A.D. Koen
Gulf Coast News Editor
Upstream oil and gas operating imperatives in an era of restructuring and cost containment are reshaping production research and development.
One of the most telling trends: In-house production R&D has increased emphasis on applied technology.
More than ever, production researchers are being asked to develop technology that can contribute immediate value to the bottom line of companies funding their work.
Researchers at major oil companies are working more closely today with affiliated business and operating units. More often than not in-house production R&D focuses on limited, short term goals, for example solving a specific problem in a specific reservoir or field for a specific client.
In many cases, oil company R&D operations have formed integrated teams to mirror reorganizations of in-house clients.
As in the past, major companies are relying on professional research organizations for help in answering basic scientific questions. But the focus on quick returns has majors and large independents--like small companies with limited research capabilities--turning more to out of house researchers for technology with short term applications.
For example, several large companies have tapped technology developed by computer hardware and software companies and geophysical contractors to improve development and production efficiencies. Similarly, oil field service companies have contributed especially to the quality and availability of horizontal drilling technology. And private and public research organizations are finding more opportunities to conduct applied research for single clients or small groups in addition to large cooperative research projects of more basic scientific merit.
As a result, even new related technology still under development is helping improve production efficiency, increasing ultimate recovery in many fields and adding to profitability.
ENDURING ISSUES
Many issues that in the past decade have affected production R&D funding, helped set technical goals, and guided research staff reorganizations likely will continue influencing the direction production R&D is headed well into the next century.
Growing global environmental awareness most certainly will keep increasing pressure on the oil and gas industry to work cleanly. As oil and gas activity diffuses around the world, more emphasis will be placed on developing environmentally safe production technologies.
The American Petroleum Institute, for example, spends about 80% of the exploration and production department's research budget on environmentally related projects--much in response to government regulations or possible regulations--with the balance budgeted for development of API equipment standards and recommended practices.
At API, at least, the trend has been set.
"And that is to do more environmental research and less standards research," an API researcher said.
In-house production R&D at large companies will continue to emphasize helping affiliated operating or business units solve specific problems affecting immediate profitability or short term recovery. In-house R&D staffs also will work on technology that could prove to be an asset by providing a significant technical competitive edge.
As petroleum industry goals evolve and new barriers to efficient, profitable operations are defined, cooperative industry studies will continue forming at public and private R&D facilities to work on new technical solutions with widespread benefits.
But whether in-house or out of house, production researchers in the future will focus R&D on two general areas to:
- Develop and help apply the best tools and technologies to heighten recovery.
- Better understand oil and gas reservoirs and to describe them so accurately that upstream decisions get the most out of natural downhole conditions that contribute to recovery but avoid damaging formations.
MOST VISIBLE TREND?
With so much emphasis on use of technology to improve profits, one of the most persistent trends in production R&D--growing emphasis on the environment--won't contribute much to more efficient upstream operations.
"Environmental costs are significant to oil companies and will continue to grow. We have to address them in the laboratory before we can control them in field," said Tom Williams, director of Westport Technology Center International (WCTI), Houston.
The weight that oil and gas companies place on effective, affordable environmental protection was reflected in a survey by the Energy Research Clearing House (ERCH), Houston. ERCH was formed by a group of major producers, independents, and oil field service companies to encourage cooperative, multidisciplinary research.
in its survey, ERCH asked members to rank 88 research topics in five areas--production engineering, reservoir engineering, enhanced oil recovery (EOR), geology, and geophysics--based on the following question: "What areas of E&P research are you willing to consider funding on a cooperative basis?"
Among production engineering topics included in the survey, the top four areas identified by respondents related to pollution problems or environmental protection.
Reduction of produced water was the top area of interest for joint research and No. 1 issue to all three ERCH member groups. Cleanup of produced solids came in second, cleanup of produced water third, and developing an alternative to disposing of produced water fourth.
Development of automated production systems for hostile environments and marginal properties, in fifth place, was the top nonenvironmental production engineering topic for which respondents said they would be willing to help fund research.
