Volume 64, Number 1 March 2010 www.pesa.org

PESANewsIN THE NEWS

2010 PESA Annual MeetingApril 14-17, 2010Ritz-Carlton Golf Resort, NaplesFYI: This year’s theme is “2010:Managing Through Global &Economic Uncertainty.” Ourspeakers are: DDaayy 11:: Don Reynolds, 21st

Century Forecasting; John Crum,Apache Corporation; RichardStoneburner, Petrohawk EnergyCorporation; Lee Boothby,Newfield Exploration, and StevenMueller, Southwestern Energy.DDaayy 22:: Peter Coleman,

ExxonMobil; Victor Obadiah,Total E&P New Ventures; andMarshall Adkins, RaymondJames & Associates.FFoorr mmoorree iinnffoorrmmaattiioonn oonn

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EVENT CALENDAR

Attendance Records

ANGA: abundance message gaining tractionMany Thanks ...

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In an environment wheremany find it difficult to forecastthe coming months, Doug Suttles is talking about trendsfor the next 20 years.

Suttles, Chief Operating Officer for BP Exploration &Production, says, in short, “theworld needs what we do.” Oiland gas aren’t going anywhere.

There are, he says, a few features of the next 20 yearsworth thinking about. The singlebiggest thing is the growing demand for energy. About 1.5billion people don’t have access

to electricity, and 2.5 billiondon’t use modern fuel to cooktheir food.

“That’s driving the growth,”says Suttles. “People want aquality of life that affordable andsecure energy provides.”

Over the last 10 years, oil hasbeen volatile, but Suttles saysthe run up of the last 4 to 5 yearsis one of the most sustained runsthe industry has ever had.

“It started to drive some interesting behavior—in Summer 2008, you’d hear oiland gas experts—people we’d

never heard of—saying that oilwas $140 and would rise to$200,” he says. “We were moreworried about when it would fallto $50.”

Suttles says the reason for thecrash is simple. The price of oilgoes up, it brings new money,and the industry is good at finding oil and gas, so ultimatelysupply is greater than demand.On top of it, a global recessionpulled 2 million barrels of oildemand out of the market.

David Trice has amessage, and he wantslawmakers, businesses,and the public to hear itagain and again.

“We have lots of natural gas, it can reduce our dependenceon imported oil, it’s environmentallyfriendly, and it’s right

here in America,” saysTrice, Chairman of theAmerican Natural GasAssociation (ANGA).“We have to take thatsimple message andtranslate it into policy.Our job is to make thatmessage heard.”

Though ANGA wasfounded only one year

ago, he says the groupis gaining traction withits messaging.

“One message thatresonates with policymakers is the jobs thatthis industry creates,”he says. “Our studyfound that natural gasprovides 3 million direct and indirect jobs

in every state butHawaii, and there arenow 32 states producing natural gas.”

But there is a longroad ahead, and thegroup is looking to theservice and supply sector to lend a hand.

�See ANGA, Page 8

Three PESA District Meetings draw huge crowds

Speaker: Doug SuttlesDistrict Meeting: Gulf Coast LouisianaAttendance: 138

Speaker: Larry NicholsDistrict Meeting: Mid-ContinentAttendance: 193

Speaker: Chuck DavidsonDistrict Meeting: Gulf Coast TexasAttendance: 191

Suttles: Oil and gas business is secure for decades

� See Suttles, Page 4

PPEESSAA CChhaaiirrmmaannRobert Workman,

National Oilwell Varco

PPEESSAA VViiccee CChhaaiirrmmaannBill Coates, Schlumberger

PPEESSAA 11sstt VViiccee PPrreessiiddeennttJohn Gremp, FMC Technologies, Inc.

PPEESSAA PPrreessiiddeennttSherry A. Stephens

PPEESSAA VViiccee PPrreessiiddeennttMichael Perini

PPEESSAA DDiirreeccttoorr ooff CCoommmmuunniiccaattiioonnssChris Evans

PESA, Petroleum Equipment Suppliers Association, and the PESA logo are allregistered marks of the Petroleum Equipment Suppliers Association.

