Jobs? Better Operations? Look Under a Different Rock!

The development of new technology is transforming the energy industry.
This article appeared in Vol. 16, No. 5 - 2019


Jobs? Better Operations? Look Under a Different Rock!

We have witnessed a tremendous transformation in the oil industry in the last few years, beginning with the adoption of the new techniques of ‘factory drilling’ of horizontal wells, with multi-stage hydraulic fracturing, and then with the digitalisation of all aspects of exploration and production. It has happened so quickly that many may not be aware of how the new technologies came to be developed and implemented so fast.

In the past, most technological development occurred either in company-owned R&D branches, or in various consortia, often located in universities. While those approaches are effective, a dramatic shift has occurred due to the availability of infrastructure, cloud computing and capital, which make it possible for companies to develop and launch products quickly and then be acquired by a larger organisation for further development and commercialisation.

In many ways, the approaches have emulated the technology start-ups and incubators of Silicon Valley, but with a few significant differences. Firstly, the applications tend to be much more specialised, so the development requires a team of technical experts as well as data scientists. Secondly, the nature of oil and gas production requires a great deal of attention to safety, the environment, and a complex web of infrastructure, which makes it necessary to proceed with caution, with redundancies and fail-safes in the process.

  • The author; behind her a participant is pitching an idea at AAPG’s U-Pitch. © AAPG.

Organisations such as the American Association of Petroleum Geologists (AAPG) are working to attract capital, promote adoption, and boost commercialisation for new technologies. As a not-for-profit professional society dedicated to the advancement of science and technology, AAPG seeks ways to help its members equip themselves for changing times. Its U-Pitch Showcases are a prime example, which take place in conjunction with AAPG’s major event.

Sources of Capital

A crucial requirement for a successful new technological development is access to funding. Several options are available. 

Self-funding: Many start-ups are self-financed, particularly if they are expanding a current technology. Companies that undertake analytics and reservoir modelling often start by offering services, and then develop a platform or customised set of applications, taking advantage of general cloud provision offered by Google, AWS and Microsoft, before developing a custom platform. Other start-ups may create sensors, equipment, water processing technology, or oil field chemicals, offering a service that incorporates their unique technology. The advantages of self-funding is that there is no dilution of ownership and there is also the opportunity to develop technology for real-world situations, and to modify it in response to real-world settings. The downside is that they may be undercapitalised, lacking sufficient funds or time for marketing or new business development. Furthermore, they may not be aggressive enough in the truly innovative aspects of the product development or have enough time or in-house expertise to build a working prototype for the next generation of their product. Finally, the key personnel may be poached by a company that can offer a higher salary or benefits.

  • An example of new technology: SeekOps develops and fields advanced sensor technology for the energy sector to detect, localise, and quantify gas emissions through drone-based systems. energy sector to detect, localise, and quantify gas emissions through drone-based systems. © SeekOps.

Angel Investors: Angel investors tend to offer capital in exchange for a percentage of the company, assuming it will either eventually seek to be acquired by another organisation for a large return on investment, or it will generate profits that will result in ongoing cash flow and revenue. Angel investors are less risk-averse than companies that deal with a more established product or market. The downside is that the start-ups give up a relatively large percentage of the company, which may make finding a commercialisation partner more difficult later. The benefit of having a silent partner is that it allows the company to develop the product more quickly, but having an investor who does not know the business could lead to disagreements about the strategy for advancement, or to the company being acquired before the full potential of the product has been explored.

Technology Ventures Divisions: Despite the fact that major oil companies have been investing in new technologies for many years, their efforts are not always recognised in the overall development of game-changing technologies. Chevron, Shell and Equinor, among others, have divisions or subsidiaries that actively seek new technologies that can be used to improve their operations and business processes. They also invest in technology that will protect the environment, provide safe working conditions, and increase security. The majors often purchase a non-majority interest in a company or award a development grant and then provide technical and strategic guidance to the technology start-up. National oil companies may form a subsidiary to develop technologies in-house in addition to investing in technology start-ups, while large independent producers may not invest directly but will work with a new company and allow their operations to be used as a living laboratory to test out the equipment, process, or chemical.

