Considered an expert on the intersection between the vast oil, gas, and energy (OGE) industry, and digital technologies transforming all industries, author Geoffrey Cann offered insights on industry challenges and opportunities in a recent ASUG interview.

ASUG tapped into Cann’s thoughts as he prepared to keynote the upcoming ASUG Best Practices: SAP for Oil, Gas, and Energy conference in Houston. More information about the event can be found

In this discussion, Cann speaks about how the industry continues to grapple with the significant disruptions brought on by the COVID-19 global pandemic and the war in Ukraine as well as his outlook for the future.

This is an edited version of the conversation.

Question: Can you give us a thousand-foot view of where the OGE industry is at this moment?

Answer: As the pandemic was unfolding, the industry was in a critical position. If you were an oil and gas company or a power utility with a fossil fuel source and you went to raise capital, you needed a decarbonization, climate sensitivity, or ESG story that resonated with capital markets. And you needed a digital story because the capital markets have been burned by industries not prepared for this wave of digital change. You needed to have a competent story to tell around that. Then the pandemic hit, and that created yet another pressure on the industry: chronic and dramatic oversupply.

In January of 2020, OPEC could not agree on the correct pandemic response from a supply standpoint, so they went whole head along into over-production mode and flooded the market with oil at precisely the time when the world was trying to cut back.

Here we are now, coming out of the pandemic and Russia invades Ukraine, which is now forcing Europeans to confront the reality of where they source their critical energy input from—Russia principally. As shortfalls in refining capacity have themselves created shortages of diesel fuel and gasoline, now we have energy prices skyrocketing at a time when countries lack the financial resources to subsidize the fuel or pay for the alternatives. Suddenly, we have this energy security problem on our hands.

If you go back to 2020, the price of oil was negative. In other words, you paid people to take the oil off your hands. Twenty-four months later, we're now at $120 a barrel. I mean, it's a roller coaster. It's pretty crazy.

The big pressure issues are decarbonization, energy diversification, energy transition, this wave of digital change, capital markets and capital market access, and talent. Talent is a sub-story under all of this. Young people do not want to work in this industry. If we can't sort that out, we have a very big problem because we have to run this industry for a long time yet. We're going to need to replace the old guard that retires. We have shortages of young people.

Q: What are some other major hurdles that OGE organizations face right now?

A: Well, the biggest one is access to capital. Even though energy security and high oil prices are compelling companies and countries to cap prices or have a fuel tax—like a windfall tax on energy—the reality is the structural pressures on the industry to decarbonize have not gone away. An example is with high oil prices, people might move over to public transit. They might sell their house and move closer to work. They might sell their high, expensive, gas-guzzling vehicle and get a lower-cost vehicle to run. But now they've got another option, which is to get an electric vehicle. Those are now coming into the frame here very quickly.

Higher prices are accelerating this transitional pressure and giving it some momentum. The industry's biggest hurdle, when you think about it, is the structural shifts that are now baked into the law. We will decarbonize, we will move off fossil fuels. Those are not changing just because the price of oil went up. Capital markets are not going to pour money into this industry knowing that it has to be pushed down into a permanent decline curve in less than a decade away. Capital continues to be the biggest issue because this industry is a huge capital consumer. That's just not changing.

Q: Beyond what you’ve already touched on, how would you say that COVID-19 has affected the OGC industry overall?

A: Well, it's had several important effects. The first one is that it demonstrated—and taught—the industry that it can move quickly when it needs to. Just to illustrate, a little story. There was a fire in Fort McMurray area, a huge forest fire back several years ago. One of the big oil companies said, "Our people are in harm's way and our facilities are vulnerable because we have our control rooms there. Let's move the control room out of harm's way in Fort McMurray and drop it into Calgary, where we have lots of people willing to work and have the right skill sets.” This project dragged on for two years because every person in the oil company had an opinion on whether it was a good idea to move the control room or not. They invented all kinds of boogeymen that they would have to confront and deal with. Two years. No progress. Then the pandemic hit. Two weeks later, they moved the control room. Two weeks.

Q: They can move fast when they want to move fast.

A: They can move fast when they want to move fast. The thing is, they need an outside villain to provoke the change. It's very hard internally to deal with change in these big oil companies with all the challenges they face: regulatory, reliability, integrity, and staff availabilities. But when an outside villain shows up, these organizations move. They know now that they can move quickly. They also know that a whole bunch of manual, paper-driven processes had to be stripped away and replaced. One avenue is to just route the paper to where people live. It didn't last very long. They then began to say, "We don't need the paper.” A whole bunch of digital projects that they had underway, trucking along, got a huge boost in imperative.

The third thing is the latent investments they had made in new ways of working—even the use of Microsoft Teams. All these companies have Teams built into their Microsoft licenses, but they weren't using them. The pandemic created the imperative and the ability for them to finally put these tools to work. This is when the executives looked around and went, "Well, shoot, what saved us here is all of this technology. Let's do more of that." It's given a huge boost to their technology investments which are driving process change, restructuring, and providing different ways of working. That's been a significant opportunity.

The fourth big change is more subtle. The industry normally makes change happen in person. But they still have to make a change, so how do they do it? They figured out how to do that virtually. A good example, let's imagine you are a machine shop. You're in Lethbridge or Red Deer and you are fabricating some piece of equipment for an oil company. Normally, the oil company would send their engineer or designer to your facility to take a look at what you're doing and make sure it stays true to the design. Well, they don't do that. Now, they get a phone and they live stream from the phone back to the engineer who never left their home office. They're now able to see what you are just building on-site and do the inspections directly.

