role of academia in the advancement of upstream …...role of academia in the advancement of...

Role of academia in the advancement ofupstream oil and gas technologies

2017 SPE-KSA ATSE, Dhahran, Saudi ArabiaExecutive Panel, April 25 2017, 13:00 – 15:00 a.m.

Tadeusz Wiktor PatzekKing Abdullah University of Science & Technology

Patzek 1 / 13

Summary

The Context of Academic Research in E&P. . .

Crude oil and natural gas are the two most important sources of powerthat builds and maintains modern societies

Quality of the resource base + extensive social claims on oil&gasproduction provide thereal flooron their sustainable price, while healthof the global economy provides thereal ceiling

All oil companies operate and conduct research between themarketfloorand ceiling prices of the day

Today’smarket ceiling priceseems to be almost exactly$55per barrel,close to thereal floor pricefor the remaining resources in most places

Without smartinvestment and focused research, the oil industry willcrumpletaking the global economy with it

Academiaeducatesthe future leaders andslowly pushesthe envelopes ofscience and technology

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So What’s Happening Worldwide?

What are the causes of current difficulties?

The head of Saudi Arabia’s state energy giant has warned of alooming oil shortage as a$1tndrop in investments into futureproduction takes effect. Amin Nasser, chief executive of SaudiAramco, the world’s largest oil producing company, said on Fridaythat 20mbarrels a day in future production capacity was requiredto meet demand growth and offset natural field declines in thecoming years.

“That is a lot of production capacity, and theinvestments we now see coming back – which are mostlysmaller and shorter term – are not going to be enough toget us there,” he said at the Columbia University EnergySummit in New York.

Saudi Aramco chief warns of looming oil shortage, Anjli Raval and Ed Crooks in New York, FT.

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Net Increase of World’s Oil & Lease Condensate ProductionRelative to 2005. Source: U.S. DOE EIA, accessed 01/18/2017

1980 1990 2000 2010-25

-20

-15

-10

-5

0

5

Pro

duct

ion

Rat

e, 1

06 b

arre

ls/d

ay 4.3 Mbpdof mostlyshale oil

Global O&LC relative to 2005US O&LC relative to 2005

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Normalized Producer’s Price Index and Oil PriceSources: U.S. Federal Reserve Bank, EIA, Labyrinth Consulting Services, accessed 04/01/2017

1985 1990 1995 2000 2005 2010 2015 20200

0.2

0.4

0.6

0.8

1

0

0.2

0.4

0.6

0.8

1

Producer Price IndexWest Texas IntermediateOnset of global plateau

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Net Present Value Discounted @10% of ReservesSources: 10-K and 20-F SEC filings, Labyrinth Consulting Serv., accessed 04/01/17

0 20 40 60 80 100NPV of reserves @ 10% discount, $/bbl

Continental

EOG

Chevron

Pioneer

Conoco

Shell

Exxon

2016 reserves2015 - 20162014 - 2015

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Normalized Measure of Discounted Future net Cash FlowsSources: 10-K and 20-F SEC Filings, Labyrinth Consulting Serv., accessed 04/01/17

2014 2015 20160

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0.4

0.6

0.8

1N

orm

aliz

ed fu

ture

net

cas

h flo

w

ExxonShellConocoEOGChevronPioneerContinental

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World’s Oil & Lease Condensate ProductionIs declining. Source: U.S. DOE EIA, accessed 02/01/2016; Bloomberg, accessed 03/23/2016

2000 2005 2010 2015 202070

75

80

85P

rodu

ctio

n R

ate,

106 b

bl/d

ay

Global peak?

Historic data from EIAPrediction by Rystad EnergyWith corrected IEA 2014/15

Rakteem Katakey,Drillers Can’t Replace Lost Output as $100 Oil Inheritance SpentPatzek 8 / 13

Science, Research, and Technology

Industry vs. Academia

Industrial research by its nature is high-rate andholistic (you cannot drill1/2 of a well, or half-instrument it)

Academic research is high-complexity andintegrative(new models, newunderstanding, new connections are developed)

Academic research should becollaborativeand can be partitioned intosmallparts to assemble a big picture

Partitioningslowsdown research considerably and since big discoveriesaredisruptivenot cumulative, it may delay big discoveries even more

Planck’s Principleholds: With every discovery in science thedifficultyof the taskincreases

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Progress in Science is Difficult

Max Karl Ernst Ludwig Planck, 1858 - 1947

Ever larger demands are made ofachievementsofresearchers

The need for a suitabledivision of labor(collaboration) becomes ever-more pressing

Ever fewer researchers can perform fluently thedifficult tasks, thus manpower cost andavailability becomes the limiting factor

By an absolute standard of importance there is amarked and continuousincreaseof the overallcostof research

The cost increases not because better science isdone, but because with time it ishardertoachieve thesamelevel of science

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Science and Technology

Without newtypes of data of ever higherresolution, acquired with devices of everincreasingpower, modern science cannotfunction

Technology provides the data gatheringcapabilityfor science

Science in return providesnewtheory andmethods to design and construct the newsensors and machines

At any given moment, progress of sciencecan occur onlywithin the barriers set bythe available technology

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Science Can Go no Farther than Technology Permits

What if Galileo (1610) had the 100-inch Mount Wilson telescope (1918)?Patzek 12 / 13


Final remarksThis is where business planning of research resources should go

When times are tough,old solutions are triedagainand again withdisastrousresults.What’s in store?

Modified project management; start small, learn, and scale up

Better wells

Infill wells and pattern drives

Better surveillance with novel sensors

High-resolution reservoir imaging to place additional wells

IOR and, in some places, EOR

Hydrocarbons from unconventional/harsh places

Once there is an overall plan of action, academic research will play animportant role in answering some of the fundamental questions and trainingthe new crew

Patzek 13 / 13

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