Upstream oil and gas technology providers have doubled the number of new patents being recorded over the last five years. Contax Partner’s Vinodkumar Raghothamarao uncovers the areas of greatest innovation
The demand for oil and gas has steadily increased during the past few decades, and this trend is expected to continue in the coming decades. The question arises: With plummeting discovery volumes, where will the supply come from?
As producers are forced to drill deeper into the ground and venture into deeper waters in areas more remote from the consumers, how will the demand be met? Contax Partners strongly believes that technology will play a crucial role in meeting the worldwide burgeoning demand for oil and gas.
Technology will prove to be the reckoning force for enhanced oil recovery and increased production. In this article, manager of the Business Advisory Unit at Contax Partners, Vinodkumar Raghothamarao, provides a brief insight about the evolving upstream oil and gas technologies, the end user’s approach towards the same and the challenges grappling the industry.
The average recovery rate of a hydrocarbon reservoir is 40%. This means that of all the current and no longer active wells, 60% of their bounty will remain in the ground – unless extraction methods are improved.
If only a fraction of the untapped 60% is made available, and an equivalent increase to the recovery rate of undeveloped and yet to be found fields is gained, it is perfectly feasible that supply can keep up with demand in the coming years.
The recovery and extraction rates can be improved by the advent of new upstream oil and gas extraction technologies. New upstream oil and gas technologies can be better understood by patent trends. The number of new patents related to the extractive industry has more than doubled during the five year period 2005-2010, as per Figure 1.
From the Figure 1 above, we realise the growing importance of oil and gas technology innovation. This implies that the project owners and independent oil and gas technology companies are focused on oil and gas technology Research and Development (R&D) efforts.
Contax Partners understands that within the oil and gas industry, technology has reduced the risk of exploration, and cut the time required to drill a well. Oil and gas technologies are often destined for hostile, hard-to-reach environments such as deep offshore waters or in the high temperature and pressure encountered at the bottom of a well.
There has been a paradigm shift in the way oil companies have embraced new technologies or shown interest in new technologies.
National oil companies are aggressive users of new technology that is aligned with particular local needs, as a result of less stringent investment criteria, and a primary responsibility to most effectively exploit national resources.
Large operators focus on lower-risk technologies that reduce cost and provide access to new resources, whereas independent operators generally seek opportunities that are of higher risk and hence greater reward. Strategic investors in O&G technology include Chevron, BP, Energy Technology Ventures (JV between GE, NRG and Conoco Philipps), Statoil Ventures and KPC Ventures.
The oil and gas industry exhibits time-to-market characteristics that are consistent with other heavy industries, such as mining, steel production and power generation. While consumer goods might progress from concept to store shelves in two years, oilfield technologies consistently require 10 to 15 years to complete the same maturation cycle.
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Some of the early technologies which took a long time for the industry to embrace include directional drilling and seismic surveys.
Horizontal wells are designed to increase the production and reduce the drilling and completion cost of a well by offering a greater contact with the productive layer of a reservoir. A horizontal well typically costs 30 to 80 per cent more than a vertical well but offers the potential of dramatically higher production compared to a vertical well.
The introduction of a down-hole steerable motor that could be controlled from the surface, and introduction of measurements while drilling (MWD) complement the development of horizontal or directional drilling.
Even though the higher cost coupled with higher risk of horizontal drilling remain a deterrent to many companies, with time, acceptance of horizontal drilling methods have increased as more and more companies report success with the use of horizontal drilling.
The decade-long adoption of horizontal wells is a classic example of adoption of a new technology as costs come down, technology improves, and risks are better understood and mitigated.
Early 3D seismic surveys were expensive to acquire and process, but as the industry gained familiarity with the needed technologies, then costs and processing and interpretation times for seismic 3D came down. 3D seismic surveys produce much more detailed information than was previously possible and have been revolutionary in the oil and gas exploration arena.
The above two are just examples of technologies that took a longer time for the overall oil and gas industry to embrace and adapt. Currently some of the upcoming areas wherein significant efforts to develop and/or improvise technologies include but not are limited to:
• Advanced and integrated database with interactive visual and communication tools for oil and gas real time information
• Enhanced oil recovery, reservoir modelling, monitoring and management
• Improved oil and gas exploration rates in tougher regions
• Deep water exploration
Oil, gas and mineral deposits buried deep underground can pose a greater challenge in uncovering them, especially in terms of time, effort and money. The concept of airborne gravity gradiometry could give oil and gas companies rapid access to detailed information about geological structures, and could be a valuable tool for the rapid identification of oil and gas deposits.
Airborne gravity gradiometry surveys enable a large area to be surveyed more quickly and in a cost effective manner.
The term digital oil field (DOF) can be defined as a suite of interactive and complementary technologies that enable companies to gather and analyse data throughout the job site. More specifically, digital oil field technologies allow companies to capture data, with greater frequency, from all parts of the oil and gas value chain and analyse it in real or near-real time, thus optimising reservoir, well and facility performance.
The most common challenge in the deployment of DOF is the underestimation of the level of customisation required. Each DOF implementation has to be tailored to its specific need and there is no one-size fits all solution when it comes to DOF implementation. Hence many end users do not appreciate the importance of customisation and as such, there is a serious need for empowerment and education of end users.
More advanced exploration and production technologies are continuously being developed, in order to find more reserves and maximise cost reduction. Some of the initiatives are 4D seismic surveys, new logging techniques, control systems and down-hole sensor, coiled tubing for well work overs, completions and flow lines and intelligent or smart well completions.
The main driving force behind these new upstream technologies is the desire to increase access to economically exploitable new liquid and gas reserves, improve recovery rates of existing reserves and reduce exploration, development and production costs.
In addition, being able to mitigate adverse environmental efforts and risks to public health and safety from exploration and production activities, and develop production and conversion technologies for clean liquid fuels from unconventional resources, gas and coal are also key drivers.
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The below table (Table 1) showcases and summarises some of the developments in oil and gas technologies with their respective benefits.
From the above Table 1, we realise that Radio Frequency Identification Device (RFID) has found its way in Drilling Operations (DOTS). This results in optimised drilling operation and capture of real-time drilling measurements. The development of Solar EOR enables companies to extract more oil from mature fields, especially without the need for gas-fired steam.
Even though there are advancements in oil and gas technologies, there are still many challenges to be faced. Some of these challenges are – Improving recovery efficiency, Developing huge amounts of known unconventional deposits and Realising technology breakthroughs for improved or new gas-to-liquids (GTL) processes.
Going forward, one has to wait and watch as to how the technology landscape evolves. The large operators are refocusing their research, development and deployment efforts on technology areas relevant to the competition.
Some such examples include but are not limited to: the exploitation of difficult gas resources and the sustainable production of resources heavily contaminated with hydrogen sulphide and carbon dioxide.
On some levels, adopting new technology can be viewed as an economic risk. The cost may be higher and the result less certain than existing technology. On the positive side, the payoff from a new technology can be huge, both for the individual company and for national energy security.
Contax Partners believes that in the next few decades to come, advancements in oil and gas technologies will continue to be a key and critical driver to find more reserves that
will secure the future oil supply.
About the author
Vinodkumar Raghothamarao is the manager of the Business Advisory Unit at Contax Partners. To further discuss how the Business Advisory Team can help you understand the project landscape, the potential realisation rates and likelihood to proceed tiers for your projects, the full set of opportunities open to you and the best strategy/approach to ensure the opportunities are successfully secured, please contact Ann-Marie Carbery Antoun: AnnMarie.Carbery@contaxpartners.com.
