Independents fighting for survival

World Oil, Feb, 1999 by Deborah Rowell

Perhaps more than any other group, U.S. independent oil and natural gas producers are taking the brunt of the oil price collapse. While the major companies can--to a certain extent--fall back on other aspects of their businesses, or pursue diversification or mergers, most independents do not have the same options. With fewer alternatives, many are shutting in wells, laying offworkers and heading down a path that may not be retraceable.

In response to these conditions, the Petroleum Technology Transfer Council (PTTC), headquartered in Washington, D.C., launched an Industry Crisis Action Plan during its December 1998 Board meeting. That is not to say that PTTC only has an action plan in times of crisis. In fact, PTTC has had a non-stop action plan since it was formed in 1994, as a not-for-profit national organization to disseminate technology to independent exploration and producing (E&P) companies. Funded primarily by the U.S. Department of Energy, Office of Fossil Energy, PTTC is also supported by universities, state geological surveys, several state governments and industry.

During this crisis, many industry and government organizations are working on various policy and regulatory solutions to mm the situation around. In this crisis situation, PTTC sees its role as helping independent producers through technology-related programs that complement policy and regulatory solutions sought by other groups. And it plans to compile and disseminate results of studies being conducted by other organizations measuring effects of the crisis on independents.

Survival-oriented programs. The most important part of PTTC's Industry Crisis Action Plan involves reviewing prior plans, made some months ago, and changing them, if required, to make them more relevant to addressing survival needs of the industry. Since the organization serves as the "bridge to solutions" for independent producers, its national and regional staffs are working closely with independents to offer assistance. This is being done by: 1) helping independents identify and clarify problems, 2) educating them about options to address their problems and opportunities, and 3) connecting them with technology providers.

PTTC transfers much information through its network of workshops, resource centers, websites, newsletters and other products and services. This information has always been about field-tested, proven technologies that are cost-effective and likely to improve the bottom line for operators. However, since the industry crisis, the focus has shifted to more short-term solutions that can make a quick impact on an operator's bottom line. For example, independents are interested in identifying "best practices" for operating under adverse economic conditions, as well as ways to reduce operating costs, such as electrical power costs.

Other survival-oriented topics include managing water production, technology damage control and mitigation, marginal economics and how to shut in wells to minimize problems when they are brought back on line. These activities are being targeted, as much as possible, to the needs of local producers, and involve the operations and field staff of independents.

Although an unpleasant reality, some PTTC programs are addressing the business and legal issues associated with shutting-in wells/leases and downsizing operations. However, in the midst of all the gloom, there are still some independents who are seeing opportunities in the current difficult environment, and they want more information on how to position themselves for those opportunities. They have encouraged PTTC to continue providing access to technology solutions.

Workshops/resource centers. Information on these types of survival topics is being disseminated mainly through the organization's regional workshops. Last year, there were nearly 100 workshops held on a wide range of upstream topics; and the same number is planned for 1999. With workshop fees typically less than $75, independents can cost-effectively find answers to specific problems, and learn from peers and technology providers.

PTTC helps independent producers make timely, informed technology decisions, mainly through its 10 regional resource centers. Located at universities and state geological surveys with strong oil and natural gas expertise, the centers address the needs of producers in all 33 oil and gas producing states. In this crisis environment, the expert assistance available at the resource centers is aimed toward helping independents hang on to their businesses until the economic climate improves.

Internet/informational products. The Internet also provides an effective means of technology transfer, especially in times of crisis when travel budgets are so limited. Increasingly, PTTC's websites offer case studies, databases and downloadable field studies from public and private research projects--a growing library of technology applications. In late 1998, the organization sponsored two webcasts, allowing producers from across the country to "virtually" attend one of its workshops.