In the set of "behind the doors" conversations with an oil & gas E&P executive, we are exploring his opinions on some of the common perceptions on the industry challenges. We focus on the drivers, fears, hopes. This interview was done before the worldwide Coronavirus outbreak, but we feel it reflects pre-Coronavirus concerns that will be only more acute during the industry rehabilitation post-Coronavirus
1-a What is your view on the widely discussed topics such as the "energy transition" and the "end of the fossil fuels era," and similar? Do you see a near to mid-term existential threat to the industry?
A: (If you ask the question), will we be able to produce as much oil as we produced ten years ago, whenever the Peak Oil was? The answer is Yes, we could, but because the oil price approached twenty dollars a barrel which is not sustainable for any economy, maybe we can't find as much oil and gas as before because people will not be doing as much exploration as before. Yet, there always will be a demand -and if the oil price will sustain 50-60 $/barrel- there is a business to be made (and with the cost reduction and efficiencies industry has now) will continue to be so. But replacing reserves will be a bigger and bigger challenge for NOCs and IOCs
1-b You said – The industry is changing. What changes do you observe?
A: In reference to the large oil companies- the majors IOCs and NOCs - the industry is changing because of the type of people that have been (recently) attracted into the industry and the sort of things they are encouraged to do. There has been a massive crew change in terms of experience, and it has affected the way people think about the type of job they do and what this job should entail. So, the industry has changed because it is far less technical and far more about managing messages
2- In the absence of crucial knowledge,decision-makers typically rely on a statistical approach to the uncertainty they are facing. What is your view on the way industry deals with risk and uncertainty?
A: I don't think risk and uncertainty are fully understood across the board. I think people confuse risk and uncertainty all the time. People aren't doing probabilistic or using statistical means – here, there is a problem. People are only using deterministic methods that are not able to manage portfolio and the whole idea about managing portfolio is to manage risk. People sometimes are saying: "Oh, we have a bad run of exploration wells" - well, it means you are not drilling right exploration wells. Because in a portfolio, you should have a range of risks, and your ability to quantify the risk is represented in your portfolio. If you want to drill particularly risky things, there is a fair chance that you are not going to have any success. The challenge is to understand risk and uncertainty and how to mitigate that. A portfolio is one way to deal with risk at the portfolio level, and dealing with uncertainty is about ranges. And there are well described statistical ways of dealing with that. But it is all about the understanding of what is risk and what is uncertainty.