Oil and gas finding costs are on the rise again as inflationary pressures return to the industry and as Major companies struggle to improve their exploration performance in terms of reserves found per well drilled. That’s the picture that emerges from the latest company data from Evaluate Energy. In this report we focus just on the leading Major companies – BP, Chevron, Conoco, ExxonMobil, Petrobras, Shell and Total. We’re defining finding costs as exploration costs (as reported by the companies in their FAS69 submissions to the US SEC) divided by extensions and discoveries and revisions to Proved Reserves. Revisions often result from changes to reserves that may have been booked in the past but as they reflect better knowledge of reserve size and reservoir conditions, it makes sense to include them in this calculation.

Latest Trends for 2011

Evaluate data shows finding costs rising again in 2011 and sharply higher than a decade ago.

It would appear that the continued upward trend has been due both to rising operating costs (Evaluate data shows the average cost of producing a barrel of oil equivalent)   as shown in the graph below…

…and to a rather lackluster performance in terms of reserves added via exploration drilling:  the graph below shows the trend in reserves added via exploration and indicates that companies performed no better in 2011 on this measure than in 2010.

Ranking the Companies

There are significant fluctuations in company costs and reserve additions from year to year so we have taken a 10 year average to try to smooth out the data.

The graph shows Total delivering the lowest 10 year average finding costs of any of the Majors, followed closely by ExxonMobil and Petrobras. BP turns in the highest cost in the group at just under $5/bbl oil equivalent. This is partly because BP had some pretty big negative revisions to reserves in the last 2 years that caused its ranking to hit rock bottom.  If you ignore revisions and just look at the cost or finding proved reserves via discoveries alone, then BP actually comes out on top with the lowest 10 year average finding cost on this (narrower) definition.

If we look at how much oil and gas was added per exploration well drilled, there is a pretty close match in the rankings with Total and ExxonMobil discovering many million more barrels per well drilled than the others.

“If you don’t like change, you’re going to like irrelevance even less.”
- General Eric Shinseki

Several weeks ago, Valve’s New Employee Handbook was posted here. The handbook’s release has led to a number of discussions about the merit of The Cabal (what Valve calls their process) and their work environment. For me, it’s hard to argue with success and everything I’ve read about Valve being a great place to work.

Valve Employee Handbook Cover

Since first reading about The Cabal in 1999 and attending a few GDC sessions since, I’ve been inspired. That inspiration helped lead me to agile thinking. I felt there was a connection with agile and the kind of place, like Valve, where I wanted to work. A place where rigid process and hierarchies were considered a mismatch to creative development.

Valve’s handbook states this belief near the start:

Hierarchy is great for maintaining predictability and repeatability. It simplifies planning and makes it easier to control a large group of people from the top down, which is why military organizations rely on it so heavily.

But when you’re an entertainment company that’s spent the last decade going out of its way to recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value. We want innovators, and that means maintaining an environment where they’ll flourish.

Self-Organization

The handbook goes on to describe the role of an employee in this environment. The criticisms I’ve heard about The Cabal often say “you need the right kind of people for this to work”. I agree, but I think that the potential pool of such people is larger if you provide mentoring to help the transition into such an environment. The handbook acknowledges this as a challenge:

There are a number of things we wish we were better at:

• Helping new people find their way. We wrote this book to help, but as we said above, a book can only go so far.
• Mentoring people. Not just helping new people figure things out, but proactively helping people to grow in areas where they need help is something we’re organizationally not great at. Peer reviews help, but they can only go so far.

This is a common challenge in any studio that is attempting to improve self-organization. People have to unlearn a lifetime pattern first imposed in our public education systems, which train children how to work in a task-driven top-down hierarchical organization. It’s an even greater challenge for a studio that has been hierarchical, since it threatens the status quo (more on this later).

