Lloyd’s Register Energy offers its thoughts on OTC 2016, and the current state of industry innovation
Top and bottom, costs continue to exert pressure on company lines. Nevertheless, May’s OTC in Houston proved that innovation is still alive and kicking in start-ups and services giants alike. Paying particular attention to the industry’s innovative mood was Lloyd’s Register (LR) which, alongside urging firms to re-think their approach to technical innovation, performance and safety, also surveyed conference delegates for their thoughts on how these cost pressures might be relieved.
Perhaps unsurprisingly, technology was a major factor in most strategies. As LR’s commercial development director, Duco de Haan, commented to InnovOil: “When a business has exhausted all the options to take out cost, technology is the only thing that can make quantum leaps in cost reduction… We are entering a new era where disruptive technologies can transform an industry in need of modernisation.”
The trends we observed in the oil and gas business and further afield are borne out by LR’s findings. More than 43% of its survey respondents considered the adoption of new technologies – including additive manufacturing (3-D printing) and the use of unmanned robotics – to be the primary issue facing the sector.
Unmanned aerial vehicle (UAV) or drone technology in particular is booming. Simplifying and reducing inspection times on offshore oil rigs, “A flood of new start-ups specialising in this work are entering the market and a host of oil majors are already using the technology,” de Haan pointed out.
Alongside adopting new technologies, 17% of respondents also noted the importance of bringing in technology from other industries, 16% saw increased collaboration to be most crucial and 13% believed that new data rationalisation and interpretation techniques were of greatest value. A smaller, yet encouraging 11% of those surveyed still had their eye on the next generation of workers, pointing to the necessity of education initiatives for graduates and new industry entrants.
Industry executives, meanwhile, have not disregarded the need to find new sources, evidenced by the top three ranking of the necessity to “improve access to potential reserves.”
Yet given ongoing cost pressures, technology development has to be smarter too. LR global communications manager Jason Knights added: “Collectively, we all need to look harder at technology to help solve many of the issues highlighted at OTC Houston. This is why we are beginning to see new mergers and joint ventures start to take shape, as the cost for innovating and creating new operational efficiencies can be shared.”
No shortage of ideas
One theme to emerge from Lloyds Register’s earlier 2015-16 Oil & Gas Technology Radar survey (taken last year), is that pure idea generation within the industry does not pose problems. Engineers and technologists are, thankfully, full of novel suggestions. The greatest problem here lies in realising the results.
According to its survey findings, most companies actually rate themselves as better than their peers at conceptualising and developing new technologies, yet many see themselves as average or below-average at deploying them. As a result, 67% of those surveyed felt that the challenges of deployment were a key barrier to innovation.
While the “race to be second” is nothing new, its effects are particularly felt during a downturn, when industry demands cost-reducing technology but seems reluctant to implement it. Addressing this deployment bottleneck will be vital if any progress is to be made.
To do that, we must understand the problem. Knights explained: “There is evidence of a disconnect between the ‘accepted’ solution and current practice. The increasing complexity around ‘idea generation’ through to ‘deployment’ can be risky, as these technologies can be both emerging and unproven on a large industrial scale.”
Some risk assessment and development methods – LR points to the Technology Qualification route – can help balance readiness against the investment needed, although the latter becomes even more difficult with the increased volatility of oil prices.
Collaboration presents major opportunities to dilute these risks, but the industry has still been slow to react. Knights added: “Collaborators share risk and resources, but they also share intellectual property, competitive advantage and, crucially, returns. For these reasons, collaboration remains the exception rather than the rule throughout the sector, although there are recent examples that suggest this may be changing.” From InnovOil’s perspective, addressing these issues and working to pool resources and expertise better will be the only things which can help reduce deployment times.
De Haan is positive on this potential: “There are very positive examples of collaborations across the sectors, as joint industry projects and technology development tie-ups exist across the value chain. Collaborations are often between oil majors and service providers, but there are also instances of oil majors working together (for example, the Marine Well Containment Company, formed by ExxonMobil, Chevron, ConocoPhillips and Shell in the wake of the Macondo oil spill).”
Another example is Denmark’s Optimising Oil Production by Novel Technology Integration (OPTION). This 3.9 million euro (US$4.4 million) project, funded by the Danish InnovationsFonden, is focused on integrating and optimising reservoir and horizontal well simulation models to enhance oil production and recovery. This is valuable stuff – even a 1% increase in oil recovery from Danish fields would represent a value of around 8 billion euros (US$9 billion) to the Danish economy. “Imagine taking this concept to other fields,” Knights added.
Not invented here
If the industry struggles to deploy ideas it creates itself, there are equal or greater issues in importing innovation from other sectors. So far, Knights said, these crossover technologies have gained “limited traction” but hold a wealth of potential, especially in surveying, modelling, drilling and monitoring. He went on to cite a number of areas of interest, including: “Imaging technologies, advanced lightweight and corrosion-resistant materials, remote inspection, nanotechnologies, data mapping, advanced data analytics, cardiovascular-type pump technologies, additive manufacturing, underwater autonomous vehicles, sensors, super insulation and carbon fibre.”
Encouragingly, InnovOil has seen more external innovation entering the oil and gas periphery. Better still, events such as OTC, Offshore Europe and others are recognising the need to bring in voices from outside the energy industry, seeking insight from the aerospace, automotive, ICT and medical industries as well as further afield.
“In the early stage of the downturn, there was less motivation to drive change because of the high financial risk of something going wrong,” de Haan explained. “But we are now on the cusp of a radically smarter, leaner, technically advanced industry driven by a growing change in mindset – and an understanding that excellence through shared innovation keeps development costs down”
“If the present conditions hold, then efficiencies have to be looked at without downgrading on safety issues. Technology is an enabler and should be a constant focus. If you look at the business challenges we face today…you realise industry needs to embrace technology faster and sooner, and become smarter at improving ways of operating to remain competitive in today’s tough market.”
LR’s message at this years’ OTC was an urge to sharpen companies’ focus and to encourage them to share knowledge better. For many, that adjustment may seem alien, but it is a necessary change. De Haan added: “It will mean new ways of working, new collaborations and how we think about different disciplines. New technologies bring improvements, but many also bring new limitations, which require engineers to revisit accepted risk management techniques, develop their standards, procedures and methodologies, and apply their experience in new ways.”
Ultimately, the consequences of stasis are far greater than the risk of disruption. As de Haan concluded: “If we continue to do things exactly as we have been doing, we will fail to meet the challenges of today and tomorrow. After all, tomorrow is not more of the same, so we must find new ways to do things.”