What's Ahead in 2006

Consultants strive to keep pace with operators’ plans

William Donald (Donnie) Harris III , CEO, Forrest A. Garb & Associates, Inc., Dallas

Our industry has again come out of the valley into the peak, and I think this peak will probably have a longer life than the previous ones. With oil prices remaining at higher levels, the majors, all the way through to the small independents, have increased their spending levels. In the past, spending lagged, and the down cycle returned before the spending had even started.

Higher prices are in the equation. It appears that, across the board, managers have finally come to the conclusion that higher oil prices are here to stay, at least for the medium term. I believe that these higher oil prices will remain at, or very near, their current levels. Energy demands from countries, such as India and China, have increased dramatically over the past year, as they continue to expand their industrial bases. As a result, it will be increasingly more difficult for oil producers to keep pace with demand.

Consulting and service organizations are not the only entities that have been pushed to keep pace with the needs of E&P companies. Some of the resources previously allocated to research and technology innovations have also been shifted to operations, as a result of the increased pressure placed on E&P companies to take advantage of higher oil prices. Obviously, research continues, especially in William Donald (Donnie) Harris III, , CEO, Forrest A. Garb & Associates, Inc., Dallas

Our industry has again come out of the valley into the peak, and I think this peak will probably have a longer life than the previous ones. With oil prices remaining at higher levels, the majors, all the way through to the small independents, have increased their spending levels. In the past, spending lagged, and the down cycle returned before the spending had even started.

Higher prices are in the equation. It appears that, across the board, managers have finally come to the conclusion that higher oil prices are here to stay, at least for the medium term. I believe that these higher oil prices will remain at, or very near, their current levels. Energy demands from countries, such as India and China, have increased dramatically over the past year, as they continue to expand their industrial bases. As a result, it will be increasingly more difficult for oil producers to keep pace with demand.

Consulting and service organizations are not the only entities that have been pushed to keep pace with the needs of E&P companies. Some of the resources previously allocated to research and technology innovations have also been shifted to operations, as a result of the increased pressure placed on E&P companies to take advantage of higher oil prices. Obviously, research continues, especially in the academic arena. However, it is unlikely that the technology advancements will continue to keep the same pace as in the past.

The problem is simple: manpower. However, the solution is not as simple. The petroleum industry has been taking a beating over the past few years. Experienced professionals have left the industry, and new blood has not been infused. Even with an increased number of graduates becoming available, it will take years to build up the experience base to a level that could be considered adequate.

Innovations will need to take a different direction. The most significant innovations that will be developed will be those that allow for the maximum utilization of the experience base, while simultaneously transferring this experience throughout the organization. So here is the challenge for this coming year: Do more with less.

Greater spending expected. Last year, I reported that the service and consulting businesses were becoming busier. Well, it is safe to say that Forrest A. Garb & Associates, Inc. (FGA), along with other consultants and service providers, are now being pushed to keep up with the continued escalation of E&P company spending. New money from outside our industry is starting to invest in oil and gas. With this comes the inexperience of the investor, and the need for education of the investor.

It is my opinion that this E&P spending trend will continue throughout 2006, as oil prices are expected to remain strong. To better serve our clients and the industry, FGA has made moves to increase our workload capability through increased staff and computing capabilities.

There are two types of projects where increased oil prices have had a significant impact. The first is the revitalization of older, mature fields. Many of these fields have even been shut in or abandoned, due to economic considerations. Production that was once uneconomic can now yield a significant return on investment. The second type of project that has become attractive once again is where the implementation of technology was once cost-prohibitive. Many tertiary recovery projects that were placed on the back burner in the 1980s now have new life and what appears to be an economic future.

I believe our industry will maintain at a high level of activity in the near future. I know that FGA has been extremely busy over the previous year, and I hope that we will be able to maintain our workload. This having been said, I have been extremely busy, and I would like to thank Mark Murray, my partner, for his thoughts on this article.

THE AUTHOR
	William Donald (Donnie) Harris III joined Forrest A. Garb & Associates, Inc., as president in August 1998, and he now serves as CEO. He is responsible for the firm’s daily operations and the supervision of engineering projects. Mr. Harris began his career with ARCO Oil & Gas as a reservoir engineer. He also was a vice president at DeGolyer and MacNaughton, where he prepared and supervised engineering and reserve studies, plus appraisal reports for fields in many countries. He holds a BS degree in petroleum engineering from Texas A&M University and returned to school in 1998, earning an MBA from Southern Methodist University. Mr. Harris is a member of SPE and is a registered professional engineer in Texas.