Roger Hite, director of production research for Shell Development Co., Houston, said Shell about I year ago created the Petroleum Environmental Research Fund (PERF) at its Bellaire, Tex., research site to develop techniques and hardware to separate oil and water.
Hite said PERF is a good program for joint funding because Shell has a policy of not keeping proprietary any technology dealing with environmental protection or safety.
"If we develop technology in those areas, we publish it," he said. "So if we aren't going to keep anything proprietary, it makes sense to have joint industry participation to share the cost of those projects."
OTHER JOINT R&D
ERCH Director Cloy Causey said survey responses also revealed increased interest in funding joint R&D projects that promised quick returns on investment. Conversely, companies were least interested in topics with higher scientific interest and limited effects on profits.
ERCH survey respondents showed most interest in funding cooperative research into geological, geophysical, and production engineering topics and least interest in funding cooperative reservoir engineering and EOR studies. Respondents showed high interest in jointly funding research in technical fields outside production engineering that would further understanding of oil and gas reservoirs.
In geology, the top three areas of ERCH member interest were:
- porosity prediction in undrilled areas by extrapolating from known or inferred rock composition to help evaluate prospects or refine fluid flow concepts in basin models.
- Developing more sensitive sequence stratigraphy techniques to better predict distribution of reservoir rocks.
- Improved porosity prediction through reservoir simulations based on extrapolation of well log and core data.
In geophysical research topics, 3D model buildings editing, and visualization and geophysical reservoir characterization tied for top interest among survey respondents.
Causey said increasing interest in jointly studying more applied research topics shows restructuring and downsizing of the U.S. oil and gas industry has stepped up the search for R&D funding across the board. Also, survey results show technologies such as 3]D seismic are blurring the separation of production research from other areas of upstream study.
"With the advent of 3D seismic technology, companies began applying seismic data, formerly thought of as an exploration tool, to better define reservoir characteristics," Causey said.
INTEGRATING TECHNOLOGY
Lowell Smith, manager of Amoco Corp.'s production research division in Tulsa, said the evolution of technology such as 3D seismic is blurring boundaries between production and geoscience research.
"And the fact is we're not eradicating them fast enough because our client groups are getting more into multidisciplinary exploitation projects and teams, and we're seeing great value in having people with diverse skill sets work together," he said.
Many major companies are organizing in-house research teams to work with multidisciplined operating and business unit teams.
In the case of computer based reservoir visualization, the line between production and exploration is nearly rubbed out.
Phillips Petroleum Co. in the mid-1980s begin visualizing with 3D seismic data (OGJ, May 31, p. 29). Today, in addition to 3D seismic data, Phillips can synthesize data elements from geology, land, geophysics, petrophysics, drilling, and reservoir engineering into a single 3D earth model. The model then can be animated to allow team members to view the image from whatever perspective is desired.
Texaco Inc. can render sets of any 1D, 2D, or 3D data defining subsurface parameters to visualize earth volumes that reveal essential, important oil and gas formations features, said senior research scientist Michael J. Zeitlin, integrated visualization team leader in the E&P technology department, Houston.
VISUALIZING 3D DATA
Zeitlin said Texaco is applying visualization technology all over the world to make better upstream decisions faster.
In California, Texaco is using 3D images generated by rendering geological data and data from thermal observation wells to control distribution of steam injected into heavy oil reservoirs in Kern River field. Zeitlin said benefits can accrue from lowering operating costs and improving sweep efficiency.
"By the time a company begins injecting steam into a reservoir, it already has produced a lot of oil," he said.
"The company wouldn't want to inject steam into compartments that have been drained. Steam costs a fortune. So if I inject steam I don't want it going into a part of the reservoir I don't want to charge."
By animating a series of integrated 3D snapshots on a computer screen, Zeitlin said Texaco field technicians and managers can see how steam moves through the reservoir and change injection rates at various injection wells to improve steam distribution.
"Visualization technology can quickly tell them where to inject the steam, how to inject, and then how to produce," he said.
Visualization also can be useful for double checking data and monitoring the results of decisions. For example, because of an inaccurate calculation, a reservoir engineer might waste weeks analyzing a faulty graph or make production decisions that cause problems. But by putting the same data point in an animated 3D visualization, Zeitlin can see it in context, discover quickly whether the data itself is wrong, and then use visualization to help correct it.
