The Power of Collaboration, People and Technology in the Oil and Gas Industry

Delivered by HE Abdalla S. El-Badri, OPEC Secretary General, at the Executive Plenary Session of the Kuwait Oil and Gas Conference, Kuwait, 7 October 2013

Your Excellencies, ladies and gentlemen,

I would like to thank His Excellency Al-Shamali, Deputy Prime Minister and the Minister of Oil for Kuwait for the invitation to speak at this conference. It always gives me great pleasure to come back to Kuwait – one of the founding Members of OPEC.

The three core themes of this session – collaboration, people and technology – have been at the forefront of the oil and gas industry since its very beginning. And these three elements are clearly entwined.

Technology and people have combined to continually transform our industry, playing a fundamental role in supporting the efficient production of hydrocarbons.

Over the years, technological advancements have helped people to push the limits of the industry. For example:

  • By extending the industry’s reach in terms of the way resources are identified and developed;
  • By addressing the goals of better, faster, cheaper, and safer operations in both the upstream and downstream; and,
  • By producing cleaner and more efficient petrochemical products.

To put it simply: collaboration, people and technology have allowed the industry to survive and thrive, despite the many challenges it has faced.

The history of Kuwait’s oil industry is an excellent example. Back in February 1938, oil was discovered at the Burgan field, with commercial oil production beginning in 1946. It was a great find for Kuwait, but very few would have predicted that this field would still be pumping today. Burgan turned into a ‘giant’ oil field and it remains central to Kuwait’s oil industry.

In Burgan’s long history, people and technology have combined – to tap into the reservoir, expand its recoverable resource base and apply improved recovery techniques, so that more of the oil in place can be produced.

There are similar stories to be found across the world, with people working together to continually push the boundaries of technology.

Technological advancements have enabled the industry to increase the estimates of the amount of oil and gas that can be found, and what can be recovered. Improvements in the quantity and quality of information about different geological structures has enhanced the likelihood of finding oil and gas, and extended the reach of the industry into harsher and more remote locations in ‘frontier areas’.

Of course, when talking of fossil fuels we need to recognize that they are non-renewable resources, so peak supply will arrive one day. But at present, this day is being pushed further and further into the future.

For oil, estimates from the US Geological Survey of ultimately recoverable resources have more than doubled since the early 1980s, from just 1.7 trillion barrels to over 3.8 trillion barrels. Cumulative oil production has been less than a third of this.

And when looking at recovery rates, these have increased from less than 10 per cent of oil in place in the early history of the industry, to in excess of 70 per cent in some fields today.

In terms of drilling, we have progressed from drilling tens of metres to many kilometres below the surface, both vertically and horizontally. And the industry as a whole has evolved from basic geological sciences to reservoir simulators, state-of-the-art IT, 3D views of deep and complex horizons in the subsurface, large offshore drill ships and huge data mining activities to optimize performance.

From the downstream perspective, the development of the fluid catalytic cracking process for upgrading heavy crude components has allowed the industry to produce increasingly lighter products and much larger volumes of transportation fuels. And desulphurization technologies have enabled the industry to reduce the environmental impact of sulphur emissions.

The list of new technologies could go on and on.

And looking to the future, the industry can be expected to see technologies shift perceptions and prospects once more. For example, through carbon capture and storage, further advancements in enhanced oil recovery and the development of new oil-based materials for various industry sectors.

It is clear that technology, people and collaboration will remain central to the industry’s future. And we need to see the future as an ever evolving one, where standing still is not an option. This is easy to appreciate when we look at some important global trends.

First, although the global economy today remains fragile, we can expect to see it rebound.

Second, world population is predicted to reach 8.6 billion by 2035, an increase of over 1.5 billion from today’s level, with the expansion overwhelmingly in developing countries and urban areas.

And thirdly, we need to remember that around 1.4 billion people still have no access to electricity and some 2.7 billion continue to rely on biomass for their basic needs. There is much potential for social progress and making improvements in people’s living conditions – by providing light, power and mobility. For example, in developing countries, car ownership averages around 40 cars per 1,000 inhabitants, far lower than in OECD countries, where it is almost 600 per 1,000 inhabitants.

It all points to the fact that energy demand will rise. It is expected to increase by over 50 per cent by 2035 and all energies are set to witness growth.

However, it will be fossil fuels that remain dominant in meeting energy demand for the foreseeable future. They currently account for 82 per cent of global energy demand, and will still make up over 80 per cent by 2035.

Of all fossil fuels, natural gas is expected to witness the fastest growth rate, at close to 2.5 per cent annually. And its overall share in the fuel mix rises gradually.

For oil, although its overall fuel share falls between 2010 and 2035, demand still increases by more than 20 million barrels a day over this period, reaching almost 110 million barrels a day by 2035.

Clearly with this expansion comes the need for more technological innovation, additional human resources and greater collaboration, so that we may produce the required volumes in a secure, safe and environmentally-sound way.

However, we need to recognize that one of the three key elements of this session is now a cause for some concern. Globally there is a shortage of young people entering the industry. It is vital that this is rectified.

To do this, we need to understand the reasons behind this global shortage.

There is the current global economic climate, which is obviously impacting job prospects in many industries across the world.

There is the large-scale downsizing that led to a lack of recruitment into the energy sector during the 1980s and 1990s. At that time, many universities cut back drastically on students in energy-related programmes because the industry did not need graduates in high numbers.

In recent years, there has also been a dramatic expansion in the services industry and ‘emerging knowledge’ economies, all of which has led to fierce competition for talent.

And there is also a sizeable section of the industry’s workforce that are now rapidly approaching retirement, particularly those that entered the industry in the 1970s. This was an issue specifically highlighted in a recent study by the European Union and OPEC, titled ‘Potential Manpower Bottlenecks in the Oil & Gas Industry’.

Meeting the human resource challenge will not happen overnight. We must look long-term. The industry is one characterized by long-lead times, and often long payback periods, which means it must view employees as long-term assets.

Before concluding – and given that I am speaking here on behalf of OPEC – allow me to say a few words on the current market situation.

We see the market is balanced. There has been, and there remains, enough supply to meet demand. We also see this as the case for the rest of 2013 and hopefully for 2014, with stock levels and OPEC spare capacity continuing to support the supply and demand outlook.

The market is stable, something OPEC continually strives for.

And when thinking of stability it brings me back to the three elements of this session: collaboration, people and technology. All are key factors in helping to bring about stability and ensuring the world has enough supply to meet demand.

Without new people, without new technologies and without collaboration the industry would go backwards. These three entwined issues are essential to the short- and long-term market stability that we all desire.

Thank you for your attention.

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