First R&D Conference Highlights Challenges, Opportunities for the Third Trillion and Beyond

Ted Moon, spe.org Technical Editor

“Throughout world history, mankind has consumed about 1 trillion bbl of oil, and we are expected to consume the second trillion in less than 35 years. Where will the third trillion come from?”

This was the challenge posed by Medhat (Med) Kamal, conference chairperson, in his opening remarks at the first SPE R&D Conference, held 26–27 April 2007 in San Antonio, Texas, U.S.A. For two days, more than 130 of the brightest minds from the upstream energy sector met to discuss the myriad challenges facing the industry in producing oil and gas from unconventional and environmentally sensitive areas.

“While there are an abundance of molecule sources for the third trillion bbl of petroleum that will be needed in the next 50 years,” added Kamal, “they are technically, economically, and environmentally challenging to get…. How are we going to get them?”

Energy demand is not likely to wait for the R&D community to answer this question. According to Kamal, “current worldwide petroleum usage is about 84 MMBOPD, and by 2015 it is projected to be 99 MMBOPD. By 2030, the world will be using about 116 MMBOPD.” In order to maintain capacity to 2030, the industry will need to invest a total of USD 4.3 trillion.

Opening Session Challenges the Audience

“Given that investment challenge, and the fact that we all face challenges for funds and people, this conference has been designed to stimulate discussion,” said Kamal. In the opening session of the conference, five distinguished industry experts gave different perspectives on how R&D can pave the way to meeting future energy requirements:

Kamel Bennaceur, General Manager of Technology for the International Energy Agency (IEA)
William Fisher, Professor at the University of Texas
Yannis Yortsos, Dean of Engineering at the University of Southern California
Edouard Freund, Executive Vice President of R&D, Institut Français du Pétrole (IFP)
Tony Meggs, Group Vice President, Technology, for BP.

Bennaceur described the IEA’s focus on the global energy picture, emphasizing energy security, economic growth and environmental protection. “In order to adequately address growing energy needs within the framework of these three objectives, a range of different scenarios must be pursued at the same time,” Bennaceur said.

This range of scenarios must include carbon sequestration. “Half of the projected increase in carbon dioxide emissions is expected to come from new coal-fired power stations in China and India,” Bennaceur continued. “To handle this increase, we will need to sequester 6 gigatons per year of carbon up to the year 2050.” This is a tall order, since the three largest sequestration projects currently capture and store only 3 million tons per year. “Without alternative policies, CO2 emissions will increase by 135% by the year 2050,” Bennaceur said.

Fisher’s remarks highlighted his view of the energy mix by the year 2050, and how R&D must be used more effectively to offset the current global decline in discovery. He called natural gas “the major energy source of the 21st century,” being important over the next 100 years and peaking in 2050.

Yortsos reminded the audience that hydrocarbons are currently our most energy-dense resource, providing four times the energy per unit mass as the equivalent amount of liquid hydrogen. He also stated that as technological innovations increase, the amount of this finite resource that can be effectively produced increases as well. Yortsos closed by challenging the audience to consider some of the major issues that may hinder innovation, “namely the shortage of technical people, negative public perceptions of the E&P sector, and the challenge of producing the next trillion while transforming the industry into a leader of clean power initiatives.”

IFP’s Freund stressed that the major challenges facing R&D include the development of technologies to keep producing light oils from new areas and increasing recovery from existing fields. The industry must also develop technologies to produce heavier crudes and, perhaps most importantly, produce oil from new areas at a rate that balances increasing demand. “Improvements are needed in many areas, including basin modeling, heightened use of 4D seismic data, and superior materials of construction for extreme environments.”

BP’s Meggs reiterated the need for technological advancements along several fronts, but he also stressed the need for the companies to collaborate in key research areas in order to lift the entire industry. “Our industry spends less on R&D and takes longer to implement new technology than other industries. While we have done well with this strategy to a point, it is no longer sufficient,” Meggs said.

He likened the need to loosen the purse strings to a similar situation facing the US semiconductor industry 2 decades ago. “The US semiconductor industry set up a successful collaborative research program which enabled scarce research funds to be used to greater effect, and I believe such a collaborative model would serve the oil and gas industry in the same way.”

The opening speakers all stressed major themes that the R&D community would be forced to address, and these themes carried into the conference’s remaining sessions.

Theme 1: Greater Recovery and Discovery

The themes of getting more hydrocarbons from existing reservoirs and finding new sources permeated many of the sessions. Because current upstream technology will not be adequate for the challenges ahead, a session entitled “Innovations From Outside the Upstream Oil Industry” was included in the program. The session allowed experts from fields outside the E&P sector, such as nanotechnology, biochemistry, materials science, and computer modeling, to describe their research and begin a dialogue with the oilfield researchers.

Friday’s session entitled “Unlocking the Molecules” discussed the R&D needed to produce more from each reservoir, as well as the solutions needed to produce heavy oil, tar sands, and unconventional gas. The format of this session was unique in that after the speaker presentations, brainstorming sessions were held in which audience members at the same table discussed the topics just presented and devised blue-sky research projects which were then shared with the entire group.

Many brainstorm ideas from this session focused on automating and digitizing much of the oil field, from injecting smart fluids downhole that selectively block water movement and allow oil to flow, to bionic wells where laterals form and move into promising reservoirs on their own using remote sensing. Other blue-sky brainstorm ideas focused on ways to make cellulosic-derived energy processes more economically and environmentally viable.