Self-organization and hierarchies aren’t mutually exclusive. Gabe Newell leads Valve; it’s not a pure democracy, but Valve doesn’t have many layers between him and an artist creating texture maps. Nor is the artist being handed a list of texture maps he or she is assigned to create during the week. The artist is expected to be a professional and is treated like an adult by being allowed to be personally accountable. What self-organization does is to flatten hierarchies and reduce the number of lines of communication between people that need to communicate.

Scrum and The Cabal have the same goals

Scrum is a framework for iterative and incremental product development based around self-organizing teams. Team size, sprint durations, Scrum roles, etc. are meant to foster self-organization. Every 2-3 weeks, the team to inspects their work and practices and seeks ways to improve both. The roles provide for clear interfaces and areas of ownership. The benefit is that after awhile, every individual should find motivation in seeking these improvements. This motivation builds on itself, accelerates and leads to a better working environment.

Good working environments and profitability aren’t exclusive. While Valve enjoys the highest retention rates of almost any company, it also makes more profit per employee than even Google or Apple!

The goal of Scrum adoption is not to “do Scrum perfectly” but to establish a framework that will lead to such a culture. It’s been referred to as a starting script for self-organization.

Why is it so hard then?

So why do few companies ever achieve similar cultures? Why is it so challenging for organizations that adopt the Scrum framework to become like Valve? This is the big question. There are many different explanations and reasons for this I’ve read from “people mostly suck” (a comment I saw today) to “Scrum sucks”. Both are simplistic and wrong.

I believe it mostly lies in cultural resistance. As mentioned above, an organization that grows in a hierarchical pattern, resists the adoption of self-organization. This applies to managers as well, who see their value tied to a command-and-control structure. Even in the face of studio extinction, these forces resist change. I once heard the comparison of a manager resisting change in a failing studio to that of the Titanic passenger with the finest cabin refusing to evacuate!

Resistance comes from developers as well, who focus on their tasks and discipline and leave accountability to their bosses. This feels safe, especially in a culture that hands out blame like candy during Halloween.

Valve had the benefit of being founded with the principle above and maintaining it. It doesn’t hurt that Valve is self-funded and somewhat isolated from external customers. It also doesn’t hurt that they own their I.P. But this doesn’t mean the path to self-organization is impossible to move to from a hierarchical culture. It’s definitely hard and it takes time.

There is a revolution taking place in how we work that may take a generation to become common place. We have more examples every year that show us how to get there and what the benefits are.

Providing an adjunct to seismic, gravity gradiometry images structural complexity at a fraction of the cost of a 3-D survey.

With shale gas having the potential to change the demand/supply energy outlook in North America, today’s operators are looking for ways to exploit the resource as efficiently as possible.

Identifying, mapping, and staying within sweet spots determining well locations and spacing so drilling can be optimized and designing the most effective production strategy, while taking heed of environmental sensitivities, are all key drivers for shale gas operators today.

Rising to the challenge

There is no doubt that today’s 3-D seismic technologies are capable of developing highly accurate 3-D structural models of shale gas fields, helping to optimize drilling and completions.

Advanced seismic processing and high-resolution wide-azimuth 3-D surveys are generating detailed information on key reservoir properties such as pore pressure and local stresses and are providing important input for fracture stimulation programs.

While information generated from seismic is crucial in guiding drilling and completion programs, gravity gradiometry imaging (GGI) also is playing an important role alongside 2-D seismic in optimizing exploration strategy in shale gas plays.

These benefits are principally seen in two crucial areas – firstly, in identifying zones where there is a high probability of structural complexity, which can subsequently have a negative effect on production and fracing programs and secondly, in reducing cost and risks surrounding shale gas exploration.

Airborne GGI surveys are able to explore vast regions quickly and efficiently with minimal environmental impact and with significant implications for reducing risk and cost (typical multi-client surveys in North America cost in the region of US $2 an acre, whereas 3-D seismic can cost as much as $150 an acre).

