As I watched the news coverage of the floods in England from the comparative safety of the Netherlands - a bizarre enough experience in itself - it occurred to me that the organizers had been remarkably prescient in taking as the conference theme `Treasures from the Depths'.
It is a particular pleasure to see that, after a couple of difficult years, the exploration industry here is apparently in such fine fettle, certainly if the attendance figures here are anything to go by.
More seriously, though, the events of the past couple have years have served as a salutary reminder of the increasingly cyclical nature of our business - with painful consequences for some of our colleagues.
Unfortunately this repeat of the boom-bust phenomenon has rendered our industry, which 20 years ago was seen as essentially rather glamorous, all of a sudden relatively unattractive.
Particularly so to the kind of people that we - in competition with many other industries - need to attract if we are to continue to do what I believe to be an essentially worthwhile job; that is to meet the energy needs of the world's growing population in a sustainable manner.
This has been exacerbated within many of our companies by the flight of good geoscientists to other disciplines where their broad abilities can find equally good application, but which runs the risk of starving the Exploration `gene-pool'.
Were they wise? Can we really offer those precious graduate geoscientists the kind of career they aspire to? I believe we can, but to do so we need to make more explicit that there really is a good business case for continued exploration.
And we need also to convey the reality that the oil industry continues to offer geoscientists what I believe to be an almost unique career proposition; that of being paid to do what most of us probably wanted to do anyway from the day we first took up our hammers.
I would like therefore to begin by addressing the `why' question; why do we need to continue to explore for oil and gas.
I shall then move on to talking about the `how'; how best do we go about exploration in an increasingly globalize world? And finally I shall talk about what I believe will differentiate those that will be most successful in this fascinating business of ours. Let's begin with the `why' question.
One of the things that worried me most when I was considering joining the oil industry in the mid-1970's, when successive OPEC crises were taking their toll of the industrialized world, was simply whether there would be enough of the stuff to keep me busy for my entire career.
Was I subjecting myself, I speculated, to a career of scraping the barrel? As I quickly began to realize after I joined Shell, I needn't really have worried.
This graph shows how the past decade has seen a progressive increase in global exploration discovery volumes of both oil and gas by the industry as a whole, reversing the decline seen over the previous 25 years shown in the inset graph.
What is more, this analysis predicts that the positive trend is likely to continue for the coming few years at least.
There have been two principal reasons for this. One has been the opening up - or re-opening in many cases - of some highly prospective basins, for example in the FSU, that were previously inaccessible to international oil companies such as ours.
And the second has been the astonishing advances made in technology, especially well engineering technology, that has allowed large but previously difficult to exploit reserves to be targeted, particularly of course in deep water.
Deep water is now a major focus of world-wide exploration, particularly in the Gulf of Mexico shown here and on either side of the South Atlantic, as we shall hear in the first two sessions in this hall this afternoon.
Over 40 billion barrels have been found so far, mostly in turbidities, and an estimated further 70 to 100 billion barrels remain to be found.
Shell was among the first to invest serious amounts of money in this highly capital-intensive business and remains the leading deep-water operator.
As the volatility in oil prices over the years has shown, though, the growth in supply, particularly in non-OPEC countries, has not always been in step with growing demand.
This is just one of the elements that conspire to create an inherently inelastic market that has had increasing difficulty in finding an equilibrium.
Predicting oil prices more than a few months in advance is a pretty dangerous game.
The only thing that everyone does seem to agree on is that this volatility is only likely to increase, certainly in terms of frequency and maybe amplitude as well.
We can also predict with some confidence that, for the next 50 years at least, the world's population will continue to grow.
By 2050 there could be 50 percent more people, mostly in developing countries. Over the past quarter of a century, per capita income in developing countries has risen by 2 percent a year - and per capita energy consumption by nearly 3 percent a year. Growth may accelerate as major countries industrialize.
Shell scenarios suggest world energy demand could grow by more than half in 20 years, and developing countries will soon be the largest market.
