safety incidents are more common with a less-experienced workforce.
Question: How has environmental regulation changed in the past decade? Can we expect tighter regulation in the future?
LR: Perhaps one of the most significant areas of change is emissions control—particularly CO2 emissions. Earlier this year , the US Environmental Protection Agency proposed a plan that aims to slash carbon dioxide emissions by 30% from power plants by 2030. Several US states, including California, are thinking of or already implementing cap-and-trade schemes to control CO2 emissions. Carbon taxes are being discussed and proposed in the legislature. I think the tendency is clear and we can expect tighter regulation in the future.
ES: Environmental regulation and monitoring requirements have increased and will continue to increase. We must acknowledge that everything has an impact. Waste disposal can have previously unrecognized consequences, so whenever possible we should recycle and reuse supplies to minimize waste.
Question: Do you foresee more company spinoffs or mergers in the future?
LR: Yes. It all depends on the market situation. Generally speaking, companies tend to merge when commodity prices are low—this is what happened in 1998–2000. Spinoffs, on the other hand, tend to happen when assets inside a corporation become too diverse or their risk profiles become too heterogeneous. There is, however, no definitive rule for mergers and spinoffs. In any case, I’m sure we will see mergers and spinoffs in the future.
ES: Yes. Companies will continue to evolve to better compete in the world market. No matter how large your employer or how secure your position appears, you always need to be prepared to look for another job. Network and keep your résumé up-to-date!
Question: What is the biggest challenge you see the industry as a whole facing in the future: environmental regulation, public perception, personnel shortage?
LR: My answer: all of the above. Public perception creates a cycle that affects the industry in all areas. When people see the industry as “big oil” or the “big bad wolf,” the tendency is to increase regulation that affects us—environmental, taxes, safety, areas open to drilling, etc.—because the tendency is to think companies within the industry will take advantage of people. This also causes fewer enrolments in engineering schools or departments related to the energy sector—nobody wants to work for a “polluting, despicable industry”—creating personnel shortages and technological challenges due to reduction in R&D.
I think it is important for us to clarify this situation. For instance, the main factor that allowed the US to reduce its CO2 emissions in the last decade was the shale gas revolution. According to the [European Commission Joint Research Centre] Emissions Database for Global Atmospheric Research, the US emitted about 6 billion metric tons of CO2 in 2004 against roughly 5 billion in 2012. About 17% reduction in 8 years. Compare that to the EPA-proposed 30% reduction by 2030— or to the emissions coming from China: in excess of 10 billion metric tons of CO2.
Some people thought the US CO2 emissions reduction was due to the 2008 recession. But they continue to decline today, way after the recession is over. I believe the increased use of cleaner natural gas is already showing some benefits. Even years before the proposed EPA CO2 emissions reduction plan, companies generating electricity began moving from coal-powered plants to using combined-cycle plants powered by natural gas. Public opinion seems to ignore all this and attribute good results to government policies.
ES: Societal “license to operate” is the biggest challenge. Every form of energy has an impact, but environmental activists have particularly targeted fossil fuels. We need to better communicate how the petroleum industry enables modern life, while simultaneously minimizing our environmental impact and improving our safety record.
Question: What other major changes in the oil and gas industry do you foresee?
LR: The biggest change the industry faces is the move towards cleaner fuels. This has happened several times in history. For eons, we used long-chained hydrocarbons, such as wood, as fuel. A few centuries ago we started burning shorter hydrocarbons, although still long-chained: coal. Recently, with internal combustion engines, we switched to even shorter hydrocarbons: crude oil. We are in the middle of the shale gas “revolution,” a transition towards really short-chained hydrocarbons: natural gas, propane, and butane.
Several leaders within the oil and gas industry are advocates of moving the US from an oil-dependent economy to a gas-dependent economy. T. Boone Pickens and Harold Hamm come to mind. This transition faces several challenges—for instance, transportation. Gas is compressible and not as easy to transport as oil. The US currently lacks the infrastructure to massively distribute natural gas—for example, to gas stations around the country. Countries like Brazil run not just buses, but regular family vehicles, on natural gas. You can fill up your natural gas tank easily anyplace inside Brazil, but not in the US. The good news is the industry is already moving in that direction and, like in the past, it will rise to the challenge and will be an integral part of solving our energy needs.
ES: Collection and interpretation of “big data” will become increasingly important. We currently place a great deal of reliance on seismic. Integration of other types of data collected by satellites, airplanes, and drones may open the door to lower-cost evaluation.
Luis Rodriguez is vice president of reservoir engineering at Rex Energy Corporation. He has over 15 years’ experience in the oil and gas industry, working in different positions ranging from production and operations to reservoir engineering and management. Rodriguez has worked in assets such as the San Jorge basin in the South Patagonian region of Argentina; the Cano Limon field in Colombia; the Hugoton gas field in Kansas, USA; the San Joaquin basin in California, USA; and the Marcellus shale, USA. Luis holds a BS in petroleum engineering from Universidad Industrial de Santander in Colombia, an MS in petroleum engineering from the University of Oklahoma, and an MBA from Rice University.
Eve Sprunt, a consultant, has 35 years’ experience working in various technical and leadership roles for major oil companies, including Chevron and Mobil. She was president of SPE in 2006 and was made an Honorary Member of SPE in 2010. In 2013, Sprunt was honored by the Society of Women Engineers with the Achievement Award, their highest award. She earned BS and MS degrees in Earth and planetary sciences at Massachusetts Institute of Technology and a PhD degree in geophysics at Stanford University.
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