Abstract: The Impact of Price Uncertainty of Upstream R&D --- An EXXON Perspective

Dan Mendell

This talk addresses the impact that future price uncertainty and current low oil and gas prices have on the conduct and management of R&D in the upstream business. Uncertainty in future prices underscores the need to develop technology that will improve our ability to reduce technical uncertainties in investment decision, to lower all costs and to operate in a flawless way. Low current prices result in a need to be more efficient and cost conscious in everything we do, including R&D.

Since the price environment provides little tolerance for mistakes, we need the best possible definitions of the hydrocarbon resources that we find before committing to development. Furthermore, we must find and define the resource at the lowest possible cost, and develop it in an efficient way that is cost effective, safe and environmentally acceptable. The vital role of research includes improving tools for reconstructing basin histories, predicting hydrocarbon generation, migration and trapping, and improving the quality of seismic and attribute analysis while reducing acquisition cost. Improved methods for interpreting the data and for integrating it into the evaluation and decision making process also facilitates success. Assuring that our development systems are "right sized" initially is another objective that R&D contributes to.

It is crucial that our research clearly add near term value and address specific needs of our operating units. However, it is also important that an appropriate balance is struck to assure that longer term breakthroughs are developed. We need to continually strive for the competitive advantage provided by leading edge research, while making maximum use of outsourcing and leveraging to get the most out of every research dollar spent. Systematic prioritization and highgrading of our research portfolio is particularly important in achieving this balance.

Exxon understands the importance of R&D to the upstream business, and we are committed to managing our resources to provide the value added research needed to address today's needs as well as those we know will be there down the road. Exxon has been a successful player in this industry for many decades and we believe that our future success is closely tied to our ability to continually generate key research breakthroughs in an efficient way. This talk will provide a perspective on how we are going about meeting these challenges.

AAPG Search and Discovery Article #90956©1995 AAPG International Convention and Exposition Meeting, Nice, France