Gaffney Cline’s Meehan opens World Oil’s Shaletech Permian conference
ODESSA, Texas -- Acknowledging that E&P activity in the Permian basin has made a substantial comeback, Nathan Meehan, president of Gaffney, Cline & Associates, a subsidiary of Baker Hughes Inc., a GE company, said that it’s very difficult to know how long the global market outside of West Texas will remain in a lean condition. Meehan’s comment came during a keynote address that opened World Oil’s ShaleTech: Permian conference and exhibition in Odessa, Texas, on Tuesday morning.
“If you take the total number of rotary rigs and cable tool rigs, together, that were working in the U.S. during 2016, you will find that it was the lowest number since Abraham Lincoln was president, back when all we had was cable tool rigs,” noted Meehan. “But is it (the market) going to be like the late ‘80s and early ‘90s, where we had seven or eight lean years in a row, well it’s just impossible to know. Inventory levels of oil storage in the U.S. have begun to fall, and that’s a good thing. The real driver for storage levels will be how much demand there is from refineries and petrochemical plants for additional oil supplies. Right now, I think we still have a while to work it all off.”
Meehan made an effort to point out facts about the market that go beyond just the traditional numbers and indicators, occasionally drawing from his experiences while serving as SPE president during 2016. For instance, he showed a photo of a Greenpeace ship docked in Denmark, with the following slogan emblazoned on its side: “Fornuft eller fracking,” which translates to “Sense or fracking.” In other words, hard-core environmentalists think that the only “sensible” way for energy development to proceed is to reduce and eliminate oil usage, particularly crude supplies produced from shale, utilizing fracing, in favor of renewable fuels. Yet, as Meehan rightfully noted, “Even in the most optimistic forecast for growth of renewable energy, the use of fossil fuels will still go up.”
As regards the hot-button issue of emissions from upstream operations, Meehan said that “we’re going to have to be part of the greenhouse gas (GHG) emissions discussion, or somebody else is going to dictate the regulations,” to the detriment of the industry. That having been said, he also noted that the U.S. seems to be held to a much stricter standard on GHGs than the leading source of these pollutants, China. “After all,” he explained, “CO2, once it gets into the atmosphere, is unaware of which country it comes from.” He also debunked the myth that has become common among media outlets, that China has suddenly cleaned up its act, just because the sky in Beijing seems to be more clear of late. “The reason that the atmosphere seems to be better in Beijing is not because the Chinese reduced their coal usage, but because they moved the factories using coal out of Beijing, into more remote areas.”
Meehan also took issue with attitudes among some countries and officials in the United Nations, who think that “sustainability” means reducing the standard-of-living for everyone. “So, what is sustainability,” asked Meehan. “The UN defines it as ‘meeting the needs of today, without compromising the ability of future generations to meet their own needs.’ Notice that it doesn’t say that you must sacrifice your own needs today.”
He opined that there are several issues, upon which people on both the left and right sides of the political spectrum can agree. Number-one issue, he said, is the need to eliminate flaring. “Russia is actually increasing its flaring, as it increases oil production, and leads the word in flared and vented gas.” He said that the next nine countries with the highest flaring volumes are, in order, Iraq, Iran, Nigeria, Venezuela, Algeria, the U.S., Libya, Mexico and Venezuela. Not mentioned by Meehan, but still an inescapable fact, is that seven of these ten countries are OPEC members. He noted that flaring could be reduced, simply by conducting better drilling programs that require fewer wells. “The number-one way to reduce the environmental impact of operations is to quit drilling crappy wells. If you drill better wells, you’ll need fewer of them.”
Another item that everyone can agree on, continued Meehan is the need to ensure wellbore integrity. “Small leaks don’t show up on production logs, but fiber optics can detect them.” A third item that everyone can agree on, he said, is the relative value of natural gas to coal. “I happen to think that natural gas is the key fuel of the future. It has half the CO2 emissions.” One addition item that Meehan thinks people can agree on is that “it’s vital to eliminate oil spills. We must maintain our social license to operate. We cannot afford to have any more Macondos.”
Meehan wrapped up his remarks by noting what he thinks the oil and gas industry’s purpose continues to be: “Enabling safe, affordable energy, improving people’s lives.”