"So I can use visualization techniques to spot bad data," he said. "The images might allow observations that challenge previous interpretations of what's going on in the reservoir. But that's what we should be doing."
APPLIED RESEARCH
Reduced funding and staffing have prompted major oil companies to sharpen the focus of in-house R&D, and in-house research accounts for an estimated 95% or more of most major company R&D budgets.
Fred Perkins, president of Exxon Production Research Co. (EPRC), Houston, said the unit's downsizing and restructuring since about 1986, coupled with constant technological challenges, have focused its in-house R&D program on technology that can be applied quickly in the field. With fewer employees and smaller budgets, Exxon production researchers must study marginal applied research projects more carefully before deciding to undertake them in house.
"Today we're working harder and more closely with our affiliates than ever before to be sure technology we develop for marginal programs is really worthwhile," Perkins said of EPRC's in-house research.
Amoco relies on focused in-house research to retain competence in key core operating areas while leveraging R&D spending by taking part in joint projects. To get the most from limited resources, Amoco has adopted a more open management style with many more informally and self-directed work teams, some without a direct supervisor.
Smith credits Amoco's operating units with leading the way in recognizing the benefits of team behavior. In fact, Amoco R&D teams in many ways function as extensions of the affiliated operating and business units then, serve as clients.
Amoco researchers rely more than in the past on operating clients to help define the scope and method of R&D projects. And research team members have more say in how research dollars are spent.
RESEARCH-BUSINESS ALIGNMENT
"They can get an airplane ticket to fly to a client location tomorrow and they don't have to ask their supervisor or director or anybody," Smith said. "If the business is there, they can go.
"It is absolutely necessary in today's oil and gas industry that research--applied, basic, or a combination of both--is an integrated part of the business. Our strategic directions here are directed toward increasing the alignment of research with the business of the company, being able to demonstrate where it has value, and being able to deliver our products and processes to the user in the most timely and effective ways possible."
Shell Development's Hite said his company's main production research goal in the 1990s is to provide technology that will have the biggest boost to the profits of Shell's business units.
"We'd like to consider our research or technology plan an integral part of Shell's business strategy," he said. "In that regard, we try to participate as a member of the team, with a big emphasis on teamwork between research and the business units."
In addition to partnering R&D with business units, Shell Development takes part in joint industry research when possible. Also, Shell is on the lookout for ways to get funding from outside the company for in-house research projects, which typically consist of Shell researchers developing applied technology while guided by a steering committee composed of Shell and other companies helping fund the work.
"Our goal is to get about 5-10% of our in-house research funded through joint industry projects," Hite said.
To leverage its in-house R&D program, Amoco about 3 years ago began polling interest among international oil and gas companies in joining research begun about 2 years earlier into the viability of enhanced recovery in oil reservoirs by injecting hot air. Today, project leader Amoco and eight partners from the U.S, Canada, and Europe are funding the study, Smith said.
Amoco personnel run the experiments using Amoco research facilities. The work involves compressing air to about 10,000 psi, which heats it to 100-200 F. for injection. Joint project partners contribute oils for testing from reservoirs where they believe the technology might have applications.
Companies taking part in the research may use internally whatever information is generated by the project but may not sell the data for use by other companies.
MAINTAINING INTERNAL SKILLS
While most of majors' R&D budgets is spent in house, many companies are less adamant in developing all technology in house.
"Today, we've become more interested in acquiring new technology, then remolding or packaging it to fit the needs of our operating entities," Smith said. "Everyone is looking for a way to get a bigger bang for his research buck, and if there's no proprietary advantage to be gained and if the quality and applicability is right, we will use outside sources."
Despite trends for companies to harvest more technology from outside sources or to rely more on jointly funded projects involving groups of oil companies, service companies, and research organizations and colleges, Smith said there still is a strategic need for companies to have unique skills and develop technological areas that can provide a competitive advantage.
