PLANET OIL [WELLS; MINES] Crude Oil Resource Ecology and effects on - - PowerPoint PPT Presentation

Adrian Gregory

adrian.gregory@pathfinder-more.co.uk Principal Resource Consultant

I (Predictions) YOU (Decide)

Health Warning: …this is a TRUE SUBJECT (Subjective View) and should not be considered an OBJECT (Objective View), yet. I hold no Accountability for what I’m going to say now – only for what I will say in 3 years time. This Subject needs full & further investigation.

‘PLANET OIL’

[WELLS; MINES]

Crude Oil Resource Ecology and effects on its demand, such as Climate Change abatement

“Crude Oil Resource Ecology”

Concept - Nature

ECONOMY ~ ‘ECOLOGY’ Flow and Stock of ‘oil’ in an ‘economy’ [Ecosystem] ECONOMY Thrifty management of resources (money, materials, labour). Range of economic activities based on quantity [supply] & price [demand] -- aimed at

• ptimal ‘use of resources’ (allocation efficiency).

ECOLOGY [Industrial] Dynamic interactions between people, (natural) resources & enterprise. Analysis of flows, values, wealth and stock; and ‘consequences-of-use’. Enterprise aimed at maximisation of ‘use of resources’.

“Crude Oil Resource Ecology”

Concept - Nature

BLACK GOLD [Crude Oil] Abundant Resource. Reserves valued because of energy & chemical use (feed-stock). Value based on its consumption – cost of production key to replenishing reserves. GOLD Finite Resource. Reserves Value by being held in vaults.

“Planet Oil”

Perspectives & Predictions @Resource Ecology

# Stewardship >> Exploitation [Price & Technical]

=> Seasonal Market Trader {…built on local knowledge, performance} EXPLOITATION [UKCS] # Marginal Field Development 3-9 years profile TECHNICAL & TECHNOLOGICAL STEWARDSHIP [Phillips Petroleum] # repeat process 10 - 20 times @stock of knowledge; competencies & skills EXPLOITATION # picking wild strawberries => short supply, until next year STEWARDSHIP # grow wild strawberries => improve selection of plants => increase crop yield # produce cream => domesticate cows # find land in Wimbledon => lawn tennis # stewards show you to seats… …sell TV rights. => specialisms => Valuable Product [Brand] {…built on knowledge, understanding; know-how} => Price = f (natural abundance) => Price = f (bundled Value; work done)

Problems:

• Contingent Resource:

“Resources about to become Reserves” [Select, Define, Design]

• Peak Crude Oil Demand:

“People don’t invest if they don’t see a future demand”

[Investment; Novelty]

‘PLANET OIL’ [WELLS; MINES]

Crude Oil Resource Ecology

Petroleum Resources Management System [PRMS]

‘PLANET OIL’

Crude Oil Resource Ecology and effects on its demand, such as Climate Change abatement

adrian.gregory@pathfinder-more.co.uk Principal Resource Consultant Adrian Gregory MORE Consultancy Plc 25th April 2017

Part 1 SUPPLY

• Industrial Ecology – Natural Resource Ecology
• Resource Stewardship – Value Creation & Exploitation
• Technical Resources – Category Dilemma
• Resource Wealth (Stock) Managementship

Part 2 DEMAND

• Peak Oil Demand & Climate Change
• Renew@ble Clean Energy
• Sustainable Consumption: Benefit - Cost Parity
• Conclusion

Industrial Ecology

The study of the flows of materials and energy in industrial and consumer activities, of the effects of these flows on the environment, and of the influences of economic, political, regulatory and social factors on the flow, use and transformation of resources (White 1994) International Society for Industrial Ecology

Performance Economy [2016]

A concept which focuses is on the maintenance and exploitation of stock encompassing the linear or ‘circular economy’ flows of materials or energy within an ecosystem. (Stahel, Clift [Surrey University] 2016)

Sustainability

Performance Economy [Resources = Wealth = Stock = Capital] Natural Capital

• Pool or Mega-Pool Commons Natural Resources. If Production (Flow) Maximisation
• ccurs (Fishing, Forestry) ‘Tragedy of the Commons’ is inevitable in Local Pools

[Habitat, Biodiversity, Species Loss] ‘Second Treatise of Government’, [Nature, Ownership – Property Rights] John Locke 1689a David Gregory 1659 -1708

Sustainability

Performance Economy [Firms - Corporations] Natural Capital Human Capital Cultural Capital Manufactured Capital [Technological Capital] Financial Capital

TransNational (Mega) Sustainability

Adaptability, Change

http://www.pwc.com/gx/en/audit-services/capital-market/publications/assets/document/pwc-global-top-100-march-update.pdf

