I found your December 2015 issue of the Oilfield PULSE e-zine to be as amusing and informative a read as any in the past. As a service provider to the oil and gas industry, good insight helps shape our ability to respond better, faster and more frugally to change before or as it happens. However, this time most of the articles struck me as incredibly defensive or excusatory of an industry that is facing tremendous, possibly self-inflicited, difficulties ahead. Rather than ponder these challenges and offer realistic solutions, the focus of the issue was on wishing for the retention of a status quo that does not mirror the reality or future of local and global economies – economies that are demanding services and products which increasingly rely on sources of energy and manufacturing processes that are not reliant on oil. The global thirst for ‘things’ with internal combustion engines is in decline. Cheaper alternatives to petroleum-based materials for the production of plastics are being regularly developed. Rather than innovating new types of markets, producers have largely sat on the assumption that their product was unique, irreplaceable and largely infallible. That efficiencies of scale wouldn’t be found.
There needs to be recognition in the industry that the best times are behind for most. Recognition that the demand for oil is a shrinking one. That some producers won’t be able to provide the product at the price private, corporate and government consumers are willing to pay in light of cheaper or better solutions. That service providers to oil producers won’t be able to maintain above-average margins – they’ll be relegated to slimmer profits like most other industries, and will lose the shine of being ‘special’. The overnight collapse of the asbestos mining industry is a good example of what can happen when the winds of change are ignored. The asbestos lobby pushed the wrong buttons in its efforts to deflect change, and history could very well be repeating itself for many Canadian oil producers.
Many of the larger oil and gas producers have started to diversify their portfolios – energy is energy seems to be the new direction, with nostalgia considered a hindrance. They are still producers in the conventional sense, but realized that having a narrow focus on one or two products would – ultimately – kill their share values and prevent them from weathering lows comfortably. Instead of wishing about how things should stay the same or pointing fingers at everything that moves but themselves, publications like the OilfieldPULSE must encourage producers, their CEO’s, and shareholders to start converting oil businesses to energy business – ones that have true asset depth and offer a greater variety of products and/or services. Leaders and innovators always come out ahead – 2016 is looking to be a good opportunity for those people.
M.SC., RPCA | DIRECTOR, ARCHER CRM PARTNERSHIP
We always appreciate our readers taking the time to send us their thoughts and comments. Whether you agree with what we publish or not, we enjoy a healthy conversation/debate over the state of the oil and gas industry. The December 2015 issue of Oilfield PULSE focused on whether people were optimistic or pessimistic about the state of our industry going into 2016. We felt this letter from Mr. Farvacque in regards to the December 2015 issue was particularly relevant in showcasing an alternate opinion regarding the changing landscape of our industry. Here’s our thoughts on some of the points raised in Mr. Farvazque’s letter:
By way of background, Oilfield PULSE magazine is targeted toward key decision makers in the oil & gas industry, spanning both exploration and production, as well as energy services companies. The main goal of The PULSE is and has always been, to be the voice of our clients who are utilizing our Oilfield HUB service and participating in our online business community. For those who are unaware, Oilfield HUB is our flagship service, assisting producers of every size to achieve greater G&A and AFE cost efficiencies and productivity improvements in their day-to-day operations in how they are managing their vendor base, procurement and daily field reporting. We are a privately held company, and our mission is to be an outspoken partisan supporter of the oil & gas industry, and a vocal advocate for our clients.
As a biased supporter of an industry that has done so much, for so many, we do not believe it is our role to encourage our clients to convert their fundamental business models from oil to energy businesses, regardless of the current political or economic landscape. Trying to convince companies founded by engineers and geologists to reinvent themselves and invest in other ‘energy’ products and services beyond their scope and field of expertise, in our view, would be like trying to convince McDonalds to stop selling burgers because they are making people fat. It’s just not going to happen overnight, or any time soon.
We are not a publisher or media outlet. Just a private brand promoting an industry segment which has brought an abundance of prosperity to Canadian lives, and provides food and shelter for our employees and their families. Investors are needed in abundance, from all industry segments around the world, to fund this lofty energy businesses endeavor, and unfortunately today this money is currently heading away from Canada in droves, and even when it lands elsewhere, it certainly isn’t being offered up at will to fund such a transition.
All this said, we are always open to differing opinions on how the industry needs to grow to survive in the face of collapsed commodity prices, along with sound advice for those companies that are potentially interested in evolving over time.