As in all industries, those who don’t innovate will get left behind

Posted on 21 June 2012

By Linda Hsieh, managing editor, and Katherine Scott, editorial coordinator

Opportunities to innovate are present in the industry in areas like BOPs and shale shakers, Shell’s Jan Brakel said at the IADC ART Committee workshop in Barcelona on 12 June 2012.

Our industry is an innovative one, but not across the entire spectrum, said Jan Brakel, manager for wells R&D for Shell International Exploration & Production at the IADC Advanced Rig Technology (ART) Committee workshop in Barcelona, Spain, on 12 June 2012.  Technology developments such as the top drive, dual-derrick capabilities and the combination of drilling/production operations on jackups are all examples of innovation in drilling. But there are also “other areas where I think we have been lacking innovation where equipment still looks and feels the same way as they did since their inception,” Mr Brakel added, pointing to blowout preventers, shale shakers and rig sensors as specific areas needing new ideas.

For companies in the drilling realm that believe they can do continue to prosper without innovating, Mr Brakel pointed to Kodak as a grim example. In the mid-‘70s when a Kodak employee came up with a model for a digital camera, management decided to pass on the idea because they feared it would cannibalize their existing products and profits. The company filed for bankruptcy earlier this year. “If you don’t innovate and if you don’t recognize what is happening around you, you run the risk of going under,” he said.

An example of the flip side is Apple. People often asked Steve Jobs about the new products he was bringing to the market and whether they would take away from the sales of his other products, Mr Brakel described. But Mr Jobs’ response was that if he didn’t do it, someone else will – so you might as well do it yourself. “The message there for me is that we shouldn’t be too afraid of developing products that may seem to go against what we offer in the market,” Mr Brakel said.

He continued by pointing to several barriers to innovation in the drilling industry, starting with the question of whether drilling contractors are committed to investing in innovation. “If the answer is no, then why not?” Market uncertainty, perceived risk levels and a lack of resources/time are examples of obstacles companies face when trying to innovate. “Are we going for the short term, where we know we can get revenue, versus making the investments on projects that may generate revenue in the future?”

Despite all these concerns, however, Mr Barkel stressed that time is ripe for investments in innovation, and returns on those investments could prove significant in the coming years. For example, one major IOC forecasts that, by 2020, half of its major project CAPEX will be spent on well construction. “I suspect that other IOC’s have similar (outlooks),” he added.

The importance of innovation will always outweigh its barriers, Mr Brakel concluded. “I think there is a need to accelerate innovation in our business for reasons of attracting talent and making the case to governments and regulators that we can manage our business.”

During the Q&A session after his presentation, one audience member asked Mr Brakel to provide an example of an innovation that drilling contractors could provide – and one that operators would be willing to pay for. The answer was an integrated package for shale-gas drilling with managed pressure drilling capabilities built in, that can do casing drilling and doesn’t need a cement pump to be brought in. Although he recognizes that a rig with such capabilities would be more expensive than a rig without those technology-adds, the bottom line is lower overall cost. “At the end of the day, if the business case is there, if there is a win-win, if there is value for the operator, then we will go for it,” he said.

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