Q: Is that disconcerting to you or is it an improvement?

A: Huge improvement because a lot of those trips were wasted.

Q: You mentioned the invasion of Ukraine by Russia. That's obviously placed a ton of attention on the oil and gas industry. What do you think this conflict has unveiled about the industry at large?

A: Well, a few things. One is how devilishly hard it is to impose sanctions at a global level. Because the Europeans and Americans can sanction Russian oil, but the Indians and the Chinese will just buy it and take advantage of it. It's very hard to impose sanctions. Technology offers some avenues to solve that, by the way.

Q: Such as?

A: When a cargo of crude oil is presented for sale, there's a whole bunch of paper that goes along with that. Paper is subject to tampering, fraud, and all evidence that it wasn't under sanction. Imagine if a cargo of crude oil shows up at your site and you say to the captain of the ship, "Show me the original bill of lading where this came from, all the way from the oil field where it came from." If oil transactions were recorded on blockchain, for instance, where the actual loading was immutable, then we would know precisely where that crude oil came from. Instead, we have this broken chain with paperwork. Technology can give us visibility and transparency into that supply chain through its end to end. There are technological ways to solve this.

The invasion has also shown the underinvestment in the industry, which has been going on since the 2014-2015 downturn. When the industry has to spring back, in this case, post-pandemic, it couldn't do so and that underinvestment now means that globally we are short. It shows how reliant supply chains are on things like oil refineries in Russia that are producing gasoline and diesel. What the conflict shows is that if you start sanctioning the industry, it does create price spikes outside of unintended consequences: price spikes outside of Russia. You sanction their product, but in a market that's pretty tight, in other words, it's finely balanced. But the minute you start taking one company's volume out, and in Russia's case, it's millions of barrels, it's a material shift in overall supply.

If you go back to the 2014 period, America's shale business raced on ahead of the market. The overage in the market was around a million barrels a day. In other words, the world consumed 90 million barrels, but it was producing 91. That extra million barrels, where did it go? It went into storage. Once the storage was full and the barrels had no place else to go, the price collapsed. The market is finely balanced. If you just get out of balance by 1% or 2% for a commodity like this, without a ton of storage possibilities, then the market will collapse or skyrocket.

What's happened here in the situation with Russia is that we've taken not 1% out of the marketplace, Russia is a full 10% of the global oil industry. If a 1% shift for a year is sufficient to tip the market into utter crisis, what happens when we take 10% out in sanctions? It's just showing how the industry is so finely balanced and finely tuned. It's not very resilient when we want to do things like deal with sanctions.

A third thing is, the reliance that Europe, particularly Germany, has on Russian energy products is staggeringly shortsighted. Lots of people have been telling them for decades, "What you're doing is a mistake. You cannot rely on Russia as a supplier of energy." Russia has shown its hand using Novichok outside of Russia to kill off opponents of Putin, his invasion of Crimea, all this. The writing was on the wall, and yet we sleepwalked our way into this 60% reliance on Russian energy. What were we thinking?

If I look at what this has done for us, it's underscored this imperative to have a diversity of supply and not to be too reliant on rogue nations for mission-critical commodities like energy.

Q: I wanted to talk a little bit about sustainability. Are you seeing oil companies work to diversify their energy portfolio?

A: There are those oil companies that are in the public eye and have a wide shareholder base. Because of that, they are susceptible to pressures to deal with decarbonization. Those are the companies that are putting some modest effort into sustainability.

Now, remember, 92% of the world's energy resources are held in countries that are not open market or free-market players. We're concentrating on 8% and expecting them to be sustainable and diverse. We just have to understand what we're asking here. If you want sustainability and diversity, you have to find ways to pressure Russia and the OPEC nations to play. I don't believe they are. It's a matter of national treasury to them. Pressuring them to respond will not have anything close to the same effect it will have on organizations like Shell or ExxonMobil. Of the 92%, I am not seeing the pace or the scale of diversification in energy investment to make that big of a difference yet.

Q: What's in store for this industry over the next three to five years?

A: A few things, I think. The pace of climate warnings is not going to go away. It's going to get worse. Mead Lake is a good example. The drought is now threatening the entire water supply of the southwestern United States. That's going to be tied to climate change, increasingly showing warnings of climate risk. There will be a scramble for very high-quality carbon credits. Right now, they're in very short supply, and the price of those is going to go up. A lot of companies are going to invest in carbon credits, and it's not going to work out for them.

Optimizing the production mix—making diesel fuel, gasoline, and jet fuel—is very tricky because the ability to adjust the supply is on a step function. You take out a whole refinery of a million barrels a day, it goes down in steps. But the demand is going to be on a slow, gradual line. Every time you get a step-down, you're going to have a drop in supply, relative to the demand, and you're going to get a price spike. This is going to go on now for 20 years.

I think these high prices are propelling interest in alternative transportation models. I think people are going to go, "I can't afford the $200 a day for fuel." They're going to go, "I can sell my house, change my job, or just get an electric vehicle." I think a lot of them will go, "Get the electric vehicle. It's time."

I think there will be a permanent reaction to Russia. The catastrophe of the invasion and the documentation of their war crimes lead me to believe that this is not going to just magically disappear in a new election cycle. The Ukrainians are going to remind Europeans forever of what Russia has done, and this is going to force wholesale changes in trade flows and engagement with the energy industry because of this. We're at this very intriguing time in the industry.

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