No question, downturns are tough on investments. But companies that invest in R&D don’t have to abandon that quest altogether. They just have to invest smarter.
Erika Biediger, drilling and subsurface function manager for Exxon Mobil Upstream, spoke at a recent luncheon about the need to maintain an R&D strategy regardless of the oil price. In what quickly turned into an open discussion about innovation, Biediger said that a lot of good R&D has taken place in downturns in the past, noting that developments such as polycrystalline diamond compact bits and top drives were ideas that came out of down markets.
But these cycles are not without their challenges, and these can vary by location. For instance, technical challenges in deep water include cost reduction and increased reliability, while in remote locations the challenges include cost reduction but also equipment supply. Unconventional challenges revolve around sustainable cost reduction while improving recovery efficiency.
“There is physics-based cost reduction and supply chain cost reduction,” she said.
Companies also need to be on the lookout for innovations that come from unexpected places. This could include technology transfer from other industries and collaborative partnerships. Biediger added that often an idea will come up that’s not currently feasible. Her researchers check back on that idea from time to time to see if it’s become doable. Biediger also said sometimes small ideas can lead to waterfall breakthroughs.
“But to succeed, everyone needs skin in the game,” she said.
In a low-price environment companies tend to form joint industry partnerships (JIPs) and other collaborations, but these can have their own pitfalls. For instance, intellectual property is challenging in these situations because service companies don’t want to give their intellectual property to universities since those institutions can then license that intellectual property to the competition, she said.
“The slowest member of a JIP sets the pace for development,” she said. “There’s a tendency to group up, but you have to be selective about the numbers.”
One audience member noted that college graduates are increasingly being drawn to startups.
“Oil and gas is a high-cost business, and there’s still plenty of space for the entrepreneurial spirit,” she said, adding that some partnerships are more willing to take risks than others.
“We’re not all Steve Jobs,” she said. “It’s more like, ‘Here are my problems, and here’s a pool of money.’ Then you frame the problem in a way that makes sense.”
She gave the example of an approach to improving ROP. It started with a model developed in the 1950s on how to break rock using a curve that related ROP to weight on bit. But it wasn’t a steady curve.
Researchers determined the curve was limited by hole cleaning, directional control and motor differential rating. Then they identified the physics behind each function, monitored vibration data and performed analytics on the mechanical specific energy equations. This resulted in an increase in ROP from 137 m per day to 207 m per day (450 ft per day to 680 ft per day).
According to Biediger, barriers to technology innovation and commercialization include physics; economics; reliability; integration and logistics; alternative technologies; HSE; and regulations, patents and public perception. And down market conditions amplify the need to go from concept to commercialization in less time.
Rhonda Duey’s Exploration Technologies column originally appeared in the February 2018 issue of E&P.