URTeC speakers discuss variety of issues in first-day session

By Kurt Abraham, Editor, World Oil on 7/25/2017

AUSTIN, Texas -- In multiple panel sessions and a topical luncheon, speakers during Day 1 of the Unconventional Resources Technology Conference (URTeC) in Austin, Texas, tackled a wide-ranging list of subjects, ranging from the viability of international shales to manpower, digital transformation, community responsibility and service/supply margins. And in some cases, the speakers did not pull their punches.

“The reason that it (exploitation of shale outside North America) has failed elsewhere, to date, is that there wasn’t the infrastructure or the geopolitical will for it to happen,” declared David Adams, senior V.P. of Halliburton’s Completion and Production Division, during the late-morning Executive Panel. “So, looking at the current market, I would say that the best opportunity is Argentina.” Nevertheless, countered Ken Tubman, V.P. of Subsurface at ConocoPhillips, if the industry is looking to expand shale activity significantly, it’s going to have to look overseas. “The big opportunity is what happens internationally,” said Tubman. “We’ve proven that it can work here—now, we have to try it elsewhere.”

Executive Panel speakers expressed considerable concern about the industry’s ability to maintain sufficient numbers of employees in its workforce to fulfill all the projects and operations that inevitably will come to pass in future years. In particular, the ability to attract younger people, especially when millennials have shown an aversion to 12-hr days, remote field assignments or any other sacrifices that, in the long run, might further their careers. “I think it’s important to include the “why,” as well as the “what,” in your career discussions with the younger workforce,” said consultant Jay Stratton. “You have to communicate with the younger people, and understand what their own motivations are.”

Tubman said the current, multi-year decline in the upstream industry isn’t helping efforts to recruit younger people to replace the growing number of retirees. “I don’t think we can hide the fact that the last few years have been hell—they’ve been rough on all our industry folks,” opined Tubman. “And then it doesn’t help, that The Wall Street Journal published a story the other day, saying that millennials are avoiding the oil and gas industry in droves. But we somehow need to communicate the exciting opportunities in this industry awaiting young people, and try to also give them flexibility in the job.”

Christopher Spies, V.P. of Geoscience and Technology at Concho Resources, noted that younger people do bring a fresh attitude and outlook to upstream operations, including an embrace of the digital transformation. “The exciting thing about younger people is that they’re almost fearless about bringing their data to you. They’re also big thinkers.” Indeed, noted Tubman, “The digital transformation is really changing how we do things. The ability to make data available at any time and almost any place is really helpful.”

During one of Monday’s Topical Luncheons, Darcy Spady, managing director of Broadview Asset Management, and the designated 2018 SPE President, discussed the need for operators to take greater social responsibility in developing and producing their assets, and to work to achieve what he called a “community consensus.” Spady reviewed for luncheon attendees, how the industry got to where it is, not only in terms of the level of shale exploitation, but also in terms of public perception of its operations. “Just think, 30 years ago, if you drilled a deviated well, you probably made a mistake,” said Spady at least half-seriously. “Today, fracturing is now a standard part of the completion process. But has our reputation kept up with our technology gains,” questioned Spady. “I don’t think it has.”

He went to explain that most of the U.S. industry “thinks in quarters,” doing what is necessary for the short term. By contrast, he noted that at Saudi Aramco, which is free from worrying about investors’ short-term thoughts, the giant NOC is able to “think generationally, so it’s easy for them to put environmentally friendly well design engineers in the field, while the rest of us are thinking quarterly.”

Spady advocates that the industry quit thinking in terms of shareholders or stakeholders, and start using the term, “shapeholders,” as part of a process of incorporating corporate social responsibility into decision-making. The term is based on the book, Shapeholders: Business Success in the Age of Activitism, authored by former U.S. Congressman Mark Kennedy, who is now president of the University of North Dakota. In his book, Kennedy defines shapeholders as “the political, regulatory, media, and activist actors that shape, constrain or expand a firm's opportunities and risks.” He says that “if you either must, or believe you can, prevail in achieving the position you advance on an issue, it is essential to optimize the right mix of Why (Goal), What (Message), Where (Arena), Who (Coalition), How (Channel) and When (Timing).”

Spady said that a good example of a firm practicing good corporate social responsibility is Canada’s Foster Creek oil sands project, operated by Cenovus Energy. At this facility, the firm has reduced its water usage by half during the last 10 years. In methodically addressing community consensus going forward, Spady said that operators must: 1) “Look in the mirror and realize that what you impose on others MUST be good enough for you;” and 2) “Be the best that you can possibly be, technically.”

Meanwhile, during the afternoon panel session, several service/supply executives addressed the issue of their sector’s margins and profitability. “We’ve been looking at models on the manufacturing side, to see how we can be more efficient and cost-effective,” offered David Reid, chief marketing officer at NOV. And yet, the predicament that faces many service/supply firms was articulated well by John Schmitz, chairman and CEO at Select Energy Services. “We took a lot of cost out by closing yards,” said Schmitz. “But today, we need to add equipment, [except] at today’s rates, we’re not adding equipment, because you can’t earn an appropriate return.”

Colin Scott, V.P. at Patterson/UTI, seemed to exemplify the plight of drilling contractors in the current market. “We dropped our head count from 6,000 to just over 1,300,” noted Scott. “Now, in the second half of last year (as things began to get better), about 70% of the people we hired back were former employees. But we’ve had a number of people (mostly former employees), who have refused to come back, until they can see, with more certainty, that things are getting better.”

Richard Gonzalez, V.P. for Production Enhancement at Halliburton, summed up the prevailing attitude of service supply firms. “For sustainability, we’ve got to make the cost of capital to survive. And, it’s got to be stable over several years, across the life of these assets. If you look at the life of the assets, we’re (apparently) banking that there’s going to be better times in the future.”

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