The industry downturn in 1986 spurred the growth of large integrated service companies. Prior to this, R&D spending in large oil companies led to tool development and, in some cases, their own internal service companies. At times of financial stress and turmoil, cutting departments that were not actually involved in immediate return to the bottom line was a fast shortterm solution. High-end research and experienced staff, generally on competitive salaries, were easy targets.
Large integrated service companies grew to fill this technology void and occupied this technology leadership position. The companies themselves significantly grew in the process, and R&D became a competitive advantage for the largest of these companies with innovation mainly, though not exclusively, driven by them.
Fast-forward to the recent downturn; we appear to see the cycle turning again. What was once perceived as a technological and economic advantage is now a burden to the bottom line. R&D projects and people were hit proportionally hard. Coupled with this is a lack of hiring similar to the 10 years after 1986, which led to a bimodal distribution in the age of the working population.
This recent downturn already has led to a severe reduction in the number of candidates applying for the oil industry and petroleum-related degree courses. The impact will take several years to overcome and will lead to another age and knowledge gap in the industry.
Who will take up the mantle of technology leadership? Who will spur the industry to greater efficiencies and productivity in increasingly complex wells? The answer appears to lie in collaborative ventures between small startups and/or university projects, often funded by oil company investments, developing a new model for technology required by the industry.
This already had started to be a model before the recent downturn. The larger integrated service companies’ output of new technology had slowed considerably, and many smaller technology companies had begun to be acquired after proving their technology. Manufacturing was then handled by the larger companies. Buying and developing technology became a larger part of technology development in integrated service companies. The cost and time involved in the R&D of companies’ in-house solutions meant that only “sure win” solutions were considered.
More agile engineering without the overhead of larger companies, akin to Silicon Valley startups, may be the future. As these entities evolve, it will be interesting to see how they navigate between the “supertankers” of the large service companies.
An alliance was formed between three companies whose technologies have surpassed “proving up” to become full commercial applications. Enventure, Tendeka and XACT formed the Well Performance Network (WPN), which brings together a blend of specialist expertise and novel technology to tackle production performance (either individually or as joint solutions), a solution not provided by larger service companies. To continue the growth of this model, other similarly innovative companies in the industry can join the network.
The combined knowledge and expertise of these companies can bring new technology, innovation and solutions to the market faster and more efficiently. Along the way, it may challenge the existing role of the service provider as we move out of the industry downturn.
Recommended Reading
Pemex Shuts Three Deer Park Refinery Units After Deadly Accident
2024-10-14 - Mexico’s state-owned Pemex has shut-in three units at its 320,000 bbl/d Deer Park refinery after a hydrogen sulfide leak injured 35 and left two dead.
Oxy CEO Takes Swing for Oil, Climate at Agitator-Disrupted Program
2024-09-26 - After a New York City event was disrupted, Occidental Petroleum President and CEO Vicki Hollub said agitators were after publicity and funding to “continue a business.”
About 16% Crude Production Shut in GoM Due to Tropical Storm Helene
2024-09-24 - About 16% of crude production in the U.S. Gulf of Mexico on Sept. 24 were shut-in in response to Tropical Storm Helene.
Rice: EQT Walking the Walk on Natgas Emissions, Despite Politics
2024-09-20 - Methane emissions are falling in parts of the world as companies such as EQT, led by CEO Toby Rice, make strides to reduce emissions in their operations, although the task is not without challenges.
More Than 12% of US GoM Oil Output Still Shut After Hurricane Francine
2024-09-16 - There were 213,204 bbl/d of oil and 298 MMcf of natural gas still offline after Francine hit the coast last week.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.