The FEA-derived model shows more structurally complex areas in red and less complex areas in blue. (Images courtesy of ARKeX)

Modeling complex geologies

GGI is a fast growing technique that maps small density variations in underlying rocks by measuring the gradient of the earth’s gravity field.

The technology benefits of GGI in traditional oil and gas exploration have significant applications in shale gas fields today. For example, the high-resolution data and bandwidth generated, coupled with the strong signal-to-noise ratio, make GGI a highly effective technology in modeling complex geologies and generating accurate velocity/density relationships.

Through precise positioning of subsurface density contrasts, GGI can accurately target geological settings, derive basement structure maps, and provide input to the structural definition of overlying sedimentary sections and horizons.

The ability for GGI to include 3-D geology in its datasets allows the seismic interpreter to develop structural models outside the plane of 2-D seismic acquisition and provides an increased spatial awareness of the target area.

GGI can provide valuable data to interpolate between two seismic lines – often several miles apart – providing confirmation of whether two independently interpreted faults on two seismic sections are connected. This is a significant benefit in the early stages of shale gas exploration where 3-D seismic access is restricted. Here, GGI’s ability to look at the geology “sideways” when developing its structural models is of high value to shale gas operators.

The most significant application GGI has for shale gas exploration is through a new solution called ShaleQube. This exploration workflow combines the structural modeling information generated by GGI with the finite element method, which is used to calculate zones where there is a higher or lesser probability of structural complexity within a target sequence.

With such structural complexities increasing the likelihood of the operator losing contact with the shale or coming across faults that have the potential to divert hydraulic fracturing or reduce pressures (ultimately resulting in abandoned wells), the information generated from GGI and the resultant finite element analysis (FEA) can be crucial in determining exploration strategies.

It is more important than ever for operators to understand the structural complexity of shale gas fields, the presence of faults, and which areas of the field are more or less structurally complex than others ahead of planning 3-D seismic acquisition.

GGI on the Montney

The Montney formation is in the Western Canada Sedimentary Basin in British Columbia and Alberta. Here, shale gas extraction began in the late 2000s.

ARKeX carried out an initial GGI survey in partnership with JEBCO Seismic LLP in 2005 and 2006 to identify a Mississippian gas play. At the time of acquisition, the Montney shale gas play was not a prime target, so the survey design was not optimized for this play type. However, the data did cover part of the Montney shale and subsequently were used to help develop the ShaleQube workflow.

Using the GGI interpretation, an isopach map was generated that clearly showed the sedimentary structure within the Montney rifted section and the faults believed to control fluid distribution. The structural data were then input into FEA, where the combination of high-resolution GGI data plus a 2-D seismic-guided 3-D earth model generated a 3-D volume of the structural complexity of the shale gas interval.

In this case, zones were highlighted where there was an increased probability of faulting and where the operator might want to acquire further 3-D seismic data. The FEA-derived model illustrated more structurally complex areas where there was a high probability of encountering faults and less complex areas where there was a lower probability of encountering faults.
The model provided crucial information for operators making exploration decisions on shale gas plays and the targeting of future 3-D seismic surveys.

The full-tensor gravity gradiometry data overlying the fold axes clearly show the structural correlation.

GGI on the Marcellus

ARKeX also has been working in partnership with Global Geophysical Services to improve understanding of the Marcellus shale&rsquos structural complexity on a regional scale. The Marcellus shale is one of the largest sources of domestic natural gas to be discovered to date in the US.

The airborne survey of 9,065 sq km (3,500 sq miles) was completed in just 100 days, and the preliminary GGI data are providing valuable information about how the structures and faulting, seen in 2-D seismic data, can be linked to help provide an overall understanding of the structural framework in the area.

The data show a strong correlation to the fold axes interpreted in the region where low-density regions exist along the anticlines and high-density regions where synclines are present. While the GGI data do not image the Marcellus shale itself, they are able to identify the density interfaces that influence the Marcellus, particularly the salt the shale is sitting on top of and the Tully and Onondaga limestone layers that bound the Marcellus interval.