Commercialisation Partners: Commercialisation partners are very important and have been in many ways responsible for the adoption of the break-through technologies of the last five to ten years. A commercialisation partner is a company that specialises in business development and marketing, and which may also wish to offer services to the industry. For example, a start-up may be developing a new approach for converting unstructured data to structured. The algorithm is sufficiently unique that it can process data faster and more accurately than others, and so could be an essential tool or component in an overall solution or platform. Companies such as Enverus (formerly DrillingInfo) actively seek such partnerships in order to develop a larger analytics solution, either purchasing the company and technology, or licensing it and paying royalties.

  • The O&G industry is benefitting from new data analytics technologies that make sense of the huge volumes of data and imagery coming from established satellite and drone capabilities. © Terrabotics.

The Pain Points

There are innumerable start-ups with new technologies, but which ones succeed? In the world of shale plays and deepwater, sub-salt and pre-salt reservoirs, the costs are still very high and there is a great deal of uncertainty, not only with respect to the true commercial extent of the reservoir but also in other important technological and environmental factors. Let’s look at a few of the pain points and how they are being addressed. 

Data Nightmares: Most companies have a great deal of information, and they have systems for accessing it, but the major problem is that it is not actually usable in its current form, as it is in many different formats and in different repositories, some cloud-based, some not. In some cases, the information exists in two or three separate divisions of the company that rarely communicate with each other, resulting in silos not only of data but also of expertise. Companies often limp along with their existing legacy information systems because to change or convert it would be too expensive and too slow, but in order to improve operations as well as comply with regulations, it is necessary to have a way to access, transform and standardise data.

Start-ups and more established, very agile, companies have been addressing the data problem, first with data management, and later for specific analytics-based tasks. According to Philip Neri, spokesperson for Energistics, which develops oil and gas data standards protocols, the need for data standardisation is immense, not only in order to make it possible to share repositories and for service companies to develop a product that all clients can easily use, but also to make mergers and acquisitions seamless with respect to merging legacy data.

  • Cold Bore Technology’s SmartPAD is a digital, IIoT sensor-driven system which enables operators to completely track, monitor, analyse, record and even replay the second-bysecond details of each well, resulting in optimised completions and enhanced safety. © Cold Bore Technology.

Leaks and Spills: Quickly detecting leaks and spills and then dealing with them is vital, and technology is moving this area forward fast, with new technologies that can detect pipeline leaks with pinpoint precision. Some of these are sensor-based systems, while other leak detection systems use satellite imagery, which can be used for monitoring and measuring spills, as well as determining the extent of storm damage and human activities. Drones-based systems use hyperspectral / IR sensors to detect surface leaks and spills by means of the change in heat or colour signature from foliage and water. The data can also be used for assessing damage from floods, security breaches, and more.

Water Issues: Both sourcing and disposing of water are major issues in unconventional fields and it is an area ripe for new technologies. One of the most talked-about technologies in U-Pitch in 2018 was Katzwater, which has developed a patented proprietary water purification system which is both low-cost and easy to install. The company attracted technology venture capital and is now working on providing services, and in expansion.

The Decline Curve Problem: A number of start-ups tackle this issue using different technologies. One option is using geochemistry to determine shales that are preferentially enriched and which are likely to produce, and also identifying which drilling and completion methods and chemicals will be most effective. For example, one new technology uses a wettability alteration solution that works in mature conventional reservoirs as well as shales to improve ultimate recovery, while in another, pulsed electrical reservoir stimulation is working as a kind of waterless hydraulic fracturing.

Drilling and Completion Efficiencies: Time is money, so many new technologies are looking at improving the efficiency of drilling and completion techniques, by, for example, using smart processing algorithms to save hours of completion time – and millions of dollars. AI can also be used to automate field development, geomechanical characterisation, fault interpretation, and the prediction of core physical properties.

Safety and the Environment: An example of the use of new technologies for safety is a system that automatically detects and extinguishes fires. The environment is not forgotten, with one innovative start-up developing the use of recycled plastic and environmentally friendly, biodegradable materials to design, build and repair roads, pads and walkways.

The Future of the Energy Industry

It is tempting to look at technology as an instant solution which appears magically on the scene and solves a stubborn problem. What is often not recognised is the enormous amount of effort, persistence and creativity required to develop effective solutions. It is also necessary to have deep levels of subject matter and domain knowledge. For that reason geoscientists and engineers who feel frustrated as they look for employment in large companies in traditional positions should take a moment and explore the world of new technologies and innovation. There are opportunities at all levels, both in the start-up and conception phase and in marketing and commercialisation.


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