The last couple of months have been amazing. The environmental movement has trounced the oil and gas industry in shareholder meetings and in the hearts and minds of the western world. Regulators over here have announced the end of life of my car for a couple of years out and my oil fired central heating is likewise under threat! I said ‘western world’ advisedly because I am pretty sure that middle eastern producers do not have the same concerns. No more do the Russians if we judge from Rosneft’s plans, as reported in the Financial Times, to build ‘15 new towns to house 400,000 employees’ in support of the giant Vostok oil development.
Objectively, the efforts of the environmental movement to ‘defund’ oil and push the majors into the energy transition will likely drive up the price of green projects, as everyone piles in at the same time. It may also drive the price of oil up, as the cost of capital rises and the social acceptability of oil and gas exploration makes for a reduced exploration playground and a scarcer resource. An oil price rise does assume that demand remains high, which depends on how quickly the world comes out of covid and how fast (or slow) the energy transition goes.
That makes for a lot of imponderables but if I was an investor, I would prefer the upside available in a pure play oil company to the opportunities that may arise from an overcrowded ‘energy transition’ play. I may have been influenced in my thinking by a report from Deloitte that found inter alia that oil ‘still delivers significant value for many. Two-thirds of oil-heavy portfolios deliver above-average performance.’ Deloitte also finds that ‘green’ energy transformation may be neither profitable nor scalable. ‘Of portfolios that have become greener, [only] 9% delivered top quartile financial performance’.
As a lifelong worker in oil and gas, I have to admit some schadenfreude with regard to the difficulty that the energy transition is experiencing. I am not saying that this is a good thing. I try to refrain from the atavistic defense of the oil industry that is evidenced in many LinkedIn comments. In fact, we have been doing our bit for the energy transition in Oil IT Journal for some time. Our first ‘going green’ rubric appeared in 2010. In this issue ‘going green’ weighs-in at over 3,000 words. It is well worth a read to see what is happening, who is doing what, who is posturing and how. There are many carbon capture projects ‘under study’. The US leads the world in the number of CCS projects. Up till now, the driver has been the commercial use of CO2 in enhanced oil recovery. But, as the demise of the Petra Nova project shows, commercial CCS (like shale), needs a high oil price to work. Maybe the updated 45Q tax régime will change this.
Oil and gas had a wakeup call with the Colonial Pipeline ransomware attack. We have covered cybersecurity in oil and gas for at least 15 years. At the 2005 DigitalSecurity event, we reported on the then newish notion of deperimeterization as IT muscled in on the plant, dissing clunky old scada systems. The deperimeterization movement was launched by The Open Group back in 2002 with the formation of the Jericho Forum, with a mission to ‘evangelize the issues, problems, solutions and provide thought-leadership around the emerging business and security issues of deperimeterization’. Ten years later (in 2013), deperimeterization was declared a success, a ‘landmark victory in the evolution of information security’. The Jericho Forum was duly ‘sunset’. Maybe the sun set too soon on Jericho!
I recently read Joseph Menn’s account of the Cult of the Dead Cow, on ‘the original hacking supergroup’ (well I tried, not exactly easy going). In between the rather breathy account of curious personalities, Menn’s account constantly refers to the abysmal security of early versions of Microsoft’s software. Although Cult of the Dead Cow does not cover the process field, one does have to wonder what the contribution of Microsoft’s OLE for process control was in deperimeterization. I’m sure that Microsoft’s security has improved since the early days, but then, so has the acumen of the hacker. For more on the Colonial Pipeline attack and on the latest developments in cyber security read the cyber security round-up in this issue. Another bumper (2,000+ words) edition!
I noted that the Society of Exploration Geophysicists (SEG) and the American Association of Petroleum Geologists (AAPG) are to hold joint annual meetings ‘for at least the next five years’. The first combined event, now billed as the International Meeting for Applied Geoscience & Energy, IMAGE ’21 will be held as a ‘hybrid’ online and in-person event in Denver next September. Meanwhile, the AAPG is engaged in discussions with the Society of Petroleum Engineers (SPE) to ‘formally explore’ a merger of the two organizations. To my mind, the geophysics and geology disciplines make more natural partners than engineering. So joining the trade shows is understandable in the context of a diminished industry. But engineering is already such a broad church that adding in geology would make the SPE’s focus even more diffuse. I’m speculating, but the dual collaborations (AAPG & SEG, AAPG & SPE) would seem to herald a hook-up across all three bodies, at least for the annual trade show. If that means more exchange of ideas between the disciplines that’s great. If it means even bigger booths and yet more razzmatazz, maybe not such a good idea.
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