Well, my answer is an excellent overview of the oil and ESG market. It was an honor to sit down and talk with Jon Rogers, an experienced Board Member, CEO, and energy and ESG industry thought leader. In some inside baseball, I have had the pleasure of previously interviewing Jon and following him for years. An energy expert is not developed in a year or in a single silo, and Jon has the street cred to visit in the micro and macro views we need. Being an energy executive in companies like Locus Bio and BP working on huge energy projects is just one portion of his experience.
My talk with Jon was a lot of fun talking about things like the Clean Air Act, oil and gas E&P improving their efficiencies, and reducing the impact on the environment while delivering low-cost energy. We need more energy thought leaders to help guide us into the future learning while from the past.
Thank you Jon for stopping by the podcast, and I am looking forward to our next visit.
CEO / Board Member | Oil & Gas Industry | Energy Transition | Low Carbon Oil & Gas | Chemicals | Global Leadership Experience | Supermajor Oil & Gas Corporation
Highlights
00:00 – Intro
01:00 – How did you get started? Like you were at BP and where else were you at?
03:31 – Talks about ESG Movements and Jon Roger’s Thoughts about it
07:59 – Talks about the Article that was released yesterday about Larry Fink getting the CEO of Saudi Aramco on his Board
10:39 – Do you think if you’re an oil company like you just described and you’re doing both, are you going to attract more investors?
13:31 – Talks about the Big Climate Challenge in the late ’80s and 90`s and how they solved it
15:00 – Talks about The Clean Air Act and its impact on the regulation of the oil and gas industry, as well as renewables like wind and solar energy.
21:00 – How do you balance finance versus technology?
24:17 – What do you see is the number one thing that we can do to help get to the next level? Is it education? Is what do we do?
26:33 – They’re going to be increasing, the Permian rig count is down. But what kind of new technologies do you see coming around the corner?
30:47 – That balance between dollars spent on a more effective rig with lower is ESG is more expensive. But is it a bigger crapshoot, if you would, because you don’t know that those longer laterals are going to pull back more oil and gas?
33:00 – Longer laterals and you get a different decline curve we need several trillion dollars to invest just to keep our decline curve at the current level of demand.
35:38 – What’s coming around the corner that you see in the industry for OPEC? Do you see that as they’re coming around are they going to hold their production levels or continue to drop?
37:51 – How do people reach out to you?
38:27 – Outro
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The following is an automated transcript and may have been edited for grammar. We disavow any errors unless they make us funnier or better looking.
Stuart Turley [00:00:04] Hello Everybody, Today is just a great day. My Name is Stuart Turley President of the Sandstone Group. And I’ve got an old friend of the show here today we’re just going to have an absolute blast. We’ve got an action packed whole list of everything to talk about.
Stuart Turley [00:00:23] I have one of my good friends, John Rogers. John is a industry expert and I mean, he knows his stuff with Oil, Energy and we’re talking some serious ESG questions that we got coming up. John, thank you so much for stopping by the Podcast.
Jon Rogers [00:00:40] It’s a pleasure, Stuart looking forward to.
Stuart Turley [00:00:43] You know, when you were CEO out there and everything else, I just enjoyed tackling you at the shows. And, you know, you and I have had you been on the show I think twice before and we’ve always gotten great feedback on your your insights. How did you get started? Like you were at BP and where else were you at?
Jon Rogers [00:01:05] We have always been oil and gas business started off on the service side Stu, I was lucky enough to spend five years over in Asia Pacific and then five years Middle East, couple of years in Europe, and then the last few years in the States, always being either on the service side or oil producer.
Jon Rogers [00:01:24] As you mentioned, I was a Director of Technology for BP as a BP for eight and a half years extremely interesting. I was there during the Macondo situation and you really see how professional a company is to you know and I learned so much from my time at BP. And after that, I was with Clariant for a number of years and low cost bioenergy saw a great mix of everything from Start-up to oil Supermajor.
Stuart Turley [00:01:51] You know, the Locus bio. I loved Locus bio from the standpoint of the frack fluids in the ESG story that was really strong.
