For many years the Energy Economics and Technology Committee of AAPG’s Energy and Minerals Division has been “a hidden resource under the AAPG umbrella,” in the words of co-chair Jeremy Platt.
The Committee issues annual, sometimes biannual, reports. Because information relating to the Committee’s purview floods in on a daily basis, Platt said, the group focuses on important recent or sometimes historical events, rather than trade news or forecasting.
With reports available dating as far back as 2005, “Our contributors have included, from time to time, individuals with remarkable reputations in energy analysis. Having myself spent a nearly 40-year career working alongside such individuals, our approach has been to tap fine minds regardless of individuals’ geoscientific credentials or lack thereof,” Platt said.
The Committee’s latest submission, released late last year, is a departure of sorts, being both up to the minute and focused on one topic: “Energy and Inflation.”
“The topic of inflation and connections to oil have been on people’s minds for a long time, not least since the midsummer 2022 spike in oil prices,” said Platt.
Pratt said it’s no surprise that “as far as the general public is concerned and the tracking of big numbers, the story is dominated in most years and months by oil, by gasoline at the pump. Yet it is interesting to see how some of the components have changed since the pre-pandemic year of 2019.”
“By components? Gasoline, natural gas, electricity,” he continued. “My own background was deeply involved in fuels used for electricity – uranium, coal and for several decades, natural gas, which had once been shunned. So it was quite interesting to learn that, unlike oil and natural gas, from a consumer’s point of view, electricity costs recently have just gone up and up, even though natural gas – to which its wholesale costs are joined at the hip -- have fallen sharply into its habitual very unattractive (from a producer’s point of view) territory.”
Origin Story of the Committee
The Committee began by the fall of 1998 after recommendations within EMD by Platt and Keith Murray and later executive actions. Its aim was to provide an avenue within AAPG to advance understanding of the interplay of energy markets and technologies of supply and demand. The means for doing this has been to tap experts with different backgrounds and perspectives, to organize topical sessions principally at annual meetings, and to develop annual reviews with commentary on selected themes and guidance on important references. The importance of providing this service owes to the essential need for energy in people’s lives, the magnitude of shifting policies and fundamentals, the unease and uncertainty that never goes away, and the need to participate in discussions and learnings to stay on top of one’s profession.
The group quickly began making significant contributions and has continued to do so in the decades since.
“The Committee’s first big splash,” Platt said, “was a full-day forum at the 1999 annual meeting on ‘Gas in the New Electric Market.’ Natural gas was beginning to play a central role in the economics of power generation … The industries – oil, gas and electric power – were becoming tied together. Explosive advances in efficiency and cost-effectiveness of power generation technology, coupled with deregulation of that industry, led to burgeoning growth in the use of natural gas.”
Hydraulic fracturing wasn’t on the radar yet, he explained, while natural gas and coal presented considerable uncertainties.
“Many were surprised that reserves of seemingly scarce natural gas were proving to be much greater than expected,” said Platt. “Past AAPG President Bill Fisher was one of the first to document this. And as today, coal generation was widely seen to face waves of regulatory hurdles, even though coal supply had undergone shocking growth due to the phenomenal attributers of the Powder River Basin deposits. In a sense, the Powder River Basin had become, for coal, what the Permian Basin is today is for U.S. oil and gas, if not more so.”
Understanding Energy Economics
Energy economics can only be understood by bridging separate fields, Platt explained, be it geology and economics, exploration and engineering, and “with the advent and urgency of mobile and stationary energy storage, such disciplines as solid-state physics, electrochemistry and the outlook for the costs of battery materials and EV penetration.”
Still profound is the continuing interplay of natural gas and coal in the commodity market, both on a nearly seasonal basis and, within the past decade, in response to gas’ superior economics.
The Committee has been a major force behind many important events, exploring emerging opportunities and controversies as they buffet the industry.
