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Finding Fresh Reserves in Oil & Gas

Two serious gaps are looming in the industry: firstly between global production and demand, and secondly between experienced explorationists and the new generation of geologists and geophysicists who will be needed to find fresh reserves to fill the first gap.
This article appeared in Vol. 15, No. 2 - 2018

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In order to find fresh reserves in oil and gas, firstly we need to identify two serious gaps that are looming in the industry:

  1. The gap between global oil production and demand.
  2. The gap between experienced explorationists and the new generation of geologists and geophysicists who will be needed to find fresh reserves to fill the first gap.

Resurgence in Oil Price

At most conferences and industry meetings so far this year, including the recent Global APPEX A&D Conference in London, much of the talk has been about a resurgence in oil price, an associated growth in upstream international deal making and a return to more buoyant E&P activities. The curtailment of production by OPEC and lower influence of US resource plays have kept the world adequately supplied and allowed the oil price to rebound – but is the future of oil and gas all rosy? I think not, but perhaps not for the reasons many might imagine.

The Urgent Need for New Geoscientists

AAPG Member Demographics. Image source: AAPG/Envoi Limited. Since the extended 1984–2003 price crash, when the oil price was between $10 and $27, the upstream E&P industry seems to have done little to properly prepare for the gap in exploration capability that has been evident for some years. This is the result of a missing generation of explorationists, primarily geologists and geophysicists, who were not hired in sufficient numbers in these years, and the effect of this will start ‘hitting the buffers’ soon. To be more specific, this means the loss of a significant proportion of the world’s exploration experience – in other words, the only people who are qualified to define where hydrocarbons have been generated and where wells should be drilled to find it. Most of them are over the age of 55 and, having joined the industry at or before 1984, are reaching retirement age and don’t need – or want – to work 9–5 each day for 48 weeks a year any more.

If the 55-year-old-and-over geologists and geophysicists – we’ll call them the 1st generation – are allowed to retire without the industry harnessing their knowledge and hard-earned experience, and there is a 25-year gap between them and 3rd generation explorationists (with the 2nd generation missing), how can the younger explorationists be expected to decide where to drill and find new reserves of hydrocarbons as successfully as in the past, without the benefit of all those mentors and their experience? Unless we put into action some plans to fill that gap now and to find enough new hydrocarbons, the world’s reserves and the ability to keep up with the demand for hydrocarbons could be severely affected.

Why Not to Rely on Technology

Outlook for shares in primary energy. Image source: 2018 BP Energy Outlook. “Aa-ha,” I hear you say, “technology will make the difference, making it easier to find hydrocarbons, so less G&G people will be needed – and anyway, we’ll all be using electrical cars in 10 years so won’t need more oil…”

Really? Can the current infrastructure be that easily upgraded all over the world to cater for seven times the electrical power this would demand, even if we were able to build the new power stations which will be needed to generate that massive increase in power? And what will be the source of that power? Nuclear? OK, perhaps not, so gas then – which, by the way, is found by explorationists in the E&P sector!

Also, it is suggested, any decline in conventional reserves production will simply be filled by fracking and unconventional production from the US anyway. There is no doubt that the world’s energy mix is changing and yes, there is also no doubt that in time oil will almost certainly become the new coal, but I think that will not be for 20 or maybe 30 years – probably more. For an example of just how long such transitions really take, just look at the years it took from the invention of the internal combustion engine (reportedly 1853, when a patent request was granted for ‘Obtaining Motive Power by the Explosion of Gasses’) to the first effective mass manufacture of the motor car in the 1920s and 30s; or the fact that diesel engines did not replace coal-fired steam engines until the mid-1960s, despite their existence long before then.

New Hydrocarbon Reserves Needed

There is also now concern as to when and if US resource plays will actually make enough money to live up to the recent hype and the massive investment that has gone into them. If they do, the noticeable lack of equal recent investment in conventional production, which is still responsible for more than 90% of the world’s oil, will see a widening gap between global demand and the ability to source it.

The transition to new fuels and efficiency has started, but the oil business is far from finished. It will be needed for a good few years yet, but the possibility of a gap between global production and demand, together with the looming scarcity of experienced explorationists who will be needed to find new reserves to replace those produced over the next 20 years – before all the alternatives sources of energy are able to take up the slack and decrease the dependence and need for as much oil – should be a concern.

Two reasons perhaps to ‘Mind the Gaps’!

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