Where are the Oil & Gas technology successes of the future?

If a man……………make a better mousetrap than his neighbour, though he build his house in the woods, the world will make a beaten path to his door. Ralph Waldo Emerson; 1803-1882

In this article, I want to see if I can identify some key technology trends, and therefore potentially successful technology companies. My approach will be to look at business and exploration trends to identify the key ‘pulls’ on technology; it seems important to think about the issue this way round – as opposed to identifying “wouldn’t it be neat if…….” technologies and ‘pushing’ them into exploration (and business). This seems like a good moment to declare my views on energy policy, climate change…..

Where I am on this is that:

1. There's just no point in denying that burning fossil fuels is having an impact on the planet. I was very much in the 'old' BP position of "as scientists we should accept the evidence and think about how to respond". Pretty well as Shell articulate today.
2. As we see in most of life, we will wait a long time for politicians to do anything sensible….and if you don’t believe that, I suggest you review what happened in Copenhagen a few weeks ago!
3. I don't believe wind and solar will provide more than a fraction of the energy we need (tides may be a special thing for the UK) and I still find nuclear a bit scary [partly because of b) - imagine if this UK Government treated the nuclear industry like they treat our armed forces!].
4. So I see little alternative to fossil fuels for the foreseeable future. That said, I'm going to trust a) our inventiveness and b) technology. For example, you will perhaps have seen that the US has discovered enough Gas (which is by far the cleanest of the fossil fuels) that somebody as experienced as T Boone Pickens thinks they could aim at getting by without 'foreign oil' and I like Carbon Capture & Sequestration if it means we can use all that coal without choking everything and everyone.

So the first question I ask myself is - where are the Majors (and larger Independents) going to find oil & gas new resources in the next decade? It seems to me that there are two distinct options:

1. Building relationships of “mutual advantage” with resource-rich Governments and their NOCs who need help in bringing their current assets to production and in discovering new ones, for example in Iraq, Russia….. IOCs bring finance, “Know How” and technology.
2. Re-engagement with Frontier Exploration in, for example: a) The Arctic; b) Onshore, notably in central Africa, East Siberia and c) Deep Water, the last handful of unexplored areas.

After a decade of ‘easy’ exploration, in which relatively young (mainly Tertiary) sediments were explored offshore using regional 3D seismic as the principle exploration tool, we are returning to a style of exploration which is ‘hard’, requiring clever geological work and integrated geoscience, in deeper targets, in more remote environments.
However, even if things are getting harder, ‘explorers’ still have to pull the same performance levers that have always been available to them, namely increasing their success rate at the same time as reducing the cost of what they do: this is true whether drilling exploration wells in a frontier province, development wells in a field that is being brought onto production or new wells in a currently producing field. Ultimately, this is about spending less on drilling, drilling costs being the single biggest component (typically 50% or more) of any campaign to Find Petroleum. So there should be enormous ‘pull’ on technologies that allow us to find the required resource with significantly less wells and/or spend significantly less on any one well. Gas will be an increasingly important global theme, particularly unconventional gas, perhaps especially in Europe, emulating the massive successes onshore in the USA. For some countries, gas storage will be an important sub-theme; the UK is very exposed to gas market swings, having only about two week’s storage capacity whereas Germany for example has more like 100 days. Staying with a storage theme, the oil & gas industry will also increasingly involve itself in the storage of CO2, the ‘S’ part of CCS, both with the deployment of enhanced oil recovery schemes that utilise CO2 and its eventual permanent storage in fully depleted, rightly abandoned fields. This will fit neatly into a focus on increasing the recovery factor of each and every oil or gas field, including developing fields that are currently ‘stranded’, extending the life of mature fields and resurrecting prematurely abandoned ones.

Innovations in my past

Perhaps I ought to make it clear that I am interested in technology innovations and breakthroughs, not the sort of minor incremental improvement that comes from adding yet another attribute mapping function to a widely sold interpretation system, for example. In my humble opinion, such innovations and breakthroughs tend to come from smaller to medium sized, more entrepreneurial, companies, not from the ‘big battalions’. Let me describe a handful of experiences which lead me to this conclusion. Way back in the late ‘80’s and early ‘90’s, BP – in common with other Majors - tried its hand at in-house software development, aiming to build its own GIS data storage and mapping system (I think we called it GANDALF?), it’s own well log storage and interpretation system (WISARD?), it’s own seismic processing system (I forget the name) and it’s own seismic interpretation system (SEIS and then SIIS). It proved to be tremendously difficult to develop systems that met our users’ quite varied needs, to anything like the promised budget and schedule. Fortunately, we came to our senses rather quickly and realised that there were some great innovators ‘out there’, in small companies led by entrepreneurs, who were much better at this stuff than us – and we quickly dumped our in-house efforts in favour of Finder, Promax, Geoquest and Landmark, and so on.