For one thing, unique internal technical capabilities can be used to attract prospective global partners. To maintain internal technical skills, Smith said, petroleum industry research organizations of all kinds will have to develop focused unique or proprietary portfolios of technologies to use for business leveraging.
For example, Amoco this year has budgeted into its in-house R&D program "more high risk projects than we had trended into in the past few years because of business reasons."
Cecil Chopin, general manager of Texaco's E&P technology department, said many companies dealing with a foreign government, particularly in a developing country can bring money to the table.
"But a key interest of developing nations is developing their people as they develop their resources," Chopin said. "So in addition to money and normal drilling and production skills, technology is one of the things we can bring to the negotiating table. It can be an important tool for winning concessions. "
JOINT INDUSTRY PROJECT
Texaco has maintained a long standing program in-house to develop proprietary instrumentation and systems.
But about yearend 1992, Texaco decided to form a joint industry project (JIP) to try integrating multiphase metering technology developed in house into a module with pressure boost capabilities developed by other companies, said Pete Sigwardt, Texaco's manager of multiphase fluid flow technology.
This year, Texaco and nine other companies began testing two multiphase metering systems and two multiphase pump systems at Texaco's flow research center north of Houston near Humble, Tex.
The Humble research site is equipped with pumps, pipelines, and separating vessels with capacities similar to operating field units. That allows researchers to work with multiphase oil-water-gas flow mixtures in "field representative conditions," Sigwardt said.
Recreating near field conditions for research allows researchers to generate results that can be translated directly to the field without scaling up proportions of experiments conducted at bench scale. In some cases, equipment bound for the wellsite is brought to the Humble site to be tested.
Sigwardt said the JIP is beginning to deliver flow data, "and we hope to complete work in the last quarter of 1993."
In addition to developing information that operating or business units can apply quickly in the field, the JIP project has allowed participants contact with emerging multiphase pump technology of manufacturers and suppliers of vendor systems. As a result, Texaco and others have been able to influence some late development issues affecting their specific applications.
EVALUATING R&D
Technological advances often occur in series of many small, difficult to measure improvements. So evaluating R&D projects isn't always easy.
Some basic, scientific research can last indefinitely, confounding efforts to assign value. However, as petroleum industry research has trended more toward limited, applied R&D projects with clearly defined goals, value can be assigned with some certainty by the clients being served.
Darrel Bose, manager of reservoir technology at ARCO E&P Technology, said ARCO about 1 year ago began using technical project agreements between ARCO researchers and prospective in-house clients to guide and assess the value of research projects.
Smith said Amoco R&D teams measure success of their work with a scorecard process "based on things that at times seem a bit trivial, but which add up to create a picture of how we're doing."
The scorecards track factors such as the amount of customer contact while working on a specific problem, the number of customer requests, or reports, bulletins, or notes generated by a team. R&D management does not dictate to the team what indicators to use. Rather, teams are allowed to set individual goals and objectives based on company, department, or division strategies.
"We let the teams and their clients decide what are the "most scorable things," Smith said.
R&D FUNDING
Petroleum industry downsizing has ensured that money has remained one of the most important issues guiding production R&D.
In February 1993 at the Schlumberger Cambridge Research Center, Cambridge, England, the Journal of Petroleum Technology (JPT) presided over a day-long roundtable assessment of research and technology issues. Participating in the discussion were 16 oil and gas industry officials from major and national oil companies and service companies in the U.S., U.K., Saudi Arabia, Venezuela, Netherlands, France, and Japan.
Roundtable moderator Keith Millheim, JPT senior technical editor, used a hexagon cognitive mapping technique to help guide the high level dialogue through the many R&D issues raised to focus on key themes.
According to JPT, the central issue identified was "the use and value of technology known at a corporate level that would enhance future development and planning." As a result, part of the group's discussion focused generally on ways to integrate R&D strategies and spending with business plans to contribute to profits.
Opinions about what companies expect from R&D investments varied, depending on specific goals. Some conferees opined that E&P companies tend to define R&D value in terms of exploration, success because that is where then, compete. National companies such as Saudi Aramco Oil Co. value R&D differently because its goal is to assure that oil in the future will continue to be a competitive energy source.