PPEESSAA NNeewwss iiss ppuubblliisshheedd bbyy::Petroleum Equipment SuppliersAssociation1240 Blalock, Suite 110Houston, Texas 77055Phone: (713) 932-0168Fax: (713) 932-0497© 2010, PESA

2 PESA News EDITORIAL

PESA growing, adding value for youLast year was one of

turmoil for much of theindustry. Globaleconomies fell into recession and took oiland gas—and many ofour businesses—withthem.

PESA, on the otherhand, ran counter to therecession. Attendancefor nearly all of PESA’seighteen public events were up. We’ve alsobeen able to add many more companies asmembers. In short, PESA is financially stable and in excellent health.

More importantly, we’ve focused on increasing the value of a PESA membership.We want to offer more avenues throughwhich members can get involved in the association, attract the coming generations,and affect the future of our industry.

Our campaign to make a PESA membership more valuable is not a newone—it has been gaining momentum andbuilding on itself for some time. For the pastseveral years, PESA has focused its effortsinternally, seeking to bring membership benefits to a wider spectrum of people withinmember companies. We wanted to reach notonly the top tier of member companies, butits middle management and new recruits.

The largest example of those efforts is theEmerging Leaders Committee, which in

barely over two years has hosted more than2,000 people and increased PESA’s membership database by one third. Thegroup’s Oil 101 program alone, which soldout with a waiting list for the fourth consecutive time, has reached nearly 700.

This year, we’re shifting our innovationand resources to external audiences in twoprimary areas—education and policy.

PESA has long supported educational initiatives, including sponsorship and expertise for the HISD’s Petroleum Academies, the Offshore Energy Center, andthe National Energy Education DevelopmentProgram. But for the long-term health of theindustry, we can and should do more.

To that end, Pat Bond (Smith International)is heading up the Energy Educators Committee. The group is working out plansto greatly increase PESA’s footprint in education. The committee is devising ameans to increase member participation inschools be it through volunteer teaching,speeches, or demonstrations inside classrooms. Our members have been extremely successful and well-received inthese visits. The group also is working on ameans to make that participation easier bycreating an archive of presentable information and graphics readily available tomembers. Finally, the Energy Educators willhost an annual fundraising skeet shoot to further support our education plans.

On the policy front, PESA’s initial charter

was to aid communication between membercompanies and Washington. While PESA isactive in a number of policy issues that affect our industry, we have not sponsoredan official presence for many years.

That changed in January when RobertMoran and Galen Cobb (Halliburton)planned PESA’s three-day Washington Fly-in. The event was to give members face-to-face meetings with several Congressmen,Senators, Senior Congressional Staff, theU.S. Chamber of Commerce, and other influential decision makers. The great Washington Snowpocalypse of 2010 forceda reschedule to May 17 to 19. This is an exceptionally rare opportunity to meet andeducate policymakers in Washington. If youhaven’t already done so, send a representative from your company and makeour voice heard.

These programs are designed with onepurpose—to make your membership morevaluable, meaningful, and of practical business use. We’ve put a lot of work intothat purpose, but we need your help to setthe bar even higher. If you have an idea forsomething that PESA should do, or could dobetter, please call Sherry at the PESA officeand we’ll start a discussion. This is an exciting time to be a PESA member, and Ihope you’ll spread the word.

—Robert WorkmanPESA Chairman

Now that PESA has relocatedto our new offices at 1240 Blalockin Houston, we are also lookingto upgrade our website. Actually,this has been an ongoing processinitiated by PESA ChairmanRobert Workman, who hasworked with Mike Perini, PESA’sVice President, to make this proposed project a reality.

Our website will chronicle andoffer information on the progressof our association’s programs. Additionally, news articles andmeeting presentations will beposted and made available more

quickly. Our goal is to also postinformation on international activities and developments received through our contact withthe Foreign Service Officers whohave participated in PESA’s training program for FSOs heldeach summer in Houston.

