OE13: Geopolitics, price and technology…

Former BP CEO Tony Hayward, now CEO of Genel Energy, focused on geopolitics, prices, and technology, while explaining the role of the independent in challenging conventional thinking, at a keynote session on IOCs yesterday.

Geopolitics has defined the field of play, he said, influenced by OPEC, “the most successful cartel in history”, the collapse of the Soviet Union, and the opening-closing of Venezuela.

Technology is the lifeblood of our industry, and he said innovation has been characterized more by incremental than major step-changes.

Sharing and plagiarism of technology hardware is rife, but the real value is expertise and deep familiarity with play concepts and technology application, he said, giving shale development as an example. Here hardware may be openly available, but expertise is necessary to achieve success, he said.

He said IOCs have been successful in opening new plays through innovation and low-cost development because high oil and gas prices have made risk capital readily available, he said.

Hardware and experienced staff were freely available and independents also nimble, willing to take risks, carry little-to-no political baggage, and have realistic expectations, he said.

In the next decade, Hayward predicts OPEC will remain in place; Russian state dominance will preclude outside investment; and turmoil in the Middle East will continue, but the area will hold many opportunities for IOCs.

The US will not become energy-independent, but Hayward expects North America to become a net exporter. The US$100 barrel is the new norm, and the sector will continue to attract capital.

US natural gas prices will settle at $4-5/mcf, and it is inevitable that the link between oil and gas prices will break down. Given the global gas glut, revisiting gas-to-liquids seems inevitable, but GTL needs a breakthrough technology, he said.

Supermajors will continue to dominate Arctic exploration, deepwater Gulf of Mexico and West African development, but other markets are open for IOCS to flourish.

Session chair James Paton, of ADIL, said IOCs will beat costs by collaboration and shared infrastructure. Most discoveries are likely to be less than 10mn bbl, and the secret to success in any mature basin is to “make the pie as big as possible” and devise a fair (equitable) strategy to divide it.

Simon Flowers, Wood Mackenzie, said: “The entrepreneurial approach, seen over the last 10 years, will keep independents ahead of the competition.”

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