The Schlumberger Information Solutions (SIS) Global Forum, taking place in Paris, October 7-9, 2008, is providing an environment to facilitate discussion and collaboration on the subject of technology in the oil and gas industry. The theme of the forum, “Collaborate. Innovate. Deliver.” opened the door for discussion of the role technology will play in the future and the many challenges that stand in the way of innovation.

Fatih Birol, chief economist and director of the office responsible for economic analysis at the International Energy Agency, opened the first plenary session with a discussion of the status quo in the industry and a look at what the future holds in store.

In his far-reaching presentation, Birol examined what he called “structural issues” of the energy market and examined three challenges: the emerging energy order, climate change, and energy and the poor.

On the subject of the new order in the world of energy, Birol explained, “New players have arrived on the demand side, and old actors are leaving the scene.” He pointed to China and India in particular as sources of energy demand, pointing out that by 2010, China will be using more energy than the US. Every third dollar spent in energy generation will go to China or India,” he said.

Interestingly, the demand for oil in these regions has not been affected by the rise in oil price. In previous times when oil prices spiked (1973-1975 and 1979-1981), demand dropped. In the latest era of rising oil prices (2004-2006) demand increased by 3%. The reason for this, Birol explained, is that in China, India, and the Middle East, there are different market structures. In all three regions, fuel prices are heavily subsidized, and economic growth is so strong that demand did not decrease. Birol expects this pattern to continue.

On the subject of climate change, “Energy needs to be at the center of climate change debate,” Birol said. He presented alarming CO2 emissions numbers and discussed what needs to be done to contend with this problem. Until now, the bulk of emissions have come from the US and Europe, Birol said, noting that in 2007, China was the largest emitter in the world, with the US at number 2 and India at number 3. The problems need to be addressed, Birol said, explaining “Time is not necessarily on our side.”

Finally, Birol commented on energy and the poor. Statistically, he said, 40% of the world’s population has no electricity. That amounts to 1.6 billion people. And efforts to change that number, though significant, are not likely to make much of a dent. “In 2030,” Birol said, “there will still be 1.4 billion people who have no access to energy.”

Birol ended his presentation with a number of chilling conclusions. First, he said, the global energy system is on an increasingly unsustainable path. He pointed to carbon capture and storage as a critical element in the equation and noted that a summit scheduled for Copenhagen, Denmark, in November of 2009, will be a critical point on the path to resolving this concern. “It is one of the last exits before the end of the road,” he said. Urgent and decisive government action is needed. “The scale of this challenge is huge.”

Jean-Marie Masset, senior vice president, geosciences, Total, presented some of the challenges faced by an international operating company (IOC) and examined some of the ways his company is contending with the many challenges it faces.

Masset presented his view of the state of the industry, noting that the average discovery size has been constant at 50 MMboe since 1980. Since the mid-1990s, exploration has found 20 Bboe each year, except for the “nugget” years. He pointed out large discoveries have not all been found in one place and that the search for large reserves will continue at a rapid pace.

Masset also talked about the critical role of geologists in the search for reserves and discussed the need to integrate all of the tools the industry can bring to bear in the quest for additional hydrocarbon reserves.

Finally, Masset summarized his view of where the industry stands today and what needs to be done in the future. “The basics remain fundamental,” he said, noting that the geoscience expertise is still the foundation of IOC strategy and that geoscientists provide the basis for evaluating future oil supply. He also talked about the technologies that are key to bringing new barrels into production:
· Seismic acquisition and processing;
· Drilling;
· Production, enhanced oil recovery (chemical);
· Carbon capture and storage; and
· Software.

The final critical focus for the industry, Masset said, is investment in new concepts that are key to growth. “Brains and technology are the road to success,” he said.

Effendy Cheng Abdullah, senior general manager of the petroleum resource exploration department at Petronas, followed Total’s presentation with the viewpoint of a national oil company (NOC). One of the things he discussed his company’s need for people. “Sixty percent of the Petronas workforce has less than five years of experience or less,” he said, noting that individual desire among Petronas employees to stretch and grow is a critical component for the company’s success. The other critical component, he said, is cooperation.

One example of cooperation, Abdullah said, is the agreement between Petronas and Schlumberger. The challenges, he said, were to align business objectives, to integrate the different work cultures, and finally, to transfer technology. Though the benefit does not come without effort from both sides, he said, the end result is positive for both companies. “We are confident that this strategic alliance will bring both companies to a greater height.”

