In a bid to push back the date of ‘peak oil’, oil and gas companies are under more pressure than ever to invest in new technology
The spectre of peak oil has long been enough to bring out the most hardened energy executive in a sweat. Pushing back that date is proving to be a key factor in investing in new technology, a recent report by Lloyd’s Register Energy found.
It reported that companies in the Gulf, particularly national oil companies (NOCs), have super-sized budgets, allowing them to invest heavily in research and development (R&D). The survey of more than 250 oil and gas professionals from across the globe found a variety of technologies are set to have an impact in the coming years.
Unsurprisingly, a number are related to extending the life of existing assets – a particularly salient challenge in the Gulf where some fields have been producing for half a century or more.
But as well as investing in emerging technologies, energy companies are also addressing their present day requirements for automation, including remote and subsea operation, as firms attempt to deal with challenging environments.
“High-pressure, high-temperature (HPHT) drilling and multi-stage fracking are also expected to have a major impact, but are only expected to become fully deployed around 2020, along with many other technologies,” said the report.
“Just as important will be the more effective use of data and computing: 58% of those surveyed agree that many future breakthroughs will involve “bits and bytes, rather than physical hardware”. Further out, from 2025 and beyond, the most eagerly anticipated innovations relate to subsea robotics.”
The accelerating rate of innovation is putting pressure on oil and gas companies to invest heavily. Indeed, almost three quarters of respondents (73%) are of the opinion that the rate of innovation in the sector is increasing, heightening the pressure to innovate. As a result 59% have increased their R&D spend in the last two years, with yet more (68%) intending to do so over the next two years.
The report said that although part of that rise might be aimed at coping with higher costs, the bulk represents real growth in activity and interest. For example, management time spent on R&D and innovation has risen at 45% of companies in the last three years and 54% of respondents expect it to do so in the next three; only 6% foresee a decline.
Respondents also expect the sources of innovation to spread, with national oil companies (NOCs) a rising force. According to those surveyed, international oil companies (IOCs) have introduced by far the most breakthrough technologies in the last two years (cited by 46%), followed by exploration and production companies (31%).
The need for IOCs and exploration companies to move into new areas and to exploit more difficult-to-access reserves explains their lead in innovation. In the coming two years, however, respondents expect the advantage of IOCs to diminish, as other companies bring in new technology.
In particular, those surveyed see an increasing role for NOCs: two-thirds of those polled expect NOCs to increase their spending on R&D significantly, supporting their drive for greater international growth – and increasingly operating like IOCs.
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Continued risk aversion in the sector, especially in respect of the deployment of new technologies, is a major brake on innovation. The oil and gas sector, while becoming more eager to adopt change, remains highly conservative. In particular, the new skills required, combined with the risks that new technologies can bring, such as in operational disruption, make the majority of firms reluctant to be the first to adopt substantial innovations.
Instead, 56% of respondents described themselves as “fast followers”, who make changes once others have proved their worth; only one-quarter consider themselves to be “early adopters”.
Crucially, delayed deployment is a major barrier to progress, slowing the commercialisation of new ideas. In large part, this is due to the difficulties associated with testing in appropriate, real-world conditions. More than one in five (21%) cite this as their biggest headache in dealing with the quality-assurance requirements associated with deployment.
All this reflects the inherent conservatism of the sector, a point noted by numerous interviewees.
“Some operators are very clear about it, aiming to be second,” said Patrick O’Brien, CEO, Industry Technology Facilitator. “There’s definitely a race to be second, no doubt about it, as they don’t want to be first in introducing technology. But, of course, there’s a mix of cultures, with both leaders and followers.”
Lloyd’s Register Energy’s Joanna Pohorski agreed: “The sector can be conservative and it will stick with proven technologies, rather than innovating. But, when there is pressure from the external market, and when there are funds, there is the determination and effort to generate new technology.”
Even so, those companies that are at the forefront of innovation are having to be patient; the report found that 39% say the average time it takes to develop a technology from concept to deployment has increased, compared to 24% of less successful firms. Patience is certainly required as complexity and risk levels increase.
The report can be found at www.lr.org/technologyradar
Facts:
– 73% of respondents think the rate of innovation in the sector is on the rise.
– 68% of respondents said they will increase their R&D spend
– 39% say the average time it takes to develop a technology from concept to deployment has increased, compared to 24% of less successful firms.
