AI’s ability to replace humans makes it a critical piece of technology for the energy industry moving forward, says Wil VanLoh.

Those that don’t embrace AI and machine learning will be out of business in five years to 10 years, the founder and CEO of Quantum Capital Group said earlier this month.

There are several reasons why AI adoption in the industry is slow, he said. Human beings don’t like change and they’re unwilling to slow down processes to give AI the data it needs to work. And there’s also the fear that AI will replace jobs.

That fear is not unfounded, he said. “There will be … significant job destruction over the next 25, 30 years because of AI. There'll be more jobs for the first time destroyed by technology than created by technology.”

To stay competitive in the job market, people are going to need to know how to use AI to make themselves more efficient, VanLoh said.

“The problem with fear is fear doesn't change anything,” he said.

VanLoh sat down with Oil and Gas Investor’s Deon Daugherty to stress the importance of AI implementation, and how it can be implemented in the oil and gas sector, at Hart Energy’s Energy Capital Conference on June 4.

Deon Daugherty, editor-in-chief, Oil and Gas Investor: Hi, I am Deon Daugherty, editor-in-chief of Oil and Gas Investor here in Houston at our Energy Capital Conference with Wil VanLoh, the founder and CEO, Chairman of Quantum Capital Group. Thank you Will for being here with us today.

Wil VanLoh, founder and CEO, Quantum Capital Group: Great to be here.

DD: So we just had you on stage talking about a variety of private equity-backed and private equity interest issues. One thing that you had raised that we've not talked about so much with regard to private equity is AI and the opportunities and challenges that it might present for the industry. So kind of share your thoughts on that.

WL: Sure. No, I think AI and machine learning, I kind of group those together, it is probably the most profound technology that humanity has seen in the last couple hundred years. And I think that's not meant to be a hyperbole. It really is unique. It's the first technology that has extraordinary applications and implications, but it's the first technology that really in almost every way can replace humans, right? Because it has intelligence.

And so I think it's something that the industry has been slow to embrace and adopt. And I think that's both an opportunity for the industry. But I also think it's something that if the industry does not do that, those that don't get behind and embrace it fully are going to be out of business in five or 10 years. They will not be able to compete. AI and machine learning are going to enable oil and gas companies to find more oil and gas, get it out of the ground quicker, and drive down cost in ways that we couldn't do before without it.

DD: So why do you suppose the industry has been slow to adopt?

WL: I think in general, human beings don't like to change. And in order for AI to work, you have to change everything about how you work. And so it starts with, obviously you have to have a lot of data for AI to work. And to do that you have to capture the data. So a little bit, you have to slow down before you can speed up. And so it radically changes how an individual works. For a while, it's going to make them a lot less productive, but then it's going to make them massively more productive. And so you have to just understand that mindset. And so most people just don't want to go through that curve.

DD: Okay. Do you suppose that there is the fear of “AI is going to take my job?” Is that also maybe at play in the slowness to adopt?

WL: Absolutely I think that's part of it, right? And the problem with fear is fear doesn't change anything. And the reality is in this sector and really in every sector, AI is not going to take your job. It's going to be people that know how to use AI and implement AI are going to be people that are going to take your job. And I think that's an important paradigm that you have to really appreciate because there will be absolutely, I think, significant job destruction over the next 25, 30 years because of AI. There'll be more jobs for the first time destroyed by technology than created by technology. Now, this is a very controversial topic and lots of very smart people would disagree with that statement, but that's my opinion. And therefore, if you want to be successful, if you want to have a job 10 or 15 years from now, you better learn how to utilize artificial intelligence and machine learning, and it will absolutely make you much more productive. It will absolutely make you much more intelligent. And I am a believer that we'll never replace humans completely with AI, but it is the most powerful tool that humanity's ever developed to make them better.

DD: So what are the ways that can really advance the industry, the attraction or the incentive, other than “I don't want to lose my job,” but what can it do for the industry to push it forward?

WL: Yeah. Well, if you think about it, I mean the oil and gas industry in the United States, pre-shale, was a sunset industry. I mean, it was going out of business every year. Production declined. It was not a growth industry. And the Shale Revolution, which by the way was a technology revolution, completely upended that. And it turned one of the biggest declining industries into the biggest growth industry, biggest growth engine in America.

And so I think understanding that and embracing that, that what AI and machine learning will enable the only gas industry to do is, it's that next wave of innovation … because there's not another Permian Basin sitting in the United States. There's not another Marcellus, Utica sitting in the United States. So what we're going to now have to do, we know where all of the source rock is now. We exploited all of the reservoirs, the conventional reservoirs first because they were easier and cheaper, then we had to go exploit the source rock. We've done that.

The only way you're going to get more oil and gas production growth as these basins mature is through technology. And it's through, if you think about, I like to explain to people who don't understand AI and ML very well, that all machine learning is, is it's multi-variable statistics on steroids, right? I mean, it's the ability to look at a lot of variables and understand how if you change this, how it impacts these other eight things. But if you change these other eight things, how do they interact with each other? So if you think about it in oil and gas, it's all about, okay, where are we going to land that lateral, how many frac stages are we going to put on? How many clusters per stage are we going to put on? How many pounds of sand are we going to pump? How much water are we going to pump? Customizing, looking at the data at every single, if you've got 30 or 40 frac stages, every one of those frac stages is a different reservoir, effectively, okay? How do we optimize the exact custom completion design for every foot of that reservoir? There's so many things. How do we take cost out of the system? How do we do this cheaper? How do we avoid making mistakes that we would make through trial and error before? Now the computer can simulate that and keep us from making those mistakes. That saves us money.

So there's just so many things that the computer can allow us to do so much better than humans can do on their own. So that's how I think about it. And so embrace that. You'll ensure your own job security, but you'll also ensure the success that your company will be in business five or 10 years from now.

DD: I mean, those all sound like things that anybody would aspire to.

WL: You would think. Yeah. And they also make the industry investors have a choice where to invest their capital. And while we invest in energy, most investors out there can invest in any sector they want. And so oil and gas, the reason it lost a lot of investors over the last 15 years is because it was a horrible steward of capital. It was not very … return on capital employed plummeted during the first 15, 12 to 15 years of the Shale Revolution. It's only just in the last year or two, started to come back up and actually compete with other sectors. But that's how the sector will continue to track capital, is it will generate return on invested capital that's on par or better with other sectors out there, non-energy sectors. And the only way to do that, because those other sectors are implementing AI and ML at a much faster pace than oil and gas is. So they're getting better. They're getting more attractive in terms of investability to the average generalist investor.

And if oil and gas does not embrace that, we're going to, what's been a nice rebound in the last couple of years will quickly fade and it will be a lackluster or a subpar performer, if you will, relative to other sectors in the S&P.

DD: P. Okay. That's an important warning.

WL: Yeah. Well, I think it's the truth.

DD: Alright, Wil, I mean, excellent perspective as always. Thank you very much.

WL: Great to be here. Thank you.

DD: And thank you for joining us. Hope to see you again soon.

RELATED

VanLoh: Continued US Oil Growth at $63 is a ‘Dangerous Assumption’

Wil VanLoh on Trump 2025: ‘Chaos’

Comments