According to Abdullah, the Petronas-Schlumberger strategic alliance provides a key platform for people, technology, and business development. It involves Petronas staff in the alliance projects to ensure faster development in technical capability and technology, and it is paving the way for the development of new technology approaches and applications to resolve specific technical challenges. The alliance is also assisting Petronas in its long-term positioning to reach what Abdullah called “autonomy” in technical capability and skills on an institutional level. Finally, the win-win partnership between Petronas and Schlumberger is allowing the NOC to focus on business and technical E&P needs in Malaysia.

José Formigli, executive manager of E&P pre-salt for Petrobras, provided a different NOC point of view. Formigli opened his presentation by enumerating the requirements for innovation:
· Cooperation based on reciprocity;
· Free information flow;
· Open boundaries;
· Disseminated work ethics;
· Scientific mind stimulation; and
· Pragmatic leadership.

Formigli also discussed what he called “social technologies,” methods and processes for organizing people to improve effectiveness and collaboration in joint ventures. “Technological capability alone is not enough,” he explained. “The greater the cooperation, the greater the economic benefits,” he said.

Formigli also discussed the necessity for physical and social technologies to be implemented together for long-term success, pointing to Petrobras milestones as a series of examples. In the end, he said, the goal of technology development is sustainability.

Finally, Formigli discussed some of the challenges associated with the pre-salt basins offshore Brazil and explained how these challenges will lead to innovation in reservoir characterization and engineering, well drilling and completion, subsea engineering, flow assurance and artificial lift, floating production unit advances, logistics for associated gas, and carbon capture and storage.

“Petrobras believes that collaboration involving universities, research institutions, service companies, and operators speeds up the process of identifying opportunities for innovation and technological development,” Formigli said. Developing pre-salt oil fields will impose tremendous technological, logistical, and economical challenges for which innovations will be necessary and collaboration will be wise, he concluded.

Andrew Gould, chairman and CEO of Schlumberger Ltd., concluded the plenary session with observations about the technology challenges facing the oil and gas industry, suggesting a number of other industries from which this industry can borrow.

“Our industry faces multiple technical challenges,” Gould said. “These include new field developments in harsher and more complex environments such as deepwater and the arctic, a greater emphasis on exploring for and producing unconventional resources that include heavy oil, tar sands, oil shale and coalbed methane, and a need not only to generate, but to effectively utilize, more real-time data to manage production and risk.”

Fortunately, the oil and gas industry is not unique in its requirements. It would be in the industry’s best interest, Gould said, to look to other industries that are investing in innovative answers to today’s technology problems.

One of those industries is aerospace, where investment has gone into new materials and sensing technologies, some of which have found their way into the oil and gas industry. Structures in the aerospace industry need to be strong, lightweight, durable, and they have to be capable of maintaining these properties under high loads, at high temperatures, and in corrosive environments. “These are almost exactly the requirements of the upstream oil industry,” Gould said, “and many of the high-performance alloys we use today owe their origin to aerospace-driven developments.” In a more limited sense this is also true of composites, some of which have found applications in the oil industry, and others of which have been used for pipelines.

The aerospace industry is also pursuing the use of embedded miniaturized sensing elements for prognostic health monitoring of key structural elements. “This is likely to lead to a proliferation of distributed sensors integrated by fiber-optical and wireless communications to monitor structural stress and corrosion,” Gould said.

Gould pointed out contributions as well from the automobile industry, where microcontrollers and processors with consequent automation are being deployed on what he called, “the dumb iron” of the internal combustion engine. The cost advantage of applying this sort of technology to the oil and gas industry is enormous, he said.

Biomedicine is a third area from which the oil and gas industry can borrow. The reservoir engineer, like the medical practitioner, wants to understand the structure of a complex, porous medium and to study the composition of its fluids with comprehensive and accurate chemical analyses performed cheaply and quickly. There is a need to target intervention chemicals specifically and to perform services and repairs remotely while visualizing the environment in situ with high resolution, Gould explained, noting that some of the technologies being developed in the biomedical industry are breaking new ground in this area.

Finally, Gould cited examples from NASA, the US Department of Defense and others, which are pioneering human systems integration. The study of how humans interact with various systems takes human factors into account when designing, manufacturing, testing, operating, and maintaining systems. “The goal,” Gould explained, “is to make systems reliable (meaning free of failure under normal conditions) and robust (defined as being tolerant of unexpected conditions in order to allow human creativity to be brought to bear on non-routine, unanticipated problems.” There are significant implications for use of human systems integration in the engineering of software, equipment, and operations centers as well as in training, he said.

“By further innovation of the technology around us, I am convinced that we can exact the step changes that will be necessary to ensure the security of hydrocarbon-based energy until other forms of energy supply are ready to make greater contributions,” Gould concluded.