Output

# quantity, quality

Resources

# Assets; USD $

Mega Company Activities Social, Political & Environmental Consequences

Policy, Procedures & Processes

Signals

# Public, Stakeholders

Transactions

# Assets, Goods & Services, Money

Value

# Tangibles, Intangibles

MarketPlace

Informed Policy Changes

Mega Company Activities

MarketSpace

Organisation

• What is appropriate 'Value-for-Money' where services are not marketed ?
• How should efficiency be measured when outputs are produced many years later ?
• What effort should be spent assessing, evaluating, reviewing work ?
• Appropriate for Stewardship of National Resources? [Value Preservation]

Saudi Aramco: ‘The Caravan Goes On’ [2013] Frank Jungers, Chairman & CEO 1973-1978

Chapter 22: Master Gas Plan

Sustainable Growth

Oil Gas Solar Wind

Natural Resources

Technical Assurance Oil Gas Renew@ble Clean $/BO $/MSCF Big Innovation:

IOP IOR

Solar; Wind;

Core Competencies Cost/Risk Core Growth Technical Culture & Change

Sustainable Growth

Saudi Aramco Natural Capital = 265 Billion BO Reserves 31st December 2016 {15% Planet Oil [Proven]}

Sustainability

Natural Resources – Technical Stewardship

Creation Exploitation

Yin Yang

Explore Appraise Develop

7 Core Activities

7

1 2 3 4 5 6

Produce

Sustain

Abandon Resource Management & Ecology Explore – Identification, Reconnaissance, Access, Exploration [Discovery] Maintain Abandon – ‘Rehabilitation’ [Mining]; Abandonment, Reclamation and Remediation Appraise – Delineation, Feasibility, Option Selection [Commerciality]

{Mining 1:1000 commercialisation} {Wells 1: 6 commercialisation UKCS}

Develop – Development Define, Design, Sanction, Build Produce – Commissioning, Start-Up & Plateau Production, Improved Recovery [IOR] Sustain – Improved Production [IOP], IOR, Maintenance [Maintain] Resource Management & Ecology [Stewardship]

“…Technical Stewardship maximises economic resources” [Best Practice]

Market Oriented Resource Exploitation

Improved Production & Recovery

Doing Right; Doing Right Things; Doing Things Right

# producing sustainably = f (Flows, Reserves, Resources [Stock]) HIIP => ‘Trapped’ Volume, Geology & Fluid Properties [Resources] Reserves => Wells, Drainage, Reservoir Management Plan Production => Investment, Design & Infrastructure ‘Ability’

Market Oriented Resource Exploitation

Recover the 'Full' Barrel

UEYoil Qoil CRoil URoil

# National Resource longevity [Production Stewardship] # produce as much can [Profit Maximisation]

Natural Resource Economics

Yield & Time-2-Move-On [Dynamic Markets]

Maximum Sustainable Yield [~58% RF] Quantity [MM bopd] Technology Advances eg Exploration [IOE] Recovery Techniques Improves [IOR] Production Improves [IOP] Business Come Business Go Local Markets Go New Substitute Markets Grow Lowest Cost ($)/BO survives

Sustainable Oil Production Sustainable Oil Production [Supply]

Time

‘PLANET OIL’ [MINED SHALE OIL]

Estonia Shale Oil – Resource Management Plan http://www.envir.ee/sites/default/files/polevkivi_kasutamise_arengukava_2008_2015_eng.pdf

‘Sputter, Surges and Stalls’ ‘Peak’

Artic Development Deep Water Development Difficult Environments: Barents Sea, West of Shetlands Oil Sands [Extra Heavy Oil] Distal Offshore Proximal Offshore US Onshore Shale & Tight Oil Onshore Viscous Oil [<1000cp] Onshore & Shallow Water Proximal Offshore

‘@Risk’ Production & Recovery

Cost of Production = f (Scale, Scope, Proximity, Complexity)

Supply > Demand:

Risk = f (Cost)

Stewardship Focus: Nos 1 Production [IOP] Nos 2 Recovery [IOR]

Easy Oil Difficult Oil ~30-50 MMBO/D [2015-2035]; 10 MMBO/D @72 yrs = ~265 Billion BO

Market Oriented Resource Exploitation

Stewardship – Resource Stock

Natural Resource Challenge - Wealth Governance Stewardship of Natural Resources

# Nurturing/Maintaining Quantity & Quality of "Stock" [Wealth Governance] # Managing "Use of (Resource) Stock" [Value-of-Use] ie Sustainable Production

Proven Probable Possible Deemed Impossible Prospective Resources Yet-to-be Prospective

[Deterministic]