We are very excited about ourupdated website. Watch for announcements coming to yousoon in the mail.

And yes, we did know it wastime for an upgrade.

—Sherry StephensPESA President

Robert Workman

New PESA website on the horizon ... and there was much rejoicing

“Everyone who thinks PESA needs a new website, say ‘Aye’”{But we built a new one anyway}

3PESA NewsEDITORIAL

Editor’s Note: This essay was compiledfrom a presentation by Shell’s Joe Leimkuhler during the 2010 ManufacturersCommittee Meeting.

I was asked to speak about technologyand leadership’s role in meeting customerexpectations from Shell’s point of view. Inmy group, we look at three major functionsinternally and with our suppliers: HS&E, reliability, and cost.

Our license to operate at Shell is safety. Ifwe can’t do it safely, we won’t do it, and weexpect the same from our suppliers. Next isreliability—my team delivers the well andwe get it back from time to time as components fail.

Third is cost, which includes the price oftechnology and the cost of installation. Unless technology is sold at a good price, Iwon’t do it—technology must be developedin a cost effective way, which is why manyof the deepwater projects take so long.When you combine cost and reliability, forthe most part that encapsulates total value.My data shows us at a plateau for total value.

Cost and reliability are affected by thetime and efficiency of installation as well astrouble associated with installation, or trouble cost. We tend to deal with troublecost as an overall gross number that we rollin, and as operators we haven’t done a goodjob at drilling down, understanding, andcontrolling it. According to an SPE paper,trouble time from 1999 to 2004 was 27 percent. Today, our trouble time is running at40 percent, burning an average of $270,000a day of non-productive time.

We need to take a long and hard look attotal cost. We at Shell have implemented acost transparency model—which detailseverything it takes to put the well together—to see, understand, and reduce costs. We

need to know where that $270,000 is going.According to my data from 2006 to today,

we had trouble with cementing, but nowhave a good handle on it. Open hole troubleand lost circulation are now pretty minorcompared to 10 years ago. Mechanicalbreakdown of the rig is now in the singledigits. Recently we’ve seen cased hole trouble—understandable, since I have olderwells, but it’s still less than 10 percent.

The thing that surprises me the most isfailed tools and equipment from my suppliers. It’s now the biggest chunk of mytrouble cost. In 2006 it was 7 percent trouble

cost, and in the last three years, the greatestgrowth has been in failed equipment fromsuppliers. It now stands at 10 percent of totalwell costs—it’s unsustainable and unacceptable.

We’re drilling tougher holes, and had ahuge spike in activity—that explanation maywork from a fiscal sense, but you have tounderstand the costs at a deeper level. I’mlooking at operator costs and vendor costs.

Here’s some dirty laundry: Trouble timewithin Shell—operator trouble—cost $42million and 44 percent of trouble time thisyear. We’ll do after-action analysis and willimprove this with multiple committees. Onthe supplier side, we have 56 percent of ourtrouble time. We have a team focusing ondrilling tools to investigate failures to seewhat went wrong and make corrections, particularly in completion tools.

Sure, asking for a refund from the suppliermakes us feel good, but it doesn’t solve theproblem and it will force a raise in prices.Accountability is the only way to move forward, and accountability needs to be increased across the board on both sides.

I think we can take some of the improvements we’ve made in HSE since the1960s and apply them to cost. IADC’s losttime incident rate from 1968 was 12 to 14people per 100. Today, it’s way below one.What got us there were industry standards,working on our safety culture, and investi-gating all incidents, no matter how small.When your proactive safety efforts drop, incidents go up. I believe we can do thesame for cost in terms of standards, culture,and investigating. Let’s learn to take lessonsfrom things that don’t cost us money, and wecan get in front of the cost issue together.

Joe LeimkuhlerWell Delivery Manager TLP’s/Spars

Shell Oil

Trouble costs rising; operators, service companies must unite to fix it

PESA’s newest committee,Energy Educators, has started anaward program for teachers inthe IPAA energy academies.

