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In a dynamic and increasingly challenging world, the E&P industry must take on new energy frontiers while continuing to invest in cutting-edge technology R&D to satisfy fluctuating demand.
In today’s changing energy landscape, there exists an abundance of oil and gas resources thanks to unconventional development and enhanced recovery techniques. With scarcity a moot point, issues the industry will face in the foreseeable future include accessing new energy resources, spurring investments as projects become costlier, and propagating technological innovation through R&D measures while maintaining a strict safety culture.
These were the themes discussed by two industry-led panels opening the Tuesday session of CERAWeek in Houston, Texas. A panel of experts explored the topic of questing for energy security during the first plenary, “Strategies for a Growing World,” which was moderated by IHS CERA Chairman Daniel Yergin.
Yves-Louis Darricarrère, president of Total E&P and Total Gas & Power, and executive vice president of Total SA, began the discussion with a macroeconomic view of future supply and demand. He underscored the growing need for the oil and gas industry to venture into newer, more challenging frontiers to meet energy needs across the globe.
According to Total, the primary energy demand is expected to increase 25% over the next 20 years, reaching approximately 325 Bboe/d in 2030. And, in a post-Fukushima environment, the position of fossil fuels as the dominant source of energy will be even more difficult to challenge, according to Darricarrère.
“We foresee fossil energy sources representing three quarters of the energy supply by 2030, with oil clearly keeping the lead,” he said. “Over the projected 20-year period, the share taken by oil is likely to decline somewhat in relative terms by 30%. Nevertheless, it will continue to grow in absolute value, reaching 95 MMb/d to 97 MMb/d to 2030 (including NGL).”
Natural gas also will contribute a larger share, growing in both absolute and relative terms and reaching 44% of the primary energy mix in 2030. “At that time, gas production should reach around 450 Bcf/d versus 320 Bcf/d in 2010,” Darricarrère said.
Longer term, the fundamental question is whether fossil fuels will be sufficient to sustain future demand. At the current rate of demand, Darricarrère said, oil resources can be expected to last for the next 75 years, and gas for the next 130 years. That’s considering the world’s existing fields, the resources improved recovery techniques should bring, unconventional resources, huge discoveries offshore Brazil and West Africa, and yet-to-be-found reserves which, based on recent discoveries in several frontier areas such as East Africa and the Mediterranean, are substantial, he noted.
With existing fields declining at a rate of 5% annually, according to Total estimates, investments in new production capacity will be crucial to bridging the gap created by flagging production from mature assets.
Recovery techniques, for example, could enhance lifecycle of aging fields, which is what Juan José Suárez Coppel, director general of Pemex said his company is aiming to do onshore and offshore Mexico as the national oil company reinvests more capital, historically earmarked for government revenue, into E&P and technology R&D.
Suárez Coppel said an issue that has plagued the Mexican oil sector has not been one of oil and gas scarcity but a lack of investments and “a very poor running of the national oil company.”
Pemex meanwhile is taking more proactive measures to avoid becoming a net oil importer. As Mexico moves to curb steep production declines from its major Bay of Campeche assets, he said new reserves can be recovered and accessed in mature onshore assets like Chicontepec, from shallow-water prospects and underdeveloped fields near the country’s prolific southeastern basin, and by exploring the deepwater Gulf of Mexico.
Technology is at the forefront of harnessing new hydrocarbon resources and expanding the industry as it forges ahead, according the consensus of a global oil plenary, “Technology and New Horizons,” which was moderated by IHS Chief Energy Strategist David Hobbs.
Kicking off the session, Mauricio Cárdenas, Minister of Mines and Energy, Colombia, said the country’s oil sector is undergoing a “silent revolution” to avoid becoming a net oil importer due to waning production. In recent years, the South American country has evolved from “a pariah of investment” to one of the most competitive in the world as national oil company Ecopetrol has gone through financial and management reforms, technical capabilities have improved domestic E&P, and ongoing upgrades to existing infrastructure and facilities are making headway in expanding regional production capacity.
According to Cárdenas, Colombia is expected to increase its production level to 1 MMb/d of oil in the next few weeks, with the goal of bringing additional fields online and improving recovery to 1.5 MMb/d by 2020. The country’s national hydrocarbon agency (ANH) also is touting a new crop of unconventional oil blocks in the country’s 2012 licensing round roadshow.
Another transformation brought on by technology innovation and R&D efforts is under way in Saudi Arabia. According to Amin Nasser, Saudi Aramco senior vice president for upstream, Saudi Aramco recently launched an Accelerated Transformation Program to “fundamentally transform the oil and gas company into an integrated energy and petrochemicals enterprise.”
Saudi Aramco has led several advances in developing new technologies, including using nanotechnology for reservoir sensing and “smart” water-flooding.
The company has “set aggressive targets in the discovery and recovery of oil,” according to Nasser, and anticipates the discovery of at least 100 MMbbl of additional resources within the Kingdom while also aiming to increase its targeted recovery by 50% to 70%. And, in terms of developing new energy frontiers, Saudi Aramco expects to begin deepwater development by year-end 2012.
“We are confident that with the latest technology and best practices, we can achieve these targets,” he said, adding that technology partnerships between operators and service companies are mission-critical to fostering new developments.
Additionally, Saudi Aramco plans to broaden its research initiatives by establishing R&D centers around the world, with the first likely to be in Houston.
Taking a broader view of how technology is transformative across all platforms and borders, Martin Craighead, CEO, Baker Hughes Inc., said the industry has been affected by a “wikification” of energy as information is disseminated within seconds and as E&P technology evolves.
“This wikification will increasingly trigger a reexamination of both the exploitation and distribution of domestic reserves,” he said. And, as technology redefines how information is relayed, the demand for more transparency and greater accountability in how energy resources are managed will increase.
According to Craighead, the oil and gas industry has “entered an entirely new cycle where the influence of national oil companies is causing disintegration between boundaries we historically assigned to the industry’s key participants.” This also is prompting a consolidation of the supply chain that is shifting the markets to service companies, he said.
According to industry experts, oil and gas resources remain plentiful in the foreseeable future. Investments also are on the rise as projects become costlier: In 2011, US $600 billion was spent by the E&P industry, up 140% from 2005, according to Total’s Darricarrère. “This issue of resources in the ground is not what matters to meet the growing demand,” he concluded.
Rather, the industry must contend with a variety of factors, including regulatory environments, investment climates, geopolitics, information exchange, and the need for greater transparency and safety. Ultimately, oil and gas companies must accelerate development in ultra deep water, the Arctic, and unconventional basins throughout the world to access tomorrow’s resources.
“Exploration is the first step in developing these new resources,” Darricarrère said.
Contact the author, Nancy Agin, at email@example.com.