Jon Rogers [00:02:01] Spectacular, great technology I’m going to touch on a little bit later on in the context of, okay, just about talking about new technologies and what Exxon bringing them. But there are some great technologies which, you know, we’re only getting 10% of the oil in place out of shale there’s a lot of technologies now that can empower corp. Bio surfactants is one of them.
Stuart Turley [00:02:23] Do what now?
Jon Rogers [00:02:25] So bio surfactants is one of the technologies that can, I think, augment what ExxonMobil are trying to do.
Stuart Turley [00:02:32] Oh, cool. You know, as we sit back, we were kind of chit chat and before this and there is a serious there’s about 15 different things that are now trying to change the world pricing mechanisms.
Stuart Turley [00:02:49] And, you know, we have energy poverty John, you know, my feelings on let’s get the lowest kilowatt per hour to everyone on the planet with the least amount of impact on the environment and absolute we got to use everything got to use renewable nuclear I don’t care what it is, but let’s get the lowest kilowatt per hour and and end energy poverty.
Stuart Turley [00:03:12] And so we got the geopolitical stuff going on out there, man people go to war over energy. So, you know, we take a look at you remember, it was a was it a couple of years ago when Little Engine number one went into was it Exxon’s board and got that in there?
Stuart Turley [00:03:30] So we’ve had the ESG movement in there we’ve had the Europeans total and all those other ones go totally off their base and then we’ve had the U.S. kind of really stay on their tracks. What are your thoughts on those kind of things?
Jon Rogers [00:03:50] I think it’s really interesting. If you look at where the industry was in 2020, we were, you know, negative oil coming back. Everybody’s reinvented themselves and we really had two distinct divisions. Now, obviously for Europe, the European based companies. Europe’s always regulated more for ESG and there was a 2018 actually came and it was an action plan for sustainable finance, an amendment European companies had to have ESG as one of their KPIs.
Jon Rogers [00:04:23] So coming out of 2020, I think we had two distinct schools. We had companies in Europe that maybe said, okay, we’re going to be power providers rather than oil and gas producers. In fact, we’ve be looking about we’re going to be electricity suppliers.
Jon Rogers [00:04:37] So very much they laid out the vision of renewables how do we do everything from EV charging? And there was a great technology laid out there was people like Exxon in the US said, no, we’re going to double down on oil and gas. We know it’s good. It’s a coal business.
Jon Rogers [00:04:56] I think up till about 2020 the jury was out there was a lot of major investors that basically pulled out of some of the big companies. I think there was one called Stolen Asset Management that ran a lot of Norway’s big funds and they said, no, we’re pulling out of some of the major oil and gas.
Jon Rogers [00:05:16] And I thought some companies in Europe, they put out their plans there to have this hybrid mix of oil production for X number of years and then that long term commitment. And really the there was sort of crickets from the market because they were in a they were really caught between two stools because you had the environmentalist didn’t think it went far enough and you had the traditional oil and gas investors who were looking for investment return and really what interested in funding some long term carbon neutral project.
Jon Rogers [00:05:48] But obviously, I think it all changed obviously when the Ukraine Russian conflict started and suddenly we come to this much bandy term, the trilemma. How do you get access to energy security? How do you get affordable and how do you get sustainability?
Jon Rogers [00:06:08] And then we had a one from the governments who had been pushing for oil companies, big oil companies, to actually reduce down the amount of all they produced. And then suddenly coming back said, we need you to ramp up right away, even to the fact that if you look at Europe, Europe was importing like 40% of its gas from Russia and it was something like 46% of its oil. And what did they do when the power or rather the lines were cut off, they had to go into reestablishing coal power plant so it’s not a black and white argument the way to go forward.
Jon Rogers [00:06:44] But what the markets basically rewarded were the companies that when the demand came, were best able to ramp up and certainly that was ExxonMobil. They could ramp up they could meet that demand and their stock price reflected in it the stock price increased by 50% last year.
Jon Rogers [00:07:03] Now, what’s what’s happened, I think, in the meantime is people realize now that the engine one that you mentioned, even engine one, are saying, yeah, we have to have energy security first and foremost.
Stuart Turley [00:07:17] Right.
Jon Rogers [00:07:18] It’s a basic need for humanity and certainly for the West and all the industry. So I think we’re coming maybe to a point where we’re considering different factors rather than you take a polarized view no oil or basically nothing for the environment.
