Regina 鈥� 鈥淚鈥檝e basically chosen not to participate in the downturn.鈥�
Those were the words George Sutherland, a geologist, said in winding up his presentation to the Williston Basin Petroleum Conference supply chain forum on April 28 in Regina.
You see, he鈥檚 been through these things before, and has learned a thing or two.
For instance, being a geologist, you need to be an optimist. And that means looking for opportunities where you haven鈥檛 found any before.
Sutherland is the president of the Petroleum Training Institute, and formerly was the head of the Petroleum technology department at the 麻豆传媒AVern Alberta Institute of Technology for eight years.
He started his presentation with greetings in several languages.
鈥淵ou may say, 鈥榃hy would you start that way?鈥� Well, we鈥檙e looking for opportunities,鈥� Sutherland said. 鈥淥pportunities are not what鈥檚 in front of your nose, what you鈥檝e been looking at the same way for the last 15-20 years! Opportunities are something that may be in front of your nose, but you didn鈥檛 realize it.鈥�
鈥淥pportunities are something you didn鈥檛 perceive as an opportunity before. The issue is how to realize it鈥檚 an opportunity.鈥�
He picked up on a Newfoundlander expression. 鈥淪tay where ur to and I鈥檒l come where ur at.鈥�
鈥淭hat鈥檚 where we鈥檙e at! You are there, and I am going to stay where I am to, so you, as a group of suppliers, better figure out where I am at, or you鈥檙e going to have difficulty in this market being successful.鈥�
鈥淚f you don鈥檛 know where you鈥檝e been, I don鈥檛 know how you are ever going to map where you are going to.鈥�
And that would be to increase their business, he said.
鈥淲e know the industry is sometimes up, and sometimes down.鈥�
He recalled the summer of 2008, when oil got into the $140 a barrel range, but by October it wasn鈥檛 looking that good.
鈥淭he past industry picture, back to when I started my career, was 鈥榝ind more oil and gas,鈥欌�� he said. That included Lloydminster in 1934, and Leduc in 1947. 鈥淲herever it is, we鈥檝e got to find more of this stuff. And the only way to do it is to drill more wells.鈥�
Basically companies keep drilling and let the good times roll. He recounted the famous bumper sticker calling for God to grant one more oil boom and I promise not to screw it up today.鈥淓verybody in this room is more than aware exploration activity is down. How many geologists and geophysicists would you like to hire today? It wouldn鈥檛 take too much effort to get a room full of them. I don鈥檛 mean they鈥檙e not good people, there鈥檚 just simply not that activity. If you don鈥檛 get a big exploration picture, we know the number of drilling rigs that are operational (will be down).
鈥淒rilling activity is down. So if you are a company that is in the oil and gas business, what do you make your money from? Production. So production, historically, just rode along. Profits were great. We watched closely our exploration budgets, our drilling budgets, and we made profits. But, I just took the first two off the table, so now we鈥檙e on the production cycle. That鈥檚 where you鈥檙e going to get your money from.鈥�
鈥淲hat is the trigger for this to go another direction? WTI is higher lately, a positive thing? What does the sheik in Saudi Arabia think? What鈥檚 on the table? We won鈥檛 get into what鈥檚 under the table. I think that has a bit to do with it today also, but that just may be my opinion.
鈥淩ight now we have a huge supply and lower prices. Pretty much anybody who鈥檚 got more than a one-litre or one-gallon bucket has it full (with oil), because you can buy it at a really good price. That鈥檚 where we鈥檙e at. That鈥檚 what we have to deal with. It doesn鈥檛 matter how long you鈥檝e been in this industry. You have to put up with, right now, lower rates of exploration, lower rates of drilling. So who is it that鈥檚 doing anything? That鈥檚 where you are going to get your work,鈥� Sutherland said.
鈥淭he current focus is on production, because that鈥檚 where cashflow comes from. But since the first two are off the table, companies have a cost reduction strategy, particularly for production and operations. They want more for less.鈥�
He noted anyone who sells from pencils on up has had companies have been asking for price reductions. Companies granting those reductions are, in turn, asking for long term contracts to make up for it, so they can ride this out. 鈥淭hat鈥檚 a possible option,鈥� he said.
Shale gas in Sask?
As a geologist, Sutherland suggested there might be a possibly of development of shale gas in western Saskatchewan.
鈥淚s it economically viable? Does it have the light liquids with it like northeastern B.C.? But if you look at a geological map, there鈥檚 quite an area that might have some potential.鈥�
Better mousetrap
鈥淚f you invent a better mousetrap, you can鈥檛 be putting a lot of capital in it,鈥� he said, adding you will have to charge more for it. That is problematic in an environment where clients are demanding paying less, so you have to be careful.
He laid out a graphic of the cost of production in various basins (including Lloydminster at US$47/barrel for heavy oil). 鈥淲hether we like them or don鈥檛 like them, that鈥檚 the way it is.鈥�
鈥淐an you do it more effectively, more efficiently? Can you lower your costs? Or can you come up with a new trick of how to do it? We need more efficient, longer lasting pumps. So, do we need a new mechanism, an different metal, a different packer, a different something that, all of a sudden, makes it better?鈥� he said.
Faster and less costly pump replacement is another possibility he suggested.
鈥淢ore effective and less costly emulsifying is another area of potential interest. Reduction of transportation costs is another.鈥�
Using steam as a recovery and drive mechanism is another area. Producing that steam above ground means losing a lot of energy on the way downhole. Some companies are looking at pumping the water, air, and gas underground, creating combustion at the reservoir face, and producing the steam underground, he said. This is being done in Saskatchewan, he noted.
He added this was not a toe-heel air injection or fireflood concept.
One company, in particular, is hoping to move into a full-fledge pilot scheme this fall, he said. 鈥淭hey have made it work, here in Saskatchewan.鈥�
North Dakota has new environmental regulations in place, and those regulations are not optional.
鈥淒o you have methodologies to help companies address these new environmental requirement, keeping the cost down and addressing the requirement?
For gas recovery, Sutherland said the rules basically are now in North Dakota, 鈥淣o. 1, don鈥檛 flare. No. 2, didn鈥檛 you read No. 1? And No. 3, you must be really dumb, please go back and read No. 1 and get out of the business.鈥�
Summing up, Sutherland said, 鈥淲e need operational and logistical efficiencies. It is time to refocus. The industry is not focused on exploration and drilling. I don鈥檛 mean forget everything you knew about that, but you need to focus on production, which produces money. Environmental requirements are stricter and stricter and there鈥檚 technology and services and people required to do that.鈥�
His company is training many people who are now laid off. 聽