The award—dubbed thePESA Teacher of the YearAward—will be given annuallyto an energy academy teacherwho exemplifies excellence inthe classroom. The award carriesa $10,000 stipend, distributed tothe teacher and his or her school.

Galen Cobb (Halliburton) presented the award to BethMizwa of Lamar High School.

“This award gives us the op-portunity to celebrate an educa-tor who is dedicated to securinga future for the next generation

of industry professionals,” saysCobb. “She has approachedteaching students about the oiland gas industry with a sense ofresponsibility and integrity andis well aware of the effect thatone teacher can have in the lifeof a student.”

Mizwa says she was honoredto be the first recipient of thePESA Teacher of the YearAward.

“I want to thank PESA andthe Academy Executive Boardfor supporting public educationand giving these students the op-portunity to learn about all of theincredible opportunities withinthe energy industry,” she says.

Energy Educators committee launches Teacher of the Year Award

Doris Richardson (IPAA), Teacher of the Year Beth Mizwa, and PESA PastChairman Galen Cobb (Halliburton).

4 PESA News NEWS

Nichols: Devon to focus only on North America Devon is undergoing a

fundamental shift in the waythey do business. All of their international assets are on theauction block as they turn theirfocus solely to North America.

Larry Nichols, Co-Founder,Chairman, and CEO of DevonEnergy Corporation, discussedthe reasons for leaving some ofthe hottest oil and gas plays onthe planet.

“We are in the process ofselling all of our assets inBrazil, Azerbaijan, and China,which is of course a majorchange for us,” says Nichols.“The reason is simple—whyincur the risk and expense ofoffshore international drillingwhen we can do the samedrilling at home?”

The companies holdings inNorth America have far exceeded expectations from justa few years ago, he says. Inorder to capitalize on those opportunities, Devon is sellingall international assets.

“We expect the after-tax proceeds to be between $4.5and $7.5 billion,” he says. “Wesee unprecedented opportunityhere in both gas and oil.”

Currently, Devon is producing a 60 / 40 gas to oilpercentage. In 2008, Devonspent $6.6 billion drilling wells;in 2009 it went to $4.9 billion;and plans for 2010 include aramp-up to $5.6 billion, mostlyin North America.

Gas Revolution

Nichols says that one of thegreatest challenges in the

coming years is explaining topolicymakers in Washingtonhow the industry has changed.

“In the past, we searched forone geologic trap after another,and the utilities said, rightly,that to have a steady supplywe’d have to find new anticlines and new formations,”he says. “Now the source rockis the trap. We’ve solved theriddle of getting gas out ofshale, and suddenly there arelarge areas of natural gas whereyou can drill well after well. It’schanged everything.”

He says that analysts are

focusing only on the initial decline of the wells, which canrun at a decline rate of 50 to 60percent.

“Once they go through that,they settle out,” he says. “In theHaynesville, one of the mostprolific wells got 1 bcf of gasout of it in less than 90 days …I’ll settle for the steep decline.”

In the Barnett Shale, Devonhas drilled 2,000 straight successful horizontal wells,over 4,000 wells without a dryhole, and have 7,500 undrilledlocations.

“That’s just us, and that’s

what makes this different,” saysNichols. “It lets our industry goto the utilities and say ‘youdon’t have to rely on us makingmore discoveries, we havethese wells here, now, they’reproven, they’re surrounded byproduction, and we know howto do it.’ We can compete withcoal very effectively in order tobe a reliable long term supply.”

Devon has expanded in theWoodford Shale in southeastOklahoma with five rigs, andthe other major field is theCana-Woodford Shale.

“Our typical well in the corearea has 11 bcf of gas reservesin the middle of Oklahoma,” hesays. “In the Cana, we estimatethat our net reserves are 7 tcf.It’s here in the U.S., it’s cheap,reliable, and we can drill andstop whenever we want to.”