Stuart Turley [00:07:35] You know, John, I’ve always been a big fan of Saudi Arabia, not some of their humanitarian policies, but I love the way they are doing their energy policies. You know, they are putting money into hydrogen they’re putting money they’re using natural gas and oil as their way to pay for their Saudi fund and everything else hats off to them.
Stuart Turley [00:07:59] Did you see the article that was I think it was just released yesterday that Larry Fink is getting, as you know, the CEO of Saudi Aramco on his board. Did you see that? That was pretty wild.
Jon Rogers [00:08:15] Yeah.
Stuart Turley [00:08:16] And so that do you think that that kind of marriage that you were just kind of alluding to is coming down the road?
Jon Rogers [00:08:23] Well you need both, if you’ve got a project that especially when interest rates are low. You could have a project when interest rates are low obviously, when they discount back from when these projects are going to produce cash flow profits.
Stuart Turley [00:08:38] Right.
Jon Rogers [00:08:39] But when interest rates are low, you can look out at 20 years and come back with something that’s got a positive MPV value. When interest rates go up, then you need to have some initiative, which is value in the first few years for it to be viable but you can have both.
Jon Rogers [00:08:54] If you don’t have profits today, you don’t have cash flow today. You cannot pay your shareholders because you’ve got incorrect investments.
Stuart Turley [00:09:04] Right.
Jon Rogers [00:09:04] That’s the first and foremost that you’ve got to do and then part of that is you need that free cash flow to invest in these new projects. Well, I think what people are doing is realizing now, as I mentioned before, that you’ve got to have both.
Jon Rogers [00:09:16] You’ve got to have something that could reduce cash in the medium term that can be doing sustainably if you can do it.
Stuart Turley [00:09:24] Right.
Jon Rogers [00:09:25] I much prefer that the big companies like ExxonMobil and BP and Shell and Exxon, other ones that we choose to close the gap on energy. Why? Because they’re highly regulated but transparent they’ve got shareholders or rather that the smaller operates that maybe doesn’t have the same transparency and maybe is cost driven or maybe other countries that don’t have the environmental regulations that we have.
Jon Rogers [00:09:56] So I like the fact that these big companies aramco’s one of them are the ones that were looking at investing in the short, medium and long term to do both the energy for today, the security, and to fund the new technologies that are need for the energy transition.
Stuart Turley [00:10:15] You know, we’ve kind of talked in I’ve always loved your stance on ESG and taking care of the environment. Do you think Oxy was one of the best players out there because they really went to the carbon capture environment and was it Warren Buffett bought a bazillion shares? That’s a technical term, you know, Bazilion. So he bought all these shares, So do you think if you’re an oil company like you just described and you’re doing both, you know you’re going to attract more investors? And I’m just asking.
Jon Rogers [00:10:50] Well, I think go back a step. Obviously, the 10 billion that Warren Buffett put in preferred stock was really to help fund the Anadarko. And one of the things that Vicki Hollub is doing now is obviously paying down that debt because why? Because being fiscally, well, managing their coal business.
Jon Rogers [00:11:10] I think that was a key if she is back in growth at any cost, so they lost the investor institutional investors. Obviously, they never had the green people on board because the fact that oil and gas is seen as a polluter. So the first thing they did was say, look, we can actually manage the returns that you actually get in the moment from oil and gas companies that are leading the market.
Stuart Turley [00:11:32] Right.
Jon Rogers [00:11:33] So first and foremost, what they’ve shown is they can live within their means. Last year, the spending was below the rate of inflation so the returns are phenomenal. And what are they doing? They’re paying down debt, so they’re less leveraged they’re doing share buybacks.
Stuart Turley [00:11:48] Right.
Jon Rogers [00:11:49] Now that the one thing with the share buybacks is, in theory, they’re supposed to be value neutral.
Stuart Turley [00:11:55] Right.
Jon Rogers [00:11:56] So it dividends, but it does signal to the market good things if you believe your stocks are undervalued and you want to reward investors. But the other thing it can suggest is that maybe we don’t have enough positive NPV projects in-house, so the better use of that money in new projects.
