No one doubts that developing new technologies and techniques and improving on existing ones is the key to getting more oil and gas out of the ground.

But the damaging industry downturn continues to bite hard and deep. Analyst firm Rystad Energy’s managing partner, Jarand Rystad, described it in the opening general session at the recent Society of Petroleum Engineers (SPE) Annual Technology Conference and Exhibition (ATCE) in Houston as the “biggest drop in investment ever, from $900 billion to $750 billion. This is not just cost-cutting. It could result in more than 4 Bboe in lost production over 10 years.”

Concern is resultantly growing that in today’s undeniable dog fight for survival that operators and service companies are in, they are being forced to cut too deeply into their investment programs for innovation. The paradox is that such technology solutions are often the very things that enable the industry to achieve what it needs—increased efficiency, maximized recovery, lower costs and higher profits.

Technology prize of 4.8 Tboe
Referring to the importance of such advances, a recent technology outlook by BP stated categorically that emerging and existing technologies could “significantly increase” the world’s proven oil and gas reserves to nearly double the 2.5 Tboe forecast as needed to meet energy demand through 2050.

“Technologies such as enhanced oil recovery [EOR], advanced seismic imaging and digitization will have a huge impact on which of the available fossil resources we develop, how, where and when,” stated the major’s CEO Bob Dudley in the outlook.

BP believes proved reserves recovery from existing fields could increase from 2.9 Tboe to 4.8 Tboe through advanced EOR solutions, improved imaging, well construction and well intervention.

The proof is in the pudding. But it has been done before—proven oil reserves today are twice the level of 1980 thanks to a multitude of technological advances.

Improved technology and techniques such as hydraulic fracturing and horizontal drilling also have led to the dramatic production improvements that have come specifically from unconventional plays, BP said. In addition, companies have utilized pad drilling, added frack stages, extended laterals and used enhanced completions, all of which have contributed to further production growth.

Extraction costs 25% lower
BP’s technology outlook also flagged the increasingly vital role of digital technologies in particular. Advanced sensors, data analytics and processing, and robotics and automation, all enabled and enhanced by supercomputing, have the most widespread potential to drive change and make energy supply safer, more reliable, more efficient and more cost-effective. David Eyton, BP’s group head of technology, stated in the outlook, “These technologies are already transforming the oil and gas industry, and the longer term possibilities are frankly difficult to imagine.”

Such technology advances, said the company, could lower extraction costs by about 25% by 2050.

But in recognition of that constant balancing act between funding innovation and remaining competitive in a downturn, BP stated that producers “must commit to unwavering innovation through the oil and gas price cycles if they are to meet demand safely and at competitive cost through to 2050 and beyond.”

Technology offers help on two fronts, the outlook continued. “The first is in raising short-term production, the denominator in the cost-per-barrel equation. The other involves attacking capital costs and operating expenses head on. Both place an emphasis on efficiency.”

BP’s admirable beating of the technology drum was echoed by a number of senior industry figures featured in another study released by Lloyd’s Register. Its “Technology Radar 2015” report stressed the need for greater collaboration, data analysis and cultural change to address the innovation challenges in oil and gas.

BP is investing $6.8 billion on its Clair Ridge project west of the Shetland Islands, which will see the use of the first sanctioned large-scale offshore EOR scheme using the operator’s reduced salinity water-injection technology (LoSal EOR) to carry out waterflooding. The field, seen here having its quarters and utilities topside modules installed earlier this year, is due onstream in late 2016. (Source: BP)

Industry falling short
The Lloyd’s Register’s report reflected the general industry concern over how the current downturn is impacting technology development budgets—nearly half of the 450 senior upstream oil and gas executives interviewed admitted they had “fallen short of their innovation goals in 2015—a twofold increase since early 2014.”

Alarmingly, 76% also said the recent price instability had led their firms to “slow or halt most of their innovation initiatives,” according to the report.

However, it does appear to depend partly on how far out from completion certain technology initiatives are. SPE President Nathan Meehan said in the report that companies are concentrating on projects that have a good chance of succeeding in the near term. “They may be in material science or efficiency improvements, or displacement of other technologies. However, long-term disruptive innovation projects are going to take a back seat for now,” he said.

Two-thirds of those interviewed also said they were under pressure to collaborate more with other organizations in the sector and to seek out more “crossover technologies” from other industries such as the aerospace, defense, IT, telecommunications and biomedical sectors.

Innovation’s role
John Wishart, Lloyd’s Register’s group energy director, stated in the report, “The oil price slowdown is clearly impacting investment in innovation initiatives. However, our report finds that contrary to perceived wisdom, innovation has a crucial role to play in the current environment, where it creates operational efficiencies and is cost-effective.”

He added, “Encouragingly, our findings show that overall the industry understands the need for innovation and has begun reaching out to other sectors to gain technological insight.”

The role of data collection and analytics in driving innovation also was once again highlighted as a “musthave” factor, with a lack of data and systems integration across different parts of the business seen as huge barriers to successful data collection and analytics and with silos the biggest cause of the issue.

Digging into the depths of the Lloyd’s study, Eyton pointed out that waterflood and gas-based EOR are among the innovation priorities because these specific EOR technologies are price-competitive. “They don’t have the same kind of downside from a change in the oil price that other technologies might. They’re much lower cost to develop than, for example, thermal EOR
technologies.”

Digital technologies, he said, arguably offer the greatest efficiency benefits to be gained in a low-oil-price world. “They have the advantage of being scalable at comparatively low cost and can be deployed upstream more quickly than other technologies, which take years to scale from bench to pilot and to the field.”

Encouragingly, Eyton confirmed that BP is investing more in the digital sector than in previous years.

Finding more reserves
Jonathan Carter, head of technology and innovation at operator E.ON E&P UK, said in the Lloyd’s study that finding new reserves remains the top priority.

