Despite the cyclical nature of petroleum industry supply-and-demand dynamics, it’s important that operators continually invest in new technology. In fact, a downturn may be the best time to ramp up investment.

Can the petroleum industry continue to increase reserve production capacity — despite present falling demand — such that it will be ready when demand, inevitably, begins rising again?

In the four weeks prior to Oct. 10, the US consumed around 18.6 million b/d of oil, a drop of 1.8 million bbl, or nearly 9%, over the year-earlier period. Already, in light of the slowdown in the US and globally, OPEC has convened an emergency meeting, where it may trim at least 1 million b/d from production going into 2009.

The Iranian oil minister, Gholamhossein Nozari, recently quoted in The International Herald Tribune, said, “I think low price is a real damage to the future of production.”

A 50% decline in natural gas futures from its July highs hasn’t helped the outlook for US onshore E&P companies, some of which, most notably Chesapeake Energy Corp., had ramped up drilling plans hoping to capitalize on high commodity prices.

In the information technology industry, it’s a truism — and perhaps something of a sales pitch — to say one of the best times to invest in new system solutions is during a downturn. Nevertheless, looked at across the full range of technologies relevant to E&P, the idea may have real merit.

Of course, international oil companies are always investing in new technologies. Given the precipitate rise of national oil companies, it’s important they do so, as going forward intellectual capital will be for them an important source of competitive differentiation vis-à-vis state-owned companies having the advantage of native access to petroleum reserves.

Shell, for example, recently held an International Nanotechnology Forum to discuss both immediate prospects and ongoing promise for using nano-based
materials in petroleum industry E&P.

Possible applications — some of which literally boggle the mind — include catalysts that last longer and more easily regenerate; membranes that discriminate between molecules based on small size differences; and substances, which once introduced into a wellhead, “find” oil and then signal its location back to the surface.

More immediately, according to BP in its annual Technology Report, Sept. 2008, “significant value can be generated by transforming abundant data into timely information and knowledge, allowing better decision making and use of valuable resources.”

While less exciting perhaps than breakthroughs in materials science, the key to gaining value — when it comes to digital technologies — according to BP and others, is
standardization. As the Technology Report states, in its “field of the future” initiative, BP is turning to a “common real-time digital and telecommunication infrastructure” and a “suite of standardized digital sensor and control technologies.”

All new BP projects — including those in the Gulf of Mexico, Azerbaijan, Angola, the North Sea, Indonesia, and Trinidad — will be equipped with this emerging infrastructure. It’s only through common infrastructure that data can acquire the context that leads to its use as trusted information.

New technologies have to come from midsize companies as well. In fact, in other industries that’s the rule. The electronics industry, for example — to achieve balance between the massively scaled output required for consumer markets and the focused entrepreneurial efforts needed to realize innovation — relies on a unique dialectic.

Research emanating from government labs and academia spawns start-up companies that grow rapidly. Eventually many of these start-ups are acquired by their best customers, the brand-name, multinational corporations. Thus, small and midsize companies act as crucibles of innovation in high-tech electronics, the most innovative of all industrial sectors.

In the petroleum industry, it could be said that the service companies assume this role as the focused entrepreneur gaining needed scale by working with as many operators as possible.

In fact, because today’s technologies are so complex, it’s increasingly rare for any single company — big or small — to have all the expertise needed for successful innovation. This places a premium on alliances, partnerships, and consortiums.

Just these kinds of promising, innovative technologies, emanating from start-up companies to behemoths, will be discussed in the December issue of E&P, which features “emerging technologies,” and again in January 2009 with its special supplement on research and development.