Jon Rogers [00:12:15] But I think to answer your question, that there is a market out there an excellent just formed a new low carbon division. And what they see as they see that this could be a $6 trillion business by 2050, taking their expertise and applying it to other industries so that the carbon intensive industries, steel and cement so they can get expertise in how to mitigate, reduce carbon all funded by what they do now then they get the technological developments and it can be a viable business. Not sure if you know this Stu but the lithium battery was actually invented by ExxonMobil.
Stuart Turley [00:12:53] I did not know that.
Jon Rogers [00:12:55] In fact, they want a joint winners of the Nobel Prize a few years ago this year, he died at the age of 100 last June.
Stuart Turley [00:13:04] Right.
Jon Rogers [00:13:05] So big technology, big companies they’ve got the experts they know how to run R&D projects. And certainly when it comes to things like carbon sequestration, they understand the geology. They know how to drill.
Stuart Turley [00:13:17] Right.
Jon Rogers [00:13:18] So it can’t be just these companies but what it can be is if you put the incentive out there, you can encourage people to develop the technologies. There’s one thing that fascinates me, Stu. I mean, I think you and I grew up in the same era what was the big climate challenge in the late eighties nineties? It was acid rain.
Stuart Turley [00:13:39] Right? Oh, absolutely.
Jon Rogers [00:13:41] So how do we solve that? We solved that basically by the 1990 Clean Air Act. What it did was it was a cap and trade, which I know a lot of people hate, but the cap and trade was basically the government said you have to reduce emissions of sulfur dioxide. That’s what’s causing the acid rain, which was falling snow, rain, and devastated rainforests.
Stuart Turley [00:14:04] Right.
Jon Rogers [00:14:05] What they did was they said to people, we’re going to set a limit and as long as you’re under that limit, right, then you’re not going to be fined. But it also incentivized people if you actually accelerated how you capture the sulfur dioxide in these big coal-fired plants was putting it out. If you accelerated that, you could actually sell the credits that you hadn’t used the allowances right, to somebody else.
Jon Rogers [00:14:31] Well, it turns out that it was a quarter the cost that they expected to it was going to be a lot of people say this is going to be helping the industry with more cost. And it actually happened about four times quicker than people thought and you don’t hear about acid rain today.
Stuart Turley [00:14:45] No.
Jon Rogers [00:14:46] So. I’m not too much for government regulation, but there’s got to be some incentives they’ve got a monetary incentive and people develop the technology.
Stuart Turley [00:14:57] Do you think the Clean Air Act, I think was astounding in many ways, but it also, I believe, set the standard or the ability for them to overreach because the regulatory situation in oil and gas and renewables is so strong and stringent that we’re not there they’re they say they’re war with the oil and gas companies they’re at war with all energy.
Stuart Turley [00:15:27] Because even the oh, the wind and solar, they can’t get built either. I mean, even, you know, the train in California there, it’s what, $100 billion over whatever the number is. Oh, it’s 15 years and overbudget and it was supposed to be all powered by solar. You know, it’s all regulations that are stopping those kind of projects. Do you think that there’s any way to rein those back in? I don’t.
Jon Rogers [00:16:02] Well, you know, I would argue that like most problems, especially of this magnitude, Right. We have to have a balanced view we have to have people that actually made aware of the facts. As you say, we’ve got probably 2 polar groups now. You know, just stop oil some people who say that we should be unfettered. And there’s always the argument that the solutions would be somewhere in between.
Jon Rogers [00:16:25] Here’s what I would say is certainly if people are educated, that there is no magic button to flip over at the moment now it’s on Google’s for every reason. It’s not just the power aspect think of everything that we used, and I think it was basically facilitating this call now we need plastics. Not just the calorific value of oil we need raw materials for fertilizers, for plastics, for medicines.
Jon Rogers [00:16:54] So just oil so we need to have a rush slog but I think like most things, the pendulum swings from one point to the other it will come back in the middle. But if we’re going to leave it to private enterprise to come up with the solutions.
Jon Rogers [00:17:08] My view is you have to incentivize and there’s a great, great quality out there, which I think is is a great example. So if you take, for example, some of the lowest-hanging fruit out there, you can reduce emissions. As you know, one of the things out there is certify gas to the world you pay a premium for companies that pay a premium for the gas producers who can show they have eliminated or minimized their gas emissions so they monetize that.
