Randy Eresman

No Backroom Engineer

January 2, 2008 - Randy Eresman might be considered an accidental CEO.

"I had no desire but to be a backroom engineer, where someone would slide something under the door to me to work on, and I would slide something back out," says Eresman, recalling the early days of his career.

However, his success is anything but accidental. For nearly three decades, Eresman has steadily advanced at the same company where he started out—Alberta Energy Company, which through a merger in 2002 has become EnCana Corporation.

The corporation Eresman now leads is a top natural gas producer in North America and has the largest stake in developing Jonah Field, a world-class gas reservoir about 30 miles south of Pinedale, Wyoming. The field is productive; it accounts for 13.5 percent of the natural gas produced in Wyoming and 1.5 percent of the gas produced in the United States.

In 1982, though, Eresman wasn't dreaming of making a name for himself. He was just trying to figure out how to get ahead in a struggling energy industry. He'd graduated from the Northern Alberta Institute of Technology and was working as a petroleum technician for the Alberta Energy Company (AEC) at a time when the western Canadian energy industry was struggling under the burden of Canada's National Energy Program. Western Canadians didn't much like the program. It was intended to promote low energy prices and alternative energy sources in the face of an expensive world market; but it also imposed a double tax on petroleum products and squelched investment in areas such as Alberta.

Eresman thought if he wanted to get ahead, he needed more education.

Growing up in Medicine Hat, Alberta, he never intended to go into the energy business. Medicine Hat was mostly a farming area. There were some gas wells, but then energy development was an industry that was run from big cities. But influenced by the father of a boyhood friend who owned an energy services company that supplied drilling mud and by his older brother, who went into the field, Eresman changed his mind.

While at AEC, he'd met some engineers who had graduated from the University of Wyoming. When it came time to pick a university, he headed south to the United States and Laramie.

"Had I stayed at the company, there wouldn't have been as much drilling, completion, and tying in of new wells," Eresman says from his Calgary office. "My decision to go to UW was based on the feedback from some of the people in the company who had gone there in the past."

It was also based on a trip to Laramie he'd made in the spring of 1982 to talk with Jack Evers, who headed up the petroleum engineering program.

"UW was a good fit for me because I wasn't exposed to big places. I felt comfortable there. The class sizes were great."

Two years later, fresh from his UW graduation with a degree in petroleum engineering, Eresman returned to Canada. Even though prices in the energy patch were still depressed, he prepared and sent out about 100 resumes.

"I got one reply," he says. "It was a rejection."

He was able to work on contract for the AEC, and eventually he was hired as a full-time production engineer.

Eresman attributes his rise in the company partly to being adept and efficient at solving complex problems and partly to some notable achievements such as developing computer models early on to solve problems and applying horizontal drilling on a broad scale.

"We had done some horizontal drilling in a smaller way," he says. Engineering calculations showed that natural gas wells were not being stimulated to the extent they could be. They used larger boreholes and stimulated the wells with different fluids. They were amazed at the results in the very first horizontal well they drilled this way.

At the time, production of 10 million cubic feet per day was normal, Eresman says, but he and others thought they could more than double that to 25 million cubic feet per day. They achieved 300 million cubic feet per day.

"We were almost scared," he says. "You don't want to have a well that big."

Eresman says he used basic understanding of engineering principles he learned at UW to work on developing the AECO natural gas storage reservoir in western Canada's southern Alberta, which is now the major trading hub for natural gas.

His career path followed that of many petroleum engineers, starting with some exposure to operations, production engineering, and drilling and facility management, and moving on to include financial considerations.

"I always had a strong desire for the projects I was working on to be successful," he says with characteristic understatement. Even so, his doggedness served him well as he outgrew most of his supervisors as he took on more and more responsibility.

"From my very earliest days, I felt that it was really important to help my company succeed," he says. "If I helped them succeed, they would help me succeed. And I firmly believed that I was very fortunate to work for a company that enabled this to come true."

His progression went something like this: vice president of AEC Oil & Gas, a division of AEC in 1996; president of AEC Oil & Gas Partnership in 1999; executive vice president for the onshore North American division in 2002 following AEC's merger with PanCanadian Energy Corp., that resulted in EnCana; chief operating officer later that same year; president and CEO of EnCana in 2006.

EnCana earned its reputation by developing unconventional natural gas and oil reservoirs. Jonah Field is considered one of those unconventional natural gas reservoirs because its gas is held in place by tightly packed sands. Unlike conventional natural gas formations, the tight sands require some ingenuity to tap. But once the wells start producing, they tend to produce for several decades, not just the handful of years of conventional gas wells.

Jonah Field is unquestionably important to Wyoming. During its life, it is expected to generate about $6.1 billion in royalties that will be split between the federal government and the state of Wyoming. EnCana officials estimate the total economic impact from developing the oil and natural gas from the field will be about $30.5 billion over the length of the project.

UW is also seeing some impact from EnCana's success. In 2006, EnCana Oil & Gas USA, a subsidiary of EnCana, pledged $2 million to UW for new petroleum engineering research laboratories. The gift, which comes to the university over five years, will be matched by state funds and will result in establishing the EnCana Research Lab, an EnCana Reservoir Simulation Lab, and other facilities.

Earlier this year, EnCana Oil & Gas USA also pledged $5 million to help pay for a building for UW's School of Energy Resources.

Combined, these two donations make up the largest industry gift to UW.

"Wyoming has been blessed with a great number and variety of unconventional reservoirs that will sustain growth for many years to come," Eresman says. "It has the kind of geology that really attracts us to want to look for more opportunities to repeat the successes we have had at Jonah and elsewhere in the intermountain basin."

The investment in the university may also reap benefits for the company, which continues to be a destination for UW graduates.

"When you focus effort on any particular area of science, advances are made and tremendous value is created," Eresman says. "But it needs leadership and funding to get it started. It's a long payback, but it's a proven method that has worked for every area of science."

Even as the energy industry is vastly different from what it was when Eresman fruitlessly sent out his 100 resumes, it's poised to change again. Industry, government, and academic experts are examining the impacts of climate change and the role that energy development and use play in it.

"As a company, we struggle with how deeply we should get involved with investing in alternative energy. However, we do see great value in advancing our knowledge base in the applicable sciences.

"I think the School of Energy Resources will study all of those potential alternative energy sources. We're right in the middle of it. We expect the U.S. will adopt some form of carbon-based legislation, and people will figure it out. A lot of research needs to be done to accommodate that expectation."