Producing more hydrocarbons by increasing recovery factors was the focus of the session entitled “Deep Diagnostics,” which highlighted various deep-reading reservoir measurement techniques, such as borehole gravity. Saudi Aramco’s Ton Loermans explained that the method measures the difference in gravity between two points downhole to indicate whether water or hydrocarbon is present. While the technique is an extremely precise and robust method of measuring residual gas and oil saturation with a unique response, “the current hardware can only be used for vertical wells and cannot be permanently installed,” Loermans said. “Hardware developments are needed to make this technology more commercially viable, and there are significant rewards for those who take up this challenge.”

Theme 2: Getting to the Third Trillion With an Eye on the Environment

Another theme that permeated the conference was the industry’s responsibility to produce the next trillion barrels in an environmentally friendly way, and what would be required of R&D to achieve this. Most of this discussion was centered on means of reducing greenhouse gas emissions, with a particular emphasis on carbon capture and sequestration (CCS).

Jean-Francois Vidalie of Total outlined his company’s major initiatives in environmental stewardship, which includes a major initiative being tested at the Lacq CCS project in southwestern France. The pilot project, which is scheduled to commence in 2008, will capture and compress CO2 generated from an oxy-fuel combustion steam generator at the Lacq gas production facility, pipe it to the declining Rousse gas field, and inject it into the reservoir at a depth of 4,500 m. “In addition to capturing and sequestering up to 150,000 metric tons of CO2 over 2 years,” said Vidalie, “the project will demonstrate the commercial feasibility of oxy-fuel combustion, which could potentially reduce CO2 emissions by 50% vs. existing technologies, with a 50% lower capture cost.”

Total’s initiative would go a long way toward proving the feasibility of a long-term CCS project in Europe, but there is also a great deal of interest in CCS in North America. Ian Potter of the Alberta Research Council in Alberta, Canada, outlined the future of CCS in North America and attempted to separate the common misconceptions from the realities. “There is a huge storage capacity for carbon dioxide in North America’s water basins,” Potter said. “However, long-term storage effects must be studied, as there is a concern about water quality. Clean water will become a huge issue over the next century, around the world.”

Potter would like to see more R&D effort put into linking CCS with enhanced gas recovery and coalbed methane work. While cost scenarios currently put CCS at between USD 50-100 per ton of CO2, Potter believed that this would drop as more R&D effort was put forth. “Companies will likely have to do this kind of research, because I don’t believe they will be given operating licenses in the future if they cannot provide a climate management strategy that includes CCS,” Potter concluded.

Theme 3: Greater Attraction and Retention of Young People Into R&D

Any discussion on the R&D requirements to find and produce the next trillion would be worthless without serious discussion on how to attract and keep quality people in the profession. This was the main focus of the session entitled “Global Need for People and Education.”

“The industry needs to take new paradigms in how we train and retain our people,” said SPE’s 2007 President Abdul Jaleel Al-Khalifa during his presentation entitled “Unleashing Industry Potential.” His proposal was a paradigm called ‘People First,’ in which employee needs are placed at the forefront.

“The People First paradigm will ensure commercial success of the company by aligning personal interests with corporate interests. If people are compensated fairly and treated with fairness and integrity, the company will have commercial success with committed, loyal employees.

“By implementing a People First philosophy, I believe we can see upwards of a 30% increase in industry potential,” Al-Khalifa continued. “However, it will require that Wall Street start realizing that earnings reflect short-term success, while people ensure long-term viability.”

While companies need to nurture their best R&D people, they also need to nurture relationships with universities so that young people entering the workplace have the necessary tools to make positive contributions quickly. This was the focus of 2006 SPE President Eve Sprunt’s message to the session audience.

“People are a just-in-time commodity; they go stale quickly if they are not equipped with the right tools,” Sprunt said. Sprunt’s company Chevron cultivates extended research relationships with universities to ensure that young people have the right training.

“Chevron cannot cultivate extended relationships with all universities, but rather we selectively choose institutions that conduct research in critical areas,” Sprunt added. “Cultivating these relationships by bringing students on for extended internships within Chevron has been a great way to ensure that the university is providing the necessary training, and it allows us to screen potential hires.”

Keynote Speaker Addresses Real-Life R&D Management Adventures

Janeen Judah, General Manager of Reservoir and Production Engineering for Chevron Energy Technology Company, provided her perspective on the short and long-term challenges in managing a global R&D program in her keynote address on Thursday evening. Judah’s major short-term challenges include a shortage of experienced people and the demand for her people’s time from various business groups within Chevron.

For the long term, Judah asked the audience to consider ways of encouraging companies to keep important R&D platforms in their portfolios, even if the current business environment becomes less favorable, and in taking more risks with technology and shrugging off failures. “Typically, management has very long memories and very low tolerances for failure. We should be willing to drill some ‘dry holes’ in technology just as we do in the field.”

The first SPE Research and Development Conference brought to the forefront many of the challenges the industry will face over the next several decades to produce the next trillion barrels of oil, and it started a dialogue among a diverse group of scientists and engineers that promises to spark fruitful collaborations. Expect more R&D Conferences to come as the industry continues its important work of meeting the energy demands of a burgeoning worldwide economy.

To learn more about the 2007 R&D Conference, contact Chairperson Kamal at mkamal@chevron.com. To view many of the presentations from the conference, please visit http://www.spe.org/spe-app/spe/meetings/RDC/2007/tech_prog.htm.