Although the survey results need to be analyzed in more detail, an improved understanding of the Salina salt and associated faulting will provide valuable information about the structural complexity within the Marcellus.

Getting in on the ground floor

Although 3-D seismic is still playing the lead role in mapping out shale gas reservoirs today, if used at an early stage in the exploration lifecycle, ShaleQube can play an invaluable role in identifying key structural elements such as faults, identifying more structurally complex zones, providing input into the design and targeting of future 3-D seismic surveys, and optimizing drilling program and production strategies.

This post came from Industrial Marketing Today and discusses how a traditionally conservative industry, oil and gas, is embracing new social media methods to get their information out.

The Upstream Oil & Gas industry, also referred to as the exploration and production (E&P) sector, has a reputation of being very conservative and conventional. Even though the companies that operate in this sector are well-known global brands, they are not exactly forward thinking online marketers who use business blogs and social media regularly.

However, these companies are no slouches when it comes to using the power of blogging and social media to talk about a politically and emotionally charged topic like hydraulic fracturing. Google the search phrase hydraulic fracturing blogs and it will return 2 million results!

Sure, there are plenty of blogs written by die-hard tree huggers and other environmentalists with their own agendas but the list of blogs on hydraulic fracturing from companies and organizations reads like the “who’s who” of the E&P industry.

The number of blogs, videos, tweets and other social media efforts goes up dramatically if you include the broader phrase “shale oil & gas” or as the industry likes to refer to it as “unconventional resource plays.”

The facts, figures and the hype are mind-boggling. So it is not surprising that E&P companies, oilfield services firms, trade organizations, environmental and political associations are all actively participating via blogs and social media channels.

Here are some examples that I found from both sides of the discussion.

Blog posts:

• Facts on the hydraulic fracturing process (ExxonMobil)
• Hydraulic Fracturing: An Environmentally Responsible Technology for Ensuring our Energy Future (I of III) (Baker Hughes)
• Hydraulic Fracturing (Switchboard – the staff blog of the Natural Resources Defense Council)

Twitter: Tweets with #shale

Facebook: Search for pages related to hydraulic fracturing

YouTube:

• Eagle Ford & Bakken Shale Oil: The New Rush For Black Gold
• The Process of Hydraulic Fracturing (from EnergyFromShale.org)

SlideShare: Hydraulic Fracturing and Water (From the Ports-to-Plains Energy Summit)

Infographics: Understanding Hydraulic Fracturing in the Marcellus Shale (from EnergyFromShale.org)

Understanding Hydraulic Fracturing in the Marcellus Shale

Browse more Environment infographics.

I am sure you have your own list of blogs and social media marketing on hydraulic fracturing if you work in the upstream Oil & Gas industry. Feel free to share them in a comment.

 Here are Bluware we employ Agile in many of our projects. It helps us work faster, deliver better products, and stay in tune with the client’s needs. Our intern found this post, and we think it’s rather appropriate.

Agile vs Waterfall Video:

Kate and Rusty have the same goals: to build a great product for their client. Their approaches, outcomes, and results are very different. Neither is right nor wrong. BUT I sure know which team I would appreciate.

Tear down the walls of silos, put multiple heads on a problem, and engaging the client frequently are all hallmarks of agility and gaining business value. Every wonder how they get those video games to market so fast? Agility. Proudly deliver a product every two weeks to your clients…

Agility is the ultimate in teamwork. Projects move fast and everyone pulls their own work, thereby creating accountability. Boss-worker mentality is a thing of the past. Kate’s team stays fresh and motivated. Rusty’s team has a hard time staying in for the long haul.

Which team are you on?

Even as you read this your mind is probably considering a variety of other things. Did I leave water for the pet? Does my spouse have cash for lunch? Do I have cash for lunch? Do I have time to read this and still get my work done before Friday?

