Crossover technologies are emerging as a priority in energy companies’ fiscal defence against low oil prices. The elongated wave of higher prices pre-June 2014 stalled the deployment of much-needed innovations aimed at curbing costs and boosting operational efficiency. Now, companies’ stressed budgets and rising energy demand must herald a new era of cutting-edge technology, especially as the oil glut looks set to continue. Saudi Arabia, OPEC’s linchpin, is shrugging off global pressure to lower the group’s 30mn b/d production ceiling in Vienna next month. Sub USD 50/bl oil has already trimmed many companies’ revenues by two thirds, but creating innovative technologies from scratch is expensive and time-consuming – time and excess cash are distant luxuries.
Crossover technologies provide a middle ground; energy companies need new ideas and adapting innovations from other sectors for oil and gas operations saves considerable time and money. Exploring this alternative could mark a turning point for companies looking to pull back their investments in novel initiatives. Lower oil prices have already slowed or halted many firms’ innovative plans, according to 76 percent of survey respondents to Lloyd’s Register Energy’s 2015 Oil and Gas Technology Radar research report ‘Innovating in a New Environment’.
The Middle East has an abundance of energy waiting at its drill bits, but the industry needs to enhance its tool kit. Energy equipment faces a tough balancing act; it must be easy to maintain and repair while also being able to withstand harsh conditions.
A single technology holds potential for many industries. Automated image analysis can be used by security forces for facial recognition, by doctors for digital pathology and in the oil and gas sector, to determine drill bit damage. Directional control can happily straddle the medicine and energy sectors with steerable needles and geosteering, respectively. Novice oil rig workers can be protected from hazardous environments by using simulators for training, as done in aviation by professional pilots. Determining when an oil pump may fail is similar to checking when a commuter train could stutter to a halt during rush hour, as is the risk analysis of an energy geologist’s view of a rock formation before drilling and sailors gauge of a meteorological threat.
Obstacles to application
Yet, a number of obstacles mean energy companies’ actual application of crossover technologies has dragged. The need to safeguard their squeezed budgets has formed the crux of companies’ defense, especially as today’s volatile pricing has put balance sheets under the spotlight.
A new breed of thinkers who can carry over established ideas from other industries to transform the archaic methods in oil and gas are urgently needed. Nearly half of the world’s petroleum engineers will reach retirement age within the coming decade, accelerating the dash for new talent. Companies can also look for untapped thinkers internally, which could be helped by creating an innovative culture in-house. Gulf countries are also increasingly reappraising school and university curricula to galvanize students’ critical thinking and appetite for science, technology, engineering and math (STEM).
The industry is still treading too carefully around the topic of collaboration as they fear that sharing too much could jeopardise their intellectual property. But ring-fencing sacred information and sharing the rest is essential in seeking out new channels to transfer technologies into the oil and gas industry – medicine and aviation remain firm favourites. Boosting the level of standardization is also key. A transparent set of best practices for crossover technologies could help initiate change in oil and gas – an industry deeply entrenched in aged practices – and ease shareholders’ reluctance to explore new territory.
Energy companies eyeing crossover technologies also need to make sure they finish the job. Lessons on how best to use digital platforms in oil and gas have partly been gleaned from other industries. But there is an inconsistency in application – digital information from an oil field is passed through the operational chain on PDFs and paper.
Companies must first overcome their fear of first-mover disadvantage and must seek strategical guidance from the many success stories. The Canada Oil Sands Innovation Alliance (COSIA) was launched in 2012 and provides a blueprint for collaboration and is a great example of a joint approach to improving the sector’s environmental impact, with over 800 distinct technologies and innovations shared so far. Lower oil prices need not dampen companies’ hunger for innovation, as illustrated by Shell when it established GameChanger during a down cycle in 1996. GameChanger is based upon the exploratory thinking of Silicon Valley and has engaged 1,700 innovators and turned more than one hundred ideas into reality.
The energy industry has already embraced the concept of crossover technologies, especially the significant savings in research and development. But a theory means little without real-life application and the industry cannot afford to wait.
Ghassan Barghouth is the executive president of Schneider Electric in Qatar. He has held a number of key leadership roles throughout his 18 year experience region, where he successfully led the growth and development of long term strategy of highly reputed international organizations across the Gulf region, with solution leadership in Transmission & Distribution, Smart Cities, Oil & Gas, Industrial Services, and Power Generation Segments. Ghassan joined Schneider Electric in October 2011. Prior to that he was the general manager for Energy Services business in the Gulf Region for General Electric. Barghouth holds a bachelor degree in mechanical engineering from the University of Jordan.