Technological leaders will be prepared for top investment return opportunities.

One of the three pillars of economic growth in today's world, according to the World Economic Forum, is technological readiness. In fact, technology is increasingly important to economic development worldwide. And, for countries close to the technological frontier, technological innovation is the key to future growth.
Of course, technology always has been critical to success in the energy business. Where would we be, for example, without 3-D seismic, horizontal drilling, logging and measurement while drilling, or fracture stimulation?
As our horizons expand, both literally and figuratively, our reliance on an always-full "pipeline of innovation" grows. And that's what this issue of E&P is all about.
What is the industry looking for?
The goal of technology is always a moving target, driven by a host of sometimes conflicting needs. Today, our industry seems to be looking for technology in four categories: mature environments; exploration, especially in hostile environments; real-time operations; and unconventional hydrocarbons.
Everyone in our business is familiar with the need to produce more efficiently from existing oil and gas fields. If we could recover just 1% more from the approximately 1 trillion bbl of known conventional world reserves, we could add 10 billion bbl. That's like finding another Prudhoe Bay - the largest field in North America.
Clearly, it's worth the effort to develop more effective exploitation technologies. However, they must be cost-effective and fit-for-purpose. Expensive, high-end technologies may not permit the return on investment (ROI) that's necessary in mature fields.
Apache Corp. is known for squeezing more out of mature fields. So the company is always on the lookout for technology that can improve returns.
For example, integrated software has proved extremely beneficial to Apache and other operators, merging many types of data in one environment. We've all seen how integrated personal-computer software - like Word, PowerPoint and Excel - benefits us in the business world. The same is true down hole, where Apache is using Petrel workflow tools to improve its ROI.
Exploration, especially in hostile environments, demands cutting-edge technology, and operators gladly will pay for it if it increases their chances of success. For example, electro-hydraulically controlled completion and test trees for subsea operations offer a fast, reliable way to secure a well in deep water.
Most of us remember when almost all engineers worked in the field. Now digital technology permits us to centralize most operations. Real-time drilling-operation support centers enable one person to monitor multiple drilling jobs at once, while small teams of experts optimize the drilling process. This is especially important as operators face aging work forces and downsized staffs.
Finally, as improving economics permit the production of unconventional hydrocarbons -
such as oil sands, coal-bed methane and shale gas-we need special tools and processes to wrestle them out. These hydrocarbons can be difficult to identify and quantify with conventional logs, so we must develop better processes for formation evaluation, stimulation technology and reservoir development. New processes are imperative, as unconventional sources can add decades to the world's energy supplies.
How fast is technology moving?
As Figure 1 illustrates, addressing these technology needs - and quickly - will be essential to meeting energy demand as this century progresses. How can our industry do a better job of getting new technologies into the pipeline?
For Schlumberger, this is an ongoing process, with ideas for research and development (R&D) submitted by people throughout the company. The process typically generates 2,000 to 3,000 ideas annually. Ultimately, a final portfolio of these projects will move into the concept, feasibility, development, commercialization and close-out phases. Some ideas become rapid-response projects to address short-term customer and field needs.
Pitfalls to progress
In our minds, the four biggest pitfalls to implementing emerging technologies in the oil field are people shortages, location issues, funding and corporate culture.
The perception in our business is that we're facing a people shortage, and it seems to be true, at least to a degree. Too many people refuse to consider careers in our business because they perceive it as a polluting, dying industry. Our job is to help people everywhere understand that the oil and gas industry does more to improve the worldwide standard of living than any other industry, as Figure 2 illustrates. We also must wholeheartedly support research on environmental concerns, such as the Global Climate & Energy Project.
Furthermore, we must broaden our horizons beyond the West. Although many bemoan the lack of petroleum engineers, we note that there are plenty of petroleum engineers who are eager to work for us in India, China and Russia. Why aren't more of us recruiting in these countries?
We urge the same broadening of horizons in the siting of technology-development centers. Schlumberger believes that, if you want the best technology, you must develop it in all the places where you work - not just in the West. Yet we note that there are no major technology centers in the vicinity of today's - and tomorrow's - major oil fields. Schlumberger has established new R&D centers in Russia, China and the Middle East to address this issue.
Then there's the question of funding. The same World Economic Forum report that we referenced earlier stresses the importance of R&D spending when it comes to technological progress. With the world's future riding on the increased availability of oil and gas, we can't afford to hold back any longer.
Just a few years ago, most large oil companies maintained substantial R&D staffs. Now that role has fallen to the service companies, and that, in our opinion, isn't enough. When you look at the money that operators are spending in the oil field, it's clear that good business practice calls for investing more in the technologies to make these ventures succeed.
Investments can take the form of collaborations, partnerships, or direct funding of R&D. But they need to come - and soon. Somehow we must simplify our joint ventures so we don't waste valuable time negotiating every niggling point. Too often, it takes years to negotiate a single joint-research contract, and that's too long. With the money we're spending in the oil field, we can't afford to lose that kind of time - and potential production.
