Reason #2 Why I Love To Blog -- Feedback From Readers -- Learning Something New -- October 13, 2019

This is really cool. I posted something about which I knew little and I was clearly in front of my headlights. I thought I should have deleted that post but before I could delete a reader commented on it. I was saved by that reader who tactfully told me "to be careful."

In addition to that, there was more. The reader used a phrase I had not seen before, actually two phrases:

• advantaged oil
• advantaged natural gas

Advantaged.

I had not heard that term before and I could not figure out what it meant.

It was very, very difficult to find anything on "advantaged" used in this context.

What little I found suggests "advantaged" used in this context is more fitting for "advantaged oil" than for "advantaged natural gas."

It appears that either Phillips 66 or BP coined the phrase. My hunch it was Phillips 66 that coined the phrase but BP took the phrase and "ran with it."

Four links:

• from oilandgas360: we are all about 'advantaged oil' and 21st century data processing capacity: BP.
• from Quora: what is advantaged crude ... and why is Phillips 66 investing in infrastructure that "drives" toward it?
• from drillers.com: BP scores a win off the Digital Oilfield
• from 247wallst.com: what another one billion bbls of oil means for BP

From the first link, January 18 2018, more than a year ago:

BP’s Chief Operating Officer for Developments and Technology James Dupree recently defined BP’s current upstream focus. The new focus was no doubt influenced by the commodities price downturn.

Dupree said BP’s upstream priority is on what BP calls “advantaged oil.”
“From an investment perspective, an advantaged oil project means a short cycle time for development (from finding the resource to producing first oil) and a low development cost,” Dupree said in a recent interview published in BP’s in-house magazine.

“Scale is important as well; we are usually talking about large-scale developments, and often in areas where we – or our partners – have existing infrastructure. Typically, we look for light oil (with a low density, this flows easier than heavier crudes) with a high deliverability. In other words, wells that produce at a high rate,” Dupree said.

The majority of BP’s portfolio today is advantaged oil, according to Dupre. “We’re pursuing resources in regions where we have existing positions, for example by applying the latest seismic technology around our Thunder Horse field in the Gulf of Mexico and the Clair field in the UK North Sea.

Dupre said BP is applying enhanced oil recovery technologies to extract more from Prudhoe in Alaska. “The results have been fantastic; they have reduced decline, holding production almost flat – and the overall breakeven for the business is down by 40%.”

From the second link, last updated, January 11, 2015, more than four years ago:

Though it has the name of an one of the original 'oil patch' companies, the modern Phillips 66 consists of the downstream assets (i.e, refineries and distribution) spun out of ConocoPhillips in 2012. The company in its prior incarnations had a long history of processing the heavy and sour crudes from Alaska, California, Mexican, and Canadian oil fields. For this reason, they claim an 'advantaged crude culture', and the press release is announcing their intention to double down on the competitive advantage they've identified for themselves in a very competitive industry. It's also timely, given that the growth in North American crude oil production has mainly been in the category of advantaged crudes.

From the third link, dated much more recently, July 2, 2019:

Shale has sucked all the O2 out of the room in recent times. This new announcement by BP and credited to their analysts at their Houston, Tx Center for High-Performance Computing, processing data from a 2018 exploration well in a matter of weeks, could change that narrative in the coming year. New billion barrel fields are not commonly found anymore, and the ones that are found are much harder to find than in years past. Particularly ones that are “advantaged,” as defined by BP’s Chief of Upstream, Bernard Looney.

In upstream the business is focused on growing both gas and advantaged oil – focusing on only those resources that are low cost or high margin – to be resilient to any price environment.

From the fourth link, dated January 8, 2019, fairly recent:

Bernard Looney, BP’s Upstream chief executive, said of the discovery and expansion:

BP’s Gulf of Mexico business is key to our strategy of growing production of advantaged high-margin oil. We are building on our world-class position, upgrading the resources at our fields through technology, productivity and exploration success… And these fields are still young – only 12% of the hydrocarbons in place across our Gulf portfolio have been produced so far. We can see many opportunities for further development, offering the potential to continue to create significant value through the middle of the next decade and beyond. 

Tell me if I'm wrong, but it seems journalists are quoting CEOs but not providing more background by what CEOs exactly mean when talking about "advantaged oil." It seems very nuanced, a shorthand lingo.

Again, from oilandgas360:

BP’s Chief Operating Officer for Developments and Technology James Dupree recently defined BP’s current upstream focus. The new focus was no doubt influenced by the commodities price downturn.

Dupree said BP’s upstream priority is on what BP calls “advantaged oil.”

“From an investment perspective, an advantaged oil project means a short cycle time for development (from finding the resource to producing first oil) and a low development cost,” Dupree said in a recent interview published in BP’s in-house magazine.

“Scale is important as well; we are usually talking about large-scale developments, and often in areas where we – or our partners – have existing infrastructure. Typically, we look for light oil (with a low density, this flows easier than heavier crudes) with a high deliverability. In other words, wells that produce at a high rate,” Dupree said.

The majority of BP’s portfolio today is advantaged oil, according to Dupre. “We’re pursuing resources in regions where we have existing positions, for example by applying the latest seismic technology around our Thunder Horse field in the Gulf of Mexico and the Clair field in the UK North Sea.”

Dupre said BP is applying enhanced oil recovery technologies to extract more from Prudhoe in Alaska. “The results have been fantastic; they have reduced decline, holding production almost flat – and the overall breakeven for the business is down by 40%.”

Transportation costs are not mentioned as one reader suggested.