'Auld Lang Syne': The Year in Review

It is customary at this time of year to look back at the past year to review significant events and accomplishments, while at the same time to also look forward into the New Year with resolutions for improvements.

As of this writing in late December 2018, West Texas Intermediate crude oil is trading below $50 a barrel, extending the slump in commodity price to now a full four years since the precipitous fall beginning in 2014. Oil and gas companies have attempted to adjust to this “lower-for-longer” reality by reducing staff, reining in expenditures and redeploying capital away from exploration and deepwater drilling to onshore (mostly oil) development projects.

While this may all seem like terrible news, the North American rig count has increased by nearly 170 percent since 2014, 88 percent of which were horizontal wells, according to the Baker Hughes rig count. U.S. crude oil production reached a record 352 million barrels a day in August, and the United States became a net petroleum exporter in November, continuing a steady decline in net petroleum imports since 2006 according to the Energy Information Administration.

What Does This Mean for EMD?

The purpose of the Energy Mineral Division is to promote the geological sciences of unconventional oil and gas and alternative energy resources. Although unconventional could be defined as “uncommon,” “unconventional oil and gas” refers to hydrocarbons produced from reservoirs not otherwise thought of as “conventional,” such as shale gas, tight oil, coalbed methane, heavy oil/tar sands, oil shale and gas hydrates. “Alternative energy resources” refers to all other geological energy resources, such as coal, uranium and geothermal.

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It is customary at this time of year to look back at the past year to review significant events and accomplishments, while at the same time to also look forward into the New Year with resolutions for improvements.

As of this writing in late December 2018, West Texas Intermediate crude oil is trading below $50 a barrel, extending the slump in commodity price to now a full four years since the precipitous fall beginning in 2014. Oil and gas companies have attempted to adjust to this “lower-for-longer” reality by reducing staff, reining in expenditures and redeploying capital away from exploration and deepwater drilling to onshore (mostly oil) development projects.

While this may all seem like terrible news, the North American rig count has increased by nearly 170 percent since 2014, 88 percent of which were horizontal wells, according to the Baker Hughes rig count. U.S. crude oil production reached a record 352 million barrels a day in August, and the United States became a net petroleum exporter in November, continuing a steady decline in net petroleum imports since 2006 according to the Energy Information Administration.

What Does This Mean for EMD?

The purpose of the Energy Mineral Division is to promote the geological sciences of unconventional oil and gas and alternative energy resources. Although unconventional could be defined as “uncommon,” “unconventional oil and gas” refers to hydrocarbons produced from reservoirs not otherwise thought of as “conventional,” such as shale gas, tight oil, coalbed methane, heavy oil/tar sands, oil shale and gas hydrates. “Alternative energy resources” refers to all other geological energy resources, such as coal, uranium and geothermal.

Since January 2000, oil and gas production from unconventional (tight oil and shale gas) reservoirs as monitored by the EIA has increased by a whopping 1,658 percent and 1,688 percent, respectively, to 7 million barrels a day and 64 billion cubic feet per day! Our industry has been through a lot of changes since 2000, due in no small part to the explosive growth in unconventional oil and gas.

Petroleum geologists have had to adapt to this change by learning new skills to keep abreast of the technological changes required to explore and develop unconventional oil and gas resources. EMD members have led the way through their participation in organizing meetings, workshops, short courses and field trips, and publishing their research through AAPG and other scientific publications. We have formed new multidisciplinary partnerships with engineers, hydrologists and environmental scientists in industry, government and academia in a cooperative spirit for the worldwide sustainable development of unconventional resources for the beneficial use of mankind.

Yet challenges remain:

  • Volatility has always been a part of the energy extraction industry and will continue to be while the market seeks to balance energy supply with demand.
  • The rapid pace of technology development demands continuing education and adaptation to new technology.
  • Our industry workforce is on average becoming younger (and more diverse) as the next generation replaces the aging talent during the ongoing “great crew change.”
  • Many young professionals are experiencing angst as the field of mentors diminishes, and they face increased workloads and new responsibilities with increasing opportunities for advancement. Ironically, many of these same people are missing an opportunity for continuous professional development by allowing their AAPG student memberships to lapse and failing to upgrade to full member status.

Unconventional Natural Gas

An unintended consequence of U.S. drillers’ focus on tight oil has been a concomitant increase in associated gas production. Failure of pipeline infrastructure to keep pace with this increased natural gas production has led to steep discounts in wellhead gas price in many of the unconventional resource basins. Combine this with the continued exploitation of shale dry gas, and you have a recipe for a ballooning natural gas supply in search of a market. According to the EIA, U.S. shale gas production in 2017 was 18.6 trillion cubic feet, representing 57 percent of the total U.S. gas withdrawals, with a record 2.34 billion cubic feet produced in November 2018.

I have been tracking announcements of new and expanding LNG export facilities around the world, and it is clear that industry is making a large financial bet on natural gas as the fuel for the future as coal- and nuclear-fueled power plants are decommissioned.

The first export of U.S. LNG was in February 2016 from the Sabine Pass terminal located on the Louisiana Gulf Coast. Since then, production began in Cove Point, Md. and Corpus Christi, Texas in 2018, and the Cameron, La.; Freeport, Texas and Elba Island, Ga. liquefaction facilities are expected to begin exporting LNG in 2019. The EIA recently forecast that the United States would rank as the world’s third largest LNG exporting nation with 8.9 billion cubic feet per day capacity by the end of 2019. It is anticipated that continued exploitation of U.S. unconventional natural gas will be required to meet the long-term U.S. LNG export contracts.

EMD Future Vision

According to the BP Annual Energy Outlook through the year 2040, hydrocarbons will continue to supply the anticipated worldwide growing demand for low-cost energy supply.

The Outlook also forecast:

  • U.S. tight oil production is expected to lead the world’s oil growth for the next 15 years, and the United States will make up nearly a quarter of the world’s LNG exports by 2040.
  • World coal demand is projected to continue to fall, assuming government policies promoting fuel-switching remain in effect.
  • Although growth in nuclear power generation stalled following the Daiichi nuclear plant accident as a result of the 2011 tsunami in Fukushima, Japan, nuclear power generation is anticipated to increase primarily in China, which will represent 90 percent of the growth by 2040.
  • The outlook for other unconventional and alternate energy resources can be found in the recently published 2017 Natural Resources Research review article prepared by EMD, which can be found at aapg.org/divisions/emd/nrrjournal.

It is clear that interest in unconventional and alternate energy resources will continue to remain strong well into the future as a wide variety of geological energy resources will be required to meet the demands for a sustainable energy future. EMD’s mission to provide a resource for training and education through AAPG will thus remain relevant.

Some of our recent initiatives include:

  • Filling vacancies to improve communication and relationships with the sections and divisions
  • Improving member communication by instituting a quarterly newsletter
  • Investigating several new ideas to add digital resources and improve functionality of the EMD website
  • Expanding inter-society cooperation
  • Updating the EMD bylaws
  • Creating new commodity committees to reflect evolving interests, such as critical minerals associated with energy production
  • Developing new leaders

Wishing you a prosperous new year, and as always, your comments are welcome.

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