Dan Allford grew his company by building precision oil and gas field equipment with cutting-edge robots, and like many Texas businesses, he profited when energy prices rose and buckled down when they fell during the industry’s incessant cycles.
This downturn feels different, though, and Allford’s ARC Specialties is moving into other industries that promise a little less volatility, and perhaps, a more prosperous future.
“This has been one of the longest downturns, so that is one indication we need to look to other industries,” Allford, founder and CEO of ARC, told me. “We always have, but to be candid, when the oil patch is doing well, it’s lucrative and fun and challenging.”
ARC Specialties will never abandon its oil and gas clients, Allford insists, but they could play a much smaller role in the company’s future. If current trends hold, it may be the only way his company survives.
COVID-19 is sparking a lot of conversations about the future of oil and gas. The move to work-from-home has crushed gasoline demand, and the longer the pandemic lasts, the less likely people will return to the office.
TOMLINSON’S TAKE: Texas needs pipelines and a phase-out of oil and natural gas
Back in April, at the height of the shutdown, vehicle miles traveled in the United States dropped 64 percent, according to a new report from consulting firm KPMG. And while Americans are getting back in their cars, they may never again drive the 3 trillion miles they did in 2019.
Analysts at KPMG say new habits formed during the pandemic could eliminate 270 billion miles of travel a year, a reduction of 9.2 percent. An increase in the number of delivery vehicles on the road would not make up for the lost demand for oil because many of them will be electric.
“Energy demand and certainly mobility demand will be lower even when this crisis more or less (is) behind us,” Royal Dutch Shell CEO Ben van Beurden said in an interview with IHS Markit, an energy consulting firm. “Will it mean that it will never recover? It’s probably too early to say. But it will have a permanent knock for years.”
With more than 1 billion barrels of oil in storage, and prices below the breakeven point for most companies, drilling activity will remain low for at least the next year, if not longer, especially in North America. Allford is finding new work for his engineers and robotics experts.
“The same technology we use to coat the inside of valves in subsea applications in the oil patch is also applicable to submarines,” he said. “There is a huge amount of technology transfer; we just have to be presented with new problems to solve.”
While robotics is undoubtedly one of the industries of the future, revenue comes from aiding other emerging technologies. Allford has identified surgery, maritime vessels, space flight and electric vehicles as growing markets.
Humans may remain the best problem-solvers on the planet, but robots offer unmatchable precision. ARC is developing a robot for joint replacement surgery that, under a surgeon’s supervision, will produce better results and fewer mistakes.
Allford’s first robots were used to apply welds to difficult-to-reach places.
He’s also using what he learned in oil and gas to develop a tool that applies heat and computer vision to shape metal into complex shapes for ship hulls. The same technique applies to spacecraft and electric vehicles.
TOMLINSON’S TAKE: Coronavirus costing oil and gas $1.8 trillion in 2020
“When we take a solution from the oil industry and apply it to rockets, or electric cars or surgery it makes us look smart, but in reality, we are only applying a solution that was already successful for us in the oil field,” Allford said. “I’m excited about the electric car industry because that’s going to be big.”
One of the things I admire most about Texans, and particularly folks in the energy industry, is their ingenuity. The methods they have developed to find, extract, transport and refine oil and gas are indisputably astounding and worthy of admiration.
The world needs visionary entrepreneurs and bold engineers more than ever, but we need them to leave the oil patch and focus on new technologies.
“I have so many good friends who have failed to pivot to new industries,” Allford added. “There are a lot of good people out of work, and if they would all follow our lead and go into new industries, that would be great.”
Giving up what you’ve always known is hard, but failing to recognize change is foolish, especially in business. Rather than trying to return to the past, we are better off applying our skills to new problems, the ones people will pay us a lot of money to solve.
Tomlinson writes commentary about business, economics and policy.
twitter.com/cltomlinson
chris.tomlinson@chron.com
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