Sustainable Recovery: Managing Risk, Uncertainty, and Complexity

Abstract

I was invited to chair an executive panel related to best practices in oil megaprojects at the 2021 World Petroleum Congress in Houston in December. There were outstanding presentations by Petrobras, Equinor, and Chevron related to developing very complex projects in challenging surface and subsurface environments with the required quality and in line with initial cost estimates. Technological evolutions in our industry have allowed such an achievement, which makes me proud to belong to this industry. If I were to characterize the skills that differentiate our oil and gas professionals from most other industries, I would highlight our knowledge of subsurface sciences and the ability to manage large-scale projects that are complex and have significant risks associated with them. The latter refers to a significant deviation from the planned/expected performance of the project due to various factors. SPE has developed over the years several initiatives related to risk management. They span most of the technical disciplines, in particular the Health, Safety, Environment, and Sustainability, and the Management disciplines. Among the latest resources is the Human Factors Technical Section, which has done an outstanding job to deliver valuable information on how to mitigate risks associated with human factors, especially in the case of complex decisions with short-time response required. With the expanding use of artificial intelligence in our operations, there will be more involvement of the Data Science and Engineering Analytics discipline. Other resources include publications about decision analysis, and in particular, the books Making Good Decisions, Introduction to Petroleum Economics, and the still very useful Decision Analysis in E&P. A particular type of risk that our industry faces is the challenging economic environment that has resulted in shorter industry cycles associated with an increased impact on activity (hence employment) in the oil and gas sectors. The activity drop in 2014–2016 led to a decrease of more than 25% in upstream investments, followed by another even larger (30%) decline in 2020. In fewer than 5 years, the upstream sector has seen investments nearly halved. I highlighted in a previous column that the 2022 recovery would depend on the emergence of new variants of COVID-19. The emergence of the Omicron variant and the speed at which it is spreading around the world, with limitations imposed on international travel, has led to new daily cases reaching a (conservative) figure of 3 million daily worldwide. Thankfully, it seems that the severity of the cases is lower than with previous variants such as Delta.