Jon Rogers [00:17:35] The great thing is that then trickles down to the smaller companies there’s a good friend of mine, Ex VP of BP, an extremely smart guy called Bob Flint, is now the CEO of a company in the UK called Miracle. And basically what they’ve got is they’ve got a laser dispersion technology that can measure leaks.
Stuart Turley [00:17:58] Wow.
Jon Rogers [00:17:58] So they develop that technology they’ll only develop that and deploy it if there is a pull from the end user. And Pokemon huge in my mind, you have to incentivize them. Maybe not so much stick, but you’ve got to say, well, you can there’s a there’s a benefit if you stop those fugitive leaks from abandoned wells or emissions on your actual production site, you can get a premium for your gas.
Jon Rogers [00:18:26] So that’s to me how I think commerce is always one of the greatest things, is you incentivize them maybe a little bit to stick with regulations, put the incentives there, show people that they solve the problem tangibly what they can, and I think that will develop it.
Jon Rogers [00:18:44] But I think there’s a lot of that is not all just carbon capture in the future, which is every other technology we need that there’s some technology, not just direct capture and removing CO2, but there’s things like a little bit like the sulfur dioxide analogy let’s have Technologies I could actually scrub out of the imaging bluestacks, etc. at the cost of a moment is less than $50 a ton for some of these technologies. So there’s a lot of things we can do and can do it today.
Stuart Turley [00:19:17] Yup.
Jon Rogers [00:19:18] Methane, which is fugitive gas, is 80 times worse, a greenhouse gas than carbon dioxide. The good thing about it is it doesn’t persist in the atmosphere like CO2 does but there’s a lot of things that technologies like Miracle are doing now that can help people find where they’re actually emitting methane as a first step.
Jon Rogers [00:19:42] If you don’t know where it’s coming from, you can’t do anything about it and then you can solve it. So that’s the lowest hanging fruit, I think, out there. Emissions and then probably down to carbon capture at source has been emitted and then maybe a little bit long term have actually suck directly to capture and remove CO2 from there.
Stuart Turley [00:20:04] You know, I know you have a very strong technical background and a financial background, and that is critical. And we’re sitting here trying to think of the technology like you just mentioned, BP created the lithium batteries.
Jon Rogers [00:20:18] ExxonMobil.
Stuart Turley [00:20:20] ExxonMobil. Thank you. I got a fact check myself, John. You know, it’s it’s just one of those things. But when you sit back and take a look at it financially to the consumers, the ability for companies to look at financial, seeing the ESG aspect and then trying to see that it’s being polled because not everybody wants to pay a little bit more for energy they may not be able to.
Stuart Turley [00:20:47] How do you articulate that across the whole thing? Because education is you can’t pay three times the amount of money for your your energy, your oil or anything else. How do you balance finance versus technology?
Jon Rogers [00:21:06] It’s a great it’s a great, great question. And I think there is already out there a technology for fuel that will do both. But it’s basically gas and rather than say, let’s eliminate fossil fuels, that’s a progression. Everybody knows coal is in terms of the emissions against the smog that we used to get that’s probably the worst case. Then you go maybe to oil, but then you go all the way to gas, like calorific value, relatively clean burning.
Jon Rogers [00:21:39] So I think the the argument should be that’s the first step I know in Germany now, they’re trying to get people to completely rip out and change how they heat their homes there’s a big backlash.
Jon Rogers [00:21:52] A country that was seen as extremely green you’re completely right. People want green, but not if it means that by being green, I can’t feed my family. So it is a balance but the great thing is, is this there are solutions out there.
Jon Rogers [00:22:09] Now, obviously, Germany was highly dependent on Russian gas and what they’ve done just to show that, well, you know, the Green Party made them closed down the nuclear plants. So the only thing they could fall back on was coal. And so coal is a bigger part of the energy mix and Germany never thought it could be.
Jon Rogers [00:22:28] So for sure it’s balanced but gas to me can give both my family still lives back in the UK. Energy prices are through the roof that while it’s the old turn the lights off when you come out of one room, you know, minimize the my mother’s 92, you know, minimize the heating it. It is a tremendous amount of what they pay all think it needs to be right because there are solutions out there I think can can do both.