The Committee was a principal organizer of AAPG’s 2012 Geosciences Technology Workshop in Golden, Colo., on “Hydraulic Fracturing – New Controversies, New Plays.” It organized the panel, “Energy Transition: Oil and Gas in the Crosshairs,” at the 2021 International Meeting for Applied Geoscience and Energy, bringing perspectives from Wall Street finance, the auto industry and the power sector.
And it was with great anticipation that it organized a workshop and field trip to examine the special markets of natural gas liquids, centered on the pre-eminent storage and price-setting hub just 30 miles east of downtown Houston, Mont Belvieu – only to be scuttled by the pandemic.
As these few examples attest, energy economics and technologies are constantly changing, and it should not be surprising that the purview of the Committee remains at or near the top choice in surveys of AAPG members. It also regularly engages experts from outside the geoscientific community, Platt said.
“The door is always open,” he emphasized. “One of the most rewarding collaborations was when our Dieter Beike, a petroleum engineer with a rich industry background, jumped on board and soon became co-chair.”
The Committee’s “bread and butter” remains its annual reviews, he said. Beginning about 2000, and ending with its 2018 contribution, these were periodically co-published in the journal Natural Resources Research.
Other major contributions from the Committee include 2022’s review: “Transition Framework and Questions.”
“That deep dive on the energy transition, as noted, was issued in November 2022. The review followed a very similar outline to one presented at the AAPG September 2021 annual meeting, when AAPG partnered with the Society of Exploration Geophysicists under the entity called ‘IMAGE,’” Platt said. “That in turn was based on interviews and research throughout 2021, so that by November 2022 we had been pursuing this topic of the energy transition for over a year and a half and had exhausted all the low-hanging fruit and ourselves (and myself).”
“Another year has gone by, but I haven’t seen anything to dislodge or replace the insights included in that major review,” Platt added.
In the Market for Experts
The Committee’s main goal, he said, is to “stay on top of a bucking bronco and remain relevant, continuing to advance understanding of complicated markets and other developments, and organize occasional topical sessions and other events.”
“To do this, it will be important to find co-workers and successors to keep up the work,” Platt reiterated. “Those who have the connections, or can make and sustain them, to experts across industry and the consulting community will be a great asset. With such individuals, the Committee will continue to serve as a forum for learning, doing the legwork for those who don’t have the time or position to do this all themselves but appreciate the destination. The notion of symbiosis is at the heart of this, namely providing forums shaped by individuals’ professional needs, where they can shape AAPG to serve their own evolving geoscientific/economic interests. Only then does AAPG remain a relevant priority in their lives,” Platt said.
Predictions
What does the future hold for energy markets and technology?
“A short answer is ‘more of the same, but different,’” answered Platt. “This means understanding the scale and extent of possible changes in transition, serving vital needs to bring perspective on such changes which are often nearly unrestrained fantasies produced by well-intentioned scenarios quantified by vast computer models and data collections.”
More specifically, Platt said that “hydrogen realities will need more attention. Autothermal reforming, the Allam Cycle in power generation, the promise and constraints on renewables, the faltering steps toward carbon sequestration, all these will need to continue to be tracked. Will they rise above the forest floor and make a difference?”
Embedded in this is appreciating the oil and gas industry’s remarkable technical proficiency and the role that the private sector has played in transformations, he said.
“This is not a statement of capitalistic political philosophy but the reality of what it takes to steer investment at scale. How will the tension and promise of ‘demand pull’ be reconciled with ‘regulatory push’ in any serious grappling with climate change?” Platt explained, citing the shale revolution as illustrative of this tension.
“One certain conclusion is that Big Oil’s negative reputation has done it no good in making the case that it is a vital part of the solution, and not the problem,” he added. “This has led to efforts to nip off fossil fuels at the bud, on the easy-to-snip supply side, without giving serious attention to the demand. Time and again, when demand gets ahead of supply, fuel insecurity and intolerable price escalation will take primacy over all other considerations. Anticipating this, tracking how this plays out, sticking to objective facts and data, and steering clear of advocacy will be central to sound understanding going forward. Not an easy course.”