By Stephen Whitfield, Associate Editor
Choosing the right technologies to adopt in the oilfield can be a challenging process. There is no shortage of developers and startups looking to break into oil and gas, while the need for new systems to further drive efficiencies is ever present. With the industry now facing the prospect of a prolonged downturn, representatives from various operators and venture capital groups looked into how the technology adoption cycle can serve our evolving industry during a panel session at the 2020 Unconventional Resources Technology Conference (URTeC).
Dr Aaron Lazarus, Chief Scientist in Emerging Technologies at Pioneer Natural Resources, said his company uses the Technology Readiness Level method to evaluate potential technologies. The company focuses on levels 5-7, which refers to technologies that have a basic, realistic prototype where the economic viability has already been demonstrated. Once a technology reaches level 7, where a system prototype has been demonstrated in an operational environment, it typically starts to receive significant attention from venture capital funds.
However, commercializing a new technology can be just as difficult as developing it, Dr Lazarus noted. This is where larger companies like Pioneer can come in, he said, by helping to clear financial roadblocks related to the manufacturing and scaling production of a new product.
“Do not undervalue the contributions of partners at every stage of the development process,” he said. “All too often, you have a scientist in a lab who comes up with a brilliant idea, and he’s hesitant to bring in venture partners and other people into a relationship for fear of giving up equity. What that person fails to realize is how hard it is to take a product from that early stage all the way to a commercialized product that somebody could actually buy.”
Mike Party, Drilling Engineer and Emerging Technology Specialist at Hess, stressed the importance of collaboration in bringing new technology to market, especially for technologies that may require capital-intensive field testing to show a proof of concept. This can be especially challenging now, when R&D funding is highly strained due to the oil price downturn. Collaboration could be a good approach to handle the associated costs of technology development, and it could take many forms, like operators agreeing to split the cost of the field trial, or the developer agreeing to split trial costs with an operator.
“If something has not gone through a field proof of concept, no one is going to be eager to pay the costs for development and commercialization because, not only are they paying the developer for the technology, but there’s the time of the employees, the cost of taking time off the rigs, the cost of adjusting the completion schedule. There are a lot of associated costs operators face with these technologies,” he said.
Further, he added, it’s important for different teams within a company to be on the same page when considering a new technology for adoption. This means there must be consistent communication between the engineers in the field and front office staff so each group understands what each other’s needs are. Mr Party cited Amazon’s Two Pizza Rule, where no meeting should be so large that two pizzas cannot feed the entire group, as a good rule of thumb to ensure that every idea gets heard.
“You don’t want to bog down your process with bureaucracy, or groupthink, or this culture of consensus. For oil and gas, maybe it’s a four-pizza rule or a five-pizza rule, but I think that idea still holds true that we want to involve all the key stakeholders when discussing new technology. More often than not, that includes your people in the field,” Mr Party said.
Some of the panelists discussed specific areas of focus for their companies when they look for new technologies to develop. Dr Lazarus said Pioneer is paying increasing attention to ESG (environment, safety and corporate governance), as well as non-oil and gas R&D. While the oil and gas industry is highly capital intensive, the amount of money spent on R&D relative to CAPEX is comparatively small. It’s likely that a lot of technology development and innovation in oil and gas will come from companies with no previous energy connections. He pointed to the Internet of Things (IoT) and artificial intelligence as examples of disruptive technologies that came from outside the industry.
Dr Mouin Almasoodi, Senior Staff Reservoir Engineer for Subsurface Technology at Devon Energy, said his company has seen significant improvement in subsurface data analysis, particularly with drilling and completions data. Devon has put significant emphasis on quality data interpretation and analysis.
“With the current situation – the oil price downturn, the COVID-19 pandemic – it seems like there is a greater sense of responsibility within our team members on squeezing as much insight as possible out of our subsurface data,” Dr Almasoodi said.
Subsurface technologies typically face a long adoption timeline, and the panelists acknowledged a need for operators to speed up the cycle, especially in the current economic environment where new technology may help realize vital efficiency gains.
Dr Lazarus said the challenge in the pace of adoption boils down to risk. Technologies that can affect a wellbore are often considered to be high risk, so operators are more deliberate in advancing them. Amy Henry, CEO and Co-Founder of Eunike Ventures, an organization that connects startups with potential investors, urged operators to re-look at their risk profiles to determine if they are taking full advantage of new technologies in the current economic downturn.
“The adoption area is truly the valley of death for startups,” Ms Henry said. “Digital companies run into the same issue. They can quickly do trials, but then they run into the issue of IT and governance and the approval process. Going that route takes time.” Companies, both oil and gas companies and those involved technology development, should look at their approaches to governance and risk, and find new ways to adapt.