The global oil and gas in­dus­try should shape post-easy-oil era with tech­no­log­i­cal in­no­va­tion or risk be­ing shaped by it!

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The global oil and gas in­dus­try should shape post-easy oil era with tech­no­log­i­cal in­no­va­tion or risk be­ing shaped by It!

It is the fun­da­men­tal truth of our time that tech­nol­ogy is evolv­ing at an ac­cel­er­at­ing pace, trans­form­ing, whether we like it or not, the way com­pa­nies op­er­ate and make de­ci­sions ev­ery day in or­der to op­ti­mise business. The global oil and gas in­dus­try is no ex­cep­tion, and it must de­cide whether to proac­tively shape the fu­ture or risk be­ing shaped by it.

Ad­vances in and the wide­spread adop­tion of tech­nolo­gies have trig­gered a con­ver­sion process that's res­onat­ing across the en­tire in­dus­try and along its value chain. The growth in com­put­ing power and wide­spread dig­i­tal con­nec­tiv­ity en­ables com­pa­nies to har­vest and an­a­lyse ever-larger amounts of rel­e­vant data in real time, help­ing make faster and smarter de­ci­sions, fa­cil­i­tat­ing equip­ment main­te­nance, op­ti­mis­ing pro­duc­tion, and en­hanc­ing safety and com­pli­ance.

Tech­no­log­i­cal ad­vance­ments in reser­voir imag­ing, drilling and well com­ple­tion, among oth­ers, have truly rev­o­lu­tionised the in­dus­try. For decades, tech­no­log­i­cal in­no­va­tion has helped off­set the im­pact of de­ple­tion by in­tro­duc­ing smarter and more ef­fi­cient ways of dis­cov­ery and pro­duc­tion. Thanks to tech­no­log­i­cal progress, the in­dus­try has been able to open up ev­er­more chal­leng­ing fron­tiers in the quest for new hy­dro­car­bon re­sources, de­velop in­creas­ingly deep and com­plex reser­voirs, and boost ef­fi­cien­cies in their re­cov­ery.

And, go­ing for­ward, more than ever be­fore, in­no­va­tion – new and im­proved tech­nolo­gies – will play a cru­cial role in meet­ing the ris­ing en­ergy needs of a grow­ing and in­creas­ingly ur­banised pop­u­la­tion, and cop­ing with the en­vi­ron­men­tal chal­lenges in the decades ahead.

Only 10 years ago, the pro­duc­tion of shale

oil and gas in North Amer­ica wouldn't have been fea­si­ble. Although the ex­is­tence of shale for­ma­tions in the US was known for many decades, high cost and a myr­iad of tech­no­log­i­cal chal­lenges stood in the way of de­vel­op­ment. It was a cock­tail of high oil prices and ad­vances in hor­i­zon­tal drilling and hy­draulic frac­tur­ing tech­nolo­gies com­bined with a push for greater sup­ply se­cu­rity that brought shale oil and gas de­vel­op­ments within the realm of eco­nomic fea­si­bil­ity – po­ten­tially open­ing up bil­lions of bar­rels of oil and tril­lions cu­bic feet of gas for ex­trac­tion and pro­duc­tion in the US and in other parts of the world, and with it the po­ten­tial to lower the price of power gen­er­a­tion.

As tra­di­tional forms of hy­dro­car­bons are be­com­ing harder to find and ex­tract, on­go­ing tech­no­log­i­cal in­no­va­tion will be in­te­gral to push­ing back the much de­bated ar­rival of ‘peak oil' – the point at which the world's oil pro­duc­tion is reach­ing its peak. This also holds true for the Mid­dle East, a re­gion long known for the ex­is­tence of eas­ily ac­ces­si­ble oil and gas reser­voirs from such gi­ant fields as Ghawar in Saudi Ara­bia and Bur­gan in Kuwait that are now ma­tur­ing while new ones are more chal­leng­ing to de­velop.

It there­fore doesn't come as a sur­prise that im­prov­ing re­cov­ery and ex­tend­ing the life of ex­ist­ing as­sets are emerg­ing as dom­i­nat­ing themes in the oil in­dus­try around the globe. As the find­ings from a Lloyd's Reg­is­ter En­ergy survey “Tech­nol­ogy Radar” (­nol­o­gy­radar) car­ried out among se­nior in­dus­try ex­ec­u­tives and aca­demics in 17 coun­tries shows, the majority of those polled plan to fo­cus on fur­ther in­no­va­tions in high-im­pact tech­nolo­gies such as au­to­ma­tion, in­clud­ing re­mote and

subsea op­er­a­tion, and en­hanced oil and gas re­cov­ery (EOR) in the near and medium term.

En­hanc­ing pro­duc­tion and op­er­a­tional ef­fi­ciency is one, but not the only, driver of tech­nol­ogy in­no­va­tion in the in­dus­try. Cost re­duc­tions as well as safety and en­vi­ron­men­tal im­prove­ments are also widely seen as ma­jor ob­jec­tives of in­no­va­tion, es­pe­cially re­lated to re­mote op­er­a­tions. The rea­son is clear. Safety isn't just about loss preven­tion and min­imis­ing the cost aris­ing from in­dus­try ac­ci­dents and in­ci­dents; it is the in­dus­try's moral obli­ga­tion to pro­tect the en­vi­ron­ment and peo­ple – both those who work in the sec­tor and those whose lives may be af­fected by the in­dus­try's ac­tions.