Sustainability - Stewardship

Peak Oil Supply

CR = ~1.6 T BO IOR = ~1 T BO SR = >1 T BOunrecognised PR = ~0.8 T BO PR = ~0.2 T BOunrecognised

UTR = ~4.6 T BO

USR = ~1 + >1 + ~0.2 T BO = ~2.2 T BO

IOR SRunrecognised PRunrecognised

Legend: CR Current Reserves [~2P]proved IOR Technically Recoverable [SR] PR Prospective Resources SR Speculative Resource UTR Ultimate Technical Resources USR Ultimate Speculative Resources

Market Oriented Resource Exploitation

Sustainability - Stewardship

‘Planet Oil’ [Current; Speculative & Prospective Resources]

Sustainability - Stewardship

‘Planet Oil’ [Current; Speculative & Prospective Resources]

Market Oriented Resource Exploitation

• unrecognised economic potential

Sustainability - Stewardship

‘Planet Oil’ [Current; Speculative & Prospective Resources]

#Investments

…follow the money!

#Novelty

"Sustainable development is development that meets the needs of the present, without compromising the ability of future generations to meet their own needs."

Market Oriented Resource Exploitation

Sustainability - Stewardship

‘Planet Oil’ [Current; Speculative & Prospective Resources]

#Novelty

3% Decline 6%

On Decline [additional monies]: # Abandonment # lng + FLNG [New Technology] # New Pipelines => Difficult Oil => Depletion Engineering

???

More Oil:  Iraq [70 new reservoirs]  KSA [90 new reservoirs]  Iran ?  Russian Shale Oil  Emirates

 Offshore Oil [Post 1973]  Shale Gas  Shale & Tight Oil  Oil Sands [wells]  Upgrading & SAGD [EHO]  Artic Drilling

Market Oriented Resource Exploitation

Sustainability - Stewardship

‘Planet Oil’ [Current; Speculative & Prospective Resources]

Sustainability

Price Stewardship vs Exploitation

Market Oriented Resource Exploitation

Exploitation Cost [Wells] {Supply Costs}

Quantity Price

OPEC Cartel Demand dictates Quantity Inefficient Production ‘OPEC Quotas’ Efficient Production [Exploitation Lowest Price – Largest Quantity] Price Stewardship [Market Power]

Monopoly Profit Maximisation

Part 1 SUPPLY

• Industrial Ecology – Natural Resource Ecology
• Resource Stewardship – Value Creation & Exploitation
• Technical Resources – Category Dilemma
• Resource Wealth (Stock) Managementship
• Succession

Market Oriented Resource Exploitation

‘PLANET OIL’

Crude Oil Resource Ecology and effects on its demand, such as Climate Change abatement

Technical Stewardship: IOR

Speculative Resources

Market Oriented Resource Exploitation

• Immiscible Gas Injection [SWAG; IGI]
• Intelligent Water [SMART + Modified]

unrecognised for their economic potential

Resource Management Plan

Producing Resource Categories Dilemma

Market Oriented Resource Exploitation

• Historical Production
• Current
• Improved
• Prospective
• Yet to be Discovered

[Un-Known]

>50-150-300 Years [Deterministic]

Stewardship – National Wealth

Small Pools – Stranded Pools

Stewardship – Resource Stock

Critical Infrastructure OGA September 2015

Servicisation of Stock?

Sustainability

Operational Risk (E&P; IO)

#Partner (JV) #Position Management Abandonment Exploration Appraisal Development Production

# Cost [CAPEX] # Schedule # Value # Cost [ABEX] # Schedule # Redeemable Value

NPV IRR IE

Appraise Appraise Select Select Define Define

Assessment Evaluation Deterministic Probabilistic

Residual Risk FDP Field Development Plan

# Own vs Lease

OWN LEASE

Forward Sell [FS]

# IOP # IOR

# Improved Oil Production [IOP] # Improved Oil Recovery [IOR]

PV = OWN << LEASE + FS + IOP;IOR

# Development – Build Risk

=> CAPEX >20%; Schedule > +50%; Sanctioned Value <60%

[RF58UEY]oil

Market Oriented Resource Exploitation

Crude Oil Resource Stewardship

Resource Wealth; Resource Stock Value is the worth or deemed price in money of a private (good or service) product,

property, possession (shareholding), project, or person to own the (equivalent) property rights

Reserves have economic value

Market Oriented Resource Exploitation

Resources have economic value? Supply > Demand Economic Rent vs Volume Cost Reduction Demand > Supply Resources vs Reserves Innovation

‘On-tap’ Value based on its consumption (cost of production + risk discount) ‘To-be-tapped’ Value based on its consumption (cost of development & production + risk discount [Risk = f(Cost)] )

Economic = Rents (Normal ~ Economic Profit + Risk Premium]

