Print this pageNew Ideas and Their Diffusion: A Model for Exploration and Production Companies in the 21st Century*
By
Arthur E. Berman1
Search and Discovery Article #70017 (2006)
Posted August 19, 2006
*Oral presentation at AAPG Annual Convention, Houston, Texas, April 9-12, 2006
Click to view
presentation in PDF format (1.4 mb).
1Sugar Land, TX ([email protected])
Abstract
Most petroleum
exploration and production (E&P) companies have embraced risk 
evaluation
and
portfolio management practices, but are not replacing reserves except by
acquisitions and mergers. The chief tangible cause for failure to discover
large, new reserves is that about 80% of the world is controlled by state oil
companies and is, therefore, unavailable for competitive investment and
drilling. It is reasonable, in other words, that if companies must continue to
prospect in the same 20% of the world's basins that the size of new discoveries
should decline as it has.
There are,
however, more fundamental and systemic reasons why petroleum E&P companies are
in trouble. First, the Risk process discourages discovery of large reserves. The
Risk evaluation model does not take diffusion theory into account adequately. By
the time most companies decide to enter a new E&P play or trend, little
opportunity remains and most remaining opportunity is in relatively small
fields. Gulf of Mexico shelf and deepwater drilling and discovery patterns
clearly show
this.
Petroleum companies reward their management largely without regard or accountability for reserve additions through exploration and production. Poor company performance has led to repeated technical staff reductions over the past 30 years, which, in turn, have discouraged young people from entering petroleum-related fields. The result is a depleted work force that has little replacement potential, but remains unappreciated and inadequately rewarded by their employers.
At the same time, technical staffs have not adequately embraced inventive application of new technology and have, therefore, not developed new ideas for exploration and production. Seismic attribute analysis and deepwater facies models are believed by most to be the cutting edge of E&P but diffusion theory shows that, since everyone is using these approaches, they will yield limited future opportunities.
