Gould: Oilfield Services Spending Likely to Increase

Schlumberger CEO Andrew Gould said he believes that integrated oilfield service companies will play an even more important role in extracting the full potential of existing and new hydrocarbon resources, and that the share of future spending on oilfield services will likely increase.

Oilfield services companies that best help their customers to de-risk and drive project financial performance will ultimately be the most successful, Gould said, adding that the company's approach of applying its unique scientific platform and technical abilities to all parts of its business – supported by its research by development investment of over one billion dollars per year.

Speaking at the Barclays Capital CEO Energy-Power Conference in New York on Sept. 7, Gould said his company has not seen its customers' activity plans impacted by the significant downward revisions of 2011 and 2012 growth forecasts for the major OECD countries, as well as inflation pressure in some key non-OECD countries that is causing concern. However, the company is monitoring the situation closely and is ready to adjust its plans if needed.

"In the past two years, our industry has seen significant volatility, with the largest year-on-year fall in global energy demand in two decades followed by the largest recovery ever seen," Gould said, noting that the world and the energy industry have faced major natural disasters and political unrest and the financial markets have been significantly impacted by both the sovereign debt crisis in parts of the Eurozone as well as the U.S.

The importance of higher exploration activity is best illustrated by the growing supply challenge the industry is facing with the International Energy Agency estimating that around 40 percent of the oil production needed by the end of this decade has yet to be found or developed, Gould said. By 2030, this figure will likely be about 60 percent; natural gas resources show similar trends.

"Adding future reserves is becoming more complex and technologically intense, and is associated with additional cost and risk. With more than half of reserves discovered worldwide offshore and new reserves often located in deepwater and hidden below complex salt structures, the ability to de-risk exploration prospects prior to drilling becomes more and more important," Gould said.

However, statistics show that, on average, two out of three frontier exploration wells today are unsuccessful, indicating that, in spite of advances in seismic technology, the industry still fails to properly manage exploration risk, Gould said. "While seismic technology advances have made significant contributions to better evaluate trap and reservoir risks, almost three-quarters of dry exploration wells are due to inadequate understanding of seal and charge risk."

The last decade has seen a doubling of the number of land and offshore rigs operating worldwide in more difficult, complex and expensive situations, but the general approach to drilling optimization has changed little since the 1980s. "Over the past decades, we have seen excellent examples of advances in individual drilling technologies such as top drives, rotary steerable systems and PDC cutters," Gould noted. "We believe that in order to create the next step change in drilling performance, we need to take a systems approach and move the entire drilling process from being partly an art form to becoming a full-fledged science."

While conventional gas will continue to play a central role in the global supply picture in the next five years, making up more than 85 percent of total gas supply, shale gas development activity continues to grow in the U.S. and worldwide. The U.S. Energy Information Administration estimates that international shale resources are six times higher than those of the U.S. At this time, international shale gas activity remains focused on exploration and pilot projects, but Gould said activity will increase in the coming years and shale gas will begin to have an impact on international supply towards the end of this decade.

Schlumberger's CEO said that the current industry approach to shale development in North America is sub-optimal, as it involves significant cost and resource waste. Thought the energy industry drills horizontal wells spread evenly over acreage, with the entire horizontal section completed and fractured with massive amounts of water proppant and hydraulic horsepower, shale reservoir quality varies both vertically and laterally. "And the standard logging measurements interpretation techniques and modeling workflows used in sandstones and carbonates cannot be directly applied."

Gould noted that the company is seeing signs that the scientific approach to shale developments is gaining momentum and as the international oil companies continues to build their positions in the shale basins both in the U.S., and overseas this trend will only strengthen. "The scientific approach will also be critical overseas as the industry faces more public pressure to minimize the operational footprint and adapt to less available infrastructure compared to North America," said Gould.

Besides investing heavily in the development of new individual drilling technologies that combine the capabilities of its various drilling product lines and creating a powerful technical community by co-locating its GeoMarket drilling experts into drilling support centers, Schlumberger has some of its brightest minds working on creating numerical models able to predict the behavior of the entire drill string as a function of changing surface and downhole parameters, Gould said. The company will have 10 drilling support centers established by year-end; that number will increase to 30 by the end of 2012.

To meet the challenges of more complex, more expensive and more difficult projects, Gould told attendees at the SPE Offshore Europe conference in Aberdeen, Scotland earlier this week that project management skills need to dramatically improve. Great project managers cannot be created overnight as it's a combination of leadership and technical skills, with the ability to constantly evaluate options. The need to train rand season project managers is becoming acute, Gould said.

The talent war within the oil and gas industry will be "inflationary and disruptive" as the industry is chasing the same workers and not necessarily adding to the same population at the same rate. Engineers in the U.S. and western Europe can be recruited based on the industry's technology, but only after defending company ethics, proving that the energy industry is not a sunset industry a clear position on climate change. "In the rest of the world, this is unnecessary as oil and gas companies get the pick of students because an oil and gas career is coveted," Gould said.


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Ann Gaddis | Sep. 9, 2011
Hooray for the oil and gas industry. This industry is the sine qua non of modern life. Of all the men I know working in this field, from a former FEO of Mesa Petroleum to an independent oil producer to the former CEO of Pioneer Drilling - all have been men of honor and ability. Ann Hubbard Gaddis

David Cole | Sep. 9, 2011
Gould appears to have a handle on both the direction of the energy development and the oil field service industry needs for the current and future situation. The article was well written in as much as it stayed close to the script and the facts as Gould sees them, I would like to have seen more reflection on the newer clean technology of the Company called Echosphere Technologies since they can do so much more with the footprint issues at the well sites.

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