On a different tack, the tremendous improvement in exploration success rates that occurred from the mid 1990’s onwards was due to the availability of large regional or ‘exploration’ 3D seismic that enabled us to explore the Tertiary sediments of the Gulf of Mexico, Deep Water Angola and Nigeria, Trinidad, the Nile Delta etc etc. The innovations that enabled us to access such 3Ds at remarkably low unit cost were introduced by two Norwegian companies, at the time one medium sized, one small, namely Geco and PGS, who transformed the acquisition technology that was being deployed.

Finally, I recently spent a couple of years as a board member of the Danish company Welltec who, under innovative and entrepreneurial leadership, developed a set of robots that run on wire-line (“tractors”) together with associated well work tools; their equipment is of much higher quality and reliability than that available from (bigger) competitors. The technology reduces by nearly an order of magnitude the cost of working in the reservoir (compared with using a rig or a coiled tubing unit). Welltec and PGS are a couple of exceptions to my further observation that in general innovative and entrepreneurial companies do not necessarily fail (well, of course many of them do!) but instead are absorbed on success into the maws of the behemoths, the whales – Schlumberger, Halliburton, Baker Hughes, perhaps Weatherford. I recall that at the beginning of this decade, my former employer decreed that henceforth we would tend to contract with such whales, it being troublesome and inconvenient to have to manage the supply chain with lots of minnows in it……..thereby accessing lots of incrementalism but cutting ourselves off from real innovation. So here’s a question for anyone who wants to reply – can you point to one technology that was invented in Schlumberger, Halliburton, Baker Hughes or Weatherford that improved anybody’s exploration success rate?

Focussing

Beginning in the mid 1990’s, the advent of regional or ‘exploration’ 3D, at extraordinarily low unit cost, enabled us to explore offshore in a very precise way; for example, the whole of the Angola Deep Water blocks 15, 16, 17 and 18 – an area of 20,000 sq kms plus – is swathed in such 3D, and this is a direct enabler of the high exploration success rates enjoyed by ExxonMobil, Total and BP. We find ourselves presented with a different problem when exploring onshore. Consider for example East Siberia, an area that we can describe for qualitative purposes as ‘similar in size to western Europe’. How can we focus our efforts in an area of such scale, engaging first 2D and then 3D seismic only when we have a degree of focus that means we can afford to deploy it?

Well, one option would be to repeat the way the Soviets approached exploration in West Siberia (and to some extent East Siberia) and have a vast army of geologists walking the ground, mapping and sampling. Perhaps some 21st Century CEOs would welcome having the command and control options that the Soviets enjoyed but actually this approach belongs to the past! An alternative is obviously to map and ‘interrogate’ from the air, or more accurately first from space and then from the air. Satellites have been used in oil & gas exploration for a long time and a company like NPA (now Fugro-NPA) can point to a 30 year track record, acquiring, processing and distributing image data including Landsat. SPOT, IRS, RADARSAT, ERS-1/2, Russian imagery and data from any other optical or radar satellites. A particular exploration theme is natural oil seep detection which complements the visualisation of terrain and geology.

In the last 6 months or so, I have come across a small company called Scotforth, with its origins in Russian analytical techniques, that offers what they refer to as RSDD-H (Remote Sensing Direct Detection of Hydrocarbons). Satellite imagery is used to detect photo spectral brightness anomalies; these anomalies are said to be indicative of the presence of subsurface hydrocarbons. Their occurrence is related to minor geo-botanical changes in vegetation and geochemical changes in soils or outcrop rocks resulting from micro-seepage or diffusion of hydrocarbons. Proprietary processing algorithms are used to display photo-spectral variances on map-form satellite images; the degree of anomalous response can be used to categorise or ‘rank’ the anomalies.