Technology development
When we compare ourselves with other industries that have an appetite for new technology, even the most optimistic observers agree that our "clock speed" is pretty slow. In general, we're not technically aggressive risk takers - perhaps because we take such risks in field development.
Figure 3 illustrates the continuum of technology adoption: the small number of early innovators and visionaries, the large number of pragmatists and conservatives, and the small number of laggards. The oil industry tends to be characterized by technological conservatives and laggards. Over and over, we hear, "Try it with someone else and, when you're sure it works, bring it to us." However, if we intend to meet the world's energy needs with fossil fuels, we're going to have to move faster.
Unfortunately, sometimes operators are not ready to adopt technology as fast as it is developed. Believe it or not, Schlumberger has had to slow some of its technology introduction so as not to overwhelm the market. Schlumberger also is turning to highly targeted technology marketing - pinpointing the specific fields where a technology will have the greatest impact.
Unfortunately, the lag in technology adoption also sets up a vicious circle. By the time operators are ready to take the risk, other service companies have figured out how to offer similar technology, and the competitive advantage or ROI - or both - are lost. Clearly, this is a disincentive for further technology development.
Of course, it's also vitally important for technology developers to conduct the necessary market research to ensure that their new products and services are the ones their customers actually want and need. For example, Apache is focused on several technologies, including 3-D seismic, horizontal drilling and fracture stimulation. So the company is very interested in Schlumberger's progress in Q technology, rotary steering, geosteering and multiple fracturing of horizontal wells.
But, even when technology developers are right on the mark, they still can encounter resistance in the field. Sometimes this is connected with organizational issues. Although some of the forward-looking chief executive officers are asking for new technology, the choice of technology often is made by the operating company in the field. Field managers ask, "Who's done it? Has it worked before?"
It's no surprise when people resist change. But in the typical oil company, where the technology function is not centrally driven, this can be a huge roadblock to adoption. When regions are evaluated by their individual financial results, trying a new technology can mean taking a big risk.
To overcome this hesitance, it's important to designate "champions" of the new technology on both sides of the customer/supplier fence. Without an internal champion, most people's first answer to new technology will be "no."
When Schlumberger introduced its new Petrel workflow tools at Apache, the internal and external champions joined forces to present a worldwide Web cast describing the value of the new technology to Apache reservoir engineers and geologists. Anyone who missed the initial Web cast can click on
it at any time. Apache managers are accustomed to sharing information in this fashion: In monthly Web casts from one office to the others, managers and staff discuss the most critical technologies introduced during the past 6 months. This is one of many examples of how to build a "can do" corporate culture.
The appropriate use of technology can pay sizable dividends. For example, by adopting coiled-tubing drilling, Apache has dramatically reduced its drilling costs in thousands of shallow Canadian wells. Today, Apache is the No. 1 user, world-wide, of this cost-effective technology.
Of course, stepping out is risky. When the cost of failure is as great as it can be in our business, discretion can be the better part of valor. How can we reduce those risks - or at least minimize the cost of failure?
One answer is pilot projects. If we can find just the right candidate for a particular technology to demonstrate its value, then other people can be more easily persuaded to give it a try. This, too, can occur on both sides of the customer/supplier fence.
To ease the introduction of technology in the field, Schlumberger has set up its own drilling rig in Cameron, Texas, where it tests new downhole products. Using this test facility, where the cost of failure is very low, Schlumberger can demonstrate the effectiveness of its emerging technologies.
Another answer is financial incentives to try new technology. At Apache and other operators, the corporation sometimes will foot the bill centrally for testing a new technology rather than leaving the risk to the operating unit.
The final pitfall we've identified is the learning curve, which is an issue for anything new. This pitfall grows larger as our work force ages - and it gets deeper with each staff reduction that leaves remaining workers with added duties. Although learning a new technology ultimately means a lighter workload, it's hard for most of us to look past the immediate requirement to take time out for training.
Part of the answer lies in service companies doing a better job of demonstrating the benefits and ROI of new technology to their customers. And part of it lies in using new training tools that shrink the time needed for personnel to develop experience with new technology.
The time is now
If there ever was a time for innovation in our business, it's right now. Energy demand has gone through the roof - worldwide - and our existing supplies can't keep pace. At the same time, the price of oil enables us to fund the development of emerging technologies.
Throughout human history, some of our greatest inventions have come during stressful times - when society feels intense pressure for change.
Today, people worldwide are worried about having enough gasoline for their cars and, after the recent US hurricanes, having enough heating oil for winter.
Our job is to eliminate those fears by continuing to provide the oil and gas the world needs - now and in the future. Stabilizing the supply/demand curve will take a step change in technology. But the good news is that the emerging technologies you'll read about in this issue are the key to transforming uneconomical oil and gas fields into economical ones - and even prolific and highly profitable ones.