Leena Koottungal
Survey Editor/News Writer
Energy executives believe that the rate of innovation in the industry is increasing and the innovations that use a variety of new or existing technologies will bring the most dramatic change, according to the 2014 Oil & Gas Technology Radar survey conducted by Lloyd's Register Energy.
The survey polls 257 oil and gas executives ranging in seniority from operational-level professionals to board-level executives, representing private and public companies, as well as national oil companies (NOCs).
Key findings
Fifty-nine percent of surveyed companies increased their average research and development (R&D) spending, with almost one in four boosting this by more than 10%. Looking ahead, 68% intend to increase their R&D budgets, with about one half of the total increasing this by at least 10%. Although part of that rise might be aimed at coping with higher costs, the bulk represents real growth in activity and interest. For example, management time spent on R&D and innovation has risen at 45% of companies in the last 3 years and 54% of respondents expect it to do so in the next 3 years; only 6% foresee a decline.
The more effective use of data and computing will be more important. Fifty-eight percent of those surveyed agree that many future breakthroughs will involve bits and bytes, rather than physical hardware.
According to respondents, international oil companies (IOCs) have introduced by far the most breakthrough technologies in the last 2 years (cited by 46%), followed by exploration and production companies (31%). In the coming 2 years, however, respondents expect the advantage of IOCs to diminish, as other companies bring in new technology. In particular, those surveyed see an increasing role for NOCs: two thirds of those polled expect NOCs to increase their spending on R&D significantly, supporting their drive for greater international growth and increasingly operating like IOCs.
Given the link between innovation and competitive advantage, in the past 2 years, in-house research has been the most widespread approach to developing innovation (cited by 59%). Although this will continue to be the most common model in the coming 2 years (51%), companies are looking to spread the costs and reduce the risks of development. In particular, specific joint ventures with external partners are set to become more common. This should lead to more rapid change.
Continued risk aversion in the industry, especially with respect to the deployment of new technologies, is a major brake in innovation. The industry, while becoming more eager to adopt change, remains highly conservative. In particular, the new skills required, combined with the risks that new technologies can bring, such as in operational disruption, make the majority of firms reluctant to be the first to adopt substantial innovations. Instead, 56% of respondents describe themselves as fast followers, who make changes once others have proved their worth; only one-quarter consider themselves to be early adopters. Crucially, delayed deployment is a major barrier to progress, slowing the commercialization of new ideas. In large part, this is due to the difficulties associated with testing in appropriate, real-world conditions. More than one in five cite this as their biggest headache in dealing with the quality-assurance requirements associated with deployment.
Outlook to 2020 and beyond
In the longer term, subsea robotics, autonomous underwater vehicles and other ultradeepwater advances are seen as key areas of advancement, along with laser and rigless drilling, and other forms of directional drilling improvements. Beyond these, digital technologies are also expected to continue developing during this time frame, from 4D seismic flow modeling to digital wells.
Ken Cronin, chief executive officer of UK Onshore Operations Group, explains that various developments are now building on top of the breakthroughs that have already come in areas such as horizontal drilling. "Technologies are coming along at a time when you can retrospectively look at wells that didn't work out properly and go back in and look again, using that technology, and find out the reasons why it didn't work and that automatically feeds back into the experience of the technology.