As CERAWeek kicks off, energy industry focuses on technology, innovation

Daniel Yergin listens as Rex Tillerson, CEO of Exxon Mobil, speaks during the annual CERA Week energy conference at the Hilton Americas, Friday, March 9, 2012, in Houston. ( Michael Paulsen / Houston Chronicle ) less Daniel Yergin listens as Rex Tillerson, CEO of Exxon Mobil, speaks during the annual CERA Week energy conference at the Hilton Americas, Friday, March 9, 2012, in Houston. ( Michael Paulsen / Houston Chronicle ... more Photo: Michael Paulsen, Staff / Houston Chronicle Photo: Michael Paulsen, Staff / Houston Chronicle Image 1 of / 11 Caption Close As CERAWeek kicks off, energy industry focuses on technology, innovation 1 / 11 Back to Gallery

In the heady days when crude oil topped $100 a barrel, energy producers drilled with abandon, raking in profits with little incentive to streamline operations.

Then, a precipitous plunge in the market sunk the price of oil far below $50 a barrel, forcing producers to slash thousands of jobs, choose their wells wisely and adopt better technology in the name of brutal efficiency.

Now, as oil prices climb above $60 a barrel, the industry will likely focus on preserving those efficiency gains, collecting and analyzing vast amounts of data to improve oil and gas operations, said Daniel Yergin, one of the world’s leading energy experts. In addition, Yergin said, energy companies will likely need to shift investments into renewable power sources, such as wind and solar, and new energy technologies as growing alarms about climate change lead governments around the world to tighten emissions regulations and shift their economies away from fossil fuels.

“Technology and innovation is more of a theme that it has ever been before,” said Yergin, author of The Prize, the definitive history of the oil industry. “The focus of the oil and gas industry is on production, but it’s also on using an immense amount of data.”

These issues will shape the discussion at research firm IHS Markit’s 37th annual CERAWeek when it opens in Houston on Monday, an event that attracts the biggest names in the industry, including CEOs, government officials and political leaders. This year’s headliners include U.S. Secretary of Energy and former Texas governor Rick Perry, U.S. Secretary of the Interior Ryan Zinke, OPEC Secretary General Mohammad Sanusi Barkindo and Saudi Aramco CEO Amin Nasser.

Yergin, the vice chairman of IHS Markit, will lead conversations about the future of an industry in flux, shaken up in part by the surge in U.S. oil and gas production that has upended global trade and geopolitics by flooding markets with cheap and plentiful petroleum extracted from vast shale reserves in West Texas and elsewhere. The U.S., now among the world’s top crude oil producers, is expected to pump out an average of 10.6 million barrels a day this year, surpassing Saudi Arabia and nearing Russia in output.

The U.S. is also producing and exporting record amounts of natural gas to countries in Latin America and Asia, where demand has grown as part of an effort to reduce emissions with cleaner-burning energy sources. The U.S. became a net exporter of natural gas last year for the first time since 1957, driven in part by a massive expansion in cross-border pipelines to Mexico and overseas shipments of liquified natural gas pioneered by Houston’s Cheniere Energy.

The prolific Permian Basin in West Texas has accounted for much of the growth, and major oil companies including Exxon Mobil and Chevron Corp. are expanding operations in that region and crunching troves of data to make the most of their investments.

“The impact Texas has on the global oil market is as large as it has ever been,” Yergin said. “Different players are trying to understand how the structure of the market is changing.”

But OPEC, which last year lifted global oil prices with a sustained cut in production, remains a key player in determining the state of the market. OPEC Secretary-General Mohammad Sanusi Barkindo will join Yergin and Fatih Birol, executive director of the International Energy Agency, for a discussion about changes in the global energy economy.

U.S. producers, meanwhile, remain focused on advancing hydraulic fracturing and drilling techniques to produce more oil and gas at lower costs. Digital technology, meanwhile, is further transforming oil field operations, said Andrew Smart, who leads the global energy practice for researcher and consultant Accenture.

Accenture, which will present at the conference’s sessions on innovation, found in a recent survey that oil production companies have already begun to adopt digital tools to speed production and expect to invest in technologies such as robotics in the coming years.

“We will continue to be a premier player in the global energy mix,” said Jack Gerard, president and CEO of the American Petroleum Institute, a trade group. “Who would have thought it six or seven years ago?”

Oil and gas, however, will share the CERAWeek spotlight with renewable technologies and discussions about the role wind and solar power will play as governments around the world enact policies to lower emissions of carbon dioxide and other greenhouse gases to meet targets under the United Nations climate accord ratified last year. Meanwhile, fuel-efficient and electric vehicles are lessening the transportation industry’s reliance on oil.

Gasoline and diesel accounts for about 70 percent of U.S. demand for crude.

Last year, the conference discussed if and when oil demand will peak in the coming decades. This year, Yergin expects a more nuanced conversation about how best to use a mix of different energy sources and technologies to reduce emissions and push the industry into a more efficient and cleaner future.

“Now,” he said. “it’s more of a question of what an energy transition actually means.”

katherine.blunt@chron.com

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