The Scotforth web-site has some persuasive examples from Kurdistan and Uganda, for example. If it works, this technique may have real potential for screening large, unexplored, onshore areas and leads to the next low-cost ‘focussing’ step of acquiring direct geochemical and botanical sample data in sub-areas of possible interest. After that, the next step is to think about air-borne technologies.

Full Tensor Gradient Gravimetry

Textbooks, MSc courses and proponents have long argued the case for potential field, i.e. gravity and magnetic, techniques as a reconnaissance oil & gas exploration tool, especially the air-borne versions. Unfortunately, I think it’s the experience of explorers that the promise is almost never fulfilled, the lack of resolution and the interpretation ambiguities not at all being compensated for by the cheapness (and what does magnetic susceptibility have to do with petroleum anyway!). Until now! Full tensor gravity gradiometry (FTG) brings vastly superior resolution and definition to the potential field arena; this is important as it offers a relatively inexpensive regional screening tool that can be used onshore, focusing thinking prior to committing to seismic data acquisition (which can be an order of magnitude more expensive onshore than offshore). FTG technology derives from initial US military applications – as I recall, for submarine warfare, detection of underground 'bunkers' etc – in which highly sensitive gradient gravimeters are deployed in stable platforms, at sea or air-borne. While a conventional gravity survey records a single component of the 3-component gravitational force, FTG measures the derivatives of all 3 components in all 3 directions, yielding 9 tensors from which can be derived 5 independent components. Compared with conventional gravity, the extra independent components reduce the ambiguity inherent in potential field methods; from the maths it can be shown that FTG measurements are richer in shorter wavelength data and also the differential measurements deal far better with the effects of a moving platform (a plane or a ship),yielding more accurate shorter wavelength data. The shorter wavelengths are key to subsurface description at the depths of interest for petroleum exploration.

A couple of companies have developed a profile in providing FTG services to the oil & gas (and also the mining) industry, these being Bell Geospace and ArkEx. Bearing in mind that they first needed to replicate what the military had achieved, this has taken them a while. However, there are now regular reports of FTG surveys being implemented; for example, back in April, Bell announced that they were going to undertake a FTG survey for NAM in the Dutch sector of the North Sea, the aim being to ‘gradient optimize’ 3D seismic data to image the tops and flanks of salt masses within the sector, interpretation of the ‘gradient optimized’ 3D seismic data being done jointly by NAM, Shell and Bell Geospace. Now to be perfectly honest with you, what ‘gradient optimize’ actually means escapes me! Perhaps they mean that if you are working in a very mature area where you have tons of 3D seismic, it’s certainly best to integrate the FTG and the seismic to get the best out of both? However, what I hope I’ve made clear is the exciting possibility of using FTG onshore, to focus where expensive seismic should be shot. Or maybe not so expensive!

Onshore Seismic

As I mentioned earlier, the cost of onshore seismic can be an order of magnitude more than that of offshore seismic. One of the reasons for this is that a typical onshore survey consists of thousands of geophones, connected in ‘groups’ by cable, with these ‘groups’ ultimately connected by cable to the recording truck. This turns an onshore seismic survey – especially an onshore 3D survey – into a logistical nightmare, with literally hundreds of relatively unskilled, typically HSE-unaware, labourers moving lots of cable and lots of geophones, all the time. The current ‘winners’ in this world are those that can organise such logistics the best, for example the Chinese company BGP (who also have the best company song of course!!). The 21st Century alternative should be wireless technology with apparatus the size of a cigarette packet. Actually, this exists – companies in this arena include ION GEO, OYO Geospace and iSeis. In a recent Digital Energy Journal (“Getting technology implemented”), there was a feature article about a panel discussion – organised by Steve Jacobs of RMI, a Houston-based consultancy - that had taken place at Offshore Europe 2009, bemoaning the oftentimes alacrity-free response of oil & gas companies to new technologies. ION outlined the various issues that have occurred in their attempts to get rapid take up of their wireless seismic implementation, the conservatism of oil & gas companies, the incrementalism of service companies, the swings and roundabouts of their close relationships with BP and Apache in bringing ION’s technology forward.

My assertion is that the widespread acceptance of these new technologies is resisted by the big seismic services companies who have investments of both reputation and capital in incrementally improving the conventional approach to onshore seismic. They both encourage, and are aided and abetted by, the technology conservatism of oil & gas companies, and the ‘supply chain management’ mentality that has overtaken them. Who is going to shake up the world of onshore 3D seismic the way Geco and PGS shook up the offshore world 15 years ago?

