Oil prices were at near record highs when I became AAPG president almost exactly one year ago – and immediately thereafter they began to fall.
At the time I’m writing this prices have recovered quite a bit from their low in January, but the fall-out continues, with companies still laying off and cutting back on a lot of things – including travel and training, which strongly affects AAPG’s bottom line.
For someone who entered the industry during a time when oil rose dramatically to greater than $10 a barrel as a result of the Arab Oil Embargo, when news headlines were full of “obscene profits” and everyone was a bit giddy about the high price of oil, it’s a little difficult to grasp thinking of $60-plus barrels of oil as “low.” However, costs also rose dramatically along with prices over the past 10 years, and the technologies required to produce from very low permeability reservoirs are big-cost items.
So how do we proceed with $60/bbl (or lower) oil?
We do what we have always done - we get better, we get smarter, we get more efficient.
We figure it out, but we don’t quit.
I’ve always been a fan of Wallace Pratt and a firm believer in his famous quote “Oil is first found in the mind … ” Well, Pratt as chief geologist for Humble led that company to greatness by going out and exploring and increasing reserves during the depths of the depression, because he knew the economy would recover and demand for petroleum would once again exceed supply.
Pratt and Humble did this while most companies were pulling back.
Another petroleum explorer and finder, John Masters, once wrote, “You do not find reserves when it is convenient. You find them when you can.” And the best time to look is when no one else is, when everyone else is pulling back.
Mitchell Energy pursued cracking the Barnett right through the downturn of the 1980s. During the downturn, Mitchell collected the data and did the research that would ultimately lead to pursuing economic production in the Barnett once higher prices returned.
So how do we proceed, according to some of our most successful and well-known explorers? We get better, we get smarter, we get more efficient, but we don’t quit and we don’t shut down. We focus on preparing for the next price rise.
How do we do that?
We hone our technical, geoscientific and soft skills, including how to better sell a prospect and generate financing. As Louis Pasteur said, “Fortune favors the prepared mind.”
We utilize the vast amounts of data we have – and collect more, if need be – to improve our technologies and our geoscience models, or perhaps even develop new ones.
As Marlan Downey likes to say, “I can bring a fool off the streets to cut costs. It takes a GREAT technology to increase REVENUE.”
I would add, or a great idea.
And to quote Lee Raymond, former president and CEO of Exxon, concerning the cyclicity of the petroleum industry, “Easy Glum, Easy Glow.” This was meant to convey the message to not get overly excited and hyperactive when prices are shooting up, or overly depressed and catatonic when they are headed down – a good message for both high price and low price times.
This month’s EXPLORER and my last column come to you right in the midst of AAPG’s Annual Convention and Exhibition in Denver. As so many past AAPG presidents have noted before me, the presidential year goes very fast.
As I’ve said many times to many people around the world, while I believe AAPG provides excellent and cutting-edge geoscience, I believe our most important product is our community. We have a fabulous global community of smart, talented, interesting geoscientists who are for the most part really, really nice people. I’m very grateful to have met and gotten to know better so many of these people.
I’m especially grateful for the members of this year’s Executive Committee, for their talent, their hard work, their ideas, their humor, their caring.
The only group I may be as grateful to is our AAPG staff. We have a fabulous and very dedicated staff that took good care of me while they were taking very good care of AAPG.
Some of the things that kept the EC busy over the past year include:
♦ Implementation of the Three-Year Business Plan. We have been reviewing progress on how the Three-Year Business Plan is being implemented, including how programs and services are being evaluated in terms of cost versus benefit.
♦ Revised Candidate Campaign Policy. We reduced time and travel commitment for AAPG officer candidates. AAPG candidates for office are no longer requested to attend Section and Region meetings. Instead, candidate biographies and videos are available on AAPG’s website so that members can become familiar with the various candidates.
♦ Formation of Ad Hoc Governance Committee. It’s been more than 50 years since AAPG’s current governance structure was established, and a lot has happened to the world and to AAPG since then. The world has grown much smaller as a consequence of jet travel and the Internet, among other things.
At the same time, AAPG has grown much larger and has a more diverse membership.
Perhaps our governance is just fine and no major recommendations will result, but it was felt a “check-up” was warranted.
♦ Revised Associate-to-Member transfer form and encouraged eligible Associate members to transfer to Member. Now that only one sponsor is required to become a Member, we revised the form to reflect that and sent letters to eligible Associates encouraging them to transfer to Member. So far nearly 1,000 have done so, which is about 20 percent of those eligible.
♦ HoD initiatives. We discussed several initiatives with the chair of the HoD, which resulted in four potential amendments to our bylaws coming out of the Constitution and Bylaws Committee of the House this year. (These amendments were slated to be deliberated on by the delegates at the HoD annual meeting May 31.)
The amendments brought forward by the Constitution and Bylaws Committee concern the election of the AAPG Editor; shortening the timeframe (and consequently the time commitment) for AAPG officer candidates; the formation of Technical Interest Groups and Special Interest Groups; and changing the names of the international Regions to conform with actual usage.
We thank the House chairman and leadership for the discussions and look forward to the outcome of the votes on the amendments by the House of Delegates.
♦ AAPG-SEG joint ICE. As part of our efforts to do more things jointly with our sister societies, the first joint AAPG-SEG International Conference and Exhibition is being held Sept. 13-16 in Melbourne, Australia.
I hope you have had a chance to look at the great program for the meeting that was recently mailed to you.
Our Rocky Mountain colleagues put together a great program for ACE this year, and I hope a good many of you are in Denver right now enjoying the conference.
My wish for all of you now is similar to what it was in December: Good health, great prospects, successful wells, robust employment opportunities and preparedness for the future.
But most of all, may you all feel the passion.