Sustained tech innovation can beat cheap oil

DNV GL laboratories
DNV GL laboratories, including our environmental laboratory in Høvik, take part in many oil and gas industry innovation programmes
The risks of not pursuing new technology are too rarely considered, says a leading expert on commercialising innovation

The journey between concept and commercialisation of technologies and processes is often called 'the valley of death'. It has many pits into which innovation can disappear.

These may include lack of affordable capital at critical stages; difficulty attracting the right technical or business skills; competition; regulation; and adverse industry and economic trends.

Happy indeed is the oil technology start-up that finds a major customer who believes in its product, provides an opportunity for live trials, and actually places orders that validate the technology and generate essential cash flow to ramp up production.

Even if they make it through to trials in the real field environment, potentially game-changing innovations may never be tested to all extremes, thus limiting their market potential. There is natural nervousness among operators and contractors that trials will disrupt production or introduce potential health, safety and environmental risks.

Professor James Woudhuysen, author, journalist and public speaker on innovation, observes this and other kinds of caution about innovation across many industries. He urges companies to take a wide view of the advantages and disadvantages of encouraging the commercialisation of potentially gamechanging inventions.

“The risks of not pursuing new technology are too rarely considered,” he said. “The costs of adopting it are usually overcome by the higher productivity it affords, and the competitors it drives out of business.”

What the industry wants
Major energy companies spend heavily on R&D to boost competitiveness and reduce risks and/or costs of exploration and production. They also tap into innovation by contractors.

When the corporate venture wings of supermajors look elsewhere for technology, they still want solutions that are “big enough to move the needle” inside their own companies, Geert van de Wouw, managing director of Shell Technology Ventures explained in a 2013 interview.[1]

Lower oil prices could make it harder for new tech to reach market, Woudhuysen noted. "The short-termism that afflicts much of industry today will slow the journey. Yet, only sustained innovation can beat low prices and general price volatility.”

He suggested that appropriate responses could include finding new funds for R&D; leadership and tenacity in the face of setbacks; a disciplined approach to experiments and prototyping; and “faith in human prowess”.

Collaborative ventures, such as joint industry projects (JIPs) and national initiatives, are two responses. DNV GL has proposed 60 new JIPs to tackle oil and gas industry technical challenges this year.

Companies can reap rewards from collaboration before any technology becomes fully commercial. For example, the GBP1.13 million (USD1.67m) Fullwave Gamechanger research project, coordinated by the sector’s international Industry Technology Facilitator (ITF), aims to transform subsurface imaging capability.

This involves 15 major oil and gas operators working with Imperial College, UK. Launched in 2012, it remains in development, but is already benefitting backers.

“Some oil company participants can already pinpoint significant capital savings on field appraisal projects, through avoiding unnecessary and expensive drilling expenditure by using our technology to better target hydrocarbons in their reservoirs,” said project director Professor Mike Warner, Imperial College.

Standards benefit technology
Low predictability of quality control criteria throughout the oil and gas supply chain is another challenge to new technologies.

Woudhuysen points out that there are hurdles to achieving standardisation in many spheres of commercial and public life. “Problems can emerge when endless negotiations around standards block expeditious progress,” he said.

Still, he noted, the automotive and aerospace industries have benefitted from some standardisation in manufacturing.

Oil and gas companies seek to follow this example. Standardisation of specifications for materials, components and interfaces helps innovators in many ways. It becomes easier to define markets, to meet the requirements of a broader range of potential customers and regulatory regimes, and to achieve economies of scale in production and in sourcing components and sub-assemblies. Standardised quality assurance processes also bring clarity about the hurdles that new technologies will have to jump.

One example is standardisation of steel forgings, a high priority initiative by the Norwegian Oil and Gas Association (Norsk Olje & Gas) and the Society of Petroleum Engineers, US.

In response, DNV GL, alongside 21 companies represented by key operators, contractors and manufacturers, has developed a new recommended practice (RP), DNVGL-RP-0034, on ‘steel forgings for subsea application’.

These are the building blocks of subsea components and are often tailored to meet end-users’ specific requirements. Diversity in material specification results in long delivery times and repeated follow-ups by all involved.

The RP complements existing industry codes for subsea equipment and its implementation will provide for reduced lead-time, enhanced stock-keeping, interchangeability of forgings, and will help improve and obtain consistent quality.

“Our initial research found that differences in forging specifications are mainly due to more stringent requirements rather than unique specifications,” said Bjørn Søgård, segment director, subsea with DNV GL.

“Unifying these differences into an acceptable common forging specification can reduce the lead-time by up to a year. This will make a positive contribution to the overall economics of a project," Søgård explained.

[1] ‘Where the “smart” money goes’, Petroleum Review, September 2013