In a keynote speech at the Society of Petroleum Engineers (SPE) Annual Technology Conference & Exposition (ATCE), SPE General Chairperson Matthias Bichsel emphasized the role of innovation in moderating the price of energy.
Before expanding on this theme, Bichsel, the former projects and technology director for Royal Dutch Shell PLC, first took an unflinching look at current energy economics.
He noted that demand from the developing world continues to pressure supply, despite a plateau in the US and Europe due to a combination of sluggish economies and better conservation.
Finding and producing oil and gas is more costly for operators as they look for resources in more-difficult environments, less-permeable formations, and areas with little existing infrastructure. Meanwhile, falling oil prices make risk-taking less appealing.
Additionally, there are mounting costs for the industry that are not reflected in the indexed price of energy commodities. These unpriced factors include carbon dioxide regulations and social disruption in producing countries.
Bichsel called moderating energy prices in the face of these factors, “the fundamental dilemma of the oil and gas industry.”
‘Invest in innovation’
His solution: Do things better than before. Get more out of less. In short, invest in innovation.
History, says Bichsel, is replete with examples of innovation driving down cost: the Industrial Revolution and the advances in information technology, to name just two.
In the oil and gas industry, we have seen a reduction in the number of dry holes drilled and an increase in the success rate of 50% over the last 50 years, he said. This is not attributable to a single technology, but the cumulative result of innovations in geology, seismic, drilling, and completions over that span.
However, Bichsel warned that innovation must be tempered with practicality. If something works well enough, he said, stick with it, scale it up, standardize it, and replicate it over and over. “Reproduce what works, improve what doesn’t,” he said.
Leading by example
He noted that Shell has done this with great success in China where they have developed several small, mobile, automated drilling rigs, each designed for a single purpose. One rig drills the tophole, another the horizontal section, and another does the completion. This is repeated continuously.
The result, says Bichsel, is that drilling is done faster, safer, and more reliably than before. All of these drive down cost.
Bichsel believes that the innovations that will continue to moderate energy prices will come by sharing ideas in forums like ATCE, funding technology startups, and collaborating outside the industry. In this way, a chain reaction will speed the pace of innovation.
Critical to this process will be the way the “great crew change” is handled. Bichsel said that his generation must be ready to turn over control sooner than was done in the past. Gen Xers and Millennials should be given the opportunity to tackle the challenges that will define their careers.
“We need new ideas, from new people, and we need to move into entirely new areas of industry,” he said.
Contact Michael T. Slocum at [email protected].