The natural gas revolutionalso is changing politics of theU.S. Senate, he says. Shaleplays are all around the country,which places additional Senators in play especially inthose places where there was nooil or gas to speak of before,such as Pennsylvania and NorthDakota with the Bakken Oil.

“The importance of this is reliability of supply—the resources are here and in theU.S.,” he says. “The fact thatwe are making the radicalchange in our business modelby selling out the internationalplays we have, underscores theextent to which we believe inthat. It is going to take a longtime to develop those reserves,but it creates a lot of opportunities for everyone.”

“When the excess supply gets around 3million barrels, the price falls—there needsto be 2 to 3 million barrels in excess supplyto deal with things like hurricanes, politicalinstability, or when something happens to aproduction facility,” he says. “When excesscapacity gets to be less than 3 million barrels,the price goes up. I suspect that trend willhappen many more times in the next 20 years.”

Natural gas has the same dynamics, butit’s still largely regional, says Suttles. Theemergence of unconventional gas yielded

increased supply, coupled with an impact ondemand, and the price fell. Supply and demand, again, were at work.

Long-Term Trends

Looking ahead to 2030, Suttles says demand for oil will be flat in the developedcountries—efficiency will counteract demand growth. Non-OECD like China andIndia will create the additional growth.

In terms of total energy, coal—eventhrough environmental concerns—is thenumber-one energy source. Oil is second,and renewables are currently at 1 percent rising to 5 percent by 2030.

“Basically, the world needs what we do,”he says. “We think there were about 7 trillionbarrels of oil equivalent originally in place,and if you look at what’s been producedalong with recovery factors, we’ve producedabout 33 percent. There’s clearly a ways togo. The reason we don’t know with certaintywhen peak oil will arrive is economics—weonly go as far as we need to go.”

With the emergence of NOCs, Suttlesrhetorically asked why IOCs or independentsare still needed.

“Our part of the industry typically operates at the frontier, and that frontier includes technology,” he says. “You don’tfind NOCs drilling exploration wells in

SUTTLESContinued from Page 1

PESA’s Mid-Continent District Chairman Paul Coppinger of Circor International, Inc., Energy Group, and Larry Nichols of Devon Energy.

5PESA NewsNEWS

Deepwater, say some, holdsabout a third of the world’s remaining undiscovered oil andgas reserves.

Chairman and CEO of NobleEnergy, Chuck Davidson, is aggressively going after hiscompany’s share, upping theircapital campaign by 85 percent.He discussed Noble’s take ondeepwater as well as overalltrends in deepwater plays.

Deepwater Trends

Davidson says that an excellent barometer for deepwater is the Goldman Sachs280, a report that looks at the 280biggest global projects for oil andgas. It covers 430 billion barrels ofoil equivalent—many are deepwater projects—and represents about 40 percent of themajors’ capital program. Noble hastwo projects on the list.

“Providing deepwater services is a high growth area—there are large inventories ofprojects in the queue,” he says.“By 2015, the industry will invest in these 280 projects atabout $200 billion a year, andby 2020, they will produceabout one-third of the world’shydrocarbon supplies.”

Davidson then focused on theGulf of Mexico (GOM)

deepwater, which is maturingand progressively becomingmore difficult to produce. Deepwater production in theGOM represents almost 60 percent of the GOM production,and current projections say thatproduction will surpass 2001’speak by 2013.

“The water depth problem issolved, now we’re moving to issues with reservoir depth,” hesays. “The wells are deeper andmore complicated—one wellhas a measured depth of 34,000feet, but only in 4,000 feet ofwater. These are challengingwells.”

Of the three types of plays inthe GOM—amplitude, subsaltMiocene, and the lower tertiary—most activity is goinginto the latter two.

“The amplitude plays are

getting old—they tend to beeasier to work and above salt,”he says. “Over the last 15 years,some 75 percent of discoverieshave been amplitudes. We find alot of the little stuff, usuallyaround a 30 million barrel average, but it’s almost not worthit due to the costs involved.”

