SEG: Energy R&D demands funds, collaboration

Energy research and development challenges are becoming more complex, demand integrated and individual approaches, and are in need of wider funding sources, concluded a forum at the Society of Exploration Geophysicists annual meeting in Houston.

Alan Petzet
OGJ Chief Editor-Exploration

HOUSTON, Oct. 27 -- Energy research and development challenges are becoming more complex, demand integrated and individual approaches, and are in need of wider funding sources, concluded a forum at the Society of Exploration Geophysicists annual meeting in Houston.

The scale of the energy system is enormous, and energy technologies average 15 years from the start of research to commercial application, said Donald Paul, executive director, University of Southern California Energy Institute and retired Chevron Corp. chief technology officer.

For example, Paul noted, it takes $200 billion in exploration and production spending to add 1% of global oil and gas reserves. US ethanol output is 1% of global liquids production. And 10 Gw of solar would add 1% to US electricity capacity.

Conventional oil production will be inadequate to meet demand, enormous quantities of new feedstock are available, and low carbon fuel standards are coming, he said.

Hopefully, the world is coming out of the worst economic downturn in our lifetimes, and 2010 liquid fuels demand is forecast to be similar to that in 2006-07, he said. Every form of energy will get bigger, and oil, gas, and coal will dominate.

Making money is the whole basis of industrial technology, Paul said, and energy R&D is capital intensive. The US Department of Energy spent $180 billion on energy research in 1961-2008, and US government spending on clean energy technologies totaled $18 billion in 2006-08.

Energy R&D
DOE has allocated fewer federal dollars to energy R&D funding yearly since 2001, said C. Michael Ming, president, Research Partnership to Secure Energy for America.

But the National Petroleum Council 2007 study said that accelerating technology requires three to five times the funding level of accepting an incremental advancement pace, and to attain a breakthrough demands a 10 to 100 times funding hike, Ming noted.

Federal stimulus funds mostly haven’t gone into oil and gas. Private industry’s share is much larger than government’s in the US, with oil and gas company R&D investment falling and the service company share rising in recent years.

Ming pointed to successful programs in countries such as Norway and Brazil with gross domestic products much smaller than that of the US.

Ming listed several successful US R&D projects. He noted that 24 participants have joined the SEG Advanced Modeling Initiative (SEAM), recommended in 2005 by the SEG Research Committee. Modeled partly after DeepStar, SEAM is focused on generating a realistic synthetic salt model of a 60-block area of the US Gulf of Mexico. SEAM was created in 2007.

Trends apparent
Two major trends are apparent in energy R&D, said Bob Peebler, chief executive officer, ION. They are the need for more rapid diffusion of technology and the need for a more integrated approach.

Peebler said his company conducted mostly internal R&D in 1999. While internal work has continued, the company has now expanded into E&P operator partnerships, corporate venturing with seed capital, academic partnerships, and a joint venture with China National Petroleum Co.’s BGP, the world’s largest seismic contractor.

Industry typically does experimental prototypes with such small tests that problems don’t surface until full-size tests are performed later, Peebler lamented.

For example, his company wanted to run a geophysical test with 10,000 cableless nodes but could not afford the cost of fielding such an ambitious venture. It has partnered with several oil companies, and however long it takes to learn how to commercially deploy 10,000 to 30,000 cableless nodes over perhaps 80 sq miles, the time will have been cut in half because ION went the partnership route, Peebler said.

John McDonald, Chevron vice-president and chief technology officer, reminded SEG delegates that the world took 125 years to consume the first trillion barrels of oil and is using the second trillion in 25 years. It is estimated that another trillion barrels remain to be discovered, ostensibly at a cost of $20 trillion over the next two decades.

Sustainable R&D
Research and development has to deliver energy, environment, and economic benefits, especially an economic return if it is to be sustainable, McDonald said. Industry will derive benefits from independent and collaborative research and development.

Areas of applied R&D include how to get biomass to work at commercial scale, how to use lower grade heat in geothermal processes, how to eliminate natural gas use in oil and gas operations, how to make steamflooding work in carbonate reservoirs, and converting heavier products into lighter fuels, McDonald said.

The successful pursuit of carbon sequestration will “sustain a prosperous future for fossil fuels,” said Raymond Orbach, director of the energy institute, University of Texas at Austin.

The processes of capturing, compressing, and storing carbon dioxide are highly energy intensive, and the industry needs to reduce the cost of capturing CO2 from flue gas, which is extremely high, said Orbach, a former DOE official.

Public acceptance of the risks associated with CO2 storage cannot be taken for granted, as demonstrated by protests in Germany this year against a project to sequester CO2 at 2,600 ft in a saline aquifer.

Bob Pavey, partner, Morganthaler Ventures and past chairman of the National Venture Capital Association, said energy research projects have become a new destination for venture capital only in the past 2 years or so.

Previously most venture capital went to health care, information technology, and consumer and business services companies.

Great uncertainty revolves around who ultimately will buy the developing energy companies that venture capitalists are supporting with seed funds if those companies’ research results in commercially viable technologies, Pavey said.

Contact Alan Petzet at alanp@ogjonline.com.

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