DI Blog

Insights across the energy value chain

There has been plenty of public commentary about the loss of experienced older geoscientists and petroleum engineers simply due to aging.

The graph below, from an internal Exxon study, shows a trend from 2001–2013 their geoscience workforce sharply migrated toward older, retirement ages.

 

Dan Bilman’s 2014 article in the American Association of Petroleum Geologists (AAPG) Delegates Voice makes a similar point — many geoscientists in the oil & gas industry are at the latter stages of their careers. Based on his numbers, about half the population of the AAPG is 50 years of age or older.

https://archives.aapg.org/business/hod/2014/01jan/officers-sec-editor0114.cfm

While the Society of Petroleum Engineers (SPE) is bringing young engineers into their organization, their student membership growth is occurring outside the U.S. and Canada, and mainly in South America and the Asia Pacific region.

Growth in North America over the past five years is down for both members and students. The industry’s age demographics appear to be falling short of what the future will demand.

https://www.spe.org/about/annualreport.php

The “Great Crew Change” often evokes a fear that the insight into the practice of oil & gas geology, geophysics, and engineering — the retained knowledge of quirks in field geology and production engineering, ideas held in memory of undrilled “great” prospects, cautionary tales of “how it went wrong” in prospect  definition methodology, or access to the wide knowledge network of older peers — will disappear when the older generation heads into permanent retirement.

When they go, the worry is that the hedge against risk these accumulated insights and skillsets the older generation represents, vanishes. Does it really matter, in today’s world of unrelenting focus on unconventional reservoir development?

The qualification of risk in oil & gas has changed from, “Will I make a well (i.e. do I have a large enough sealed trap with sufficient reservoir porosity and permeability)?” to “What kind of well will our engineers deliver to the bottom line?”

The prospect generators among us — the folks who worried about fault trend closures and the Wilcox, Frio/D sand/Muddy, and Rose Run isopachs, and looked for the Holy Grail of a large strat trap — are not in much demand these days. PE and institutional capital funds are backing unconventional reservoir plays because they are far better managed to margins, even if the per well payoffs are sometimes lower. Bankers are far more comfortable lending against engineering risk than against geology risk.

What I’m curious about is this — what, in this unconventional paradigm, is a newer generation of geoscientists confronting as project viability risk events?

Presumably, we all are aware of and account for industry risks as played out in price swing cycles. Some of us feel that there is NOTHING that replaces the terror of sitting in a logging trailer, looking at a down log to see if your target reservoir is at the structural position you picked, whether the resistivity values imply the presence of oil or gas (especially if your mud log has marginal shows), and whether the up-log porosity numbers help calculate out to good water saturation values.

You either make a well — good on ya, mate, beers all around — or you make that dreaded call back to the office or your investor group to tell them the acreage and dry hole money has yielded a loss.

What kind of bone shaking risk moments do the next crop of oil & gas professionals face in this unconventional world? How should their university education prepare them for these?

Maybe in this day and age of production-line factory drilling, the appreciation of risk gets lost in the accounting, the IRR calculations, and managing the margins.

Perhaps the worst case is being so far out of zone while geosteering that you lose your downhole motors and have to sidetrack, orthat your frac fluid does not make up properly and you won’t get enough of your expensive frac job pumped.

Either way, the asset value of a 50,000 acre Wolfcamp block is not significantly impaired by one or two unfortunate events — but if you find your target reservoir target 50 feet low to projections on a conventional well  — that’s a complete project write off.

On a strategic level, there is risk in determining where and if the boundaries of an unconventional play can be expanded into an area of lightly drilled acreage that has been discounted due to minimal log control. These uncertainties can always be risked into a go-no-go acreage acquisition plan.

Whether geoscientists live in the unconventional world, the conventional world, or both, it is hard to let go of the idea that to earn your spurs in this business, you’ve learned some tough lessons about how risk really works, put your name behind a prospect, made a  hard call,  and risked nearly everything to get to TD.

Are exploration instincts being fostered and developed in the younger workforce in today’s companies? If so, how?

In the eyes of today’s managers, how important is it that their new geoscience and engineering hires have a seasoned understanding of risk? Do they value instinct as much as they value pivot tables?

I’d love to get your thoughts on what gut-stopping risk moments you’ve faced in today’s patch. Please forward any thoughts to me at mnibbelink@drillinginfo.com.

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Mark Nibbelink

Drillinginfo Co-Founder, Director Of University Outreach Before co-founding Drillinginfo in 1999, Mark had a long career as a prospect geologist at Gulf Oil before beginning work as an independent geologist. Mark is responsible for quality control and data integrity. He received his Bachelor of Arts in geology and his master’s in geology and geophysics from Dartmouth College.