Stuart Turley [00:22:58] Why is the price so high in the UK is it because of their Energy Policies or what’s going on with that?
Jon Rogers [00:23:05] I think it’s a little bit of both. I mean, yeah, for sure. I love it now, obviously not coming from Russia is having to be imported from Algeria, Norway, etc.. Right, because the U.S. is trying to, but there’s a myriad of things there as well.
Stuart Turley [00:23:19] Okay. Yeah, because if I remember right and they also import out of the Norway’s, you know, area there, I think there’s eight connections to Norway and I think the UK has two of those I could be wrong, but.
Jon Rogers [00:23:36] It also harms the coal and gas fields, two of the biggest gas fields in Europe and they were not run down, but they certainly weren’t developed as much because everybody just switched across to Russian gas as we’ve seen in that trilemma of security and affordability. So everybody went for affordability,.
Stuart Turley [00:23:57] Right.
Jon Rogers [00:23:58] It was cheap, but obviously had security implications as well.
Stuart Turley [00:24:04] If so, we’re you know, you and I are in such agreement this is very cool on this. How do you as an industry leader, you’ve got your technology background, you got your finance background what do you see is the number one thing that we can do to help get to the next level? Is it education? Is what do we do?
Jon Rogers [00:24:27] Well I mentioned if were going to solve energy, climate change and I think whichever part of the spectrum that you stand on. People realize that we have to do something all the oil companies, certainly European and the American companies agree it’s just what strides are we going to take? And it will be a mix.
Jon Rogers [00:24:48] But as I mentioned before, I think there’s some technology gaps which we’ve got to incentivize people to take. Now, what that means is in the interim, we’ve got to step up with friendly countries and companies that we control to fill the gap.
Stuart Turley [00:25:04] Right.
Jon Rogers [00:25:05] I just been rereading The Price Daniel Yergin book and talking about how basically the states had its own Russia Jimmy situation where the with the Saudis back in the seventies and that so we we’ve got a great gift here in the states which is we’ve got shale production we’ve got to use that we’ve got to be as clear as we can we got to eliminate things like greenhouse gases by doing emissions we’ve got to be the cleanest energy that we can here in the States, thats only step one,.
Stuart Turley [00:25:39] Right
Jon Rogers [00:25:39] We’ve got to incentivize people, in my mind to develop new technologies, put a prize out that like that Clean Air Act, the people that actually monetized improvements they make, and then people like Exxon can sell expertise. They’ve learned to some of the biggest polluters like steel and cement. So it’s it’s going to be more incentive rather than just dogmatic protests at some point, we need to have the conversation it really does look at it as a balanced view.
Stuart Turley [00:26:11] You know, John, you are definitely a fun kind of cat because having technology, as we had talked about, I believe it was Exxon that said they’re going to like really increase their properties in the Permian. What kind of technology do you think they’re going to be using? Because we’re all sitting here kind of going they’re going to be increasing, the Permian rig count is down. But what kind of new technologies do you see coming around the corner?
Jon Rogers [00:26:40] Right. Well, they made a big announcement CEO a few weeks back about what they’re going to do. And the great thing is your rig counts are going down, but that’s because we’re doing more on each well. As I mentioned, we’re only taking out at the moment about 10% of the original in-place right people who may not be aware of it.
Jon Rogers [00:27:00] Shale is like Sling so you really got to smash it, crack it or frack it, as they call it, to get those tiny particles of oil and gas out. Sometimes that trapped in pores which are so small, like the size of human DNA. So it’s a it’s a complex job so 90% of the moment of that oil and gas is left trapped.
Jon Rogers [00:27:22] So what Exxon are going to do, they want to do longer, longer laterals so each well is actually. Retrieving oil from longer and longer sanctions. The other thing they want to do is they’re actually going to try and keep the fracs that they make open longer. So we’re actually transporting more oil and gas out of there.
Jon Rogers [00:27:43] So it’s really efficiency improvement so when you drill rig, that’s the biggest CapEx is, as you say, getting the rig there all the people, the incremental cost to have a longer lateral and then to have an effective frac so that actual completion, the stage is there but those cracks don’t close up when you remove the fat groom, the pressure drops how do you keep them open.
