Energy 360: E&P Challenges and Opportunities: Rhapsody in "C"
Authors: Haldorsen Helge Hove 
Published: January 2015

President's column

Last month, my column set the course for my new term as SPE president by encouraging our 124,000 members to be very proud of their professions, which provide energy for human progress. As the ExxonMobil ad says: You have “changing the world” in your job description. In this column, I will describe the challenges and opportunities that our members and the exploration and production (E&P) industry face. Solutions to the challenges will come through SPE, a catalyst for innovation and rapid global sharing of incremental and radical improvements. In the process, we will help our industry become E&P 2.0.

Cs Everywhere

Have you noticed that everything critical to respond to, address, and improve on in E&P seems to start with the letter C? We see changes all around, increasing complexity costs relentlessly rising, correct petroleum engineering forecasts few and far in between because of insufficient cross-discipline collaboration with the industry’s capital efficiency and competitiveness taking a beating. E&P investor focus is firmly on value rather than volume. Investors want to see a high TSR (total shareholder return), a positive net cash flow after dividend, and a strong return on investment—basically more bang for each invested buck. Unlike a few years ago, a strong production growth outlook (for example, to 2020) no longer earns you a premium valuation in the marketplace and short-termism is rather prevalent.

Local communities in which we operate rightly expect more from us to earn their trust and a constant and relentless focus on HSSE-SR (health, safety, security, environment, and social responsibility) every day is what it takes. With absolutely no short cuts allowed. Then, there is the joint global challenge around climate change, sustainable development, and the notion of a carbon bubble (that there is an upper limit to how much fossil fuel can be burned and CO2 emitted if the planet is to stay below 2°C relative to preindustrial levels.) Compounding the issues, we have the industry big crew change going on with attempts to navigate success with less experienced leaders and professionals. At the April 2014 Cambridge Energy Research Associates (CERA) Week in Houston, the buzz was: “A new sense of reality has set in. The cost side now exceeds the income side in many E&P projects and USD 100/bbl is the new USD 20/bbl. Industry needs USD 100/bbl for field development projects to fly.”

Core Challenge

On the positive side, we are teaming up as an industry every day to deliver more than 90 million BOEPD and 350 Bcf/D. We just have to do it more safely, more cheaply, more quickly, more sustainably, and with higher margins and returns to be competitive. That is the core challenge and that is the core opportunity for us, our employers, and for the E&P ecosystem as a whole (universities, research and development, service companies, oil companies, and more.) It is a mission to share for the industry and all of SPE’s 124,000 members and staff. For the next 50-plus years, hydrocarbons will continue to fuel the world and it is our duty to take every integral part of E&P to the next level in order to relentlessly improve the sustainability and competitiveness of our business.