These remarks are my response to comments on the NPC report.
Some observers are pleased with the progress the recent NPC report has made, while others tend to think the report did not address key issues crucial to its stated mission and title. I personally can see both perspectives and would agree with many observations being made as to why the report was either wrong or right. I do, however, want to comment on one of the foundations that the report was based upon.
To the best of my knowledge, the NPC report did not independently reforecast anything; it simply analyzed currently available data. This was relayed during last year’s annual technical conference of the Society of Petroleum Engineers in San Antonio, TX where the NPC gave a status update of their report. The point here is that we would be remiss to state that the NPC sees this or that and has forecast X or Y, because what they have done in their new report is to reference myriad other forecasts and studies put out by many other groups with opinions as diverse as those of CERA and ASPO. In my personal opinion, the NPC did a tremendous job of compiling, distilling and analyzing the many differing sources of data and opinions available and should be commended for that.
Is the data that the NPC compiled and commented on suspect? Absolutely – it ALWAYS is in this business. I am certain that the past reports and studies generated by all of those who were cited by the NPC were thoughtfully and thoroughly generated, but the unimaginable complexity of this global energy business de facto makes these essays and statements obsolete the second they go to print. Some of them indeed capture the direction we are headed, but none can truly predict the outcomes with high degrees of certainty. Things change every day, particularly with respect to the above ground factors within our unpredictable and volatile economic and geopolitical environments. Let me ask – was there time for the NPC to digest and incorporate the recent IEA report that tends to be painting a tighter-than-consensus picture on near/mid term petroleum supplies? Probably not. Would the new data have impacted the NPC report’s findings? Probably so, if even only a little. Bottom line, the NPC report is only as good as the data it considered, and we all know that the landscape on the data front is changing every day.
And now to put on a slightly more defensive hat – I feel it appropriate to comment on the motives of the NPC. Yes, I work for a company that is a member of the NPC, but I am not a big hairy monster who dips his food in crude oil before devouring it. Similarly, I do not believe that the NPC and its affiliate members are conspiring to cover up a scenario that paints a dire end time for the world as we face more and more extreme difficulties on the O&G supply side. I challenge you to read and reread the NPC’s executive summary bullet points, both the observations and also the recommendations. I put forth that if one did not know the identity of the authoring body, or if one were not as intimately in tune with the current energy situation as all of you reading this assuredly are, you might think that this was a rather enlightening piece of work. Admittedly I may be biased as an industry participant, but please know that my passions reside firmly in the middle ground here and I seek only solutions as do all of you.
As someone who has personally witnessed individual wells, fields, basins and even countries achieve and subsequently pass their peak productive petroleum capacities, I can say that I’ve been there and done that. In my opinion at least one or more types of “oil” production are now, or soon will be peaking. We are seeing the effects of this in product prices, and I hope for all of our sakes that the free market does indeed respond efficiently and without great upheaval. Most economists and governments expect it should self soothe, but I doubt they suspect the magnitude of the corrections that will be necessary to bring about a new equilibrium. I wish to both learn from others, and also help continually advance the knowledge of my fellow humans in this exciting field. Wars will be fought, money will be spent, and dreams will be fulfilled and dashed all in one fell swoop. Technologies both new and old will help us achieve higher and higher recoveries from both existing and yet-to-be-discovered fields, but can we recover this petroleum at rates exceeding those at which we produce today? Maybe, maybe not – only time will tell.
As much as we may like or dislike the findings of the NPC report, it does indeed serve a purpose and appears to be taking a step in the right direction in my humble opinion. That direction is leading down the path of inquisitiveness and preparation. The NPC report encourages further research into unconventional oil and natural gas recovery methods. It discusses coal technologies and also encourages diversification to energy sources such as nuclear, biomass, and other renewables. As one whose livelihood depends on “Oil”, I am not bothered by this at all. Not even the call for efficiency bothers me or my colleagues in the least. We all pay bills too, and truth be known, high oil and gas prices don’t always mean that O&G companies make more money. (We’ll save a discussion on margin and profitability for the future.) We need additional sources of energy to sustain the world’s desire for growth and a better way of life that comes with access to clean and affordable energy. Even with alternatives to petroleum coming on line to help appease this growing global energy demand, there will be plenty of work for me and others like myself to do as we scour the globe for more and more petroleum sources while at the same time optimizing fields that have been producing for decades or even a century or more already. The production rates may or may not continue to climb, but the precious rock oil that we provide will likely be no less valuable 50 years from now than it is today.
In closing, by the time you read this, the opinions and pseudo facts I have parlayed herein will already be obsolete. That’s life – I’m wrong and there is nothing I can do about it. I do hope, however, that my observations and those of the NPC have sparked new opinions and trains of thought from within your creative minds. Interesting times are now upon us in the energy arena. Wise men have said that necessity is the mother of all invention, while even wiser men have said that not necessity, but rather desperation is the mother. How desperate area we? I think we’re about to find out.
Eric Erickson is a Registered Professional Petroleum Engineer with extensive breadth and depth of knowledge in the fields of oil and gas exploration and production as well as economic theory and global geopolitics. He works for a respected multinational independent oil and gas E&P company headquartered in North America.
(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)