Jon Rogers [00:28:07] I’m going to mention this technology’s out there like biocides, like some of the nanoparticles out there that can do a third there, which is the oil is basically attached, as I mentioned, by capillary pressure to the rock things it doesn’t want to move.
Jon Rogers [00:28:23] So you need to almost change its wearability change it from a film memorial to almost like a drop of oil, and then it will mobilize. So there are things that you can do mechanically, as Darren was just talking about, there’s things you can do chemically but again, Exxon want to double that production from the Permian.
Stuart Turley [00:28:43] Right.
Jon Rogers [00:28:44] And obviously, recovery rates is a massive part of that they can go from 10 to 14% recovery. What does that mean? That means you don’t have to drill as many wells. So straight away, your carbon footprint goes down because drilling a well is a massive carbon right cost. And so, again, the market is coming up about incentivizing new technologies to come through and this will have a trickle down effect to all the suppliers.
Stuart Turley [00:29:13] Oh, yeah.
Jon Rogers [00:29:14] Who will then develop these technologies to help Exxon and other companies?
Stuart Turley [00:29:18] You know, I’d love to do some research on some of this and the reason I’m asking this is because, you know, in the wind farms, we hear that they’re going to be there for 20 and 30 years. Well, all the numbers I’m finding is they’re less than eight years and you’re seeing them start to really fail and have some problems and nobody’s talking about that.
Stuart Turley [00:29:40] You know, the wind farm becomes no longer viable after 8 to 10 years well, they’re saying they’re going to last 30. So as we move back over into the the area over here and say on the finance part of this, as we take a look at the next oh, how do I phrase this..
Stuart Turley [00:30:07] There is some things that we can do on the length, because if you have the economies of scale of longer laterals and you have the cost for drilling a well, you know, has gone up dramatically because of the cost of steel, because of the cost, you know, $15 million is nothing to spend on a well. But if that well that you’re going to spend 15 million on and then you get an extra, I don’t know, 20 feet or whatever the number the little lateral is or whatever it is, but you only spend another 2 million and then you get X number of dollars out.
Stuart Turley [00:30:47] That balance between dollars spent on a more effective rig with lower is ESG is more expensive. But is it a bigger crapshoot, if you would, because you don’t know that those longer laterals are going to pull back more oil and gas? I don’t know. That’s a tough question for me.
Jon Rogers [00:31:08] But then they do you Stu I think they know now that if they can effectively extend the lateral, you will get more oil. I think it’s a but that’s sort of proven now. The great thing about shale is, unlike some of the other projects that people are looking for, especially you go to deep water or you go to say, a project in Africa.
Jon Rogers [00:31:32] Shale produce is back is breaking even in 1 to 2 years on these projects because the flow of oil comes back at peak and shale is is a special interest rates are high. It’s a great investment as opposed to something that’s got you know I’ll give an example on offshore well as opposed to shale while.
Jon Rogers [00:31:51] Offshore well could be in excess of $200 million just to drill about once you’ve paid for that it’s a it’s a great capital come back. The Alaska typically for multi multi is where a shale is basically very high production which then tapers off as I mentioned, is technologies that can boost that. But that’s the great thing about shale and why shale, especially at higher prices, will generally be favored because the payback is so quick, because you can actually recover the cost of get to break even.
Jon Rogers [00:32:25] And then these things that they’re doing to actually increase that, what generally means is you’ll get more back in that first two years, right? I think personally what we should also be doing is how do you extend the life of those wells.
Stuart Turley [00:32:38] Right.
Jon Rogers [00:32:39] It be more effective, refracts, it could be technologies that you can apply, which again are getting more than 90% of the oil right out, not just getting a bigger peak oil. And then the same decline curve that we get, there’s a there’s a great, great incentive out there to do.
Stuart Turley [00:32:58] Yeah, longer, longer laterals and you get a a different decline curve we need several trillion dollars to invest just to keep our decline curve at current level of demand.
Jon Rogers [00:33:14] They do that and again, I don’t think that maintain the production rate, you know, 12 million the U.S. will maintain. Maintaining the production rate at the moment generally means that you have to do more and more fracking.
