Acknowledge your mistakes. Some can hurt and be costly. I know all too well. Just make sure you remember the doors that smashed your fingers the first time and be more careful the next trip through.
Col. Edwin Drake birthed the first oil boom and the world’s commercial oil industry in 1859 with a well near Oil Creek in Titusville, Pennsylvania. I know, I was there.
Seriously, I’ve been in the oil business for 60 years. I know a lot about it; CNBC has even dubbed me the Oracle of Oil. But I’m not perfect. In this business, no one can be.
In The First Billion is the Hardest, published in 2008, I dedicated a whole chapter to what I considered an all-important truth: that the world was running out of cheap oil. Turns out I was jumping the gun on the whole Peak Oil theory by not anticipating that technology was opening up reserves we previously thought could not be retrieved. Of course, I wasn’t alone.
Further back in my career, I didn’t think that the economics could make extracting Canada’s Oil Sands feasible. That’s the same Canada Oil Sands that, some decades later, Time magazine described as that country’s “greatest buried treasure.”
Canada has the third-largest oil reserves in the world, behind Saudi Arabia and Venezuela. Of its 173 billion barrels of oil reserves, 170 billion are located in Alberta, about 168 billion of which are today recoverable from bitumen. Oil sands are a mixture of sand, water, clay and bitumen. Bitumen is oil that is too heavy or thick to flow or be pumped without being diluted or heated.
I’ve done quite a bit of business in Canada, particularly early in my career. I was living in Alberta in 1967 (at age 39) when Suncor (then called the Great Canadian Oil Sands) launched the first project to produce synthetic crude oil from the sands in Fort Murray, Alberta.
At the end of the day, I’d occasionally stop by the Petroleum Club, where four or five of my fellow geologists would be ensconced talking shop. On this particular day, we were there scoffing at the idea of this government project, mostly because we couldn’t see any way it could make any money.
One of our crew, my good friend Harley Hotchkiss, leaned over to me and said, “You know, Boone, for this thing to work, you’d have to have $5 oil.” We both laughed at the idea, as the price of oil was $2.20 a barrel at that time.
I had first met Harley in Calgary in 1957 when I was just starting out as an independent. He was in the oil department of the Canadian Bank of Commerce at the time. We were both about the same age and geologists; he was schooled at Michigan State University. We hit it off right away.
We ended up setting up shop across the hall from each other a couple years later when we both were hunting projects in Calgary. We even shared information, well cards, production cards, and electricity logs — pretty unheard of in what was a competitive, distrustful industry.
We would go on to do deals together as we became fast friends. We made a lot of money together. We in turn each gave a lot to philanthropic causes, sometimes hitting each other up for a cause either of us was working. He would later serve on our Mesa Petroleum Board of Directors for about six years in the early ‘80s, when we were involved in some complicated activities.
But back on that day in 1967, we were right for the day but not for the near future. Our imaginations couldn’t visualize $40 a barrel oil. But it would arrive, and transform Fort McMurray into a boomtown. (For example, total Canadian oil sands production reached about 2.3 million barrels per day in 2014, according to the Alberta Energy Regulator.)
I learned early on in my career to analyze well, assess risks and prospective rewards, and keep things simple. I’ve also learned you can be smart and make the wrong analysis based on the facts you have on hand at any one time. BP Capital did invest big in the Canadian Oil Sands, beginning in 2001.
I’m regularly amazed by the oil and gas industry’s continual advances in technology, research, and innovation. It’s what has made America great, and the industry will continue to prove its greatness under President Donald Trump.