The two-year oil bust resembles the theorized asteroid 66 million years ago that wiped out the dinosaurs, but ultimately paved the way for the evolution of human life, said Jose Gutierrez, Transocean’s director of technology and innovation.
Gutierrez and other energy executives spoke Tuesday at the Offshore Technology Conference in Houston about the need to innovate, collaborate and find greater cost efficiencies now that most energy companies can no longer afford to simply throw money at problems.
“The oil debacle — it’s actually the best opportunity for innovation,” he said, noting that companies are now forced to collaborate. “This is like the meteor that landed in the Gulf of Mexico.”
The theory is the asteroid hit in the Gulf of Mexico near the Yucatan Peninsula and wiped out most of the dinosaurs and much other life. But enough mammals survived and the evolutionary cycle eventually led to human life.
David Payne, Chevron’s vice president of drilling and completions, agrees about the need to enact changes. He argued the energy sector is much less boom-and-bust cyclical than how it sees itself. Apart from the recent shale boom, the history of the industry has seen very few booms. So the sector may be settling near $50-per-barrel oil for awhile.
“Are we waiting for an upturn or are we just back to normal?” Payne said, praising the onshore U.S. sector for continuing to produce at lower prices. “The problem is y’all are all too good at what you do.”
The goal now is “really about putting the value chain back together and getting more discipline.” That gets back to the need for collaboration and innovation, he said.
David Chenier, ConocoPhillips’ chief procurement officer, took a different approach, arguing that U.S. onshore oil and gas will continue to thrive for the foreseeable future while the offshore sector must find more ways to become economically competitive.
The chocolate-loving Chenier compared the industry to Neapolitan ice cream. The chocolate is the best stuff, he said, while the vanilla and strawberry are average or decent. The industry was running out of chocolate and the shale boom changed that. Now, ConocoPhillips and others can focus primarily on the chocolate and sell much of the rest. For instance ConocoPhillips recently sold its Canadian assets for $3 billion.
Chenier though agreed with Payne about getting back to normal.
“You don’t have to have high (oil) prices to have an industry upturn,” he said. After all, many people forget the energy sector performed pretty well in the 1990s when it focused on efficiency after the 1980s bust.
“The hard part is getting through the transition,” he said. “If prices stay in this $50 frame, that’s not necessarily a bad thing.”