Much of the growth will be in gas, consumption could double over the next 20 years. If it can be said that coal was the fuel of economic growth in the 19th century and oil in the 20th, then it is going to be gas in the 21st.
Extending the use of gas is the most important immediate step for both reducing greenhouse emissions and improving air quality.
We expect oil resources to meet normal demand growth until at least after 2020, although this will require continuing technological advance to improve recovery - including of heavy oils - and the time scale would be extended by rapid improvements in energy efficiency.
Ultimate resources of gas are less well known, although since for many years there was little deliberate exploration for gas, there is likely to be, relative to oil, much more yet to find.
Some might argue that the security of supply problem is now reversed, and that advances in the development of alternative energy sources could render obsolete much of the volumes of oil and gas that are left to find.
But for the next twenty years at least, our two alternative scenarios for the future shown here both suggest a continuing dominance of conventional energy forms, with no real growth - in market share terms, at least - for hydro and nuclear energy.
And despite a postulated rapid growth in renewable energy from the current low level of only 0.7 percent of total primary energy use to between 4 and 6 percent, the scenarios suggest that the overall impact is not going to be enormous.
That is not to say that there aren't indeed abundant resources of renewable energy; of course there are.
And they will have to play a significant role if the ambitious CO2 reduction targets that have been the subject of such heated debate in The Hague over the past two weeks are to have any chance of being realized.
The challenge is to make exploitation of these resources economic. We in Shell are pursuing these possibilities
For example we have this year commissioned our very first offshore wind farm here in the UK off the coast of Blythe in Northumberland.
But don't underestimate the technical, commercial or environmental problems.
In the meantime we will need to continue to explore so as to provide the energy people need, while supporting sustainable development, something to which we in Shell are committed to contributing.
By this I mean integrating economic, social and environmental considerations, balancing short- and long-term priorities.
As I have said, I believe that the business of exploration by its very nature serves a social end in providing the fuel for economic growth and ultimately raising living standards around the world.
This though is unlikely to be acknowledged unless those societies closest to the areas where we are actively exploring can see visible evidence of industry's commitment to its social responsibilities at a local level.
That is why we place such importance on striving to work with rather than around the communities we rely upon in our areas of operation.
Equally, we need to be able to demonstrate at a local as much as at a global level a visible commitment to going about our business in a manner that will minimize the impact that our activities have upon the environment.
Increasingly these responsibilities - like those we have for the safety and security of our employees and contractors - are being taken as `givens' by society, both in the developed and developing world.
Strangely enough, what cannot always be taken as a given is the economic case for exploration.
This graph compares the rate of return on exploration at $14 oil price in red and $18 in green for a number of the majors based on public domain data.
It shows how only the very best performers have been successful in delivering an acceptable return on exploration to their shareholders.
Certainly that is at oil prices that are perhaps more representative than we are enjoying today or are likely to always enjoy in the future.
Many companies have simply failed to return the cost of capital at these more modest oil prices - prices against which the prudent at least are making their investment decisions.
Fun though the exploration business can be, we have to remember that it has to provide a competitive alternative to any other means of achieving business growth, whether that be through reserves appreciation, development of static volumes or acquisition of assets or even entire companies.
This graph compares for a ten-year period the cost of adding reserves through finding and development in blue with the cost of acquiring reserves on the open market in red, set against the background of the average oil price in each year.
It shows that cost competitiveness for organic growth by finding and developing your own hydrocarbons is not an unrealistic ideal.
Moreover, as this graph shows, it is organic growth through finding and development, shown by the left column, that has delivered the barrels over the years.
There is then a business case for exploration; we just need to be amongst the best at it.
There is evidence to show that indeed, in terms of unit finding costs at least, recent years have witnessed a dramatic narrowing of the range between the best- and the worst-in-class performers.
As a result, exploration unit finding costs have increasingly become simply enablers for performance rather than a competitive differentiator.