“Although there is a short-term focus on cost reduction, the longer term objective hasn’t gone away. It’s about maintaining and growing reserves. You’ve got to find new stuff, and you’ve got to do it better. If we have two years of a lower oil price, everyone will get used to it. The current urgency about cost reduction is merely a reaction to the rapid drop in the oil price,” he said.

Tapping new reserves and reducing costs are not mutually exclusive objectives. Operators have opportunities to simplify even deepwater operations with a view to reducing cost and risk. The unnamed executive of one operator soon to launch a deepwater project in the southern hemisphere said in the report that it is refraining from putting too much advanced technology into its planned subsea system. This is to reduce risk and limit maintenance needs as maintenance accounts for a large chunk of subsea operating costs, he said.

Another oil major executive, also unidentified, added that he was certain that subsea trees will soon be entirely electric rather than today’s conventional multiplex electrohydraulic design. The company can’t afford to invest in fully electric trees for its deepwater sites at this time but is configuring a subsea system that starts with multiplex electrohydraulics and transitions to electric over time.

Petronas on technology path
One operator prepared to continue putting its money where its mouth is was Malaysian national oil company (NOC) Petronas.

Adif Zulkifli, senior vice president, corporate strategy and risk, was alongside Jarand Rystad in the SPE ATCE opening general session and stated that the NOC remained committed to investing in new technologies. “There are a couple of challenges that we face in particular. We are trying to focus on EOR—the challenge is more difficult today than it was before, but we will continue along the technology path and bring costs down.

“We also are focused on the challenge of carbon sequestration. Technology will continue to be invested in, and we will try to do this to make better efficiencies.”

Rystad stressed that the current depressed market was in fact a “moment for opportunities for boardrooms and for governments. It needs some people to stand up and seize these opportunities.” But, blaming a “herd mentality,” he said he had seen “a lot of good research projects put on hold.”

3-D printing
Not everything is on hold, however.

Some specific technology areas were highlighted as potentially game-changing at the SPE event, including additive manufacturing, also known as 3-D printing. With the industry’s focus on cost efficiency and equipment delivery times, the ability to now get increasingly complex parts such as rotors and stators made locally in a region using 3-D printing techniques
has plenty of attraction.

Rick Lucas, CTO at ExOne Co., outlined the applications to delegates during an R&D topical luncheon. Being able to get this type of part locally printed and distributed rather than manufactured and delivered via the traditional international supply chain with its long lead times, high transport costs and large carbon footprint could dramatically lower costs and delivery times, raising efficiency levels. “We will continue to see additive manufacturing making more and more sense,” he said.

The subject is now the focus of a joint industry project (JIP) launched by Lloyd’s Register Energy and additive specialist TWI. Global trends indicate the market is set to grow by 390% in the next seven years, according to Lloyd’s. With additive manufacturing on the rise, it is set to have a potentially significant impact on the upstream sector. Sponsor participants in the JIP will be able to gain early adoption of approved additive manufacturing practices for their products, while longer term benefits could include reduced manufacturing and maintenance costs, faster lead times on complex components, component life extension, and increased durability.

Offshore wind power
Another JIP is tackling the industry challenge of increasing offshore power requirements, especially for remote locations. Wind power is viewed as a concept that could supply the answer. A DNV GL-led JIP called WIN WIN (WINd-powered Water Injection) has eight participants: Exxon Mobil, ENI Norge, Nexen Petroleum U.K. Ltd., Statoil, VNG, PG Flow Solutions and ORE Catapult.

According to DNV GL, initial studies show that a standalone WIN WIN system could be cost-competitive for various types of applications, particularly for water injection far from production platforms and when costly retrofitting is not an option.

With companies from both industries involved, the project is currently working to further develop to technical feasibility what is admittedly still very much a conceptual solution. Two of the main challenges being addressed are the off-grid operation of the system and the reservoir’s response to variable injection rates.

The JIP is looking for other relevant applications of the concept as well as pushing to ensure it moves from the drawing board to a prototype and actual realization in a project. The project, which got underway in early 2015, is scheduled to complete its initial phase in first-quarter 2016.

Question of commerciality
Another challenge facing any technological innovation is not the innovation itself but judging its likely commerciality.

Partha Ganguly, senior manager (wellbore intervention) at Baker Hughes, told delegates during the SPE ATCE topical luncheon about how the company invests between 3% and 5% of its revenue on R&D.

One of the main questions during the development process for such a product, Ganguly said, is how to scale up production if it becomes commercially viable. Others include choosing which product has the most potential, testing it, measuring the value proposition and then deciding whether to “go or stop.”

A key factor is, of course, return on investment (ROI). “ROI has to be between 10% and 15% of revenue from a product in year one and 30% of revenue from years one to five,” he said. “R&D investment needs to manage both project costs and delivery risk.”

He highlighted commercial success stories such as the company’s innovative IN-Tallic disintegrating frack balls, with more than 90,000 deployed applications in multistage fracturing systems since 2011. Composed of controlled electrolytic metallic nanostructured material lighter than aluminum, it disintegrates when exposed to the appropriate fluid. The disintegration takes place through electrochemical reactions controlled by nanoscale coatings within the composite grain structure.

Timescale
Lucas stressed that a major challenge for new technologies is simply time pressure in terms of how long it may take for a technology to get accepted. “Sometimes it’s a 3- or 4-year plan. You have to understand the customer and market very well. Some larger companies know it’s going to take more time. Smaller companies may be looking for quicker returns,” he said.

The pace of technology can be relentless, according to fellow panelist Richard Byrd of Lockheed Martin’s oil and gas division. “The challenge is that you want these products developed quickly. It’s a fact that some technologies developed now will be obsolete in just 18 months or less,” he said.

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