While he made it clear that he understands and fully appreciates the role technology will play in determining the future success of the energy industry, Greg Hill, president and COO of Hess Corp., expressed even more appreciation for the role innovation will play.
“The investment requiredto meet this demand is inthe trillions of dollars.”— Liam Mallon, ExxonMobilUpstream Oil and Gas Co.
"The amount of technological change I've seen over the past 10 years in this business is truly incredible and remarkable, and [it] has made a huge difference in our bottom line," Hill said. "Technology is vital, but innovation is really the ultimate goal because technology on its own doesn't necessarily produce innovation. Innovation is a human process, right? Technology just helps enable that."
Pointing to the advances achieved in the U.S. because of innovation during the shale revolution, Hill noted that "a completely different approach to horizontal drilling and fracking made the U.S. an energy powerhouse in less than 10 years, which is remarkable."
Speaking as part of the World Petroleum Congress' Spotlight series, Hill laid out three "important realities" industry leaders would be wise to remember as they consider the future of oil and gas.
According to Hill, the first reality is that fossil fuels "are going to be here for a long time."
"The energy transition is going to take decades, so you might call that an 'inconvenient truth,'" Hill said. "But it is the truth because, at least in the near term, [fossil fuels are] going to be almost impossible to replace. They absolutely permeate every aspect of our lives."
The second reality, Hill said, is that volatility is also here to stay.
"Arguably, volatility could become even more pronounced, depending upon the speed of the energy transition," he said.
The third, "new" reality, Hill said, is that investor expectations are changing for the industry, both in terms of requiring short-term returns of capital and Expected Surprise Prediction expectations.
"The way to deal with volatility and increasing investor return expectations is having a low-cost portfolio," Hill said. "It's a commodity business. It delivers extremely efficient capital and resource utilization."
Credit where credit is due
Before Liam Mallon, president of ExxonMobil Upstream Oil and Gas Co., began to share his thoughts on the future, he paused to recognize how the industry's workforce has responded with unmatched resilience to COVID-19.
"We should acknowledge the men and women of our industry for what everybody went through in 2020," Mallon said. "We have an extraordinarily resilient industry and extraordinarily resilient people, despite the pandemic and the anxiety, loneliness and fatigue it continues to bring with it. We need to acknowledge and reflect on that."
The fact that more and more people are being vaccinated every day and much of the world is emerging from the pandemic, Mallon said, have reminded many that there is a future, and energy transition is an undeniable part of that future.
"Yes, there is a transition that we all must aspire to - to a lower-carbon future. But if you look at oil and gas and you think about any of the numerous scenarios, oil and gas is still in 50 percent of the mix by 2040," Mallon said. "In the upstream business, oil and gas fields deplete by 5 percent to 7 percent per year. If you start from where we are today and think about a scenario where, even if oil and gas is only half of the demand picture, we still need 70 million to 80 million barrels per day.
"The investment required in the oil and gas business to meet this demand is in the trillions of dollars. And it will require collaboration, innovation and technology applications on a scale we've never seen before."
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