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E&P

Yin & yang of the upstream industry—bringing the exploration outlook to production

president & CEO, I/O

The first 20% of the full text of this article appears below.

In the upstream energy industry, explor-ation and production are like yin and yang—opposite yet complementary or symbiotic elements of a unified system. Professionals engaged in these two major phases of the reservoir life cycle—geoscientists on the one hand, engineers on the other—have uniquely different mindsets, with time-honored approaches to challenges and opportunities. Yet both are absolutely vital to the well-being of the industry and of the global economy.

Unfortunately, the yin and yang of E&P are out of harmony.

For years, oil and gas companies have globalized strategic exploration projects, aggressively applying cutting-edge geophysical technologies and portfolio management methods to balance risk and reward. The same companies have been decentralizing their production operations into local asset teams focused on optimizing efficiency. Does this strategy still make sense?

Since most of our future reserves are likely to come from existing fields, isn't it time we began selectively globalizing strategic production operations, better integrating reservoir geophysics with engineering, and portfolio-managing these assets just as we have in exploration? To do so, yang may need a bit more of yin's outlook.

But the payoff could be enormous. As an industry, we stand to gain far greater recovery from known producing fields, improve net present value, and invest our production capital much more intelligently.

	Are we too risk averse?

 
Everyone knows there is a looming shortfall between oil and gas demand and the industry's ability to meet the world's rapidly growing energy needs (Figure 1). According to some estimates, global consumption could jump from about 82 million barrels a day today to 120 million barrels by 2030.

View larger version (73K): [in this window] [in a new window]   Figure 1. Looming shortfall.