By Garrett Dvorkin
Herald Staff Reporter
While the COVID-19 pandemic has changed how we operate, almost every industry has been affected by shutdown orders, uncertainty about staff safety and less demand.
The oil industry, which was founded in Titusville in the 1850s, has suffered the same fate as people drove, flew and did less in 2020.
The Friends of Drake Well invited three experts from Pennsylvania’s oil industry to give a presentation about how COVID-19 has affected their businesses, how they were able to continue operating and the future of the oil industry after the pandemic subsides.
The event was moderated by Friends of Drake Well Board of Directors President David Dubois. Dubois was joined on the Zoom event feed by President and COO of the American Refining Group (ARG) Jon Giberson, President of Paragon Integrated Integrated Services Chris Pennington and President/Executive Director of The Pennsylvania Independent Oil and Gas Association (PIOGA) Dan Weaver.
All three men shared a presentation about how their respective businesses navigated through the pandemic. The men also shared where they believe their industry is headed.
First to speak was Giberson. ARG owns and operates a 10,000 barrel per day refinery based out of Bradford. His refinery was first established in 1881, and currently employs 350 people.
While ARG’s refinery was deemed essential and could continue to operate amid the pandemic, this was just the start of their struggle.
Giberson noted that when the effects of the pandemic were starting to be felt in March, the company had a supply and demand problem.
With fewer Americans driving and flying, the demand for gas had fallen sharply.
“Our demand went down by 30%,” said Giberson. He said that 33% of ARG’s Bradford refineries business is making diesel, jet and other fuel types.
With demand lower than usual, ARG responded by cutting back their production by 30%. According to Giberson, refineries are not made to operate at low capacities.
Giberson was worried that ARG would make too much, and then be forced to close with excess product in storage. “We were balancing at 70% capacity for a couple months,” he said.
Despite the gloomy prospects of operating at 70% for months on end, ARG did not lay off one worker during the pandemic.
Giberson explained that there were several keys to keeping the refinery going, even as their production had slipped. The company made sure to have contingency plans, daily meetings, weekly communications to all employees and an offensive mindset.
Giberson said that ARG’s plan was to keep innovating and adapting to stay solvent. While their fuel production had dipped, ARG decided to lean into other niche products to keep making revenue. ARG even made their own hand sanitizer for in-house use during the pandemic. “Don’t wait,” said Giberson. “You have to be decisive but flexible.”
While the pandemic had worsened conditions for the oil industry, the industry as a whole has been getting smaller over the years. Giberson presented information that showed there are less and less refineries around the country. Shell, one of the largest oil manufacturers in the world, recently made the decision to go from 14 refineries to six.
ARG had employees focus on how the site could be working better. Not only does the company plan on releasing new products thought of during this down time, they also improved the facility vastly. “We used this time to focus and learn more,” said Giberson.
Paragon Integrated Services President Chris Pennington offered his insight.
Pennington remarked how this March the decline in oil prices was “one for the record books.” Pennington said that Giberson’s presentation covered much of the same information that he was planning to present. Specific to his company, which deals with wells and not just refining, the pandemic made well visits more difficult.
Last to present was Dan Weaver, President and Executive Director of PIOGA. PIOGA not only works with the oil industry as a trade organization, but also with Pennsylvania’s natural gas.
Weaver took his presentation down the path of explaining the situation of the natural gas industry. Weaver’s goal was to explain “how we got here? Where we are? And where we are headed?”
Weaver told attendees that natural gas prices in Pennsylvania had dropped from $12.69 MCS in 2008 to $1.63 in 2020.
This rapid decrease in price lead to many producers operating in the negative. The prices of natural gas has also impacted the number of rigs that are operating in the state, forcing rigs to be more efficent.
At the high point In 2012, Pennsylvania had 1,352 natural gas wells. In 2020, that number was down to 615.
Weaver explained that these numbers show the path forward for natural gas. Weaver said that wells have become more efficient, and the merging of large companies has allowed for actual profit margins
Weaver knows that there will continue to be opportunities to evolve. “You want to play the long game,” said Weaver. He believes that natural gas will be the bridge that allows us to more easily move towards a more diverse energy eco-system.
No longer is the business about building pipelines underground, but expanding towards the “virtual pipeline,” a complex distribution model that involves tankers, trucking gas and shipping gas by train, among other methods.
No matter the challenge, Weaver is confident his industry will survive if they keep asking the question, “How can we make this better?”
All three presenters agreed that the industry “has to evolve.”
A common theme that came up during the presentation was “cleaner greener” production. While energy may be slowly moving away from fossil fuels, oil is more prevalent in society than most realize.
“There are 6,000 products that come from oil and natural gas,” said Weaver. These products include burn ointments, emergency room materials and more. While the industry continues to move towards carbon capture wells, electronic drilling and other clean practices, one cannot forget that oil is infused into so much of daily life.
Dvorkin can be reached by email at Gdvorkin@titusvilleherald.com.