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QAd2349x

International Petroleum Technology Conference Doha, Qatar November, 2005. Session: Education, Training, and Cultural Diversity. The Energy Talent Wedge Scott W. Tinker Bureau of Economic Geology Jackson School of Geosciences The University of Texas at Austin. QAd2349x. Outline.

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QAd2349x

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  1. International Petroleum Technology Conference Doha, Qatar November, 2005 Session: Education, Training, and Cultural Diversity The Energy Talent WedgeScott W. TinkerBureau of Economic GeologyJackson School of GeosciencesThe University of Texas at Austin QAd2349x

  2. Outline The talent wedge—the gap between demand and supply of talentedpeople—that is developing in our industry today is as great an issue, than the demand-supply wedge for conventional oil. Coordinated, international action is required.

  3. Outline • Trends • An IOC Trilemma • Reserves • Technology • Talent • Towards a Solution

  4. Global Energy Consumption Trends % Coal % Oil % Gas % Hydro % Nuclear % Geothermal, Biomass, Solar & Wind 50% 45% 40% 35% 91% 86% 30% % Total Consumption 25% 20% 15% 10% 5% 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Year

  5. The Conventional Liquids “Wedge” Unconventional Liquids ExxonMobil, 2005. http://www.exxonmobil.com/Corporate/Citizenship/Corp_citizenship_energy_outlook.asp

  6. 1,800 1,400 thousands 1,000 600 1974 1978 1982 1986 1990 1994 1998 Year The Talent Wedge Decline is enabled by technology. Logical floor? Top 25 IOCs Number of employees

  7. 300 250 200 150 100 50 0 >25 26-29 30-34 35-39 40-44 45-49 50-54 55-59 60+ Age (YRS) Employees are Aging just like our Giant Oil Fields! Age Brackets for Geoscientists Worldwide (2008*) As with aging fields we need to discover New Talent!

  8. Outline • Trends • An IOC Trilemma • Reserves • Technology • Talent • Towards a Solution

  9. The IOC Trilemma • The international oil companies (IOCs) face a significant trilemma. • Although high oil and natural gas prices in recent years have helped the bottom line, the numbers may mask an unsettling reality. • The greatest assets of the IOCs • reserves • technology • talent • are all at risk.

  10. Reserves • The International Oil Companies (IOCs) combined own only a few percent of the world’s conventional oil reserves. • National oil companies own well over 90% of the world’s conventional oil gas reserves.

  11. Reserves (2004 %) 0.3 0.25 0.2 % 0.15 IOCs 0.1 0.05 0 BP Total Qatar Chevron NIOC (Iran) INOC (Iraq) Libya NOC PetroChina ExxonMobil Adnoc (UAE) KPC (Kuwait) Yukos (Russia) Lukoil (Russia) Aramco (Saudi) NNPC (Nigeria) Pemex (Mexico) Petrobras (Brazil) PDV (Venezuela) Gazprom (Russia) Sonatrach (Algeria)

  12. Reserves • This helps to explain why many IOCs continue to merge; too many companies competing for limited access to reserves. • In order to replace reserves, IOCs are forced to explore on Wall Street via acquisitions and mergers. Wall Street has become a mature province.

  13. Technology • There was a time when the IOCs conducted breakthrough research. • In part owing to ever-greater pressure from Wall Street to focus on short-term performance, private sector investment in breakthrough research has been reduced substantially. • US research labs have closed. • Service companies now account for an ever-greater percentage of the research and technology investment, but much of it is incremental.

  14. W ashington Maine Minnesota Montana North Dakota Vt Oregon NH Wisc Idaho Ma South Dakota New York Ct Mich RI Wyoming NJ Pennsyl Iowa Nebraska Unocal Ohio Nevada Md Delaware Illinois Ind Utah Marathon Marathon WV California Virginia Colorado Kansas Missouri Conoco Conoco Phillips Phillips Kentucky N Carolina Arizona Amoco Amoco Tennessee Chevron Chevron Arkansas S Carol Oklahoma New Mexico ARCO ARCO Georgia Ala Miss Mobil Mobil Texas Texaco Texaco Flor Louisiana Shell Alaska Hawaii QAc8962c Technology Unocal Exxon Prod. Res.

  15. E&P Firms* Service Companies** R&D InvestmentsUpstream Sector ($2004) 1,400 1,200 1,000 800 ($, millions) R&D Investment 600 400 200 0 1977 1982 1987 1992 1997 2002 * US E&P firms and the US R&D investments of international E&P firms; source Department of Energy, EIA, CERA analysis. ** Traditional Oil Field Service companies (Baker Hughes, Halliburton, Schlumberger, Smith, Weatherford); source, company annual reports, CERA analysis. Source: Cambridge Energy Research Associates, 2005

  16. Technology • Can a company--or industry--be successful long-term based upon incremental improvement alone? • Is breakthrough research required to remain relevant?

  17. Talent • Prior to 1973, oil and natural gas prices were stable. • Kids saw energy as a viable career option and enrollments in US geoscience and petroleum engineering programs grew steadily. • Following the supply embargo of 1973, demand for talent was fierce. The industry, price markets, and universities overreacted; the result was excessive growth until 1982.