Stuart Turley [00:33:28] Right?
Jon Rogers [00:33:29] Obviously, there’s environmental cost of doing that. I mentioned the CO2 footprint of the new well. But again, if we can get more on existing well stocks, if you can actually say that I could use from this field, whatever the field is, X number of million barrels over five years. But I did it with this carbon footprint. What we actually needed to do, 60% of the fracs that a normal operation would do, my overall carbon footprint on my carbon intensity, my crude has come down.
Jon Rogers [00:34:01] So there’s there’s a lot of incentives and I also think still in the same way that demonstrate if I guess if we can reward people for lower carbon oil. And say, actually this is going to lower carbon intensity the oil produced in this field and that operator can get a premium for that. That, again, will pull through and I think do both.
Stuart Turley [00:34:23] That’s a great suggestion, John that’s really good a lower carbon oil and reward for that.
Jon Rogers [00:34:32] Well, again, the markets got too. So, you know, if you stop this all the way and this is something that locusts are doing now, you can extrapolate all the way to if you could show you got a lower carbon feedstock going into refinery now, that’s easy to say and tough to do.
Jon Rogers [00:34:47] Then you could argue that all the way through to the products that they produce will be low carbon intensity, everything from aviation fuel to the nexus to ethylene oxide, whatever it is. But again, somebody’s got to create that market because if you don’t get if all you get rewarded for is improved efficiency, you produce more oil the same way that’s a benefit.
Jon Rogers [00:35:12] But if you can also say that carbon footprints important, the carbon intensity is important, and then pull that through and get a premium for your product. Again, it’s like the sort of, I guess you’ll create a market.
Stuart Turley [00:35:25] Right. What? That’s kind of cool. You know, John, I think we’ve got more than enough to talk about in about 16 different more episodes. But I’ll tell you what’s coming around the corner that you see in the industry for OPEC.
Stuart Turley [00:35:42] Do you see that as they’re coming around are they going to hold their production levels or continue to drop? Because they’re kind of seeing that they want the higher prices, What are you what’s your crystal ball say in there?
Jon Rogers [00:35:58] From what I read, Stu, we’re sure it’s in everybody’s interest. OPEC and OPEC Plus, now included in Russia has got to tread that fine line. And it looks as if they don’t want an economic collapse again by putting the prices up too high.
Stuart Turley [00:36:13] Right.
Jon Rogers [00:36:14] I think they’re starting to accept now this is purely my opinion. You know, a few years ago, they tried to maybe kill the US shale industry or let’s such things out of the bottle. So I think now that except in the US as a part of the mix and then they’re trying to adjust their output to keep the overall price up, realizing that it’s a fine line.
Stuart Turley [00:36:40] Mm hmm.
Jon Rogers [00:36:40] But, you know, in theory, they could get $100 a barrel, but it would destroy the demand for their product. So I think they will continue to do that. I mean, it’s a it’s a fine political line. What it does go to show in my mind is we have to have a robust domestic industry.
Stuart Turley [00:36:58] Right.
Jon Rogers [00:36:59] We cannot be Germany from found this and so is Europe we found it out in the seventies. We need to have a robust hydrocarbon industry here, but use American technology innovation to make it the cleanest barrels of oil and may instead of cubic feet of gas, that we can we can do that.
Jon Rogers [00:37:22] But it needs I think it needs people to have a narrative in these people not be polarized on the arguments, realize it’s a mix and put all these factors together and come up with a it’s almost like, say, a joint plan for world peace. But I think we can do this. It’s going to be government intervention it’s going to be financial incentives but we certainly got the brainpower and the history in the states to solve these problems.
Stuart Turley [00:37:48] Like the way you articulated that, John. How do people reach out to you?
Jon Rogers [00:37:55] You know, Christine, I hope we would have published this on LinkedIn and I’d ask people to to reach out when we do that.
Stuart Turley [00:38:01] It sounds great and so we contact you on LinkedIn and you’re off and running. So I think that you’re a valuable asset to the entire industry and John, thank you for being able to visit with you again and I’ve always enjoyed our conversation. So thank you for stopping by the Podcast Jon.
Jon Rogers [00:38:23] Thank you, Stu. Enjoyed it.
