From the Editor- January 2010

Creativity, Innovation, the Herd, and a Bubble
 
Many of us have seen the quote by Wallace Pratt, “Where oil is first found, in the final analysis, is in the minds of men.” Others are familiar with the quote by Patrick Dickey that “Several times in the past we have thought we were running out of oil whereas actually we were only running out of ideas.” Both of these quotes suggest that in order for a geologist to be successful, creativity must be part of the process. For those that may doubt this, consider the projected importance of unconventional resources in the oil and gas industry today. This rise in importance is a result of a number of innovations. First the evolution of what is considered a viable hydrocarbon reservoir to include coal beds, tight low permeability sands, and gas shales and then drilling and completion processes including the common use of horizontal wells and hydraulic fracturing. These concepts and tools transformed, at least, part of the industry. Advances in technology, such as 3D seismic, and more detailed reservoir studies have also been shown to increase production in conventional reservoirs in places such as the North Sea and west Texas.
 
Creativity and innovation clearly play a vital role in the advancement of our science and the industries we support. They lead to the development of new plays and the manner in which we explore and develop our resources. Unfortunately neither represents something that can be easily turned on at the command of management. The innovation process, by its very nature, is serendipitous, iterative, and non-sequential. Management can, however, provide for an environment that will foster creativity and innovation by providing sufficient resources as well as an understanding that creativity often marches to the beat of a different drummer and that timelines may deviate from the plan. Clearly when oil and gas prices are high, providing for such an environment and the necessary resources is easier than when prices are low and financial pressures exist. One could, however, argue that when prices are low and the system is stressed that is the time when there is the greatest need for creativity and innovative solutions to various exploration, production, and environmental problems attempting to maximize values and opportunities while reducing costs.
 
Creativity and innovation require a clear understanding of the problems before us, the technical foundations of our science, the necessary resources, freedom to think, and the necessary tools and equipment to experiment as well as an opportunity to fail without fear of retribution. There is also a need to be openminded and a willingness to examine all sides of the problem. Most importantly there is a need for thinking out of the box and a willingness to attempt as Rolf Smith suggests in The 7 Levels of Change “to do things that haven’t been done” or “to do things that can’t be done”, or at a minimum “adapting things that others do”.
 
Individual innovations need not be major to add value. Cumulatively, however, a number of small steps can greatly change the way we do business. In fact, truly innovative and radical solutions may, at times, be questioned. Very often the longterm value of a new idea is difficult to assess and the return may not be seen for many years or may yield results in areas other than those originally intended. Furthermore, it may be someone other than the creator that takes full advantage of the idea, bringing value to society or the profession. In his book Dealers of Lightning: Xeroc PARC and the Dawn of the Computer Age Michael Hiltzik documents one of the better known examples where a group other than that of the innovators’ takes full advantage of a series of inventions. He cites examples such as the mouse, the graphical user interface (GUI), and the laser printer where companies other than Xerox were able to more fully capitalize on innovation.
 
Not all new concepts and innovations are ultimately successful and lead to viable opportunities. With all new innovations and ideas, geologists must be careful of the so called “information cascade” when observations of the actions of others are used to make the same choice as the group observed. In this mode, decisions are made independently of the information available and one’s understanding and knowledge. Such cascades can lead to bubbles which ultimately burst. In our business one may look to the Western Overthrust Belt where major discoveries in excess of 1.5 billion barrels of oil and 4.5 trillion cubic feet of gas were made in the 1970’s. Explorationists attempted to expand these successes to all overthrust belts without considering that all occurrences of oil and natural gas are dependent on the same factors as in other tectonic settings. Significant investments were made in both acreage acquisition and drilling globally with only minor success and without considering the basics of the petroleum system. Realism ultimately set in and the bubble burst. Exploration reverted to more complete geologic assessments examining hydrocarbon charge, reservoir presence and quality, seal, and trap. One can only hope that over the past three decades we have learned something and that the shift toward unconventionals by so many large and small companies is more than an information cascade. The best decisions are based on a sound understanding of the science behind the different plays, remembering that oil and gas is found through rigorous observation, hard work, and study. It is important to remember that gas shales are complex petroleum systems, generalizations have limited application, and that the interchangeability of the different parameters used in their assessment has not been established.
 
Our science and the associated industries will continue to rely on innovation and creativity. But it is important to remember the thoughts of John Parker, “It takes facts to be able to deserve a concept just as it takes concepts to be reative.”
Until next time…