Vol. 58 No. 3

March 2006

John Darley, Executive Vice President, E&P Technology, Shell Ex-ploration and Production

Regarding the upcoming 2006 Intelligent Energy conference, why the term “intelligent energy”?

The provision of energy to meet the projected global economic growth in the 21st century will require our industry to continuously improve effectiveness in all areas of activity, from initial exploration to maximizing the ultimate economic recovery while incorporating necessary environmental measures. We need to adopt ideas and technologies—often information-technology (IT) related technologies, and sometimes from other industries—to achieve this goal. The term “intelligent energy” captures the concept of a new approach, harnessing new IT-enabled capability, to respond to the energy challenge.

What do you hope attendees take away from this conference?

First, we expect that participants in the conference will gain a good understanding of new technologies, which are currently being applied in the intelligent energy arena, to improve field performance. There are great examples of leading-edge applications delivering real value today, and the conference will promote the sharing of these experiences.

Second, we hope that delegates will also appreciate that the intelligent energy field is not simply a question of applying new tools and techniques. The real value is to be gained by changing the way we work, by more effective integration across various activities, by using real-time data in decision making, etc. Exciting ideas are still emerging in these areas, and we look for an active dialogue between participants to move the industry forward.

And, third, our aspiration is that the conference will help delegates, and their respective parent organizations, to build momentum to take the intelligent energy concepts forward with pace and determination. So far, we see ad hoc examples of successful applications. Real value will accrue to the industry with more wide-scale application and uptake of many of the ideas and technologies.

How well is the industry doing in adapting digital-age technologies to the oil field?

In some areas, the industry takes a leading-edge role in the development or application of new digital capabilities. Examples would be the use of advanced telecommunications to facilitate global communications and control systems (e.g., the real-time operating centers used by many companies to monitor, control, and optimize drilling activity), or the use of powerful parallel-processing and grid-computing technologies to process seismic data. At the other extreme, the opportunity to fully integrate oilfield activities, using IT capabilities in such areas as real-time data management, inventory control, and production optimization, is only sporadically applied, and there is scope for both broader and accelerated application of digital technology.

What is the industry struggling with in adapting or implementing these technologies?

The key challenge appears to be the integration of digital technology across the different work flows and areas of activity in the oil and gas industry. While individual applications are often successful, the ability to integrate data flows from the subsurface, through reservoir and well-production monitoring, and into surface control systems still proves a challenge in practice.

The industry has made tremendous strides in subsurface imaging, drilling and completion technology, and other areas in the past decade. In your opinion, what recent technology application has provided the biggest improvement in upstream operations?
In my view, the biggest impact has come from the industry’s ability to effectively integrate each of the areas of technology you mention. For example, improved subsurface imaging—particularly the use of time-lapse seismic in mature producing fields—provides the opportunity to identify small, discrete pockets of untapped hydrocarbons. The complementary capability to access such pockets, through complex well drilling and completion technologies, often involving multilateral completions, provides the means for their economic recovery. The value of each of these individual technologies is maximized through a combined and integrated approach to their application.

What upstream breakthroughs are just on the horizon and reachable in the short term?

I believe that we will see continued advances in subsurface-imaging capability, with breakthroughs at both ends of the spectrum. In the exploration area, advances in seismic technology, together with renewed application of nonseismic techniques, will provide greater confidence to explore in hitherto poorly mapped areas (e.g., below major salt bodies). In parallel, and on the detailed scale needed for production optimization, time-lapse seismic techniques, including permanent monitoring systems, will see real breakthroughs in reservoir management and control.

In the production arena, the ability to further optimize the economic development of unconventional resources—such as extraheavy oils and tight gases—will see real progress as technologies that span the upstream/downstream interface (e.g., crude upgrading and effective treatment of nonhydrocarbon gases) are developed further. A continued drive for more cost-effective drilling and completion options, such as through expandable-tubular technologies, will allow ever smaller resources to be tapped, particularly in deeper water.

And, of course, the accelerated implementation of smart wells, digitally enabled production optimization, and the opportunity to harness the power of IT to change the way we manage the oil and gas business—intelligent energy!—will generate significant value in the years ahead.

Where is the greatest need in the industry today for technological breakthrough?