Technical Stewardship

Crude Oil Resource Stewardship

Resource Wealth; Resource Stock

VALUE = EXPECTED + VALUE of VALUE USE

[ PV; NPV] [Resource Management]

https://www.onepetro.org/general/SPE-31019-MS Not Recoverable Future Viable Produced Remaining Reserves Recover the 'Full' Barrel

[RF58UEY]oil [RF46UEY]oil

Part 2 DEMAND

• Peak Oil Demand & Climate Change
• Renew@ble Clean Energy
• Sustainable Consumption: Benefit - Cost Parity
• Conclusion

Market Oriented Resource Exploitation

‘PLANET OIL’

Crude Oil Resource Ecology and effects on its demand, such as Climate Change abatement

Peak Oil Supply Peak Oil Demand

Natural Resource Economics

Production Peaks, Supply & Demand

Population Growth @Sustainable Development

People

Environment @Sustainable Development

Human Impact on Global Climate, Local Habitats & Ecosystems

Renew@ableCleanEnergy

Temporal Strategy [Supplemental & Enhanced Resources]

$30-50 billion 160117 China investing £292 billion by 2020 [050117]

Part 2 DEMAND

• Peak Oil Demand & Climate Change
• Renew@ble Clean Energy
• Sustainable Consumption: Benefit - Cost Parity
• Conclusion

Market Oriented Resource Exploitation

‘PLANET OIL’

Crude Oil Resource Ecology and effects on its demand, such as Climate Change abatement

Responsibility

Industrial Impact; Societal Response [FLEB Matrix]

Market Oriented Resource Exploitation

EMOTION FACTS [Data] LOGIC [Rational] BEHAVIOUR Interaction Communication

ACTION RE-ACTION [Externality +ve/-ve] SOCIETAL VALUES INDUSTRIAL GOODS [Additionality]

#Interactions

Politics Policy

Economic Growth @Sustainable Production

Industrial Impact

Part 2 DEMAND

• Peak Oil Demand & Climate Change
• Renew@ble Clean Energy
• Sustainable Consumption: Benefit - Cost Parity
• Conclusion

Market Oriented Resource Exploitation

‘PLANET OIL’

Crude Oil Resource Ecology and effects on its demand, such as Climate Change abatement

‘Planet Oil’ – Natural Resources

Technical Stewardship

• Technical & Technological Stewardship
• Assets/Resources Stewardship – Wealth & Stock

# Discover the 'Full' Barrel # Recover the 'Full' Barrel

“…Good Stewardship, Price or Technical, dictates how much Speculative Resources are commercialised.”

Sustainable Oil Production

Natural Resources – Stewardship [4th Industrial Revolution]

Most Responsive? Distinctive Advantage? Change

#Investments

…follow the money!

#Novelty

Adaptation

TWITTER more_Upstream

Tim Jackson: ‘Prosperity Without Growth’ [2009] Surrey University

AGE OF ‘ABUNDANT RESOURCES’

Maximisation Value

“Planet Oil”

Perspectives & Predictions @Resource Ecology

# Stewardship >> Exploitation [Price & Technical] # Abundant Oil => Resource Wealth [National Interest] # Infrastructure Stock [Value-of-Use?, IO] # Managementship [Issues Oriented] # Integral Approach [IRP - ReM - WARM] # Inter-Temporal Strategy {COP21} [Transition Plan, NI] # Resource Management Plan [Stranded Pools]

Legend: IO Input-Output [Servicisation] NI National Investment IRP Integrated Resource Plan ReM Resource Management Plan WARM Wells and Reservoir Mgmt

‘PLANET OIL’

Technical Dissemination

adrian.gregory@pathfinder-more.co.uk Principal Resource Consultant Adrian Gregory MORE Consultancy Plc

• Natural Resource (Industrial) Ecology
• Speculative Resources – Unrecognised Resource
• Technical & Price Stewardship – IOP & IOR
• Resource Stewardship – Managementship of Resources
• Resource Wealth; Investment Efficiency; Novelty
• Knowledge & Technological Stock – Resource Succession
• Sustainability – Growth, Production & Innovation
• Water Saturation
• Permeability
• Societal - Value Mechanism, Collective Action Products
• Corporate Stewardship – Resource Allocation

SAY WHAT WE HAVE

‘PLANET EARTH’

‘Peer-2-Peer’ Dissemination

adrian.gregory@pathfinder-more.co.uk Principal Resource Consultant Adrian Gregory MORE Consultancy Plc

• Taking Risks

[CMI 11th January 2017]

• Innovation

[CMI 10th May 2017]

• Making Decisions
• Sustainable Working
• “people want to do work – they want to do – in a way they want”

SAY WHAT WE HAVE