I don't believe anyone can claim to be getting it right all the time, but this clearly provides evidence that we are learning, and we are learning from each other.
What, then, are the common factors that characterize the best-in-class explorers, and differentiate them from the pack? Broadly we can recognize three common aspects that characterize the top performers in our business:
materiality - usually reflected in a significant number of material discoveries each year -,
capital efficiency - normally measured in terms of finding costs -,
and value creation - which as much as anything is about minimising the cycle time from discovery to development, and contributing to short term production.
What you will see listed below are a number of key enablers which I have mapped against each of the performance categories. I don't intend to talk about all of these.
Instead I would like to make some remarks about those I have highlighted here. Let me begin with Strategic Focus. We have become very used in recent years to hear senior oil men extolling the virtues of strategic focus in exploration.
And it is indeed the case that trying to work on too many different plays in too many different countries is only likely to result in doing nothing properly.
Put another way, it is no good being in all the right basins but not in the right blocks.
Focused exploration strategies are all very well, though, so long as you focus on the right things. That requires above all an ability to acquire, retain and apply a fundamental understanding of the workings of successful petroleum systems around the world.
The ability to keep and harness efficiently regional geological know-how is something that larger enterprises can aspire to a degree that smaller companies will find it difficult to replicate This I feel sure has been at least one of the major drivers behind many of the mergers in recent years that have led to the creation of a kind of ivy league of E&P companies.
I always like to use examples from Oman, where I was lucky enough to spend seven years of my career.
It provides such a plethora of examples of the benefits of doggedly pursuing exploration opportunities in a basin that you know has got what it takes to deliver success year after year.
In the early 1990s, substantial hydrocarbon reserves were discovered in Late Precambrian over-pressured, highly porous and fine grained siliceous deposits entrapped in salt domes of the South Oman Salt Basin at depths of some four kilometers.
These rather unique `silicilites', as we call them, comprise an integral source rock/reservoir system with very high volume potential.
Although they have posed some equally unique challenges for development, light oil has recently begun flowing from this formation, helping to continue the steady growth in production from a basin with an apparently endless capacity to surprise.
A postage-stamp approach to exploration is unlikely to generate discoveries of this kind, which owe a great deal to understanding how such a basin, with an incomparably long petroleum geological history, works.
Yet so often this all-important part of the puzzle is skipped as attention becomes focused at a prospect level. In this respect we have to some extent become the victims of our own success.
In the 1980s and 1990s, the emphasis has been more on learning how to use the potential of newly developed tools to understand the subsurface in much greater detail and to reduce uncertainties, and this has been immensely productive.
Shell was among the first to use 3D seismic commercially in the Netherlands in the mid 1970s, and in the 1980s we led the industry in committing to wall-to-wall 3D.
Pre-stack depth migration - now applied to entire data sets - gives even greater degrees of definition needed for today's more precise well targeting.
Even to the uninitiated, the value of using Shell pre-stack imaging to process North Cormorant data shown here is clear.
Meanwhile visualization and interpretation technologies have transformed the way in which explorationists work, allowing them to manipulate and process data in ways that hitherto were simply unattainable.
There are, though, inherent dangers in relying exclusively on hi-fi techniques to de-risk prospects.
This graph shows the average probabilities of success and actual success rates of a number of prospects drilled in Shell in recent years shows, comparing the outcome of those that were DHI supported on the left and those that weren't on the right.
Note that some 50 percent of prospects that were drilled on the basis of DHIs did not encounter producible hydrocarbons.
Moreover, a similar success rate was achieved from drilling non-DHI supported wells. Clearly, not all prospects - especially those at greater depths - are so brazen as to reveal their full beauty to the explorations behind his or her workstation Focusing exclusively on DHI supported plays runs the risk of distracting attention from the likely much greater number of attractive prospects that prefer to retain something of their modesty.
By Andy Wood, Head of Global Exploration, Shell International E&P B.V.
Source:Shell.com
© 2000 Mena Report (www.menareport.com)