Working on a complex problem, like writing an accurate C++ program, is greatly facilitated by that elusive concept called total concentration. For any task requiring complex thought, our productivity is accelerated during the times where we focus completely on that task.

So, what’s getting in the way? Perhaps a methodology would help.

• Choose the appropriate task
• Get everything needed to move the task forward
• Bracket the time to work on the task
• Eliminate distractions
• Clear your mind
• Make an outline
• Get started

Choosing the appropriate task is a logical first step, though not necessarily the easiest. Do you take on the easiest task first to get going, or the most difficult? I like to do the difficult task first, and coast through the easy ones to the end. Do it your way, but choose one.

How many times have you gotten rolling on a task only to find that you need something that you do not have? Several times I have sat down at a new workstation, ready to start writing a program, only to find that there was no software development kit installed. Numerous times I have been working on a car or bike and a critical wrench was missing. When that happens, focus goes out the window, and we are now on a major detour of locating the missing item. It is best to make a list of dependencies and check them before launching.

If you think the task will take a week, then you have not broken it down sufficiently into sub-tasks. Get down to something that can be done in a bracketed span of time, and then bracket that time. Put the time on your schedule as “busy”, set the phone to airplane mode, and turn off the little daemon that notifies you of new mail. You can turn it all back on when the time is up.

Some places have policies about keeping doors open, so find out if it is ok to work behind closed doors. If so, close it. If not, put your back to the door and most people will respect your privacy. I have seen paper signs that say “Working Session: Please do not disturb” on or near the door. If someone has an urgent matter, they will generally be smart enough to disturb you anyway. There are PhD theses on eliminating distractions, but it is very important to do so. Distractions are enemy number one of focus.

The active mind, and I assume yours is, works on many issues in parallel. Often that is a desirable trait. But, when you want to focus completely on a single issue then you want to put the rest of the universe on hold. If you have ever successfully meditated, then you know how to clear your mind. Even if you have not meditated in twenty years, it still works and you can do it. Relax in place, close your eyes, take a few deep breaths and let them out slowly. As you exhale, visualize a clear two-dimensional plane resting on top of your head, and then moving down through your body. As it touches a new area, your forehead, ears, jaw, neck, shoulders, feel them relax. By the time your feet are relaxed, you are generally grounded, clear, and open minded to be filled with the task at hand.

If the issues around you flood back in, try this visualization:

Eyes closed, picture yourself in a chamber of a submarine with your work area and doors to either side. To the left is the door to past issues that still nag you, and to the right is the door of the future things you are considering. Close each door, turning the little wheel to lock them tight, leaving only the current chamber representing the here and now for your thoughts. Open your eyes and get to work.

To get started, make some semblance of an outline of what you are to accomplish. If you are writing a chapter of a book, it is the outline you learned in English back in high school. If it is a program, pseudo-code the steps or the objects and methods build.

Once the high level is on paper, start at the beginning.

I hold focused time as precious and sacred. With focus, I can create far more in an hour than if I am entertaining even light distractions.

What are your thoughts?

January 21, 2012, Houston, TX –Bluware, Inc, a Houston based corporation, celebrated a milestone anniversary – 25 years of success and diversity.

The company gathered at the Hotel Sorella CITYCENTER for the aptly named event “BluYear” – a night of dinner, dancing, and art to celebrate their success.  The theme of the evening, to celebrate such a culturally diverse group, was “International Formal.”  Guests wore formal attire from the country of their choosing.

The company, founded by CEO Rick Jones, develops custom scientific and engineering software.  Jones started the company 25 years ago writing seismic interpretation software for one of the world’s leading oil and gas companies.

Over the past couple of years the company has garnered several awards, including the Houston Business Journal’s FastTech 50, Fast 100, and Inc. Magazine’s 500|5000.

“Bluware closed 2011 with another year of record results,” said CFO Deborah Simmons at the event.  “Given the growth curve coming out of 2011, 2012 looks to be our biggest year yet.”