Noble has moved to a heavyfocus in the subsalt Miocene.

“We don’t know where thisplay is in terms of its evolution,but the prospects are good,” hesays. “Drill depths are in the20,000 to 30,000 feet range, aretypically subsalt, and take amassive amount of computerhorsepower. Our inventory suggests that some of the thingswe’re drilling hold 100 to 200million barrels.”

The lower tertiary holds evengreater potential reward with

estimates of up to 300 millionbarrel fields.

“There is still much testing tobe done in terms of reading thereservoir, and those who arecompleting these wells havetheir hands full. We’re still waiting on the first long-termproduction test—we’ll see howthey prove out.”

Noble’s Plans

Ten years ago, Noble was focused on amplitude plays asthey afforded lower risks andrelatively short productionramp-ups of three to four years.Now, Davidson says the amplitudes are withering awayand the company shifted focusto subsalt Miocene.

6,000 feet of water to 28,000 feet of depthwith 28,000 psi reservoir pressure and 450degrees. That’s what we do—we get outthere on the edge.”

Geographic and political frontiers are another reason for IOCs and independents.

“One of the big plays in the comingdecades is the offshore arctic—we haven’tfigured out how to produce in pack ice, but Ibet we figure it out. There are massiveamounts of potential out there,” he says.“We’re also on the political edge—our company signed the first contract in Iraq.There’s a lot of risk.”

In offshore, Suttles says that some studiesestimate that about one third of all the oil left

to be found is in deepwater.“We’re starting to get into some very

difficult wells that need 1 million pound fracjobs in 5,000 feet of water with 28,000 feetof reservoir depth,” he says. “There are billions of barrels at stake, so that’s why weget excited about it. We play the game because there’s a big prize.”

And finally, he commented on climatechange and carbon emissions.

“The world believes this is an issue andbelieves that carbon-based fuels are contributing to negative issues with the climate,” he says. “If you don’t want asmuch carbon, let the private sector figure outthe most efficient way to do it, be it cap and

trade or carbon pricing. Level the playingfield so that the best things win, and don’ttry to select what they are.”

Suttles says that demand for energy willgrow, and oil and gas will be a big part ofthe growth. The challenges of companieswho work the problem will be tough.

“The work will be demanding in terms ofthe places we go, the technology we need todevelop, and environmental expectations,”he says. “Volatility will continue to be there.We produce a fungible product—demandcan grow, but supply can outstrip it, and theother way around. Our challenge is to find away to meet the demand and successfullyoperate in a volatile world.”

Davidson:Deepwaterthe play ofthe future

PESA Chairman Robert Workman of National Oilwell Varco, PESA Gulf Coast-Texas District Chairman Joe Winklerof Complete Production Services, and Chuck Davidson of Noble Energy.

� See Davidson, Page 7

6 PESA News NEWS

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Explorers Golf 2010Weather was virtually perfect for PESA’s Explorersof Houston Annual Golf Tournament, held March 4at Redstone Golf Club. The event was chaired andorganized by Committee Chairman Charlie Jones(Forum Oilfield Technologies).

Above: PESA Service Committee Chairman JeremyThigpen (National Oilwell Varco) finishes his swingon a Par 4 hole.

Right: Gary McNair (Chevron) makes a short chipto finish off a Par 5.

Bottom Right: PESA Chairman Robert Workman (National Oilwell Varco) is in mid-swing on a longPar 4.

Below: Jim Owsley (Wilson) sends a long putt up thegreen. The course was being prepped for the ShellHouston Open.

7PESA NewsNEWS

Is there a business case for Web 2.0? Perhaps.Some say they’re a waste of

productivity, accounting for $2.2billion in lost productivity lastyear; others say they’re a boonfor business, resulting in a newavenue for sales and increasedcollaboration. One way or theother, Web 2.0 and its social networks are here to stay.

Their effects on business areundeniable, as they’re beginningto be a part of, or affect, a widerange of functions includingsales, human resources, operations, technology, andmore. PESA’s E-Business Committee Meeting, chaired bySchlumberger’s Charles Currie,explored social networks andtheir effects on business.