But whether long or short term goals were deemed most important, the key, underlying issue as summarized by Millheim was getting the most out of shrinking R&D budgets.
How much less are oil and gas companies spending on research? Results of JPT's most recent yearly PetroResearch Survey of more than 200 operating companies, service companies, universities, and private and public research labs and institutes show R&D spending is down dramatically. R&D outlays by 17 major and large independent companies compiled by Oil & Gas Journal Energy Database show the decline among oil companies might not be so severe.
Data compiled by the OGJ database show 1992 E&D spending by 17 companies declined a little more than 8% to about $2.25 billion.
A CASE IN POINT
WTCI's Williams said the Westport site is an example of how industry cost cutting is changing oil and gas R&D.
WTCI is a full service research site working for major companies and large independents in all facets of upstream technology. But until last May, when it became a division of IIT Research Institute (IITRI), Chicago, it was part of British Petroleum plc and developed exploration and production technology for BP Exploration Inc.
"WTCI would not be in existence if the majors had not been cutting costs," Williams said. "It probably is one of the newest E&P research facilities in the world, and BP sold it intact with most of the people who were working here."
Among the production technologies WTCI is equipped to research are well completions, materials and corrosion, well productivity, formation evaluation and geochemistry, production chemistry, rock mechanics, reservoirs engineering, and produced water disposal.
"As companies have downsized and realized they can't tackle a specific R&D area alone, they have defined common problems and found joint venture data is better and much cheaper," Williams said. "Everybody is laving off people, but they still need high end research." Also, Williams said, more U.S. companies are becoming interested in joint research because of petroleum industry globalization. European companies traditionally conduct more joint research than companies in the U.S. because companies in Europe don't consider as much of their research data proprietary.
"As the oil industry becomes more global, that culture has been translated to the U.S.," he said.
ALIGNMENT WITH NATURE
Production researchers agree that many of today's R&D areas will endure through the end of the 20th century. Similarly, most research methods and issues affecting R&D decisions today will persist.
Perkins said Exxon production researchers in many cases won't be running the same research projects even a couple of years from now.
"But research will continue in the same general areas, and more technologies become possible as we get better computer hardware," he said. "Someday, maybe, we'll reach the point of diminishing returns, but we're not there yet.
"One of the things that has kept us working has been constant change in the environment we're working in. As long as the environment keeps changing, we'll have to continue developing technologies that allow us to adapt."
Amoco's Smith said R&D organizations in the future generally will have to be nimble to meet growing technical needs of oil companies. He foresees more systemic approaches to doing research and developing technology.
Smith expects no letup in the next decade on the extent to which business needs will drive research efforts. Research organizations will have to be shaped around business to foster a dependable way of innovating.
"Companies will have to retain basic competencies, to continue to know the best ways to drill wells and how to manage them," he said. "But a very acute need is for continued progress in reservoir management and that's going to continue increasing the interdisciplinary character of the work.
"Everything we do in E&P is related to what Mother Nature left down there. Understanding that and interfacing the knowledge of natural systems with what we can do physically is going to be a continuing core challenge for business and for R&D well beyond my career."
If any one technology can help petroscientists understand and interface with oil and gas reservoirs, it is computer visualization.
Already, Texaco's Zeitlin said, little separates what most people think of as virtual reality from what Texaco can achieve with its visualization capabilities. If the technology could be applied to generate holographic visualizations, 3D images could be created without the need to show movement.
Perhaps more pertinent than the possibility of a holographic imaging breakthrough to visualization's ultimate contribution to oil and gas recovery is whether data will exist to feed holographic models of the subsurface.
Zeitlin contended that already the oil and gas industry measures and collects data it can't use fully because of technological limitations.
Conversely, "if visualization technology gets too far beyond our ability to collect data, we're not being practical," he said.
Still, Zeitlin said, visualization researchers will continue trying to express suites of oil field data as closely as possible to the way it exists in reality.
"The closer we get to aligning earth data to the way earth volumes and processes are aligned, the better we will be to understand, predict, and optimize reservoir performance," he said.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
