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Why energy execs are suddenly pumped up on Trump

Donald Trump
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Donald Trump

You know your industry has fallen off a cliff when the price of your product doubles over 12 months and you're still not back on a firm footing. But that, of course, is exactly what happened to the oil industry, as the more than 70,000 Houstonians who lost their jobs in the energy crash know from painful personal experience.

Top energy executives from all over the world are gathering in Houston this week for CERAWeek by IHS Markit to discuss the state of their industry and its future. Despite the volatile and difficult past 18 months, I am encouraged. Even at current price levels, there are reasons for optimism.

Most of those reasons relate to what I see companies and the industry are doing to better control their own destiny. New policies at the federal level, however, are also encouraging.

The new administration in Washington is pushing for tax reform, a major infrastructure program, and regulatory reform. All three would help stimulate the U.S. economy in general and the energy industry in particular.

Tax reform, done right, would lower corporate rates while eliminating loopholes, putting U.S. companies on a level playing field with their counterparts in the rest of the world and with one another. The result would be a more competitive American business sector and a more rational allocation of capital within it, with a minimal loss of revenues to Uncle Sam — and maybe none.

An infrastructure program — thoughtfully conceived and well managed to avoid boondoggles and wasteful spending — would produce significant productivity gains for the economy and improve quality of life for tens of millions of Americans. The backlog of modernization projects in transportation, water, telecommunications, energy and many other areas is enormous — and U.S. business needs them.

Finally, thoughtful regulatory reform would not only enable more drilling but protect the environment and our country. Environmentally sensitive areas along the Atlantic and Arctic coasts, for example, can still be protected, while less-sensitive areas along those coasts should be opened to extraction.

Federal policies aside, I see reasons for optimism in the way the industry itself is moving to improve bottom lines while simultaneously boosting production, safety, reliability and energy management.

One big opportunity for companies is to move more rapidly to adopt or expand the use of the Industrial Internet of Things (IIoT). Hundreds of billions of dollars will be invested in IIoT in 2017 alone, according to International Data Corp., a global provider of market intelligence. The oil and gas industry is made to order for this technology. Many of the locations where the industry does its work are described by "the four D's" — dull, dangerous, dirty and distant. The sensors on which the IIoT relies are now so affordable and easy to install — many are "lick 'n stick" — that we can now achieve "pervasive sensing" with them at these forbidding or difficult-to-access sites.

"None of these initiatives — from Washington or from the industry itself — is far-fetched, either conceptually or in terms of execution. We simply need to get started on them today."

In Australia, for example, Santos is using IIoT to coordinate and enhance assets — some up to 1,000 km apart — for its Gladstone Liquefied Natural Gas project. Likewise, Premier Oil is using IIoT to enable an operations center in Aberdeen, Scotland, to remotely manage its unmanned offshore production platform 160 km west of the island — safely and efficiently.

Finally, I'm hopeful because the oil and gas industry is realizing it needs to make sure workers with the right skills are available to fill the jobs that will be created.

As the industry revives, so is the recognition that thousands of engineers, technicians, geologists and rig workers have moved on to other jobs or retired.

At the same time, jobs in the sector are requiring more education and more sophisticated skills, as they are in manufacturing in general. In fact, the number of unfilled openings for manufacturing jobs last year stood at its highest level in 15 years, according to the Department of Labor. We need to be encouraging and training skilled workers who know how to work with today's technologies in modern manufacturing.

The energy and related industries are starting to take the initiative by supporting educational programs and skills training. Sasol, for example, is investing $5 million in Sowela Technical Community College in Lake Charles, Lousiana. Many companies, including Emerson, have been investing more and more in supporting STEM (science, technology, engineering and math) education programs and initiatives all over the country.

None of these initiatives — from Washington or from the industry itself — is far-fetched, either conceptually or in terms of execution. We simply need to get started on them today.

If we all do our part, the outlook for oil and gas — even at today's anemic prices — begins to look a lot stronger, fast.

— By David Farr, chairman and CEO of Emerson, a global technology and engineering company, and chairman of the National Association of Manufacturers