Web 2.0, which has in largepart driven the number of websites from 250,000 in 1996to 80 million in 2006, is stillgrowing at an astronomical rate.Facebook is growing by 240 per-cent and Twitter is growing by700 percent. That growth, according to all three speakers,is an opportunity for businessthat should not be passed.

Johnathan Grieb of the Corporate Executive Board saysbusinesses should follow thelead of their employees for social networks. Employees, hesays, are naturally inclined tolean in and support each otherthrough sharing information andinsights, but the corporateenvironment often suppressesthat motivation, especially invirtual communication. He recommended structuring an argument for Web 2.0 solutionsthat identifies likely objections

and overcomes them one by onein the order of their magnitude.

Vince Polley, President ofKnowConnect PLLC—and alawyer by trade—took the notion one step further, sayingthat when measuring threat andopportunity, company lawyersmay be the biggest impedimentin the process.

“Everyone’s looking to findout what can go wrong, and yourlawyers have been answeringthis themselves,” he says. “Theythink if we’re allowing people totwitter or run blogs and talkabout the company, somebodywill eventually leak confidentialinformation, we’ll have a security breach, or a blog willinvade someone’s privacy.”

The truth is, says Polley, thosescenarios almost never happen.

“Lawyers are trained to be defensive, conservative, andshow you what the risks are,” heexplains. “But managers arepaid to factor that information inand decide what risks are tolerable. Some are real risks,but be careful about prematurelyshutting down evolving initiatives, some of which mayhave real business value.”

There are huge opportunities,says Polley, that come with thesenew technologies. For example,Dell Computers have increasedsales recently with Twitter-onlysales campaigns, which costnothing to operate.

Once the decision to allow social networks in the companyhas been made, says Polley, thelawyers will say, “okay we canmanage this, but we need to

have policies.” Polley stresses understanding

the business case and risks before a company makes a policy.

“Restrictive policies can col-lide with knowledge manage-ment initiatives—they canrestrict systems that enable peer-to-peer communication and col-laboration,” he says.

When building a social network policy, Polley says thatcompanies should frame the discussion from the bottom up.

“Learn what the younger generation are doing so you un-derstand how they could use it tobetter themselves or the com-pany,” he says. “Their instinctsfor utility—and their applicationof new tools to solve existingproblems in unexpected ways—are important inputs into the development of appropriate e-policies. With many of thesetechnologies, management hasmore to learn than to instruct.”

Finally, Polley described hisideal use for lawyers in newtechnology discussions—using alawyer as a brakeman. He recalled a conversation he hadwith a CEO of an oil and gasservice company.

“The CEO told me, ‘My job isto be strategic—I have to comeup with lots of out of the boxideas, and frankly, some of themare illegal. I need to have besideme this lawyer, whom I trust, tokeep me straight. Without him, Iwill self moderate and be afraidto take action,’” Polley recalled.“That’s the way to use yourlawyer. Don’t let them alwayssay no, but collaborate together.”

“We generated a lot of prospects in leasesales, built inventory, and added internationalprograms in West Africa and Israel.”Though, he points out, the internationalplays actually are new amplitudes, since theareas were unexplored.

The company has been successful in exploration recently, which Davidson sayswill require a lot of money to move into production.

“We’re bringing several major projectsonline and boosting capital to $2.5 billion,which is 85 percent above last year,” he

says. “About 60 percent is deepwater, and40 percent is for project development, particularly in West Africa, GOM SantaCruz, and Tamar in Israel.”

Exploration will continue—their target is700 million barrels of net unrisked resources. In field development, Noble hasfive deepwater rigs in the GOM, two inWest Africa, and one in Israel.

“Israel is the biggest discovery we’vemade in our company—it’s eye popping andstretches from Israel to Cyprus,” he says.“We’ve drilled two wells and the largestwas just over a billion barrels equivalent at6.3 tcf and we’re going back this year withmore seismic to develop Tamar and continue exploration.”