  18. Crude Oil Wellhead Price (Inflation Adjusted) Natural Gas Wellhead Price (Inflation Adjusted) Talent Oil and Gas Prices Historical Oil & Gas Prices 2000 Dollars $60.00 $5.00 $4.50 $50.00 $4.00 $3.50 $40.00 $3.00 Gas Price in Yr 2000 $US Oil Price in Yr 2000 $US $30.00 $2.50 $2.00 $20.00 $1.50 $1.00 $10.00 $0.50 $0.00 $0.00 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 Year

  19. Talent Oil Company Employment 1,800 Largest 25 Oil Companies 1,400 Number of employees (thousands) 1,000 600 1974 1978 1982 1986 1990 1994 1998 Year

  20. 5 Talent Enrollment Geoscience Undergraduate Petroleum Engineering AGI, 2003

  21. Talent What goes up…. • From 1982 through 1999, the industry and markets again overreacted, but in the opposite direction. • One million energy industry jobs were lost in the US. • US Universities enrollments in geoscience and engineering plummeted to 40-year lows and some US engineering and geoscience departments closed their doors. • In US Schools, an ever-increasing percentage of student enrollments are non-US.

  22. Crude Oil Wellhead Price (Inflation Adjusted) Natural Gas Wellhead Price (Inflation Adjusted) Talent Oil and Gas Prices Historical Oil & Gas Prices 2000 Dollars $60.00 $5.00 $4.50 $50.00 $4.00 $3.50 $40.00 $3.00 Gas Price in Yr 2000 $US Oil Price in Yr 2000 $US $30.00 $2.50 $2.00 $20.00 $1.50 $1.00 $10.00 $0.50 $0.00 $0.00 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 Year

  23. Talent Oil Company Employment 1,800 Largest 25 Oil Companies 1,400 Number of employees (thousands) 1,000 600 1974 1978 1982 1986 1990 1994 1998 Year

  24. China Natural Sciences Enrollments 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 5 Talent University Enrollment Petroleum Engineering AGI, 2003

  25. The IOC Trilemma • One scenario would see IOCs disappearing in a generation because they no longer control the reserves, technology or talent. • I doubt this will happen. • IOCs will focus on unconventional resources • Liquids: shale oil, heavy oil, tar sands, coal liquefaction • Gases: coalbed methane, shale gas, tight gas, hydrates, coal gasification, and beyond • Unconventionals will represent a substantial component of the fossil fuel future. • Talent needed!

  26. 1 0 0 8 0 6 0 Percentage of total market H/C<1 (Wood, Coal) 4 0 H/C~2 (Oil) 2 0 H/C>4 (Natural Gas, Hydrogen, Nuclear, Sustainables) 0 QAc9841c 1850 1900 1950 2000 Year Global Consumption Trends U.S. Data: Annual Energy Review 1999 (EIA, 2000) World Data: International Energy Annual 1999 (EIA, 2000)

  27. Outline • Trends • An IOC Trilemma • Reserves • Technology • Talent • Towards a Solution

  28. Towards a Solution • We must address the global energy talent pool. Industry, governments, and universities must “align”. • Annual company investment of < 0.1% (of gross revenue) in upstream research and… • Continually declining US government investments in energy sciences and engineering… • …will not attract the most talented students.

  29. Towards a Solution • Students today are bombarded with “semi-facts” that lead them to believe that the oil and gas industry is dirty, low tech and mature. • Students interpret mergers, oil and natural gas price fluctuations, decline in research investment, and off-shoring of jobs as an unstable industry. • Students believe “renewable” sources can replace fossil fuels in the next decade. Much of this “information” is misleading and even wrong. But perception is reality.

  30. Biomass (3.0%) Wind (0.01%) 1 MW Turbines 20% Efficiency 20 ac spacing 1 million kg biomass/km2* 16,000 BTU/kg = .02 Q/4000km2 after loss 0 2 0 0 4 0 0 m i 0 6 0 0 k m Pimentel, D. and others (BioScience, September 1994) Emerging Mitigation Options To produce 20 Q/yr (20% U.S. Energy with today’s technology) Solar (0.2%) Weitz, Physics Today, 2004

  31. Towards a Solution Universities • Establish global partnership that are long term and research based. • Two way street; balance US and international student enrollments and company employment • Do not overreact to talent demands (learn from the 1970s) • Tougher (not easier) enrollment and retention standards • Break out of the discipline silos: well-designed, integrated research programs

  32. Towards a Solution Industry • Act for the long term in terms of research (and have the resolve to ignore the Wall Street reaction!) • Invest substantially in universities in good and bad times. Universities are your seed crop. • Do not expect impact on quarterly strategies • Seek to develop research partnerships outside of the standard faculty/student models

  33. Towards a Solution Governments • Invest in long-term, high risk research • Support programs that drive commercialization • Recognize the global nature of the industry in terms of policy (taxes, incentives, etc.) • Work hard to bring allure and respect back to science and engineering.

  34. Towards a Solution Professional Societies • Develop a coordinated, accurate, and interesting global message about energy • The story should include contributions from universities, government and industry • Find a credible storyteller; there is a good story to tell!

  35. Crude Oil Wellhead Price (Inflation Adjusted) Natural Gas Wellhead Price (Inflation Adjusted) Summary Oil and Gas Prices Historical Oil & Gas Prices 2000 Dollars $60.00 $5.00 $4.50 $50.00 $4.00 $3.50 $40.00 $3.00 Gas Price in Yr 2000 $US Oil Price in Yr 2000 $US $30.00 $2.50 $2.00 $20.00 $1.50 $1.00 $10.00 $0.50 $0.00 $0.00 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 Year

  36. 1.7 mil $80 1.1 mil $10 0.7 mil 5 Employees Large O&G Co US Upstream R&D 2004 Dollars CERA Oil Price: 2003 Dollars BP Website Summary Supply Push Demand Pull US Undergraduate Geosciences AGI, 2003 AAPG Website

  37. Summary • The best way to build bridges between cultures is to share a common goal. • Energy is vital to global health. • Top talent is critical to success. • We have an opportunity to take a coordinated, global approach to address the energy talent issue. • The IPTC is a good start!

  38. From our Gulf to Yours…Many Thanks! QAd3931x

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