In my view, there is considerable value to be gained by further improvements in subsurface-imaging technologies. While the record of exploration success has shown steady improvement over the years, the size of new discoveries and the complexity of the subsurface environment for new plays demand advances in imaging capability to allow further increases in success rates and, thus, confidence in exploration investments.

Equally, the opportunity for appreciable increases in ultimate recovery from discovered resources—particularly in challenging reservoir and fluid environments (carbonates, heavy oils, tight gases)—presents a real challenge for technology breakthroughs. A combination of technologies, including sophisticated enhanced-oil-recovery (EOR) techniques and including more cost-effective drilling and completion technologies as well as real-time subsurface monitoring, is needed to deliver this goal.

Finally, the industry will need to address the growing impact of CO2 emissions on the global environment. Solutions will need to be found to contain and reduce greenhouse gas emissions, particularly as the industry moves to further develop heavier oils and tar sands. Research into CO2 sequestration and other forms of containment are active in many locations, but real breakthroughs have yet to be reported in this area.

Is industry R&D, both from service providers and operators, keeping pace with the need for new solutions and new technology?

We can always use new solutions and technologies more quickly than our R&D laboratories can deliver them. But, perhaps more seriously, I think that the pace of technology development is effectively maintained through the fierce competitive arena in which our industry works. Any breakthrough in technical capability, whether the introduction of a new seismic algorithm or advances in well-completion technologies, is usually quickly pursued by a competing player. The one exception may be those areas in which significant investment is needed to mature or deploy new technologies. In these cases, the inventor can hold a competitive position over a longer period but, in the longer term, the overall competitive pace will be maintained.

In this time of high oil prices, are operators concentrating more on R&D?

In general, R&D investments cover a longer-term time horizon and are not unduly influenced by shorter-term swings in oil price. It is neither desirable nor sensible to quickly switch R&D funding in response to oil price movements. Having said that, the recent emergence of a higher price outlook for the longer term may well influence operators to refocus some of their R&D investments into recovery technologies that benefit from the higher prices, such as some of the more sophisticated EOR technologies and methods of recovering heavier oils.

What is Shell’s current approach and emphasis in R&D?

Even before the recent oil price increases, Shell had moved to rebalance R&D investment to focus on longer-term opportunities, such as the recovery of unconventional hydrocarbons (both heavier oils and tight gas), nonseismic-imaging technologies, reservoir-surveillance capabilities, and smart fields. This reflected a shift from the focus at the end of the last decade, when technologies to maximize economic recovery and production potential in deep water, and in a lower price environment, had generated successful results. Of course, many of our programs— such as advances in proprietary reservoir simulation capability, subsurface-imaging technologies, and a strong focus on developments in well engineering—will remain important through any change in emphasis elsewhere.

What are some technologies recently developed or employed by Shell that show great promise?

We continue to be impressed by the value generated by the application of Shell’s expandable-tubular technologies, in terms of opportunities for more effective well completions and recompletions, as well as in overcoming drilling problems, particularly in deep wells. The application of smart-well technologies is generating exciting new potential in the Asia Pacific region (with the recent announcement of the Bruneian Champion West field startup only the latest in a string of applications), and we are looking to deploy this technology in a number of new greenfield projects, as well as looking to retrofit in more mature properties. Production optimization, using Shell’s Production Universe software, has generated real gains in a number of applications and will also be deployed across the wider Shell asset base. And we are really excited by recent results using electromagnetic logging techniques that have supported the successful drilling of a number of our Big Cat exploration wells in 2005.

What is pushing the industry to perform better and faster—is it coming from financial analysts or others outside the industry, or within the industry as it ponders the demand challenges that lie ahead?

Both of these factors play a role. As mentioned earlier, competition in our industry has perhaps never been as fierce as we find today, with many new players such as state organizations and national oil companies competing strongly with more traditional players to access new sources of hydrocarbons around the world. Global demand for oil and gas is projected to show continued strong growth well into the 21st century, and the competition to supply this demand is apparent from recent and current bid rounds in many countries. One of the more exacting aspects of the competitive situation is the need to attract, recruit, and develop the talented people needed in our industry to meet the growth challenge. As I always explain to young people, the future of the oil and gas industry will be exciting, challenging, and rewarding for many years to come. We need great people, and we can provide great opportunities!