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Necessity is the mother of invention – digital innovation in the era of low prices

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Oilfield Technology,

Sumita Singh, Managing Director of Reference Solutions, Elsevier’s R&D Solutions, reviews the ways in which the 2014 crisis has actually been a catalyst for greater innovation in the oil and gas sector.’

In 2014, when the oil crisis hit, engineers working in the oil and gas industry were once again challenged to achieve greater results with less resources. This focus on maximising output without negatively impacting costs led companies to focus on incremental improvements instead of large-scale projects. This improvement in operational excellence came in many forms – including better fracturing treatments, improved reservoir management and a focus on enhanced oil recovery. This is because the oil and gas industry is often found to be at its most creative when prices are low – as engineers are driven to be more creative and efficient. Traditionally, innovation has tended to focus on the physical side of E&P. However, as industry experts suggest the dip in prices might not be a temporary phenomenon, could we now be set for a golden age of digital innovation?

Lessons from history

Historically, high industry prices have allowed companies more leeway, providing the opportunity to invest in more capital intensive, and often riskier, projects. From Arctic exploration to deepwater drilling, these projects are often abandoned when fluctuations cause oil and gas prices to falter. And while low prices can force companies to retrench, they must ensure they don’t compromise on health, safety and environment (HSE) issues – nothing will shut down a project faster than HSE concerns. Therefore, businesses need to become leaner elsewhere by making sure that informed decisions can be made quickly, cutting down on delays and inefficiencies – all of which means that innovation is actually at its sharpest during these periods when prices are low.

One instance of this is the 13 years between 1986 and 1999 when oil prices remained stubbornly low, yet the industry as a whole witnessed huge advances in conventional drilling, both in North America and the Middle East. For example, it was during this period that Saudi Aramco reaped the benefits of new onshore and offshore horizontal drilling techniques— as well as improvements in drill bits, drilling fluids and other technologies. These improvements managed to increase well capacity by 150-400% while simultaneously lowering costs by 20-25%. This level of innovation is seldom replicated in times when oil prices are higher.

Seizing the moment

Saudi Aramco made huge strides in equipment and processes but, in today’s ‘information age’, innovation is just as crucial in the digital world as the physical one. Modernisations that emerged in the 80s and 90s may seem quaint to us now, but at the time these were hugely important developments. We now take as standard that engineers are able to create 3D visualisations of reservoir images, forgetting that in years past this had to be done by marking paper printouts with different coloured pencils. Just as improved fracking or drilling technology can help to increase ROI, better data management can have a significant impact on the oil and gas industry. In fact, improved data management and analysis can actually reduce wastage and improve agility.

In addition, in order to enable engineers in E&P teams to be as effective as possible, companies need to ensure they have access to digital tools that allow them to access the right data, in the right way and at the right time. But what is the right data? Successful E&P teams’ aggregate internal and external data and information, making sure engineering teams have access to all the data that is available from early exploration to production; enabling more effective and safe management of oil fields, and ultimately improving overall recovery rates.

Further, of increasing importance are tools that allow access to multi-disciplinary data, and information across industries and research. For example, in recent research, the ‘most viewed resources’ by oil and gas engineers were found to range from ‘chemistry and chemical engineering’, to ‘sustainable energy’, to ‘welding engineering’, to ‘marine and naval architecture’ (Knovel, ‘Top Content 2015/2016). Access to such cross-domain knowledge can help drive innovation, provide answers and insights needed to solve critical problems, help identify and mitigate health and safety risks, and ultimately reduce costs and increase margins.

The industry recognizes this; it has often borrowed innovations and technologies from other disciplines and industries, modifying and further innovating to great success. For example, seismic technology – first deployed and used in World War I to detect enemy artillery – through further innovation and development has become one of the most relied upon and effective tools for oil and gas exploration. By peering into other industries, oil and gas engineers can discover the latest innovations and solutions that have proven track records, even in unlikely places, reducing the need to conduct costly experiments without guarantees of success.

Uncertainty breeds digital innovation

The oil and gas industry is working against a backdrop of great societal, governmental and political upheaval – from the impact that Brexit negotiations could have on North Sea exploration, to the potential for deregulation in the United States. This means the current uncertainty over prices will continue for the foreseeable future. In this climate, ambitious projects are unlikely to be approved; a more sensible path is to focus on the more modest, incremental improvements that can be made. The right digital tools and platforms can provide engineers with the answers and insights they need, and in areas beyond a narrow scope, ensuring companies continue to turn a profit during an extended downturn. Necessity really will be the mother of digital innovation.

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