In West Africa amplitudes, Noble made11 discoveries out of 12. In the GOM, hesays the portfolio is rich, with a little over30 prospects in inventory and average sizeis around 150 million barrels—most aresubsalt.

“Looking at the portfolio either from theU.S. side or global, deepwater is going to remain extremely active,” he says. “It’s anoil based play in most areas and the valuewill support further development. Whilesome, like the GOM amplitude plays, aredeclining, it’s clearly not over when youstill have companies making multi-hundred-million-barrel discoveries. It’s technologydriven and more technology will open moreopportunities.”

DAVIDSONContinued from Page 5

Vince Polley of KnowConnect PLLC cautions companies against placing restrictive policies on new technologies before a business case is explored.

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8 PESA News NEWS

A Late-Night E-mail

ANGA’s 31 members—all independentE&P companies in North America—are thespokespersons for natural gas production.

“We are the creators, developers, and keyplayers in every unconventional resourceplay in North America,” says Trice. “Ourproduction nets out to 9.5 tcf, or 30 to 35percent of North American production.”

The group began with an email fromChesapeake Energy Corporation Chairmanand CEO Aubrey McClendon to Trice. Heasked how demand for natural gas could bestimulated.

“We spent most of our careers talkingabout scarcity and people valued our compa-nies based on scarcity,” says McClendon.“But scarcity is over and we need to talkabout the abundance.”

The two aimed to create an organizationthat would have sufficient capital to truly bea spokesman for natural gas via lobbying, amedia campaign, and everything it takes tocompete with the other energy sources inWashington. The group would try to influence and educate leaders about the advantages and abundance of natural gas.

Key Battlegrounds

The fundamental problem is that with theadvent of shale gas, the industry has toomuch supply and not enough demand.

“For the first time in our lives, we can say

here’s something that’s scalable, affordable,and can provide us with a pathway awayfrom foreign oil,” McClendon says. “Butmisperceptions on natural gas supply are ingrained, and some of that is our fault.”

ANGA is reaching out to organizationsand customers that help them understandthat the shortages of the past are gone.

“The credibility of abundance is our toppriority,” says Trice. “We’ve funded a studywith real data from all the unconventionalplays that tells us not only what the resourcebase is, but how fast we can ramp up production, how sustainable it is, and whateconomics will be needed to support it.”

He says the message is being heard.Opinion leaders’ approval jumps nearly 20percent once educated about the shift in theindustry and the abundance of natural gas.

The group has a $30 million campaign formedia that started in September, and willlikely spend more next year.

“It’s unfortunate that we’re labeled as afossil fuel—we’re a low carbon fuel,” saysMcClendon. “We’ve faced enormous PRchallenges as we moved East from the traditional areas of our industry. We’reworking to communicate the message ofabundance, just as all other industries thatproduce a commodity do like milk, beef, andthe like.”

The key, says Trice, is the entire industryworking together to face misinformation.

“We need to get in front of issues to address them head-on rather than reacting tothem after the fact,” he says. “Hydraulicfracturing is a big topic in our industry andsome contend that it’s dangerous for watersystems. We all know that’s a myth, but wehave to figure out how to get in front of itand focus on facts and not fears.”

Also of note are taxation proposals that ifpassed, would take $30 billion out of the industry, according to Trice.

“That means $30 billion out of wells andemployment. It’s not good for us, you, or thecountry,” he says.

While ANGA has made progress in thepast year, there’s a lot of work left to do,says Trice.

“In football terminology we’ve made it toour 10 yard line and have 90 yards to go,” hesays. “It takes a lot of dollars to support thisactivity—we have room for associate members and do take contributions. But wealso need each of you to reach our electedofficials and ask for climate change legislation that drives natural gas demand;we need you to support the House NaturalGas Act; and you can send letters to members of Congress at ANGA.US.”

ANGAContinued from Page 1

David Trice, Chairman of ANGA