Drilling Performance

I spent an hour of the holidays scouring the dictionary for words that summarised my thoughts about the day rates that are currently being paid for deep water drilling rigs – ‘usury’, ‘exploitative’ came to mind. However, nobody reads these articles of mine (of course that phrase itself may be true!) to be confronted by an airing of my particular prejudices. The oil & gas business is cyclical, with the oil field service companies often over-investing when prices are high, and so no doubt we will soon be confronted with an over-supply of deep water rigs (and 3D seismic vessels for that matter) and contracts struck in 2010 will be at significantly lower prices. Perhaps this time next year, I’ll be scouring my dictionary for words that describe oil & gas companies’ behaviour! Whatever the day rate that is being paid, world class drilling performance – delivering best-in-class wells at or close to the ‘technical limit’ – allows a company to minimise costs and maximise benefits. For example, if a well is AFE’ed for 100 days and $50m, then this or better is what is delivered; if a one year drilling program is planned for a minimum of 6 wells, then world class performance allows 7 to be actually drilled.

In project management terms, wells are well known for having time-consuming, high cost, unplanned events that with hindsight often turn out to have been predictable. One key to world class performance seems to engage everyone involved in drilling the well (operating company staff, the rig contractor, all the service providers) during the planning phase, as a team, building a comprehensive risk picture; then mitigation measures can be planned, for every risk. This approach is applying the principles of lean manufacturing to drilling oil & gas well – you could dig a little deeper by typing “Lean Team Resources” into Google; or maybe you could read Sir Clive Woodward’s book “Winning” on the 2003 World Cup win by England’s rugby team (I thought this might appeal especially to our Welsh, Scottish and Irish colleagues!). At first sight, this has little to do with technology and everything to do with teamwork. However, as I have remarked elsewhere, in my experience team work tends to work best when we are all looking at the same thing. I would like to hear from any company that has a wiki-based implementation which allows everybody in a (potentially) world class drilling team to collaborate in planning a well or wells. A second key to world class performance seems to be to understand what the ‘technical limit’ is, in particular in terms of the days drilling per ten thousand feet (days/10kft) for the well or wells in question. Fortunately, many oil & gas companies cooperate in exchanging data on drilling (and completion) performance; Rushmore (www.rushmorereviews.com) offer a particularly useful source that provides an excellent baseline for exploring best practices, not for the setting of spurious targets by senior management but in order to access superior performance.

Collaborative Technologies

To pursue a theme I have mentioned before, I have been on many team-building courses in my career but have noticed that teamwork in our industry – where there are many distinct disciplines that must contribute to an exploration venture, a field development project, a ‘debottlenecking’ exercise or a field resurrection programme – works best when everybody is looking at the same thing. Courtesy of my son, who bought me for Christmas a book entitled “Enterprise 2.0” by Andrew McAfee (sub-titled “New Collaborative Tools For Your Organisation’s Toughest Challenges”), I’ve learned that the simple idea I express above lies at the heart of what McAfee christened Enterprise 2.0 in which, he asserts, thanks to a new class of collaborative technologies, companies can perform as an integrated whole to tap into innovations and good ideas, first capturing and then deploying the collective “know how” of their employees. My favourite collaborative technology has always been Visualisation because of the profound effect I have seen it have on sub-surface work – geoscientists, reservoir engineers, petrophysicists, drilling & completions engineers working together. However, there are clearly a lot more technologies ‘out there’ and thus I was quite excited by our Finding Petroleum“Collaborative Technologies” Forum that took place last week…..and we did have some excellent presentations (as always you can view the videos on our web-site) and I learned a lot.

And yet! I was struck by the fact that this was our 8th Finding Petroleum event – we’ve held seven Forums and one Conference - and that relatively few of the oil & gas folk who we have come to think of as our ‘regulars’ attended this time – there were many new faces. Of course, hosting a growing number of attendees from a widening “tribe” is good news for us and by no means am I complaining. However, I wondered if we were seeing a signal, admittedly from a small sample of the petrotechnical population, that these collaborative technologies have not yet made it anywhere near the consciousness of typical petrotechs, or if they have, the latter don’t care or don’t believe what McAfee asserts. Which brings me to a current hobbyhorse of mine – why is it so difficult to get new technologies accepted in the oil & gas industry?

Author: David Bamford