When oil prices settle and market conditions stabilize, analysts predict three technologies will rise above the rest to enable growth.

The standouts over the next five years, according to Barclays, are subsea processing to make developments more economical, artificial lift for hydrocarbon recovery,and frontier exploration and development with 20,000-psi application and Arctic opportunities.

The outlook, delivered as part of a report released on Jan. 8 that included information about Barclay’s E&P spending survey, was one of five themes the firm believes will emerge in the future. Another outlook, released the same week, also gave insight into technology amid talk of less E&P spending worldwide.

“Most of the technology in the oil and gas industry resides with the oilfield service companies used in drilling, completion and production,” Barclays said in the report, which focused on North America oilfield services and equipment. “Ultimately, the more technology used to lower cost per barrel, the greater the growth opportunity for the service company.”

Barclays noted that the subsea processing demand is being driven not only by brownfield developments to address declining pressure and a higher water cut but also by greenfields with low initial pressure, low permeability and poor fluid properties. It used as an example Petrobras’ Marlim Field, a mature deepwater field that had water cut issues that were ultimately alleviated by FMC subsea separation and OneSubsea boosting technologies.

“While it is still in its relative infancy, we believe subsea processing will start to gain steam as offshore production increasingly faces maturing offshore reserves and new offshore fields move progressively deeper (extreme temperatures, pressures) and become more complex (heavier oils, longer tiebacks),” Barclays said.

Artificial lift technology, especially in the wake of developing unconventional plays, was flagged as another technology standout as operators look for the best solutions for various reservoir conditions. Barclays singled out Baker Hughes’ FLEXPump technology and acquisition action by Schlumberger, which Barclays said has acquired more than 12 small artificial lift companies in the past 18 months.

The move toward deeper water, frontier areas like the Arctic and into HP/HT environments also presents technology opportunities.

“The era of the 20k-psi development in the Gulf of Mexico is on the verge of reality on the back of exploration success in the Paleogene play. Very little development progress has been made because of the [HP/HT] environment, which existing equipment cannot accommodate,” the report continued. “For both Arctic and 20k, equipment companies will be the first to benefit in designing and manufacturing rig equipment, pressure control and subsea equipment.”

‘Most important’

The report came a few days after Cowen & Co. released its worldwide E&P spending survey of 476 companies. The survey also asked respondents to identify the most important technologies.

Horizontal drilling and fracturing/stimulation technology topped the list of what respondents believe are the most important technologies impacting the E&P business. Results revealed that 32% of the respondents believe horizontal drilling is the most important technology. Fracturing/stimulation captured the same percentage.

However, deepwater technology and 3-D/4-D seismic showed the most growth.

The percentage of respondents naming reservoir recovery optimization as the most important technology jumped 20 percentage points, going from only 3% in 2014 to 23% in 2015. The increase was also notable in the areas of deepwater technology and 3-D/4-D seismic. Deepwater technology grew by 13 percentage points to 14% this year compared to last year, while 3-D/4-D seismic captured 27%. That was up from 15% in 2014.

Although technology, such as hydraulic fracturing and horizontal drilling, has enabled North America to reach record oil and gas production levels, it does not necessarily mean R&D or technology spending will be immune to the latest downturn.

“I think we will see reductions but not as great as the decline in activity suggests. I would think there would be modest declines in technology and R&D spending by the oilfield service companies in 2015,” Cowen analyst James Crandell told E&P before referring to some of the technology areas listed as most important.

“Those are certainly areas of interest by the oil companies, but nevertheless the economics of the business suggest there was such a big decline [in oil prices] that R&D spending will participate in the cutbacks that we will see companies make in their cost structure in 2015,” Crandell said.

Fiscal outlook

The Cowen survey estimates that 2015 global E&P expenditures will drop 17% to $571 billion this year. The survey drew on budgets that were based on oil prices of $70/bbl (West Texas Intermediate), so Cowen pointed out that there is downside risk. “Should oil prices average $60 per barrel, U.S. E&P spending should drop by 30% to 35%,” the survey said.

North America E&P spending was forecast to fall by 22% to $119 billion based on responses from 186 companies, while international E&P spending was predicted to drop by 15% to about $417.9 billion. Cowen & Co. believes international spending will decline in just about all parts of the world, except the Middle East, where E&P spending could grow 4% year-over-year to about $41.7 billion, based on survey results.

“Every other region of the world is expecting double-digit declines in spending,” Crandell said. He pointed out that the Persian Gulf companies—Saudi Aramco, Kuwait Oil Co., Abu Dhabi National Oil Co. and Qatar Petroleum—are among the companies planning to spend more this year than in 2014. “These are national oil companies. I think they all have substantial cash reserves that they can dig into at this period in time to finance spending growth.”

Barclays also said the Middle East would see increased spending, forecasting E&P capital spending in the Middle East to rise to about $46 billion this year. The firm predicts international spending could drop 6.7% to about $451 billion this year compared to 2014.

Contact the author, Velda Addison, at vaddison@hartenergy.com.