The impacts of the rapid pace of technology & innovation on the energy industry
Coming out of the oil price downturn means that E&P firms must continue to promote digitalization strategies at the very highest levels of their organizations. But, what does this mean for advancing technologies, and what is the potential result on key upstream functions? In our latest episode of Upstream in Perspective, we discuss how the energy industry continues to advance technology with Judson Jacobs of our upstream technology and innovation service. Here's an excerpt from the podcast:
Jessica Nelson: Technology has long played a prominent role in advancing the upstream sector. What role do you see it playing now as we begin to emerge from the downturn?
Judson Jacobs: If you think about the history of oil and gas, technology has always played an incredibly prominent role in many of the advances. It's been responsible for opening up new resources. Whether it's deepwater, whether it's oil sands, or whether it's the unconventionals, technology has been responsible for many of those activities. It dramatically improves our exploration success rates. It helps us to get more oil and gas out of our reservoirs. And, it also helps us to operate more safely and more environmentally sound as well. Technology really is at the heart of many of the developments.
It's really important to begin to think about technology in a broader business context as well. If you think about the environment that we found ourselves in over the last few years, certainly the focus has been on cost management and efficiency. Companies are very much turning to technology to help them with those overall corporate objectives. It's influenced the type of technologies that the companies have begun to pursue. Certainly, anything that does have an impact on efficiency or cost reduction has been very much embraced. We've seen companies move away from technologies that aren't able to deliver benefits in a 12- to 18-month timeframe, and also put significant scrutiny on those that are riskier or a bit longer to come to fruition.
There are a couple of examples we see. Certainly, the subsea technologies, as well as some of the more expensive enhanced oil recovery technologies, have really suffered over the past few years. Now that we seem to be a bit in the recovery, one of the things that we're finding is that the emphasis remains on efficiency. Companies are hoping that they're able to make some of the significant cost reductions that they've seen over the last few years, some that are really impressive, up to 35 to 40% cost reductions in some key resource classes. They're really hoping that we don't follow the trend of past cycles where those costs began to creep back up, and they're really looking to technology to help make those cost reduction gains stick.
Now that companies have had a chance to catch their breath a little bit over the past six months to a year, they're also beginning to look in some new directions. What's interesting is that clean tech investment, those that are able to reduce the carbon intensity of their core E&P operations, are attracting a significant attention. As companies begin to think about what's next and they think about some of the new business areas, they're also looking to some of the clean tech technologies to potentially move into some of those areas. So it's pretty exciting. We've been through a bit of a cycle here the last few years, and we're seeing that reflected in where companies are emphasizing their technology investments.
Jessica Nelson: You mentioned a couple key technologies there. What other technologies is the industry embracing to help advance some of their goals?
Judson Jacobs: We've seen over the last few years that there's really been a pretty good alignment between the strategic goals around efficiency and cost reduction and where companies are focusing their technology development efforts. We see that playing out in a few ways. We track this. We actually look at the focus areas of different industry players and the industry as a whole, and some of the areas that we're seeing over the last few years that have really attracted some significant attention. One is around technologies that can help reduce the capital intensity of some of the projects.
This is especially true around some of the facilities that the companies are putting into place. They're developing lighter and stronger materials that allow them to use fewer materials and have it be less expensive. They're reducing the footprint and making some of their equipment smaller, which also creates a more compact and less expensive facility. And then they're also looking to use technology, or innovation more broadly, but shifting away from these very large facilities to more modular designs.
We've seen examples, as well as made some projections ourselves, where they can reduce the capital intensity of their projects by anywhere from about 5 to 15%. One of the things that we also see is that companies are trying to get more value out of some of their past investments. I'll give you a couple examples of this.
One area where we're seeing companies pulling back on investment is in seismic acquisition technologies. We have seen that continue significantly. Investments in seismic processing algorithms or seismic interpretation allow them to get more value out of their past seismic surveys. I mentioned that some enhanced oil recoveries, more expensive ones, are falling to the wayside a bit, but we do see continued investments in enhanced oil recovery and those that are more cost-effective at lower oil prices. And one that's been especially true, that we see a lot of interest in, is low salinity water flooding.
Then finally, one of the ones that's really hit the sweet spot of this efficiency and cost management goal is a broad class of technologies that we place into digitalization. This is quite broad. We consider things such as advanced analytics, artificial intelligence, machine learning, big data, and everything from automation, as well as robotics and field mobility devices like ruggedized tablets. It's a sweet spot. The reason that digitalization is really attracting so much attention in the industry is that most of these technologies focus on improving efficiency and lowering cost. They're also relatively less expensive and less costly to develop. They're also easier to scale up across the entire organization to get things out very quickly to begin to see an impact on the bottom line.
Posted 19 April 2018
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