The economics of deepwater development are more challenging than ever in today’s low-price environment. While technology innovation faces economic headwinds for the same reason, it also remains the key to future deepwater projects and will be essential to their competitive sustainability through market downturns.
In a session on the energy outlook and the future of innovations for deepwater in a cost-competitive environment at the recent Offshore Technology Conference, panelists emphasized the need for scalable technology, the standardization and simplification of projects, patient capital investment in innovation, greater collaboration, and new perspectives coming from outside the industry.
“Fossil energy sources will continue to be a main component of our energy mix out to 2050 and beyond,” said Robert Armstrong, director of the MIT Energy Initiative. “By 2050, fossil fuels will still account for about 75% of our primary global energy supply.
“How do we continue to take advantage of these fossil energy heat sources and at the same time start driving down carbon emissions?”
Armstrong noted the Mission Innovation commitment announced by 20 developed and developing countries at the 2015 Paris Climate Change Conference to double basic clean energy research and development budgets by 2020.
“Basic energy research is the beginning stage of the innovation chain,” Armstrong said, [but] “how do you get innovative ideas to come out of basic research; how do you get that into commercial practice? And that’s a particularly difficult thing to do in the energy sector because the amounts of capital required are quite large and the time scales are quite long, compared with what, say, the venture capital community is dealing with.”
An initiative addressing that problem, likewise announced at the Paris conference, is the Breakthrough Energy Coalition. It is a group of private investors who committed to picking up projects coming out of the Mission Innovation countries’ research—“providing the kind of patient capital necessary to move them from the laboratory and into commercial practice,” Armstrong said.
“Basic science research helps to change paradigms,” said Kripa Varanasi, deputy associate professor of mechanical engineering at MIT. “It really helps us to move beyond where we are, but at the same time we need to be thinking about scalability.” He discussed a technology that he and a co-researcher have developed and commercialized with the help of the university’s programs for bringing innovations to the market. LiquiGlide is a liquid-impregnated coating that acts as a slippery barrier between a surface and a viscous liquid.
Varanasi and research partner David Smith were interested in developing a coating to prevent the buildup of ice on airplane surfaces and methane hydrate in oil pipelines. However, LiquiGlide has initially been commercialized in food and consumer product packaging. A video created for a 2012 MIT entrepreneurship competition, showing ketchup sliding out of a LiquiGlide-coated plastic bottle, went viral and received worldwide attention. Varanasi pointed to a number of applications in which these coatings could benefit the industry, such as flow assurance, tank interiors, separation systems, and reduction in water use.
Tom Moroney, vice president of wells and facilities technologies in projects and technologies at Shell, said that the industry must find a new way to approach technology development. “We need to innovate innovations,” he said. Moroney called the Deepwater Horizon disaster in 2010 a “forcing moment” for the industry and the current fall in commodity prices coupled with climate change another such moment.
“We need to think differently about how we innovate and deliver the solutions we need and scale them up rapidly for the business,” Moroney said. His company has a number of “innovation vehicles,” he said, and noted one called Shell TechWorks, a group of 50 to 70 people from outside the industry, which the company established in Cambridge, Massachusetts.
“They are scientists; they are researchers from medical, from defense, from high-tech,” Moroney said. “They are entrepreneurs; they’re from startups. They have brought in a whole new way of thinking about innovation and matching up deep science with getting the needs out to the field quickly.”
Olivier Le Peuch, president of completions at Schlumberger, said that technology innovation to improve efficiency is essential if deepwater development is to remain sustainable. The industry must reduce risk, complexity, contingencies, and the need for downhole trips. He mentioned two new technologies that are helping in these areas, a high-pull wireline system and electric flow control systems.
Derek Mathieson, vice president and chief technology and marketing officer at Baker Hughes, said that industry thinking needs to move away from an “either/or constraint,” such as focusing on “either new technology or low cost” or “either rapid commercialization or risk reduction.” Instead of treating such objectives as alternative choices, they should be viewed as achievable simultaneously. “How do we make that transition from or to and?” he said.
Ram Shenoy, principal at Innovation Impact, a business strategy consultancy, said that industry technology investment is continuing in the current climate in focus areas such as reducing rig time, increasing production, and improving recovery rates.
Shenoy noted that deepwater and onshore unconventional developments often involve similar price tags over project life cycles but that deepwater investment is front-loaded with slow cost recovery, while investment in unconventionals is spread evenly with speedy cost recovery. Deepwater cash flow profiles need to become competitive with unconventionals, he said.
Deepwater Future Tied to Technology Innovation
Joel Parshall, JPT Features Editor
01 July 2016