A healthy geophysical industry will be needed to enable exploration and production (E&P) companies to find not only unconventional hydrocarbons, but deepwater and conventional oil and gas as well, said Stephen Greenlee, president of ExxonMobil Exploration Co., at the opening session of the Society of Exploration Geophysicists’ Annual Meeting in Houston this week (25 September).
Stephen Greenlee, Exxon, at SEG.
Photo by OE Staff.
Geophysics not only plays a major role in exploring for resources, but enabling companies to commercialize them in a cost-efficient manner, he said. It’s not about cheap seismic, but having quality seismic to support business decisions that lead to a low-cost portfolio, Greenlee, who is also vice president of ExxonMobil Corp., added.
“The companies that make the best choices and fill their portfolios with resources that have the best outcomes are the winners,” Greenlee said. Those with high-cost portfolios will be the losers. The way that ExxonMobil figures out which side of the ledger it’s on, he said, is through selectivity of projects and quality execution, which boil down to the valuation of geophysical and geological data.
Like other operators, ExxonMobil has skewed more of its capital expenditures towards North American unconventional plays. But, deepwater and conventional plays still account for 60% of ExxonMobil’s investment going forward, Greenlee said. While the company has worked to lower breakeven costs for unconventionals, it also has done the same for its deepwater and conventional projects. One example is the company’s multi-billion barrel exploration project offshore Guyana, which has breakeven costs that are very competitive with the Permian Basin. It’s also a very geophysical-intensive project, involving mostly stratigraphic accumulation, illustrating the need for a geophysical sector that can continue to invest in new technology.
Greenlee said that today’s technology is just not good enough to meet the challenges of finding and developing future oil and gas resources. He does understand the difficulty in matching the right technology with a business problem and doing the right things, comparing the process to “trying to shoot a clay pigeon while running in the opposite direction as fast as possible.”
|Exxon's Guyana exploration map.|
“Very few people really understand the breadth of technology that can be brought to any business problem,” Greenlee said. Even with all the great systems available, Greenlee said oil and gas companies still can’t access all their data. Both the oil and gas and geophysical industries need to stay on the path of applying emerging technologies to solve problems, Greenlee said, adding that the industry “was on the cusp of a revolution,” and that projects should no longer take months, but weeks and days.
Unconventional resources, which have ushered in a new age of E&P business models and strategies, offer very solid economics, high quality, low above-ground risk and are very competitive with other ExxonMobil projects, said Greenlee, a geoscientist who joined ExxonMobil in 1981. However, these resources are lower intensity from a geophysical standpoint, and require companies to acquire lots of acreage and drill lots of wells before finding success.
Supply is increasing, but so is demand, meaning more oil and gas resources must be developed for supply to stay constant, Greenlee said. Growing supply is even more difficult. Even a conservative forecast by the US Energy Information Administration shows that, by 2040 to stay constant and grow slightly, nearly all the world’s producing base in terms of volume will have to be replaced. To meet future demand, all types of energy resources, including oil and gas, will be needed, according to ExxonMobil’s own Energy Outlook.
During most of the 21st century, the world experienced a time of growing crude oil prices. This growth was driven by the perception that resources were scare, hard to come by, expensive, and would be harder to find in the future, Greenlee said.
“It wasn’t until 2014 that we started to see that didn’t make sense,” said Greenlee, noting that technology was allowing industry to deliver more barrels than the world was ready to consume. As a result, global oil prices fell. At the same time, the perception of expensive, scarce resources drove oil and gas companies to invest more and more in exploration and development. Both capital expenditures and cost structures grew dramatically. While they enjoyed high revenues, oil and gas companies were overinvesting. That resulted in profitability declining well in advance of crude prices collapsing.
“We were driven by growth as a metric, and this didn’t result in a sustainable profit situation for the industry,” Greenlee said.
A similar trend was seen in the geophysical industry, although the sector saw its net income fall a bit sooner than E&P company profitability did. A slight rebound was seen in the geophysical sector last year.
Now, both the E&P and geophysical sectors are in the same boat, working together, Greenlee said. Both need to collaborate on funding the programs to gather the sound science data needed to develop regulations that make sense. Both industries need to focus on recruiting the next generation of workers, Greenlee said, adding that the quality of these workers will impact the industry’s future.