As the in­dus­try pushes into deeper wa­ters and more hos­tile en­vi­ron­ments, and re­fines ex­ist­ing and de­vel­ops new tech­nolo­gies, the ris­ing cost of do­ing so could po­ten­tially ham­per progress on the in­no­va­tion front. Find­ing prac­ti­cal ways to col­lab­o­rate more closely with other or­ga­ni­za­tions to share de­vel­op­ment costs for new tech­nolo­gies will there­fore be of great sig­nif­i­cance for the in­dus­try at large. In­ter­na­tional oil com­pa­nies (IOCs), na­tional oil com­pa­nies (NOCs), ser­vice com­pa­nies as well as academia and gov­ern­ment will all have to play a role in this by com­ing closer to­gether.

NOCs in par­tic­u­lar are rais­ing the stakes on the in­no­va­tion front. Since 2005, five of the largest NOCs – PetroChina, Petro­bras, Sinopec, Lukoil and Sta­toil – have grown their re­search bud­gets at twice the rate of the su­per ma­jors and, in 2011, out-in­vested IOCs at $5.3 bil­lion (QR19 bil­lion) ver­sus $4.4 bil­lion1 (QR16 bil­lion) – a trend that's un­likely to stop.

At a time when oil prices are de­clin­ing and the in­dus­try's op­er­a­tional costs re­main firmly on an up­ward tra­jec­tory, con­cerns are that in­no­va­tion and re­search and de­vel­op­ment (R&D) will take a back seat as they did in the low-oil price era of the 1980s/90s. How­ever, while this may have been the case in the past, a look at to­day's ma­ture oil in­dus­try shows that it has been widely recog­nised that tech­nol­ogy and in­no­va­tion are business en­ablers, which – tight times or not – need to be pur­sued in the sec­tor's own in­ter­est.

For in an in­creas­ingly glob­alised world an oil company's com­pet­i­tive edge will, in the long term, largely be de­ter­mined by its abil­ity to gain ad­van­tages through in­no­va­tions. This makes the in­vest­ment in R&D and tech­nol­ogy a ne­ces­sity, not an op­tion.

And we are still all too aware of the dra­matic con­se­quences of the 1980s/90s oil price slump, which led to in­vest­ment cuts across the in­dus­try, in turn slow­ing in­no­va­tion and lead­ing to an out­flow and re­duced in­flux of tal­ent. The in­dus­try has never fully re­cov­ered from be­ing seen as more un­sta­ble and less de­sir­able to work in than oth­ers, leav­ing scores of young peo­ple to choose ca­reers in ar­eas such as IT and fi­nance rather than oil and gas. As a re­sult, the flow of new tal­ent into the oil and gas in­dus­try hasn't been able to match the out­flows and keep up with ris­ing de­mand.

To­day, the sin­gle big­gest chal­lenge fac­ing tech­no­log­i­cal in­no­va­tion in the oil and gas in­dus­try is ar­guably the knowl­edge short­age re­sult­ing from the gen­er­a­tional gap that can be sourced back to the 1980s, and that's set to worsen as an en­tire gen­er­a­tion of ex­pe­ri­enced en­gi­neers is reach­ing re­tire­ment age. The ques­tion be­ing asked is who will cap­ture this vast knowl­edge and ex­per­tise that is set to exit from the in­dus­try amidst this ‘Great Crew Change'?

There isn't a sim­ple an­swer. Crit­i­cally, col­lab­o­ra­tion be­tween all en­ergy stake­hold­ers – in­dus­try, academia and gov­ern­ment – will have to be ex­panded and new ways of work­ing will need to be ex­plored and deep­ened by bet­ter util­is­ing ex­ist­ing and es­tab­lish­ing new knowl­edge shar­ing plat­forms. The oil and gas in­dus­try will have to broaden its search for tal­ent across ge­ogra­phies, back­grounds and gen­ders. The sec­tor also needs to look to ad­ja­cent in­dus­tries, such as nu­clear. And it will need to at­tract tal­ent from more di­verse back­grounds rang­ing from ge­ol­ogy to math­e­mat­ics, IT and an­a­lyt­ics in or­der to drive in­no­va­tion in fu­ture tech­nolo­gies.

There can be lit­tle doubt that tech­no­log­i­cal in­no­va­tion will con­tinue to trans­form the oil and gas sec­tor. But just as the pace of tech­no­log­i­cal ad­vance­ments is ac­cel­er­at­ing, so will the need to un­der­stand the longterm im­pli­ca­tions of tech­nol­ogy adop­tion and any po­ten­tial risks, along with how to pass on the knowl­edge that's on the way out be­fore it's gone for­ever. That's another fun­da­men­tal truth

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