Over the past several decades, the upstream oil and gas industry has developed into a three-way structure consisting of operating companies, national oil companies, and service companies. In the absence of a major market need, such a triangular structure worked well enough to keep the industry functioning. As developing economies in countries such as China, India, and Brazil started to become major petroleum consumers in the early 2000s, crude oil prices began to skyrocket. The global oil supply and demand situation remains relatively tight. Even today, the industry can barely meet peak demand of 90 million BOPD. The triangular structure now falls short of meeting market needs.
A large part of the problem is that all the easily available oil has been found and much has been depleted. Growth potential now is in unconventional oil, Arctic resources, and improved recovery factors in mature areas. Development of these petroleum resources requires innovative and cost-effective technologies. These technologies must also be safe and environmentally benign. While many of them are being, and will be, developed by the upstream industry, many more can, and should, leverage technological advances taking place in other industries.
Technology transfer from other industries is not a new phenomenon. From time to time, the upstream industry has benefited from innovations in adjacent markets such as the military, medical, optics, and information technology sectors. For example, military technology developed during World War II played a large part in modernizing the upstream industry in the 1950s and later years.
Some of the innovations that migrated from military technology include shaped charges, gravity-based structures, and reeled pipelines and umbilicals. Shaped charges were adopted by the industry for use in tubular perforation and separation. Towed by the Allied forces from Britain, concrete gravity-based structures were flooded in place off the coast of France to serve as breakwaters during the Invasion of Normandy. Later, similar structures were used in the design of offshore oil production facilities. Reeled pipelines and umbilicals, used to supply fuel across the English Channel to Allied troops landing in Normandy, became the basis for the coiled tubing and umbilical techniques now used in oilfield operations.
More recently, nuclear magnetic resonance and digital core analysis developed in the medical and chemical fields respectively, have fostered technological advances in exploration and production. However, as significant as past technology transfer has been, it has occurred haphazardly. What is now needed is a more aggressive, organized system for the transfer of external technology into our industry. To create the ecosystem necessary to accomplish this, we first must honestly address a number of issues that impede technology transfer.
Not on My Watch
Perhaps the most common stumbling block to external technology uptake in our industry is inbred aversion to risking the success of a project by introducing a new, untried technology. Though understandable, the avoidance hinders the transfer and adoption of technology. We must alter this mind-set to expand our notion of acceptable risk for the deployment of new technologies. Companies should enhance their risk-taking appetite for early-stage technology. It is worthwhile to invest the small dollars early to assess the result.
Quarterly Performance
A second roadblock is the focus on quarterly financial performance. The drive to meet or exceed financial analysts’ expectations each quarter, if taken to excess, leaves little room for spending on true technology innovation and transfer. Technology development and deployment is a long-term exercise, often holding little hope of short- or intermediate-term return on investment. Nonetheless, we should overcome our reluctance to invest in new technology.
Managed Chaos
A systematic approach is critical for large capital projects. However, systematic thinking applied to innovation may constrain it. You cannot systematize innovation. The fostering of new technology, whether transferred from without or developed within, involves a level of chaos that must be managed. Cultivated land yields only a limited variety of flowers compared with the myriad of flower types found on uncultivated land—as long as you are willing to accept some weeds. In innovation, you will never know the type of flower you want to grow, so let hundreds grow. Some will sell, others will not.
Failure of Traditional Transfer
Traditionally, the assumption has been that technology transfer is accomplished by means of news releases, articles, conferences, exhibitions, and presentations. While these vehicles have functioned to some extent, they have not adequately disseminated the technology within and, especially, outside of the industry for which they were developed. Although traditional technology transfer, particularly within a targeted industry, will continue to have its place, it must be augmented with a robust, systematic technology transfer system.
A Proprietary World
The upstream industry for decades has been obsessed with protecting “proprietary information.” For exploration and some well performance data, this is justifiable. However, in the larger context of just about everything else a company does—including technology development and transfer—this can be counterproductive. Companies eventually realize they do not have all the pieces of a solution. Being overprotective of their information may stand in the way of developing the best solution for individual companies and the industry.
A Way Ahead
There must be a proactive element to technology development and transfer. Yet today’s industry practices and standards militate against the emergence of that element in companies. Technology transfer and development will not improve without a new mechanism to promote this improvement outside the traditional structure.
Besides companies, professional organizations are involved in technology transfer. Some of them are SPE, the Society of Exploration Geophysicists, and a number of other petroleum professional societies, such as the International Association of Drilling Contractors and the Society of Petrophysicists and Well Log Analysts. In addition, there are societies that overarch many industries, such as the American Society of Mechanical Engineers.
It is reasonable that these associations could take on an expanded role in technology transfer among their disciplines and with the innovative national laboratories in various countries. Specifically, it would make sense for these societies and the national laboratories to form internal technology transfer task forces that, in turn, participate in an encompassing technology transfer body comprising the task forces from the societies and the labs. The objective would be to disperse disparate technologies in industries where they could create additional benefit.
Companies need to step up their efforts to support such an initiative. They can appoint representatives, offer financial and other resources, and talk more openly about challenges. The solution can be proprietary, but not the recognition of the need. Furthermore, companies need to have a top management sponsor for the effort and to establish the quest for unconventional solutions as an institutional practice.
If we do not undertake this important project, we risk falling further behind the technological curve, waiting for the industry’s companies to correct internal issues that are not easily correctable. And that puts our ability to meet emerging oil and gas demand in jeopardy.