An upheaval in investment and operational strategies is roiling the energy industry, in large part because of unconventional natural gas and oil resources, and it’s not all about supply and demand, ConocoPhillips CEO Ryan Lance said last week.

Lance, who was a keynote speaker at IHS CERAWeek 2013 in Houston, called on his colleagues to make the case for “smart” regulations and government collaboration in an era driven by an abundance of resources. Making the most of the “new energy landscape” requires three things: responsible operations by industry, a favorable investment climate by government, and collaboration “on the part of everyone,” he told the standing-room-only audience.

“First, give credit where due to oil and natural gas. We refer to gas as nature’s gift, and shale liquids are a second gift. But producing them and getting them to market takes ingenuity, technology and investment. So recognize our industry for what we contribute: 9.6 million jobs supported here in the U.S., and economic stimulation at a time when it’s badly needed.”

Second, “tax us fairly. Development lives or dies on fiscal terms. Energy companies make easy targets, although we already pay higher tax rates than other industries. Government should keep the long term in mind. Set competitive tax rates that allow ongoing investment, job creation and prosperity.” The U.S. government also “should open more areas for development, and facilitate permitting of infrastructure.”

In addition, “we recommend that government provide a level playing field. Don’t pick preferred energy sources or solutions. After all, the Obama administration itself says the U.S. needs an ‘all of the above’ energy policy. It should live up to those words. Let the market choose the best ways to supply affordable energy and meet environmental standards.”

Strategic investment shifts also are ongoing in the industry, said Lance. For example, joint ventures between national oil companies (NOC) and international oil companies (IOC) are being made over. It’s no longer just about grabbing more access to properties but instead it’s about developing the portfolio.

“IOCs still want access to conventional resources held by the NOCs. But now, the NOCs are chasing the unconventional potential held by the IOCs. Meanwhile, the multiple resources available allow IOCs the option to refocus on organic growth, rather than or along with mergers and acquisitions. Those with scale and technical expertise can choose from deepwater opportunities, dry or wet gas, the oilsands, shale, as well as demand-driven projects, such as Asian LNG [liquefied natural gas].”

The way of doing business investment-wise also has evolved. “Shale development requires measured, ongoing investment but it gives you a quick payback. By comparison, traditional mega-projects need enormous upfront investment, with payback 10 or more years out. These are entirely different investment profiles. Companies may do one or the other, or both, depending on how they diversify their portfolios.”

The industry is challenged by new drilling in areas that until recently were “unaccustomed to development,” he said. “Our critics have focused on the hydraulic fracturing completion process. And they’ve succeeded in creating fear and rallying support. The industry is responding through community engagement, public disclosure of data and adopting best operating and environmental practices. But we’ve not fully satisfied the skeptics.

“It doesn’t take long for critical stories and videos to spread in today’s 24/7 Twitter world. So we must always demonstrate environmental stewardship, safety and good community relations.”

Critics often spread unfounded rumors, Lance said. “There’s a risk that society won’t see the shale revolution through to its full potential due to misinformation and fear.” Twitter and other social media tools have helped the industry communicate its story, but it’s a two-way street. It can be a double-edged sword, but the opportunity there is the real alignment that it drives in terms of where you are trying to take the company and make sure everybody knows the direction you are going…”

Lance didn’t dismiss the idea of regulation, but he said it “should be smart and based on science and not supposition. New rules should be tested on their environmental effectiveness and their cost verses benefits. Here too, collaboration helps. Our company cooperated with the U.S. Environmental Protection Agency and Bureau of Land Management during their data gathering on [hydraulic] fracturing. We offered suggestions on alternative technologies, and they listened.”

Collaborating with communities also is “vital,” Lance said. In Australia, ConocoPhillips is building an LNG project on an island near the Great Barrier Reef. “We planned to build a desalination plant to supply it with water. Instead, we worked with the community and built a pipeline to bring fresh water from shore. This eliminated 5 million barrels a year of brine discharge and reduced our land and carbon footprint.”

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