Economic judgment and Planning in North American Petroleum Exploration
- Louis F. Davis (Atlantic Richfield Co.)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- May 1968
- Document Type
- Journal Paper
- 467 - 474
- 1968. Society of Petroleum Engineers
- 4.6 Natural Gas, 5.6.9 Production Forecasting, 1.6 Drilling Operations, 5.8.5 Oil Sand, Oil Shale, Bitumen, 3 Production and Well Operations, 5.7.5 Economic Evaluations
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Reviewed in this paper are the numerous economic, technical and managerial factory that oil companies will have to consider to survive in the future energy market. Considered are impact of new technologies, requirements for more versatile engineering and management staffs, wiser use of exploration funds and more efficient and economical procedures for drilling operations.
How important are economic judgment and panning in North American petroleum exploration today? The answer is that only those companies who exercise sound economic judgment, who use sophisticated evaluation techniques and who prepare and execute carefully conceived. imaginative plans can expect to survive in petroleum exploration during the next 20 years. The reasons for this are easy to see (Fig. 1 ). The amounts of oil and gas that must be found and produced in North America in the future are staggering by past standards. And this must be accomplished in the face of (1) practically static crude prices, (2) increasing finding costs, (3) impact of inflation. prices, (2) increasing finding costs, (3) impact of inflation. and (4) a decreasing chance of major discoveries as older areas are drilled up, These factors cause strong conflicting pressures on the explorationist and on management. This pressures on the explorationist and on management. This paper reviews the steps required to survive and succeed paper reviews the steps required to survive and succeed in this environment. Reviewed first is the place of petroleum in the energy market- both past and future. petroleum in the energy market- both past and future. From this some estimates will be made as to requirements for finding reserves in the future. Then, some action that we as engineers and managers can take to insure that our company will be among those who are profitable oil finders will be examined.
Energy in the U. S. - The Past 30 Years
The U. S. petroleum industry today supplies most of the nation's large and growing demand for low-cost energy. Primary energy requirements have grown at an average annual rate of 3.1 percent over the past 30 years (Fig. 2), increasing from 214 billion therms in 1936 to 545 billion therms in 1965. Oil and gas supplied 40 percent of the 1936 demand, but by 1965 the oil and gas share had increased to 73 percent-an over-all growth rate of 5.5 percent/year. However, virtually all of the increased share percent/year. However, virtually all of the increased share of market for oil and gas came from coal, whose share slipped from 56 percent in 1936 to 23 percent in 1965. Although future growth in oil and gas demand as a result of the increase in total energy requirements is still bright. the industry cannot depend on displacing other sources of energy as in the past. If anything, the oil industry will lose position to nuclear energy. Needless to say, the economic and technological latitude enjoyed while this displacement of coal was taking place no longer exists. Oil and gas in the future must be more competitive in cost and price with other energy sources than ever before; and this, in turn, will require a highly efficient exploratory effort.
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