Leadership; inspiring others to do the right things for the right reasons and collectively achieving greatness! We recognize it in certain elected officials, within our religious institutions, and within our own family units. In businesses without strong leadership, financial success is hardly obtainable much less sustainable. What constitutes leadership within the energy sector? This paper outlines the key messages presented by a diverse cross section of our industry's leaders discussing the challenges and the strategies necessary to create a sustainable future.
In the global marketplace the astute investor always factors risk into anticipated financial returns. That is one of the many reasons why the value of a barrel of hydrocarbon reserves varies from country to country. Try buying non-U.S. based production / reserves and you will understand the point exactly. Is the barrel really there? When will it be produced? At what cost? Under what fiscal / tax regime? As the level of certainty to the answers to these questions rise, and the continuity of application to all market participants increases, the relative risk decreases and companies operating within these regimes are rewarded with greater valuations. Companies operating within the jurisdiction of The United States have typically enjoyed a lower risk factor / higher valuation than similar companies operating in other countries. By early 2000, after a number of fiascos across many industries, the increased confidence factor associated with U.S. based companies looked out of place.
Changes mandated by regulations established under the recent Sarbanes Oxley (SOX) legislation were intended to bolster stakeholder confidence and re-establish a level and fully disclosed playing field. Many changes have been made but even large institutional holders still complain about their lack of influence / control over companies that operate under staggered boards with management poison pills and other onerous provisions in place.
Specific to the energy sector, proper disclosure includes compliance with the Securities and Exchange Commission (SEC) reserves accounting procedures. A debate is currently underway regarding several broad aspects of the regulations;
In determining reserve levels, what technologies should the professional be allowed to utilize?
What level of accreditation and / or independence should the professional calculating / certifying the reserves hold?
What level of detail should be disclosed? Field by field? Welbore by well bore? Year to year changes? Etc.
The debate is still young and the industry; particularly the professional societies certainly have good opportunity to demonstrate leadership in this important area.
According to the International Energy Agency (IEA) world energy demand will be 16,300 Mtoe (? 320 mmboe/day) in 2030, up from 10,230 Mtoe (?200 mmboe/day) in 2002. One half of this growth will come from countries in Asia / Pacific region where today more than 1 billion people go hungry. Will our industry be capable of ensuring an adequate supply of energy, at a price that is economically acceptable, to support continued development? Will industry have access to potential reserves?