Editorial comment
There’s an old saying that states, “necessity is the mother of invention” and it’s arguable that this phrase has been something of a guiding rule for the upstream industry over the years. As demand for hydrocarbons grew over the last century or so, oil and gas companies were compelled to drill more wells, explore more hostile environments and develop new ways of accessing deeper, harder-to-reach reserves in ever-higher pressures and temperatures, both onshore and offshore.
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With the oil price now hovering between US$40 and US$50/bbl, necessity is driving another burst of innovation across the upstream industry. This time the focus is on boosting efficiency, eliminating downtime and finding smarter ways to cut operational costs. Whilst it’s true to say that these have always been desirable, long-term goals, the declining oil price has forced many companies to now view them as essential, immediate objectives.
Naturally for the upstream industry, technology is at the forefront of this trend. Take Baker Hughes and Weatherford as two examples; both companies used the recent SPE ATCE event in Houston to announce new technologies designed to boost operational efficiency in sectors that have been hit hard by the low oil price. Baker Hughes’ offering came in the form of the Spectre frac plug, which is designed to completely disintegrate downhole after fracturing is completed. This ability will allow operators to avoid performing coiled tubing interventions and leaves the wellbore clear of debris, facilitating hydrocarbon flow and wellbore access. Weatherford meanwhile launched the JetStream RFID Circulation Sub for offshore drilling operations. The system is designed to conduct multiple operations, such as wellbore cleaning, remediation fluid spotting and BOP jetting in one trip; it can also be configured by sending RFID tags down the well, avoiding the use of mechanical actuators and keeping the wellbore open. These are just two examples of the kind of technologies being developed across the industry in a bid to cut costs and keep pumping oil.
The downturn has also shone a light on the principle of ‘marginal gains’; by making small increases to the efficiency of many individual components, it is possible to significantly increase the overall efficiency of the system that they are part of. With this principle in mind, the upstream industry is seeing an uptick in demand for systems and services designed to boost operational efficiency and keep systems running for longer without interruption. ABB, for example, provides preventative maintenance services, which can help prevent costly unplanned downtime; when day rates for rigs still represent a significant cost for many operators, being able to ensure that potential problems are discovered and resolved before they impact production is a significant advantage.
Whilst the upstream industry has something of a reputation for being ‘conservative’ when it comes to the adoption of new technologies and processes, the impact of these innovations is already having an impact: some shale companies, such as EOG Resources and Whiting Petroleum Corp., are reporting profitability and considering production growth at US$40 - 50/bbl prices. Indeed, a report produced earlier this year by the Manhattan Institute looked at the economics of the US shale industry and argued that “continued technological progress, particularly in big-data analytics” would “ultimately yield break-even costs of US$5 – 20/bbl”, which would put costs on par with those in Saudi Arabia.1
It’s certainly going to be an interesting time in the upstream industry, with new technologies and systems driving ever-higher levels of efficiency and productivity. The Oilfield Technology team will be at ADIPEC (9 - 11 November – Stand 12-1234), and we’d love to hear about the innovative technologies that your company is developing in order to beat the downturn!
Reference
http://www.manhattan-institute.org/pdf/eper_16.pdf
