Executing technology innovation – the route to competitive advantage

By 2010, non-OPEC liquids productive capacity is expected to grow to over 40 MMb/d. Production will be tied increasingly to overcoming the challenges of the environment, deepwater (Gulf of Mexico, West Africa, and Brazil), heavy oil (Canada and South America), and remote production (Caspian and Siberia).

Paul Spence, Partner
Robin Wye, Manager

By 2010, non-OPEC liquids productive capacity is expected to grow to over 40 MMb/d. Production will be tied increasingly to overcoming the challenges of the environment, deepwater (Gulf of Mexico, West Africa, and Brazil), heavy oil (Canada and South America), and remote production (Caspian and Siberia). Each company operating in these areas will face bigger technical challenges than ever before.

We have no doubt that these challenges will be overcome. Technology has helped the E&P industry supply oil and gas to the market ever faster and cheaper, and the industry has improved over the years at solving technical challenges. Over the past 40 years, average non-OPEC finding and developing costs have declined from $30-$35/bbl to around $8-$10/bbl today. This is a great achievement when set against generally decreasing field sizes and increased technical complexity of current production.

Future success depends on a more deliberate approach. There are three areas that E&P companies need to focus on to sustain success:

  • Continued development of new technology
  • Creation of a framework to manage this new technology
  • Front-line execution of technology-based innovation.

There are many examples of the impact of new technology. The whole nature of the gas industry, for example, has been changed through the sophisticated application of new technologies developed by academic institutions, oil companies, and engineering companies. Gas is now the leading fuel for many power generation projects, and LNG has altered the economics of long distance gas transportation – changes made possible by advances in generation, liquefaction, and re-gasification technologies.

Today, the industry needs still further technology advances, parti-cularly in material sciences, drilling technologies, reservoir manage-ment, production engineering, process control, and information manage- ment.

For individual E&P companies to be positioned for success, it is essential that they have in place a framework to manage new technology. This should comprise:

  • Management approaches to maximize value through exploit-ation of rapidly changing technologies and technology-based innovation
  • Active management of a firm's intellectual property portfolio to enhance shareholder value
  • Management of investments in a portfolio of new technologies and technology-based ideas
  • A rigorous process of searching/tracking new technologies and of generating innovative ideas
  • Internal/external research and development
  • Accelerated adoption and adaptation leading to new tech-nologies and new ways of working
  • Management of participants in an ecosystem to spur idea gener-ation and innovation.

The third key ingredient that will turn technological advances and deliberate management into top and bottom line success is front-line execution. We believe the winning companies will be those that can instill innovation into their field engineers and that can learn to scale the early successes to have real global impact.

Petrobras has continually pushed the limits of deepwater develop-ment in its offshore acreage. Elsewhere, the super majors, which were anxious to access acreage in GoM and West Africa, are now harnessing this technology and combining it with their financial strength and global operating capabilities to recapture the lead in deepwater production.

If we look also at West Texas onshore drilling, we see a group of producers applying horizontal drilling techniques to tight gas plays, procedures described as at the very edge of current technology. This group is being very secretive around the techniques employed with the aim trying to hold onto the strategic advantage they currently have. Their challenge is now to scale and harness the procedures in all places where they now hold an advantage.

Finally, virtual services are coming into their own as more oil companies exploit the power of the Internet to put the right tools in the hands of their engineers and managers. Companies are using online tools to buy, sell, find, and develop fields, and manage their portfolios and the huge amounts of data associated with them to add the most value. Online companies are now offering assistance in finding, developing, and managing fields, sourcing specialist expertise virtually to suit the specific requirements of each prospective field and providing oil companies with the tools to add value without their even needing to invest in building a technology platform.

Portal technology can create a customized window to give employees and partners electronic access to an abundance of data and services from a single website. This new technology has therefore improved knowledge sharing, fostered collaboration and thereby improved productivity. Portal technology may put an end to common industry problems, such as multiple versions of constantly changing rig schedules, wasted time spent searching for data, and decisions based on inaccurate information. The upside is likely to be dramatic.

So it is through the continued development of technology, the creation of a framework to manage it and especially through the front-line execution of technology based innovation that oil companies will develop a competitive advantage to move forward.

This page reflects viewpoints on the political, economic, cultural, technological, and environmental issues that shape the future of the petroleum industry. Offshore Magazine invites you to share your thoughts. Email your Beyond the Horizon manuscript to William Furlow at billf@pennwell.com.

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