The company has added 54 jobs to the Houston market in that last 2 years.  “In 2010 we added 24 consultants to new projects.  In 2011, we added 30,” said Director of Operations Shawn Coker.  “In 2012, we hope to add 40 more jobs, mostly for scientific programmers.”

“The past 25 years as CEO have been a great journey with an incredible team of people.  I’m excited to see what is in store for us in 2012 and beyond,” Jones said.

From ZDnet.com:

There’s a general anxiety that has settled over much of the IT profession in recent years. It’s a stark contrast to the situation just over a decade ago. At the end of the 1990s, IT pros were the belles of the ball. The IT labor shortage regularly made headlines and IT pros were able to command excellent salaries by getting training and certification, job hopping, and, in many cases, being the only qualified candidate for a key position in a thinly-stretched job market. At the time, IT was held up as one of the professions of the future, where more and more of the best jobs would be migrating as computer-automated processes replaced manual ones.

Unfortunately, that idea of the future has disappeared, or at least morphed into something much different.

Read More

Image via Wikipedia

THE BUTLER DID IT!

Part 2 of 3.  Read part 1 here.

Time is of the essence, and it is useful to first eliminate the techniques that rarely work. Someone will have a success story about each of these, but they are a bomb with a lit fuse that I like to avoid.

Blame the hardware – The moment hardware is installed it begins to get old and slow. Pride of ownership does not last long, and IT people relish having new, faster systems at their fingertips. There are, of course, times where the hardware was underestimated for an application. Most applications run just fine with the 100 rows of test data, but when the real data starts to flow and the CPUs run red hot people are quick to blame insufficient hardware. “If only we had more, faster CPUs this would run just fine.” Though that is a testable hypothesis, it will come out of other methodologies if it is true.

One of the greatest inventions in computer technology is the loop. One of the greatest sources of performance problems is a loop within a loop. If each loop is working on a set with approximately “n” members, then the loop within a loop has an execution order of “n²” (n-squared). When “n” is our 100 rows of test data, “n²” is 10,000 executions. When it is a million rows, “n²” is now 1 trillion. That’s a lot of executions, even for a fast cpu! If you add a CPU that is 50% faster, and “n” continues to grow, the performance will continue to degrade. It is better to identify and re-engineer the million row loop-within-loop than to chase the problem with new hardware.

Blame the network – Generally when a network is slow, it is slow all of the time for everyone on it. Temporary network slowdowns can occur if someone is moving a large file on the network, or if there is a critical piece of hardware beginning to fail.  These are easy to spot and alleviate. The tricky network problem occurs when many people collectively blame the network for performance degradation with no empirical data to support it. I had a user call the IT manager one day and complain of poor network performance. Since the IT manager was short-handed that day and I was consulting for something longer term, I offered to handle it. The user showed me the application he used and the screen that was slow. Noticing that the screen was painting data a few rows at a time, I called the DBA for the database I suspected the application was querying. “Have you lost any indexes lately?” I asked. “I don’t think so, but let me check.” She replied. “Ah, wait, we reorganized the table last night and the index did not get put back. I am adding it now.” We ran the application again after the index was put back and got sub-second response. My friendly user called across the room to his other compatriots “They got the network fixed. Go ahead and use it again.” In my experience, the network is an easy target for unsubstantiated blame.

Replacing network parts and installing new servers with the hope that a performance problem will be fixed are both follies of the shade tree mechanic. Perhaps you have had experience with the mechanic who begins replacing suspect parts under the hood until one eventually fixes the problem. This is an expensive and inelegant methodology that does not necessarily converge on a solution. If the problem is bad fuel, replacing parts will not find it. Similarly, as in my story above, replacing network parts would not have found a missing index. As a professional performance tuner, I seek first a methodology that converges on a solution, and secondly one that converges during my engagement time-frame.

Next post: The butler did it!  Round Up the Usual Suspects, Part 3.