Oil & Gas Middle East catches up with Gerald Schotman, Shell’s head of R&D and chief technology officer, who shares his thoughts on the innovative future of the industry
The concerns about peak-oil have been settled, and it looks like there is going to be enough, for now. But the questions about global oil and gas supplies are still relevant, perhaps more so than ever. It’s no secret that the oil fields throughout the Middle East are beginning to mature, but thankfully, the technology surrounding them is staying up-to-date.
It has always been through innovation that today’s oil companies have thrived, the evolution of technology has enabled companies to keep up with the world’s massive demand for oil. “It’s about innovation that delivers more energy and adds value to the bottom line,” says Gerald Schotman, chief technology officer at Royal Dutch Shell.
Schotman plays a massive role in heading the development of one of the world’s largest oil companies where he is in charge of technological innovation throughout the supply chain.
“We combined the upstream and downstream under one roof because we see more opportunities where novel technology that we launch in one segment works in the other and vice versa. It’s one facet of innovating how we innovate,” he says.
But this is a stark change from the way the oil and gas industry was structured only a few decades ago.
“The up, mid, and downstream are much more integrated businesses today. A decade ago, people thought that the business would become more separated, but it’s actually become more integrated and we’re leveraging this where we can seize opportunities,” he adds.
Not only has Shell managed to integrate its R&D programmes for the entire supply chain, but it has become a leader of innovation. Last year, Shell spent US $1.1 billion, a colossal amount for research and development and conspicuously more than its IOC peers.
It’s a massive figure that allows him to confidently say, “We are leading the IOCs in [R&D], others are catching up in that sense because they have recognised the need as well.
But we are still leading by quite a margin. You can also see that in the number of patents and the quality of the patents, and that’s where the rubber hits the road,” he says.
For Schotman, R&D is an absolutely indisputable component for the company, but it’s only one of the many components which make Shell successful.
He believes that such projects are only successful from finding the right balance between what companies develop in-house, co-create, or buy on through the markets; and what they can ensure through engineering capabilities and expertise and the whole operational capacity. “But the most important thing is how you integrate all the pieces together,” he reveals.
That’s not to say that the number of patents which Shell owns is not commendable, but Schotman also says that, “It’s about the company having the guts to put the money in, it’s about having catalyst technology which is really integrated in the downstream, and it’s about the ability to run a project with 50,000 people in a plant and making sure you don’t have any injuries leading to time off work.”
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While the industry may be changing dramatically, the challenges which oil companies are up against remain the same.
“The challenges then are also the challenges of today, but even more pronounced now, they are about finding oil and gas that has not been found, and developing the very difficult resources, because hydrocarbons are getting more sour, frontier environments like the Arctic are posing new challenges, and we are going into deeper subsea conditions.
We have lower pressure reservoirs and more viscous oil, the whole area is becoming more demanding and calls for new technology solutions,” he reveals.
There are both upstream and downstream consequences to oil and gas becoming more difficult to access. “We often just ask ‘how can we find and develop the hydrocarbons? But ultimate value is only there when you can monetise it,” says Schotman.
“A lot of our key stakeholders, the companies and governments which we work with really are not looking for a small option solution; they’re looking for a value change solution.”
And no place in the GCC has felt the effects of maturing oil fields like Oman. Unlike its other GCC neighbors, Oman’s oil deposits are sparse, and the oil trapped in its smaller carbonate reservoirs is heavy.
Such challenging conditions have also made the country ripe for a number of innovative development programmes. Shell has developed a leading R&D centre in Oman which is constantly producing relevant and cutting edge technology.
For example, Shell has been issuing a number of solvents in Oman. “In the past we thought about how we are almost on stream now with miscible gas, stuff comes from the lab which needs to be driven and localised in places like Oman. The country is at the forefront in the Middle East as far as enhanced oil field recovery technologies is concerned,” he says.
Shell’s involvement with the Petroleum Development Oman (PDO) has been in the limelight over recent months following the developments in Enhanced Oil Recovery technology.
In November of 2012, Matthias Bichsel, Shell’s projects & technology director, revealed that the azhimuth seismic technology used in the Gulf of Mexico was being brought to Oman. “We have got the algorithm to Oman and we are able to image the sub-surface better and also get sharper images of the reservoir,” he says.
In the interview, Bichsel went on to explain that the next step in EOR was making it more cost effective and one of the technologies for that is using concentrated solar power instead of gas. This was being accomplished through a small American company named Glasspoint, also featured in this issue.
“Alternative energy with a strong synergy with the fossil business will really grow an interest in the next phase,” says Schotman.
“We at Shell take a realistic view: in the first half of the decade, the world needs to double the amount of energy. Alternative energies will clearly increase their share, but over 60% of the global energy will still be provided by oil and gas. They simply remain indispensible for decades to come.”
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“The world doesn’t have a choice, and it’s an end to end type of game, and the results will have to come from end to end,” says Schotman. This attitude has driven Shell’s investments into new technologies.
“We continue to invest in the second generation bio-fields, e.g. conversion of straw or raw materials directly into ethyl ethanol or directly into fuels,” he says.
Schotman also notes that the energy we can get out of crude oil is hard to match. “Take for example wind or solar energy solutions, particularly when looking at intermittency issues.
And consider biofuels, where at least currently we need a lot of mass. This means that in addition to technology-specific challenges you also have logistical challenges,” he says.
“You have to ask, how do you get the feedstock together in one plant, and how do you optimise. This is because of the huge amount of feedstock needed and the related expenditure.” These are challenges that the industry will continue to face, which is why Schotman is also vested in the next generation of engineers.
“Two weeks ago I was with students in MIT, where we have a programme with the energy initiative, they have 2000 students which are interested in energy, a lot of youngsters understand that integrated energy solutions are the heart of power to society and the way forward,” he says.
Schotman himself joined Shell almost thirty years ago, and he recalls being ridiculed by his friends for joining a fossil industry, “but they weren’t referring to the hydrocarbons”, he muses. And yet the oil and gas industry has continued to grow and adapt to the times and looks like it will continue to do so.
“So again, it’s about technology imagination, innovation and investment. Research and development are an undisputable component in the industry, without it we wouldn’t even be close to where we are now.”
Facts:
– $1.1 billion The amount Shell allotted for R&D in 2012
– 70% Fossil fuels’ contribution to the energy mix in 2050
