First Oil

Vol. 234 No. 4

If you win the lottery tomorrow, you will be elated, of course. What if the winner is an acquaintance, office colleague or unfriendly relative? You’d probably be somewhat upset. That is the emotional, instinctive reaction you’re likely to have, with a question for the Almighty: “Why not me?”

Turkey had just such a response last month at the good fortune that Cyprus gained through the discovery of the giant offshore Aphrodite gas field by Noble Energy (never mind the recent banking crisis). Turkey has had a long-standing dispute over Cyprus. Tensions between the Greek and Turkish Cypriots culminated in 1974, with the Greeks launching a coup to annex the island to Greece, and an invasion by Turkey in response. The island is now partitioned into northern Turkish Cypriot and southern Greek Cypriot areas, demarcated by a U.N. buffer zone.

In March, Turkish Energy Minister Taner Yildiz announced a suspension of the country’s projects with Italian IOC Eni, acting on a 2 year-old threat to banish energy firms from exploring for oil and gas offshore Cyprus. Subsequent news reports suggested that the suspension would concern future projects, rather than active projects, such as the Blue Stream and Baku-Tbilisi-Ceyhan pipelines. In January, Eni signed exploration and production sharing contracts for three offshore Cyprus blocks. Eni’s plans for Cyprus will be based on detailed geoscience evaluation, but just the signing of the leasing agreement has set off a negative reaction from Turkey. It is Turkey’s contention that the offshore resources belong to all of Cyprus, and the exploitation of these resources needs to await reunification of the island.

On the other hand, Saudi Aramco has been much more magnanimous in its reaction to North America’s shale oil and gas bonanza. “The oil and gas industry across North America is flourishing, and helping to drive national and regional economies, thanks to many of the enterprising companies and individuals,” said Saudi Aramco President and CEO Khalid A. Al-Falih during his keynote address at the IHS CERA Week in March. “You challenged pre-conceptions with your entrepreneurial spirit, and the ‘can do attitude’, which has always characterized this great nation. Once again, you’ve set the pace for the rest of us in the global petroleum industry.”

Al-Falih sees America’s shale growth as representing a renaissance of the oil and industry—a complete reversal of earlier news reports in the global news media about doomsday scenarios of “Peak Oil” and the inevitable demise of the petroleum industry.

Al-Falih cautioned petroleum executives not to become complacent. “Although we are on the right track, if our history teaches us anything, it is that such rosy forecasts do not always become reality,” Al-Falih warned. “Let’s just make sure that we are—collectively and individually—robust enough to withstand the shocks and black swans that we know are inevitably out there. Now is the time to think about preparing ourselves for their certain arrival.”

Here’s where Al-Falih brought in the concept of resilience. “Our industry’s story is indeed one of resilience against multiple shockwaves, thanks to dynamic individuals and companies, but regrettably with some casualties along the way and hard-learned lessons to stiffen the spines of the survivors,” Al-Falih explained. He suggested five steps to increase the industry’s resiliency: 1) recognize the value of market stability, 2) heed lessons of the past and manage risks, 3) meet societal expectations with improvements in health, safety and environmental protection, 4) invest in transformative, game-changing technologies, and 5) attract and harness the right talent.

People outside the industry often think of oil and gas discovery and development as chance events, equivalent to winning the lottery. However, as Al-Falih has explained, it requires vision, hard work and business acumen to manage risks.