Extreme Upstream Efficiency, the New Normal

Q: What are the main trends driving the oil and gas market and what role will technology play in its development?

A: The new energy markets are all about clean BTUs. The usual focus on the type of BTUs, meaning whether they are coming from oil or gas, conventional or unconventional, renewable or nonrenewable, is secondary. The market is looking for the most environmentally acceptable and economically attractive models for delivering BTUs. To achieve clean BTUs, the new norm is extreme efficiency. The idea that you can be moderately efficient and play a leading role in the energy markets is a false assumption. There is no more room for moderate efficiency. This applies to NOCs, IOCs and smaller independent players because they can all gain an advantage by becoming extremely efficient and delivering clean BTUs.

AI and advanced analytics are becoming more relevant in our everyday lives. For instance, elevators and cars have become smart machines that are now automatized and include new security features. The oil and gas industry has not been a leader in the use and application of these technologies. This will change in the next five years and any company that does not integrate these types of technologies will not be relevant in the new energy markets. This transformation is happening rapidly and these technologies are disrupting the industry. The last time a change like this took place was when 3D seismic info transformed exploration and field development or when horizontal drilling changed recoveries and productivity.

Q: How has acceptance of this vision evolved over the last 12 years among your clients and other oil and gas companies?

A: Since the beginning, QRI has focused on creating value through increased production, reserves and capital efficiency but not as a consultancy. We want to introduce a metricsbased system for managing sub-surface assets. When we founded QRI 12 years ago, the computational capabilities and algorithms we have today did not exist. We created a great deal of intellectual property. Our algorithms have matured and our track record translates to over US$75 billion. There is a tidal wave approaching as the energy market grows more competitive in response to what has occurred in the Permian Basin. The Permian is a prime example of extreme efficiency that broke all the conventional paradigms of production. The reserves associated with the Permian were nonexistent. It was people with unconventional thinking who organized an unconventional approach to unconventional resources and produced what they are now calling the Permian Event or the Permian Miracle. Today, the Permian is producing over 3.7MMb/d and will probably exceed 4MMb/d. It will ultimately hit 5MMb/d, which will have a global impact. This is an example of one platform on which extreme efficiency and extreme competitiveness are already manifesting, and from there it is cascading down to all fields of energy production worldwide.

Q: How do you measure whether or not a company is extremely efficient?

A: It starts with the cost of production and the evaluation of CAPEX and OPEX. Then you look at the growth of reserves and decline rates. But if you want to be extremely efficient, you have to compare OPEX to that of your competitors in the same basin and see if you are in the Top 10 percent or not. You cannot make the assumption that you will be in the middle, the 40 to 50 percent, which may be good enough for the company today but it is not good enough to be an influential player three years from now. The company must always aim to be in the Top 25 percent.

Applying this to PEMEX, it is in a favorable position due to its abundant resources. It has approximately 320 billion barrels, which is phenomenal, even though I am throwing Chicontepec in there, which accounts for plus or minus 60 billion barrels. Of that, I would say that Mexico has only produced less than 25 percent. That represents quite a bit of opportunity for PEMEX. When you examine the expected recovery of reservoirs, that is when you see more opportunities because they have not done many secondary recoveries to date and those are key to increasing your recoveries.

Quantum Reservoir Impact (QRI) was founded in 2007 with the objective of helping its clients to make increases in production, reserve appreciation and capital efficiency. It delivers solutions through augmented AI.