Oil prices are one of the most pressing challenges of the energy industry today. In a larger context, technology developments that help improve productivity, reduce costs and enhance quality are today’s pressing issues. Spiraling costs of E&P in the industry are threatening to price-differentiate energy plays in different geographies. It is clear the current cost base cannot be sustained. This is a crucial time for the industry. It is precariously balanced between long-term success and failure, and the choices that are made in the next few years will determine whether it has a future or not. So initiatives that nurture technical innovation can no longer be an afterthought for business or government; they must be central to any organization’s strategy for sustainable growth and market leadership. They are central to growth, too.

Even in an industry as regulated as offshore oil and gas exploration, there is always room for improvement. Identifying these opportunities is best accomplished by adopting a holistic rather than prescriptive set of safety regulations that focus on technology as well as training, taking into account the roles that equipment, systems and processes, and people all play in building and maintaining a safety culture. In the last 18 months the debate has gathered momentum on how industry needs to continue to address the challenge of driving EOR with aspirations of moving from 40% to 70% on recoverable reserves. Lloyd’s Register’s Energy Technology Radar has helped draw out these key issues and trends from personnel in the oil and gas industry. Some of the findings:

  1. Innovation is drawing on a range of technologies rather than any single breakthrough;
  2. A variety of technologies look set to have a high impact in the coming years relating to extending the life of existing assets;
  3. The near-term impact of automation on remote and subsea operations is identified as firms seek to cope with challenging environments; and
  4. HP/HT drilling and multistage fracking are expected to have a major impact but are expected to be fully deployed from 2020.

Going forward into the future, technology will be an enabler. Business challenges such as the issues around safety, the environment and costs indicate that the industry needs to embrace technology even more. Development and adoption of technology are also going to require a lot more collaboration because the cost of doing development work and adopting technology is significant.

Commodity prices

The current economic issues around the sustainability of a truly global energy mix and the supply of oil has been known for a little while, but no one could have predicted the sudden scale of fall-off in the oil price frenzy. The fall in the oil price and the effects of increasing geopolitics across the world have called into question a number of things the industry has taken for granted. Most obvious is the availability of finance and consequently the future of large energy infrastructure projects. However, some of the best operators can now profit at far lower prices because they’re learning how to drill wells more efficiently and how to increase production at lower costs with more accurate fracking, better targeting of the oil and gas sweet spots and spacing wells more closely together.

The current price environment is very much like a severe stress test to determine which companies have their finances and operations in order. Those that spent too much to lease equipment to drill or have high operating costs are most likely to suffer. If prices stay low into next year, providers of drilling services and oilfield gear will need to cut prices to retain customers, moves that will help preserve oil company margins; operators will demand higher levels of integrity from their contractors on equipment, systems and personnel. Crew competence and specific training to reduce downtime and the heavy costs associated with equipment failure will be of critical importance to tomorrow’s winners. Manufacturers will have to review their equipment designs for functionality and failure and make adjustments based on new requirements.

One of the difficult questions is to address the best strategy to remain relevant and hedge any job loss risk during downturns. One of the key factors is competition. Oil and gas companies affected by the drop-off in the oil price have strong incentives not to pull back on drilling activities. These companies will be reluctant to let go of their core talent and especially their highly trained and experienced wellsite employees.

Another issue is how to win the war for talent in the next decade. Senior executives need to understand the transformation taking place in the world of work. Increasingly, work is ceasing to be a place and more a state of mind. For large numbers of people, it can happen at any time of day and in any place. Executives who understand this and equip their organizations to survive in this new world will be the ones still leading successful oil and gas companies in the next 30 years. During market downturns, collaboration across industry is critical to share best practice and evolve joint ventures, and this should not be hampered by the focus on cost reduction. It is important for the oil and gas industry to reach out to other sectors like the automotive sector, where cars are made from parts manufactured by suppliers, enabling industrialized manufacturing.

Young professionals

The use of data is going to change how we do things in the future. But it will mean new ways of working, new collaborations and how we think about different disciplines. Chemical engineers will work with civil and electronic instrumentation engineers, who will be working with mathematicians looking at algorithms and using statistical analysis. Technology is exciting, and the industry is on the start of the development curve to be leaner and more efficient. There are different mindsets across the industry, and it is going to require very different thinking to create the smarter and sustainable oil and gas industry of tomorrow’s world.

The new generation of engineers, in particular, have had experiences as customers that influence their expectations in other business dealings, such as their interactions with their employers. That means that, as well as cost savings and productivity benefits, digital communication capabilities are becoming a key weapon in recruiting and retaining talent. Gone are the days when an employee enthusiastically received a new work laptop and mobile phone. Today’s employees often have more information communications technology at their personal disposal than they are given at work, and IT departments are increasingly seen as a limitation to their needs rather than an enabler.

Organizations must understand the best way to enhance communication capabilities for their employees. For most companies this will not involve handing out tablets or iPads to each employee, but it should involve, at a minimum, setting up internal social networking and knowledge share sites. This approach will have the added benefit of increasing productivity as processes previously requiring several stages are completed in one or two stages.

Likewise, organizations need to look at the complete package that they offer new workers. Reward is part of this, but what employees are engaged with, the environment in which they work and the opportunities for growth and development are fundamental. There is a clear trend that the engineers of tomorrow are less motivated simply by the financial rewards; the ethics and the ethos of an organization are equally important.

Technology is helping to rapidly advance education and training to ensure the availability of the necessary skilled people. Lloyd’s Register Foundation has an important role to play in meeting the global energy challenges, connecting science, safety and society. It is an exciting time for anyone interested in energy to join the industry.

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