Part 4 – Navigating Energy Transition Complexity
As land leaders think about the strategies needed to navigate the complexities of today and tomorrow, multiple business priorities are top of mind, including how to maximize asset base, drive data-driven decisions, and contain G&A costs. Technology thought leader and CEO of ThoughtTrace, Nick Vandivere, has teamed up with W Energy Software to provide his valuable perspective on the tough challenges facing the land department and how to future proof energy companies with artificial intelligence, automation, and a single version of the truth, increasing business agility, reducing costs, and improving free cash flow.
By Nick Vandivere, CEO at ThoughtTrace
Ray Kroc once had an epiphany when (and this is hard to imagine) he was struggling to make McDonald’s a successful business, realizing that he wasn’t in the burger business but in the land business and that the real money was to be made in acquiring acreage and leasing it to franchisees. I think about this awakening when I hear people talk about the energy transition. Diehard oil men and women cringe when they are told by Wall Street that they need to stop drilling for hydrocarbons and start planting windmills, and rightfully so. One thing I love about the oil & gas business is the people and their passion for what they do, so I can see how “energy transition” rubs them the wrong way. But I can also see that the transition, whether Wall Street loves it or not, is less about shutting in every well and laying down rigs forever and more about moving to a mix of energy sources, enabling hydrocarbons to retain a crucial status while opening the doors to abundant new opportunities. Just remember, we are in the land business and royalty streams flow from wind turbines, solar farms, and geothermal wells too.
In my fourth and final post in this series on modernizing the land department, I’d like to explore some of the opportunities on the horizon for land professionals and how to successfully navigate the big reading problem as they add lease and contract complexity from other areas of the energy mix. Be sure to revisit and discover the preceding blogs where I shared my views on what energy companies need to look like in the future, how to mine vast volumes of lease obligations for answers, and how to deploy artificial intelligence to automate land workflows and hit higher targets with a lean team.
The Big Reading Problem Across the Energy Enterprise
I’ve talked quite a bit about the “big reading problem” from the perspective of the land department. But if you look across the digital oilfield, you’ll find that it isn’t so digital and that there is, and will continue to be for decades to come, a massive paper data dilemma.
Most E&Ps struggle with overall document management and driving better consumption of data trapped in cellulose. Storerooms full of paper data, from land and leases to well files, midstream marketing, and gas processing. It creates barriers to critical decisions and myriad risks to the energy enterprise, including pre-acquisition due diligence, post-acquisition asset onboarding, compliance, and contractual risk.
You need more than mere access to PDF scans of your mission-critical documents; you need a contextual understanding of all documents across departments. That’s the beauty of artificial intelligence-powered document understanding technology – your team can solve the big reading problem anywhere by making your stockpiles of paper data as easy to search as shopping on Amazon. So, before you dip your toes into renewables, ensure that you are leveraging this tech across your entire oil & gas business.
Redeploying Land Skillsets
What’s so interesting about the road ahead is that just like producing hydrocarbons, renewable energy still requires rights to acreage and lots of it. Ever seen a modern wind turbine up and close? These massive structures dwarf the biggest pumpjack with a footprint as big as a well pad. I wonder if one day we’ll be running spacing analysis on wind farms like we do for tightly packed wells in the Eagle Ford.
Solar power generation facilities are sprawling, requiring renewable energy companies to scout out and lease acreage. And it’s not just surface rights either. If there’s anything in the energy transition that looks and feels like oil & gas, it’s geothermal power generation that require subsurface rights to drill deep wells that produce steam.
From hydrocarbons to renewables, there is a set of core competencies no matter what you are focused on, including land acquisition and lease administration, executing major projects (onshore and offshore), logistics, and the transmission of a commodity. Renewable energy also shares a similar need to cut checks to royalty owners in wind, solar, and geothermal facilities and manage owner relations. In oil & gas, best-in-class operators are great at these and the same is true for renewables. These competencies will serve your team well now and in the future, but be prepared for a paper data problem, ironically, even as the power grid gets greener.
Just as we’ve seen in the petroleum enterprise, navigating the energy transition demands cutting-edge tech, from AI-powered document understanding to lease administration solutions to manage your acreage. And right now, the largest pure-play renewable energy company is using our tools to manage document and contract complexity.
Getting Out of the Comfort Zone
So far, I’ve discussed areas of the energy transition where oil & gas teams share common challenges and common skillsets. Getting into renewables will also require teams to expand beyond their comfort zone to meet new challenges with new skill sets. You’ll need to understand different risks with suppliers, contractors, and customers.
Land management will continue to be a huge part of renewable energy, but the other big challenges include financial optionality, managing agreements to buy kilowatt-hours, and the options to buy a certain amount of production. How renewable projects get financed is much different than oil & gas and the contracts are very complex. In renewables and power markets, understanding implications and obligations in these areas are absolutely critical.
Here again, document understanding tech is your path to manage paper data problems in the energy mix. With 4,000 data elements recognize right out of the box, you’ll be able to seamlessly search unstructured data sources to accelerate internal audits and understand risk across the enterprise, from the fossil fuel side of the house to geothermal, solar, and wind power generation.
That’s a wrap for my blog series on leveraging technology and upgrading processes to bring your land department up to its full potential. Please reach out with any questions or critiques, I welcome it all!
This is Part – 4 of our guest blog series: Essential Guide to Modernizing the Land Department.
|Nick Vandivere serves as CEO of ThoughtTrace. During his tenure, he has led the transformation of ThoughtTrace into a company that is a technology and thought leader for the application of applied artificial intelligence and machine learning. As a software CEO, Mr. Vandivere believes that product innovation, reliability, and an outstanding user experience are the required ingredients for exceptional performance and long term value. Mr. Vandivere joined ThoughtTrace in 2010 as Director of Business Development. Prior to joining the company, he served as an officer in the US Army and later in an advisory role with the US Department of State. Mr. Vandivere holds a Bachelor of Science degree in Economics from Texas A&M University..